There is a strong public interest in ensuring that ports operate efficiently and safely, that fair and competitive services are provided, and that ports support and foster economic development locally and nationally. The public interest in ports stems from the vital role that ports play as gateways of economic trade and commerce for most nations. In 2004, international seaborne trade totaled approximately 6.7 billion tons of international commerce, which corresponded to 27,635 billion ton-miles of maritime activities (Review of Maritime Transport, 2005 UNCTAD). With the globalization of the world economy, a nationís economic competitiveness is linked increasingly to its ability to ship raw materials, intermediate goods, and final products efficiently and economically. Excessive port costs or delays can prompt investors to locate new production facilities in other countries or regions. In many countries, high port costs have an economic impact similar to a generalized import duty, increasing the cost of all imported goods.
The public is also interested in having ports operate safely and with minimal environmental impact. An oil spill within a portís harbor can damage the coastal environment and devastate local fishing and tourism sectors for several years. Port operations involve the use of heavy machinery and handling of dangerous cargo that, without proper systems and safeguards, can result in serious and sometimes fatal injury to port laborers or third persons present in the port.
Ensuring the efficient and competitive functioning of a port in a context of limited or weak competition is the purpose of economic regulation of ports. Economic regulation typically involves intervention in the functioning of markets in terms of setting or controlling tariffs, revenues, or profits; controlling market entry or exit; and overseeing that fair and competitive behavior and practices are maintained within the sector. The determination of when economic regulation of ports is necessary and how to tailor the intervention to the particular port competitive environment is the principal focus of this module.
While not discussed at length in this module, there are other public interest concerns regarding technical, environmental, and social aspects of port operations. These other areas include:
In most instances, guidelines and procedures for oversight of these elements of the public interest have already been established and their effectiveness is not materially altered by port reforms, although they need regular adaptation and updating.
This module is intended to assist public officials in designing an economic regulatory framework that will keep ports cost-effective and responsive to changing demand. The module provides guidance on how to:
Public officials can use the module when initially formulating a port reform strategy or for establishing an effective postreform port regulatory system.