Port Regulation: Overseeing the Economic Public Interest in Ports
ENDNOTES
- World Bank. 1997. Toolkits for Private
Participation in Water and Sanitation,
Module 1: Selecting an Option for Private
Sector Participation, p. 20. Washington,
DC: World Bank.
- Return on equity (ROE) = net income/shareholders
equity; return on assets (ROA) = net
income/total assets.
- Trujillo, L., and G. Nombela. 1998.
“Privatization and Regulation of the Seaport
Industry.” December, p. 21.
- Perfect competition is a noble goal, but
rarely achievable. While there are cases of
markets with large numbers of sellers and
buyers, these sellers and buyers are seldom
fully informed about their alternatives. The
information available to them may be of
questionable reliability or costly to acquire,
while at the same time there may be artificial
restraints (for example, government
regulation of prices or resource mobility)
that affect the competitive environment.
Many might argue that the U.S. port sector
represents a perfectly competitive market
given excess capacity and a plethora of
intermodal and port options. Many of these
assets, however, either directly (for example,
construction grants) or indirectly (for example,
tax-exempt status on the interest of
bonds issued to finance construction) are
subsidized, thereby distorting the market
supply in response to demand.
- But there are a number of cases where the
mere presence of a private owner changed
the efficiency of the port or the terminal
because a very different company culture
was introduced (for example, Klang
Container Terminal in Malaysia).
- World Bank. 1997. Toolkits for Private Sector
Participation in Water and Sanitation, Toolkit
1: Selecting an Option for Private Sector
Participation, Annex 1. Washington, DC:
World Bank.
7 World Bank. 1996. Infrastructure Delivery:
Private Initiative and the Public Good, pp
xxi–xxii and pp. 54–61. Washington, DC:
World Bank Economic Development Institute.
- In many ports, load-bearing capacities may
be different at each berth. For example, one
berth may be designed to handle the weight
of gantry cranes on the berth’s apron, while
other berths are designed to handle lower
weight breakbulk cargoes. There are, of
course, engineering solutions to expanding
an apron’s capacity, which require substantial
investment. This investment may be justified
with anticipated cargo volumes.
- Regulators differentiate between tariff filing
and tariff monitoring. Tariff filing normally is
required each time a service provider adjusts
its tariff. The filing is a means of informing
port users about generally available prices for
services. This allows port customers to detect
any abnormalities in pricing behavior (for
example, unjustified pricing discrimination)
and, in the event such abnormalities exist, to
register a complaint with the regulator. In the
event a complaint is received, usually for
alleged discriminatory, collusive, or predatory
pricing practices, the tariff filing requirement
gives the regulator a pricing history to support
its investigative efforts. Where the regulator
perceives a relatively high risk of anticompetitive
behavior, or if there is a history of violations
on the part of one or more operators,
then the regulator may monitor the tariffs that
are filed, assessing for itself the anticompetitive
impact of the new tariff at each filing.
- In some countries, setting the tariffs is distinct
from approving tariffs. For example, in
Nicaragua the operator (or cargo handling
company) submits a tariff for approval
through the Empresa Nacional de Puertos
(EPN, the national ports authority), which
reviews the tariff and forwards it for final
approval to the Ministry of Transport and
Infrastructure. EPN may attach comments
regarding its assessment of the fairness and
reasonableness of the tariff, but its role is not to assess the proposed tariff’s relationship or
effect on industry competitiveness (this
responsibility does not yet exist for any sector
in Nicaragua). In Colombia, prior to its tariff
liberalization in 1995, the Superintendente
General de Puertos (SGP, the General Port
Superintendent) set the tariffs, initially both
minimum and maximum charges and eventually
only maximum tariffs. In practice, the
effect is the same, as the regulator sets the tariff
by either dictating one or approving one.
- World Bank. 1996. Sustainable Transport:
Priorities for Policy Reform, p. 104.
Washington, DC: World Bank.
- World Bank. 1996. Sustainable Transport:
Priorities for Policy Reform, pp. 86–87.
Washington, DC: World Bank.
- Many port authorities, as part of their published
tariffs, will impose operational regulations
relevant to both carriers and terminal
operators. Operational regulations can refer
to a variety of topics, such as vessel reporting
requirements, navigation rules within the
port’s jurisdiction, invoicing rules for port
dues, information access rules (for example,
anchorage, vessel lighting, speed, and so
forth), port working hours, reporting procedures
for environmental incidents within the
port area, detainment rights for vessel damage
to facilities, or other rules.
- This is an important point. There are basically
only two ways for determining the
basis on which tariffs should be set. The
first is tariff benchmarking with other ports
(or their operators) that operate in similar
conditions. The second is to require the
operator to provide audited financial data
with careful consideration of the debt service
obligations from investments. In this
sense, the regulator would have to make
certain assumptions about what the rate of
return is and what rate is considered
“reasonable.” What the regulator considers
reasonable may not adequately consider the
initial investment risk that the operator
made. A complicating factor concerns those
operators that may offer bundled services,
only one of which the regulator intends to
regulate. The complexity here is derived
from the ability to assign costs to each of
these bundled services. Finally, operators
always have a monopoly on their financial
information. What they report will not necessarily
be an accurate reflection of reality.
Indeed, some operators may keep separate
accounting books, one for reporting purposes
and one for proprietary purposes.
Because of the uncertainty and questions of
data reliability, regulators will often establish
a mini-max or maximum tariff that
reflects the range of uncertainties associated
with defining an operator’s cost structure.
- The steps, while presented in a logical order,
do not necessarily need to be implemented
in the sequence presented.
- Guislain, Pierre. 1997. The Privatization
Challenge: A Strategic, Legal, and Institutional
Analysis of International Experience, p. 258.
Washington, DC: World Bank.
- Guislain, Pierre. 1997. The Privatization
Challenge: A Strategic, Legal, and Institutional
Analysis of International Experience, p. 258.
Washington, DC: World Bank.
- Eustache, Antonio. 1999. Privatization and
Regulation of Transport Infrastructure in
the 1990s: Successes...and Bugs to Fix for
the Next Millennium, p. 28. Washington,
DC: World Bank.
- See in this respect Module C.63 of the
International Labour Organization’s
Portworker Development Program (PDP).
- Guislain, Pierre. 1997. The Privatization
Challenge: A Strategic, Legal, and Institutional
Analysis of International Experience,
pp. 280–81. Washington, DC: World Bank.
- Smith, Warrick. 1997. “Utility Regulators—
The Independence Debate.” In The Private
Sector on Infrastructure: Strategy,
Regulation, and Risk, September, p. 22.
Washington, DC: World Bank.
- Eustache, Antonio. 1999. Privatization and
Regulation of Transport Infrastructure in
the 1990s: Successes...and Bugs to Fix for
the Next Millennium, pp. 24–25.
Washington, DC: World Bank.
- Burns, Phil, and Antonio Eustache. 1999.
Infrastructure Concessions, Information
Flows, and Regulatory Risk. Washington,
DC: The World Bank Group.
- Guislain, Pierre. 1997. The Privatization
Challenge: A Strategic, Legal, and Institutional
Analysis of International Experience, p. 268.
Washington, DC: World Bank.
25 Green, Richard, and Martin Rodriguez Pardina.
1999. Resetting Price Controls for Privatized
Utilities: Manual for Regulators, pp. 11–12.
Economic Development Institute, World Bank,
Washington, DC.
- Green, Richard, and Martin Rodriguez
Pardina. 1999. Resetting Price Controls for
Privatized Utilities: Manual for Regulators,
p. 64. Economic Development Institute,
World Bank, Washington, DC.
- The operator, itself, may also be affected by
factors outside its control, such as ship size,
number of moves for loading or discharging,
type and number of hatch covers, vessel
dimensions (width and depth determine the
path of the container’s movement), and
stowage plan.
- Berth performance is a reflection of both
efficiency at the berth as well as efficiency
for the operations behind it. Yard congestion
itself can cause delays in vessel loading
and discharge.
- Operators, on the other hand, should be
concerned with these incremental measures
because they point to underlying causes for
overall productivity performance.
- Guislain, Pierre. 1997. The Privatization
Challenge: A Strategic, Legal, and
Institutional Analysis of International
Experience, p. 280. Washington, DC: World
Bank.
- World Bank. 1997. Toolkits for Private
Sector Participation in Water and
Sanitation, Toolkit 1: Selecting an Option
for Private Sector Participation, Annex 2,
p. 33. Washington, DC: World Bank.
- Eustache, Antonio. 1999. Privatization and
Regulation of Transport Infrastructure in
the 1990s: Successes...and Bugs to Fix for
the Next Millennium, p. 29. Washington,
DC: World Bank.
- For example, the port authority may have a
general perimeter gate in which initial access
is cleared by port authority personnel. An
“interior” terminal gate is under the control
of the operator that leases the facility.
- The extent to which regulation is necessary,
of course, is dependent on the risk of
monopolistic or oligopolistic behavior on
the part of both the port authority as well as
the firms. Even in a post privatization environment,
the port authority may still be
considered a monopoly by virtue of facility
ownership (for example, the landlord model
in an environment where there is no interport
competition) and in terms of its charges
for navigation, wharfage, and dockage
(assuming it charges these). In addition,
even in nonmonopolistic settings there may
still be a need for antitrust concerns for
specific services in light of the highly
concentrated markets that have resulted
post privatization.
- This arrangement is changing, however, as
the society is now providing vessel stevedoring
services for vessels calling to berths
where the society’s gantry cranes are located.
