Permanent Commission on Infrastructure and Environment
TWEEDE KAMER DER STATEN-GENERAAL
Professor HE Haralambides
Econometric Institute
Erasmus University Rotterdam
The Hague, Thursday
17 March 2016
Dank u voorzitter, goede middag dames en heren.
In the little time I have at my
disposal, I will try to sketch for you a
scenario,
placing the port of Rotterdam on the European port chessboard. As the word
suggests, this is only a ‘scenario’, among many others, in a landscape that
changes by the day.
I
would start therefore from the basic premise that, by its mere location, the
competitive position of Rotterdam is enviable. This is so, in spite of the fact
that our main competitors, Antwerp and Hamburg, subsidize their port
infrastructure, while we, instead, pay every year a substantial dividend to our
shareholders, the City of Rotterdam and the Dutch Government. However, the risks are not few either, and we
need to continuously stand on our toes, and be in a state of permanent alert,
rather than sit back and rest on our laurels.
Port competition in Europe is not
straight, but tilted, if you would
allow me the chessboard witticism. The board is placed neither North-South nor
East-West. Rather, the chessboard is placed from North-West to South-East. In
the former region we have the ZARA ports of continental Europe, i.e. Zeebrugge, Antwerp, Rotterdam and Amsterdam, while in the latter region ports
are aplenty in Egypt, Israel, Turkey and Greece. Amongst them, I must highlight
the important future role of Piraeus, recently bought by COSCO Pacific of
China, which intends to transform this port into the southern gateway to
Europe, albeit amidst significant resistance by the communist Greek government.
The North-East (Baltic Sea, including
Copenhagen) and South-West (Portugal, Spain, France, Italy) regions seem to be
losing out in their ‘hub status’ aspirations, if they ever had any, while I foresee
a declining market share of the port of Hamburg. The reason for the latter
prediction is the competition posed against it now by Piraeus, for the
hinterlands of Central and Eastern Europe, as well as Southern Germany, up to and
including the Munich/Nuremburg region. This threat is not passing unnoticed by
the North German port, and this is exactly why it now tries to develop,
strengthen, and finance its links with the ZARA ports, intending to spend 350
million euros on road and rail infrastructure (including its part of the 3rd
track of the BETUWE route).
The Mediterranean region is
assuming an increasingly important role in the global East-West trades of
containerized goods, and it is not at all certain that the continental ports of
northwestern Europe, Rotterdam included, will continue to play as important a
role as they used to. This observation
is particularly relevant, in view of the overland rail transport plans of China
and Russia, coupled to European distribution possibly from central Europe.
It should also be kept in mind
that shipping networks are being reconfigured, so as to better serve the
increasing African trades. The port of Tangiers in Morocco is a case in point, being
developed as a key transshipment center, feedering West Africa with both Asian
and North American cargo. The eastern part of the African continent, including
its many landlocked countries, is principally feedered from Dubai, and somewhat
less from S. Africa, while, in the future, this role is likely to be taken by
the new port being constructed in Tanzania, south of Dar-el-Salaam. It is highly likely that the new port is
selected for the One Belt, one Road
(OBOR) network of China: there, half-empty ships with European cargo would top
up before returning to Asia.
In parallel with African trades,
competition is also increasing for supplying the world’s biggest consumer
market, i.e. the American market east of the Rockies (US East Coast). Two
oceans compete for this market: the Atlantic and the Pacific; in other words,
the Suez Canal and the Panama Canal. Suez has recently increased its capacity, while
Panama, under its current locks configuration, is unable to host containerships
of the latest generation (bigger than 15,000 TEUs). With the tacit blessings of
the United States, this problem has prompted Panama to sign, recently, a
Memorandum of Understanding with Egypt. Although the stated intentions of the MoU are of the usual kind, i.e. exchange
of information and know-how, one should keep an attentive eye on ‘correlations’
between the canal dues of the two
canals.
There are two main players at the
European port landscape: Maersk-APM Terminals-Mediterranean Shipping Company
(MSC) on the one hand, and COSCO-CSCL (and their current or future alliance,
which might possibly include CMA CGM) on the other. As mentioned above, COSCO
Pacific has already bought 67% of the port of Piraeus’ share stock, while I
foresee that, soon, it will also win, amongst toughest competition, the complementary
bid for the port’s 200-hectares distribution center at Thriasion. The two
groups both compete and cooperate in many projects. For instance, APMT withdrew
at the last minute from the Piraeus bid, although it had continuously proclaimed
its strong interest in the project, as well as that “when APM bids for
something it never loses”. This left COSCO as the sole contender, securing the
port at the extremely attractive price of €365 million. I predict that APMT
will instead win the bid for the port of Thessaloniki in the north, to
complement its investments in Izmir (Turkey). Again, I foresee that these
developments will eventually encroach on Hamburg’s south European market share.
Efforts to cement Rotterdam’s
position on the Chinese OBOR network are imperative. “Antwerp” is already
talking a lot to China on this, and Rotterdam should not lose its step. A lot
of uncertainty prevails at this point on the “One Belt, One Road” project of
China, both within that country and in the rest of the world. India, Russia and
the United States see the project with a pinch of suspicion, as a move on the
global geopolitical and security arena. India has described the project as a
unilateral initiative, claiming that China should have brought it to the Asian
Infrastructure Investment Bank (AIIB) to be discussed jointly with others.
Also, India is neither happy with Chinese investments in Pakistan and
Bangladesh (seeing them as encircling
it from the north), nor with the massive Chinese investments in Sri Lanka.
Russia does not welcome the Chinese encroachment into Central Asia, which it
sees as its own backyard, while the United states has three concerns: China’s
activities in the South China Sea; its increasing links with Pakistan and that
country’s willingness to, perhaps, accommodate a Chinese naval presence at the
port of Guadar. Finally, the USA sees OBOR as a competitor to the Trans Pacific
Partnership (TPP), in view of China’s interests in the Pacific (investments in
Australia and a possible construction of a new canal in Nicaragua). Finally,
all three superpowers are equally concerned with China’s intentions to use the
Yuan as the underlying currency for the development of OBOR.
The ‘stated’ objectives of this
multi-billion dollar project are to secure China’s energy demands; develop the fairly
underdeveloped northwestern part of the country and connect it, through central
Asia, to Europe; better connect China with South-East Asia; and provide a
circular sea-land transportation network, running westwards overland, and
returning to Asia by sea, through the Mediterranean, starting, in all
likelihood, from the port of Venice.
Enough anecdotal evidence
indicates that China is showing serious interest in Venice’s offshore container
terminal (VOOPS), designed by our own Royal
Haskoning. In July 2016, the Mario Monti Foundation is organizing an
international conference in Venice, with strong Chinese participation, to
discuss VOOPS. The project concerns an innovative offshore-onshore port system,
able to accommodate ships of the latest generation. Information also indicates
that China might be interested to finance 70% of this 1 billion euro project,
with the remainder financed by the Italian government. The Port of Rotterdam should try to find ways to connect to this project, including a possible expression
of interest in taking a small part in its financing. It should be kept in mind
that Venice, or better the port system of Venice-Trieste-Ravenna, is ‘the port’
of the very important Milan/Turin distribution system to which Rotterdam is
connected by rail. To my view, it is the importance of this rail connection
that, if played well, could anchor Rotterdam as a principal port in the OBOR
system. Increasing both the capacity and the quality of this rail link presents
us with an opportunity not to be missed, and resources shouldn’t be spared
either.
In conclusion: Rotterdam’s future strategy should be more to
its south (Venice-Trieste-Ravenna), where it could cooperate, rather than to its east (Hamburg-Bremerhaven),
where it competes. Entering the Piraeus landscape at this (late) point in time
might be difficult, but a presence there would be advisable and hopefully
welcome. On the basis of the above, the following steps are recommended as Rotterdam’s
southern strategy:
- Improve the capacity and quality of the Rotterdam-Milan rail
link
- Express a non-binding interest in taking a share in the
financing of VOOPS
- Under the auspices of the highly enterprising Dutch embassy
in Athens, and possibly in cooperation with COSCO, establish the Netherlands Institute of Maritime and Port
Studies (NIMPS), as a branch activity of the Netherlands Institute at
Athens (NIA) where the maritime institute could be comfortably housed.
- Stand firm on its expressed conviction for a “level playing
field” and “full cost recovery” among European ports and reconsider its
decision to allow dredging costs be excluded from the forthcoming European
Commission’s State Aid Guidelines.-
H. Haralambides
In general, it is not in the interest of big business to
show large profits, as this may potentially attract competition from newcomers.
In the last twenty years, however, American profits have soared but new entry,
domestic or inward FDI, has been scarce. Company size (cf. M&As) and consolidation
on the one hand, and transaction costs (cf. regulatory lobbying by potent incumbents) on the other, pose significant barriers
to entry that could explain all this.
