April 30, 2014
The Dutch and Spanish seaports are very important for their economy. In 2011, the added value of the Dutch logistic sector was 40 billion euro (8% of its GDP) and the number of employees working in this sector is 750.000 (10% of the labor force). Spain is the European country with the greatest length of coastline with about 8000 kilometres. The traffic of the Spanish ports represents the 53% of Spanish foreign trade with European Union and the 93% of foreign trade with third countries. Moreover, the Spanish port system provides about 20% of the GDP in the transport sector and 1,1% of the Spanish GDP. It also generates direct employment for more than 35,000 jobs and 110,000 indirectly.
The port of Rotterdam is the most important Dutch seaport and is responsible for 75 % of the Dutch transshipment of the goods transport. Especially, in the field of container transport Rotterdam takes a leading position internationally not only because of its geographical position but also due to their capacity for large containerships, but also its good facilities for train and canal-transport towards Germany. The Spanish port system is composed by 28 port authorities that manage 44 ports of general interest. The three largest ports, Algeciras, Barcelona and Valencia, are in the top-10 of European ports in terms of container traffic. They are all located in the Mediterranean Sea corridor which enjoy of an excellent geographical situation to channel the traffic that goes from Asia to the South of Europe.
In the literature most attention has been focusing on the relation between factor productivity and governance structure. For example, based on international institutional comparison in an article in Transportation Research Part E, Cheon, Dowall and Song (2010) showed that ownership restructuring in ports contributed to total factor productivity gains. Especially, reforms of ownership structure through a less pronounced involvement of the government and new asset management practices have been successful in speeding up efficiency of port operations. However, less attention in this study has been given to the role of competition in this productivity gain. Globalization and containerization has brought an increase in freight traffic but in practice the shipping companies tends to concentrate the traffic in a few ports that operate as a logistic platforms. This has led to an intense global competition among ports to attract shipping company’s traffic. In addition, the ports are competing to attract investment companies specialized in the management of terminals, which are also large multinational companies.
Indeed, terminal and cargo shipping services are becoming more and more a global competitive sector and this competitive scenario is in part responsible for the productivity gain in the port industry, although it could be the case that such productivity gains are hindered by government intervention.
In a study last March by the Dutch consultant Ecorys it was revealed that particularly German and Flemish authorities financially support their ports at the expense of the public budget and therefore competition was unfair. In those countries public money was invested in the maritime entrances of the ports, docks, quays, sites, operational costs of port management and deficit compensation. To create a genuine level playing field in Europe with respect to port financing, the public financial support should be equal in all countries concerned; preferably public authorities should abstain from public support to seaports. The recent EC initiatives – the communication “Ports: an engine for growth” and the proposed EU Ports Regulation are an opportunity to launch the debate.
A more difficult question is the introduction of a corporate profit tax for port authorities in the EU. Spanish ports enjoy of a partial exemption in the profit tax because only revenues from commercial activities in the port sites are subject to the tax while charges set to shipping companies and terminal operators are exempt. Dutch authorities recently postponed the introduction of a corporate profit tax for the most important Dutch ports. According to calculations by the port of Rotterdam this would mean an extra tax burden of approximately 50 million euro in a situation in which other ports in Europe pay nearly any taxes. In 2012, all the 28 port authorities only paid about 4 million euro for this tax.
In 2006, the EU commission published a report “Public Financing and charging practices of seaports in the EU”. The aim of the study was to contribute to the transparency on both public financial flows into the port sector and charging flows back to the state. Looking at the major ports it was showed that they crucially depend on public sector intervention in terms of financial flows and charging practices. Also based on these report many things have changed and it is, however, advisable to repeat this report. For example, the Spanish ports located in the Mediterranean corridor needs huge investments in surface transport modes (railways, motorways) to be able to exploit their excellent geographical positive in the traffic Asia-South of Europe. It is debatable who should pay those investments and the current solutions seems to go towards co-funding of central government and port authorities. (together with Xavier Fageda, Universitat de Barcelona)