Abstract
In this paper, we describe the capabilities and strategies required for obtaining a concession to operate a terminal in a seaport. The extent to which concession procedures create entry barriers and lower the contestability of the market is assessed. Recent studies and policy initiatives have stressed the importance of lowering economic, institutional, and locational entry barriers in seaports. Concession procedures have an effect on market entry. Tenders may lower entry barriers by ensuring transparency, restricting discrimination and exclusivity, and limiting concessions to certain periods. However, tender procedures may also introduce entry barriers in a number of ways, including the requirement of capabilities and track records to win a tender. This paper examines relevant empirical material of recently completed or intended concessions in major European ports to evaluate these issues.
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Notes
An earlier version of this paper won the Palgrave-Macmillan MEL Best Paper Prize at the International Association of Maritime Economists (IAME) Conference, Dalian, PRC, April, 2008.
However, even in the British case, where both the regulatory and port-ownership role of the public sector have been minimised, government influence is significant at various levels (national, regional, or local) in port development (Gilman, 2004). Recent examples are the UK government decisions to grant approval for the London Gateway development and to reject the proposal for the expansion of the port of Southampton.
Liquid bulk cargo ports often do not require large infrastructure investments and may simply consist of infrastructure to connect a ship at anchor through pipelines with storage facilities on shore. Containers require specialised gantry cranes and further maritime and hinterland infrastructures.
This conclusion is irrespective of the way in which their performance was measured – throughput per quay metre, TEU per ship-to-shore gantry, or TEU per hectare.
The concentration of terminal operators may be considered as an effective means to counterbalance the power of liner shipping companies and alliances. On the other hand, the concentration is sufficiently large to question whether terminal operators have market power. EU competition regulations have affected Hutchison's expansion in North Europe, and it is likely that the regulatory authorities will also carefully scrutinise future expansions by the major players.
See the general literature on concessions in infrastructure and the related (re)negotiation processes between public actors and private interests (Kerf et al, 1998; Guasch, 2004; Guasch et al, 2006).
In several cases, a minimum percentage of transhipment containers is also agreed upon in the concession contract.
The nature of the container-handling business (notably the high fixed costs and lack of service differentiation, except in terms of location) in theory creates significant opportunities to improve service through cooperation. However, forms of operational cooperation in the market do not come about easily and they usually end up in mergers or acquisitions (Notteboom, 2002; Musso et al, 2001; Slack and Frémont, 2005).
Terminal operators that operate more than one terminal in the same port area (each terminal with different concession stipulations regarding throughput guarantees) are very creative in redistributing volumes over the different terminals in order to meet minimum throughput guarantees and optimise terminal operations.
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Pallis, A., Notteboom, T. & De Langen, P. Concession Agreements and Market Entry in the Container Terminal Industry. Marit Econ Logist 10, 209–228 (2008). https://doi.org/10.1057/mel.2008.1
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DOI: https://doi.org/10.1057/mel.2008.1