Monday, February 29, 2016
Master-planning and city-port relationships
Master-planning, and the revisions thereof, is a long process. From the time the decision to develop a new MP is taken, until the latter is in place, in Italy the process could well take 6 years! There would be no less that five ministries involved in an MP approval, let alone local and regional governments and other stakeholders. The MP of the port of Brindisi dates back to 1974, when the port, its traffic, and the type of ships calling, had nothing to do with the business realities of today.
The MP is a useful planning instrument and in this regard it has to be flexible and able to accommodate the changing demands on port services. Often, the opposite is true and the MP is a statutory straight-jacket, constraining agile port management and development. Often, this is the result of inflexible berth designations; i.e. allocation of berths to a specific port traffic. Two examples from Brindisi could illustrate this point.
1. The port of Brindisi is served by a single towage company, owning 5 tugs, berthed at the inner port, which, at the time of writing, was undergoing urban rehabilitation. As a result, the tugs needed to move to another spot at the middle or outer port but, in spite of the ample and underutilized infrastructure there, no other place was available, because this was not provided in a 40-year-old MP!
2. The middle, and most commercial, part of the port of Brindisi, for years now, is dedicated to Ro-Ro and passenger traffic. To serve this traffic, the Port Authority had decided to construct a new passenger terminal; one of the most modern in the Adriatic Sea. The terminal should have been ready by the summer of 2012 but works have been suspended as a result of an administrative appeal, claiming that, according to the 1974 MP, passengers cannot be handled at this part of the port. Interestingly, the person who has lodged the appear is the owner of the sole ‘private’ passenger terminal in that part of the port!
Port land (demanio marittimo) is usually well defined by law. The land is State property, albeit managed by the port authority. The same applies to the land of urban areas. In cases where the port and the city interface, conflict may arise usually as a result of political power games, on the part of the City Administration. The latter usually sees port areas as areas of alternative use (coastal zones; residential; fisheries; recreational; etc.). One should not forget that the port is often the favorable subject of discussion of mayors, many of whom don’t even know what a port really is, but who believe that by doing so they may score political points, or divert public attention from other pressing problems of their own Administration. In Brindisi, as in other Italian ports, the mayor is a member of the port council. During my term there, I don’t recall a single meeting where the mayor did not state that the reason he takes part in the Council is not just to control, supervise and vote, but to actually manage! Certain ‘left’ parties of the City Administration, in addition, still believe that ports should not be autonomous, but run by city councils as was the case 50 years ago!
Regional planning, and inter-port competition
In Italy, port planning, together with the planning of the rest of the infrastructure, is the prerogative of the Regions. This is stipulated by the country’s Constitution (Article 5). Of course, Italy is not unique in this policy of decentralization but, unfortunately, this has created considerable duplication, ‘cathedrals in desert’, and a waste of scarce financial resources. With the need for fiscal harmonization in the European Union, it is obvious that a reversal of trends needs to take place, transferring decision making power from the periphery to the center.
Regional transport plans are often at considerable variance from national transport and logistics planning, rather than being parts of it. Rarely, if ever, have I seen a serious scientific transport planning exercise, similar to those we are accustomed to in northern Europe. Instead, plans are influenced, and relevant funds allocated, according to the relative influence (at “Rome”) of local politicians. This is one of the reasons why infrastructure in southern Italy is so underdeveloped, compared to the north, where political power mostly resides.
Brindisi is another good example of neglected infrastructure, vis a vis its adjacent neighbor, Bari, just because the latter port-city is the Seat of the Regional government, with the large majority of regional politicians coming from that city. This, in spite of the fact that, in terms of traffic and available infrastructure and connections, Brindisi is far more important and more strategically located in the Adriatic and Mediterranean Sea.
When the European TEN-T ‘core’ and ‘comprehensive’ ports were decided, I made a great effort to also include Brindisi as a ‘core’ port, together with the other two regional ports of Taranto and Bari, which were included, but on the basis of only “political” and not economic arguments. This would create a real ‘port system’ of the Apulian ports, something that, as it became obvious, the regional administration had paid only lip service. Unfortunately, my efforts met a brick wall, for the fate of the port of Brindisi had been already determined by influential Bari politicians (and nonexistent Brindisi ones). To add insult to injury, the same politicians who for years had been favoring Bari over Brindisi (often with the ‘convenient’ assistance of local Brindisi port interests) have consistently been arguing that the predicament of Brindisi was owed to its own bad management. Let it be noted that, currently, Grimaldi, the world’s largest Ro-Ro operator has already made Brindisi one of its most important Mediterranean hubs!
TEN-T and national transport and logistics planning
The Trans-European Transport Networks (TEN-T) is one of the European Union’s most ambitious and far- reaching projects, aiming to: a) advance economic and social cohesion; b) harmonize and rationalize public investments in infrastructure throughout Europe; and c) improve the competitiveness of European exports. The creation of a trans-European transport network includes ports, as crucial network nodes, and, through the equally important program of the Motorways of the Sea, extends this network to third countries outside the Union. TEN-T divides ports in two categories: ‘core’ ports, i.e. ports of European interest and ‘comprehensive’ ports, i.e. those of national or regional interest.
After many years of deliberations, in 2014 the Italian government decided to draw a National Port and Logistics Plan, PNPL, so as to: harmonize the country’s port system to that proposed by TEN-T; select as ports of national interest those included as ‘core’ ports in TEN-T; strengthen the link between ports and logistics service providers; improve the competitiveness of Italian exports; strengthen the competitiveness of Italian ports vis a vis those of northern Europe; and last but not least save–or so it thought- on the financial resources going into other public port administrations, i.e. those port authorities intended to be abolished and integrated under those of ‘core’ ports.
In spite of its stated objectives, from the beginning I was against this idea, believing that a national ports plan cannot exist without a national transportation plan; otherwise it would look like we were putting the cart before the horse. Without a transportation plan, one could not possibly argue which port authorities should remain and which should be taken over; any such arguments would be bound to be political rather than economic. Moreover, the aggregation of ports has been motivated by competition among north Italian container ports, while a number of other ports, to be integrated, were handling important bulk cargo and passengers.
The drafting of PNPL was commissioned to an international consultant, under the supervision of a so-called Scientific Commission, appointed by the Minister, the composition and competences of which I never understood. The Report was nothing more that what it was expected to be at the outset: A ‘consultancy report’ full of tables and figures, as well as normative wish-lists and unsubstantiated views, without any scientific or methodological rigor or relevance. As a result, the proposed list and composition of ‘port clusters’ has been changing by the day, according to the ‘political influence’ of port presidents in the ruling Democratic Party (PD), and the intensive horse trading among themselves and the minister.
It thus became clear to all something that, to me, was evident from the very beginning: The objective of ‘port aggregations’ was never to create stronger and internationally more competitive ‘port clusters’ but to centralize decision making in order to eliminate competition among ports. Such ideas however belong to the past and, at any rate, go against the orientations of the European Commission and European Parliament who would like to see ports as ‘enterprises’ with operational; administrative; and financial autonomy.
Infrastructure financing through ‘project financing’ (PPP)
Thus, the Italian government has made the usual textbook mistake of most economic reforms: Instead of improving on efficiency; cutting down bureaucracy; and encouraging private sector participation, it opted for just reducing the mere number of port authorities, without any economic rationale.
Public sector bureaucracy is Italy’s biggest challenge and if the problem is not addressed timely I fear the country could soon face the fate of Greece. A miscellany of international reports and statistics demonstrate Italy, together with Greece, as the worst European countries in terms of attracting Foreign Direct Investment (FDI). A few years back, my colleague, the president of the Port of Taranto, invited the Port of Rotterdam to have a look at the Apulian ports (Bari, Brindisi, Taranto) and assess whether opportunities existed for cooperation and joint ventures. The Rotterdam team, following intensive visits and interviews, produced its report, with a very clear bottom line: “the entrepreneurial climate in southern Italy is at great variance to north European business practices and this reality was not conducive to taking the issue further”.
In terms of financing, it should be noted that Italian ports do not cost anything, to say the least, to the country’s public burses. They are instead self-financed through VAT receipts from Italian imports passing through seaports. The system entails a degree of unfairness and considerable lack of transparency, particularly as regards the criteria of redistribution of these receipts amongst all ports by the Italian government. For instance, Brindisi is a major VAT contributor, being an importer of considerable quantities of coal, but what comes back to it as a result is very limited. Said differently, the city and the port face all the environmental problems connected to the handling of coal, while other, ‘luckier’ ports enjoy the benefits of Brindisi’s VAT receipts.
I have always argued that this type of public financing is wrong and it ought to change with emphasis on private investment and finance. This is also the orientation of the European Commission who would like to see more port autonomy in terms of investments, financing and the pricing of port services. To my view, public financing should be reserved only to major infrastructure works, such as motorways, railways, and basic port infrastructure of general interest such as breakwaters and access channels. Everything else should be the domain of the private sector who should also assume investment risk through concessions and PPPs. In this way, it would be ‘demand’ that would dictate infrastructure development and not supply, which tends to create excess capacity and ‘cathedrals in desert’.
 At the time of writing, one of the objectives of the Renzi Administration was to considerably shorten these times, as well as scrap Port Councils; and quite rightly so: The latter, in the past 20 years, have done nothing else than hold back the growth and development of ports, by promoting personal or special interests, often in tacit agreement with the port management they were expected to control and supervise.
 In Brindisi, I had ferociously resisted such a policy, promoted by various interest groups (ship agents) who wanted “their own” berths, at the cost of better port utilization.
 At the time of writing, Grimaldi had asked for a 20 year concession of one of our terminals, as it had done in many other parts of the world. The majority of port operators (ship agents and not only), many quite friendly disposed to Bari, and with businesses there, were against this project on the basis of irrelevant ‘monopoly’ arguments, when it was crystal clear, from their publications in the local press, that the real issue was that the concession would ‘disturb’ the regional, Bari-centric, planning. In other words, the concession would make Brindisi more important than it should be….
 I have colleagues, port presidents, who vehemently argue that “competition kills competitiveness”. Others, with strong “left” political inclinations, argue that ports should not compete at all. Instead, if, say, a global liner operator would like to call or invest in the country, he should not talk to individual ports but to the minister himself; the latter would himself tell them in which port they should go!