NO to Penang Port privatisation

I don’t know about you, but I got that sinking feeling when I heard that Penang Port could be privatised.

At present, Penang Port comes under the federal Finance Ministry. The government reportedly has already spent RM1 billion over the last five years to upgrade Penang Port.

Now the news is that Malaysia’s seventh richest man, Syed Mokhtar Al-Bukhary, could take over the port, as reported in the Singapore Business Times. Just how many ports do they want him to take over? His MMC already controls Port of Tanjung Pelepas and the Johor Port in Pasir Gudang.

Surely ports are strategic assets that should remain in goverment/public hands. Remember that the successful Singapore port is government owned.

If Penang Port is not being run efficiently enough, then just hire more qualified and competent managers.

Read this argument against the privatisation of ports from Business Line, the financial daily of the Hindu group:

`Privatisation does not promote the interests of ports or the country’ — Mr K. V. A. Iyer, Vice-President, Water Transport Workers Federation of India

V. Sajeev Kumar

THE WATER Transport Workers Federation of India, one of the five major federations representing port and dockworkers in the country, is spearheading the agitation against privatisation of ports. Mr K. V. A. Iyer, Vice-President of the Federation, spoke to Business Line on the views of the Association against transferring of public assets to private players for operating container terminals through BOT (build-operate-transfer) route. Mr Iyer, who is also the Working President of the Cochin Port Labour Union, strongly opposes transferring of ownership or control of ports to multinational companies.

Excerpts from the interview:

How do you view privatisation of ports, in general?

By privatisation of ports, we infer that ownership or control or both of a public port asset is transferred to private entrepreneurs.

The ports are unique public assets with inherent right to public access. There is need for caution in transferring such public assets so that public interests do not get jeopardised.

Ports are natural public assets and must remain in the public domain, as they are key to national security. In case of a war, the first targets are ports. Naturally, such strategically important assets must always be under the control of a public authority.

It is perhaps time for a policy shift in the port sector. Do you have any suggestions on the need for Indian ports to keep pace with similar facilities elsewhere in the world?

We cannot keep aloof, lest we are left out. But the findings of a recent study by International Association of Ports and Harbours (IAPH) suggest, “Although the influence of private sector actors in ports is growing, the role of public sector agencies also remains significant.”

Public authorities control most ports in the United States as also in the European Union. The major share of investment for ports in advanced countries comes from public funding.

Such flow of public funds in European ports has become controversial and led to disputes among EU members because such public financial support deters competition and free access that Maastricht Treaty — the EU’s foundation — guarantees.

The EU has passed a law to look into the public subsidy that goes into ports sector in Europe to determine whether they are consistent with the Maastricht Treaty. The ports provide service to facilitate international trade by shipping.

World-wide, the private sector is recognised as an efficient provider of service. So, is the private sector not most appropriate to operate ports?

Singapore is a public port authority. In terms of efficiency the port is world-class. In Kochi Port, the Dubai Port has secured the concession to operate RGCT.

This Port has entered into contract to build and operate ICTT at Vallarpadom Island of Cochin port.

Dubai Port is said to have acquired CSX Terminals world-wide. There are models for everything. One model doesn’t fit all.

How will it be possible to raise the Rs 50,000-crore investment required for the port sector for the next 10 years without involving the private sector?

The objective must be very clear. If the Government does not have adequate resource to invest in ports, alternatives must be looked at. In that case the government should invite competitive bids to quote highest revenue share from prospective entrepreneurs. If the intention is to ensure efficient port service, parameters of efficiency must be set rather than the revenue share.

For example, for a container port, benchmarks must be set for the number of moves per hour, the turnaround time, the rate of user charge, and so on supported by credible performance guarantee.

However, this is not how port concessions are awarded in India. Here, most of the pre-bid meetings take place between the port authorities and prospective bidders. The bidders are encouraged to set as many conditions as they feel like.

All such demands are later incorporated in the bid document as if the public port authority set them. It will ultimately result in a container shipping interest cornering almost all major ports in India for its service. Such privatisation merely helps the shipping line to promote its interests and not that of the ports or the country.

So what you oppose is not privatisation per se, but to the method and means of inducting the private sector in ports?

Only the Government can be in charge of some functions, for example police, defence, ports and so on. The Government has to find the money to invest in these sectors. It is not good to entrust these functions to the private sector because there is no money.

In the globalised environment, the role of government is waning while that of the private sector is waxing? Is not privatisation desirable from this point of view?

The roles of governments are not shrinking under the globalised environment. The question is whether everybody in the world accepts globalisation.

There is growing opposition to globalisations from a large number of people because its benefits accrue to a very small section in society. There is demand to make the economy more inclusive so that no one is left out.

Globalisation is not just free trade in goods and services and its rules are set by the World Trade Organisation. The significant thing is that the maritime sector that includes ports and shipping did not come within the scope of the WTO. That means the governments are not obliged to allow free entry of maritime services.

The main opposition against inclusion of maritime service under the WTO was from the United States. The US wanted to continue with highly subsidised shipping service and ports so as to provide inexpensive service to its exporters who could then capture the world market.