Tuesday, August 30, 2016

Public financing of private ports?

After years of debating, I must admit I am quite happy that the European Commission appears to converge to my views on the subject, repeatedly expressed for more than 20 years now.

As ports are increasingly adopting an ‘enterprise’ model through the award of concessions to private port operators, the public financing of port infrastructure and operations assumes a very different dimension, even for ports that are under full State of municipal control.

For instance, what happens if a public intervention, intended to promote the ‘general economic interest’, instead favors only one concessioner, or group of concessioners, against some others located in the same port, neighboring ports, or neighboring countries? What are, finally, those ‘infamous’ sovereign state responsibilities, often taking the form of Public Service Obligations, that allow governments to pour public money into clearly private port infrastructure?

Dredging is a good case in point I have often used with my students. Providing and maintaining access to a port could be rightfully considered as a public good serving the general economic interest. But when the access channel is dredged down to 16 meters, surely this public good is not meant for my little fishing boat, but for a containership of 20,000 TEU. Once identified, it should therefore be the user of the good who should pay for the costs of its production and not the general taxpayer. In other words, port access is no longer a public good and, among other things, the taxpayer should be informed on how his money is being spent by public port authorities.

Last mile investments is another good example. Connecting the port with the national motorway system is in principle a public good, serving the general economic interest (I would happily take my bike and go to the shore for some birdwatching!). But what happens if this ‘connection’ favors just one terminal operator against many others? Clearly, this ‘last mile’ investment is a private rather than a public good and the terminal operator should pay; participate in the development costs; or pay for the use of the road, once completed. Finally, the absence of such a connection should be clearly discussed in the concession agreement: More often than not, concessions are awarded, with the concessioner quickly reverting back to the awarding authority to ask for more infrastructure and connections because, allegedly,  he cannot do his job as efficiently as he would like to. The awarding authority is often ‘obliged’ to accommodate such requests and this cannot continue.

As said, I am quite content with the policy orientations of Competition Commissioner Vestager  in terms of focusing on the real issues facing our ports. HH