ASIAMARUNESCAP Conference Bangkok 27 October 2005

1
ASIAMAR/UNESCAP Conference Bangkok27 October 2005

• Port Competition and Demand for
• Land Transport Infrastructure
• Andreas Kopp
• OECD/ECMT Transport Research Centre

2
Overview

• Determinants of Port Competition
• Perceived Problems of Port Infrastructure Policy
• Undercapacity
• Monopoly
• Lack of connectivity
• Pre-emptive Competition and Overcapacity
• Some Empirics
• Institutional Solutions

3
Determinants of Port Competition

• Economic catchment area of the port
• Land transport connections to demand determines
  size and overlap of catchment areas
• Intensity of competition is function of
  territorial overlap of catchment areas
• Switching costs for shippers
• Geographic distances between competing ports
• Contractual relationships

4
Determinants of Port Competition

• Technology of ports
• Indivisibility
• High capital intensity
• Investments are sunk facility cannot be sold to
  somewhere else
• Congestibility

5
Undercapacity

• Lack of Competition Monopoly
• Switching costs are prohibitively high
• No overlap with catchment areas of other ports
• New port (entry) would find no demand
• ? undercapacity increases profits or rents

6
Undercapacity

• Even with competing ports but weak land
  infrastructure
• level of switching costs allows for some market
  power
• congestion drives up revenues
• ? undercapacity still increases profits or rents

7
Overcapacity

• Strong competition intensity
• low level of switching costs
• strong overlap of market territory
• uncongested land transport connections
• potential of pre-emptive competition
• competition by price and capacity
• large capacity and sunk investments work as
  credible announcement of low prices
• contestability does not work

8
Average Costs and Size

Throughput
9
Martitime Infrastructure InvestmentSelected
Western European CountriesStagnation
10
International Transport through SeaportsGoods
loadedBy Asian Standards Moderate Increase
11
SeaportsSize bias (?)
12
Empirics on Forms of Competition

• Many forms of competition of importance in Europe
• Imperfect monopolies due to bad land
  connectivity
• United Kingdom
• Manchester, Southhampton worst performers
• Pre-emptive competition in Western Europe at the
  beginning of the 90s
• Antwerp Rotterdam
• Rotterdam Hamburg

13
Empirics on Forms of Competition

• Pre-emptive competition in New Member Countries
  of EU
• Gdansk among European best-performers
• Scezin among worst performers in strongly growing
  market

14
Institutional Solutions

• Conditions of pre-emptive competition
• international agreement on location of individual
  port
• international cooperation on regulation
• international coordination on intermodal
  connections
• Undercapacity
• international cooperation on land infrastructure
  to create level playing field
• agreement on regulation and incentives for
  capacity expansion

15
Institutional Solutions

• Informative Conventional Wisdom, Saundry and
  Turnbull (1997)
• "It is no coincidence that the majority of the
  world's most successful ports conform to the
  landlord model, with public sector involvmement
  in the administration of the port as both land
  owner and regulator. This allows the benefits fo
  private sector management in the efficient
  handling of cargo to be combined with the public
  and (common) user interest of both customers and
  other important stakeholders. If port users are
  required to fund superstructure investment, in
  port or whole, this will place an immediate and
  effective restraint on potential over-capacity."