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The new National Ports Policy sets out the intention by the Government to adopt a more hands on approach in its management of the sector. This, however, may prove challenging according to Mary Gallagher and Michael D’Arcy.

The 2013 National Ports Policy launched by Leo Varadkar TD, Minister for Transport, Tourism and Sport, states, in its Executive Summary, that “the structure in place since 1996 and the laissez-faire policy where ‘one size fits all’ is no longer appropriate”. Instead the Department is going to be more ‘proactive’ in its management of this sector.  

A series of actions is proposed to implement what is, objectively, a considerable change in the role the Minister sees for policy actions and instruments in directing the operation of Ireland’s port companies. These changes include:

 The establishment of a hierarchy of five ports of national significance  (tier 1 ports: Dublin, Cork and Shannon Foynes and tier 2 ports: Rosslare and Waterford)

The transfer of other commercial State owned ports to local authorities as there is no longer a role for central Government in their management

  Closer scrutiny by the Government of the ports sector through the introduction of a performance measurement system,

  The use of capacity forecasting, from 2018 onwards, and the use of origin and destination studies of freight traffic to support a more systematic approach to the long-term development of port infrastructure 

Before the 2013 National Ports Policy

The Department’s use of the term laissez faire to describe its policy since the passing of the 1996 Ports Act is an interesting one. This term is generally understood to mean a policy of leaving things to take their own course, without interference. In hindsight this appears to have been a successful policy during a period (1993-2007) when demand for port services grew at an unprecedented pace and, unlike other elements of Ireland’s infrastructure, chronic under provision was avoided. As the Department correctly highlights, however, the result of that growth spurt is that ports are no longer of ‘one size’. There were winners and losers amongst the port companies and their customers (providers of shipping and port services) in the boom years; this is even more evident in their responses to the economic downturn. But having concluded that a policy of laissez faire is  no longer fit for purpose, deciding instead when, where and how to ‘interfere’ is a complex and important task.

Objectives of the new policy

The primary objective of the new ports policy is “to facilitate a competitive and effective market for maritime transport services”. The document also notes the long-term international trend towards increased consolidation of resources in ports and shipping, as economies of scale are sought. In this context it will be interesting to see the conclusions of the Competition Authority when its report on the dynamics of competition within the Irish ports sector is published For example, it is to be hoped that it will be clear and comprehensive on the existence or otherwise of breaches of the competition rules and will, where justified, recommend appropriate preventative measures. By publishing his ports policy before the Competition Authority’s report is completed, the Minister appears to be signalling that being proactive does not, at this point, include measures that would alter the competitive market conditions. On other hand it may be that being proactive will necessitate policy changes in response to the Competition Authority’s Report.

An EU perspective

What other potential strategic policy challenges are likely to emerge in the sector, at EU level and nationally, over the rest of the decade that a more proactive policy may need to address? At EU level, the current ports policy is enshrined in the Ports Policy Communication 2007. The European Sea Ports Organisation (ESPO) feels that this is a good basis for action which could be strengthened by EU initiatives on specific areas such as guidelines on state aid.[2] The EU, however, seems to feel that the 2007 approach has not worked and that a full-blown ports policy and attendant legislation is necessary. The related consultation process has been completed and the new policy is likely to deal with issues such as state aids, port charges and concessions to provide services, as well as the promotion of more efficient port operation through fair competition[3].

In making proposals, the European Commission will no doubt be mindful of the fact that its draft Ports Directive in the early 2000s failed to secure approval on two occasions. Therefore the Department will no doubt be keeping an eye on developments in Brussels and working closely with the Irish Ports Association (IPA) on its responses to what is proposed.  

Intra-port competition

The Ports Policy expects the ports of national significance (tier 1) to lead the way in meeting the country’s future needs for port capacity. One of the successes of the previous policy was the development of more intra-port competition in service provision. The projections and expectations of port service providers will therefore be an important influence on the direction these ports take. The Policy document also notes that the tier 2 ports have a role “to develop additional capacity to aid competitive conditions in the unitised sector in particular”. Should we translate this as an expectation that Rosslare and Waterford will compete successfully with Dublin Port in relation to Ro/Ro and Lo/Lo respectively? With regard to competition between ports in this island’s twojurisdictions, we note that the ports policy is also strangely silent on the island of Ireland dimension, yet the ports of Belfast and Larne remain a key element of the port infrastructure serving business across the island (e.g. the North West).

The future of shipping services

Ports exist to facilitate shipping services and their relative success is dependent on the range and number of shipping services they attract.  The unitised shipping sector (Ro-Ro and Lo-Lo) is vital to Ireland’s trade. It is this sector and the ports that handle these services that have experienced the most significant changes since 2007. Commercial ferry services are under increasing pressure from the continuing recession and challenges to their business model on a number of fronts. Will the shape of the ferry network change as road freight pricing in introduced by the UK in 2015 and more services operate directly between Ireland and the Continent? (It is anticipated that the charge will be £10 per truck per day.) Will the network of container services contract further as operators seek to preserve margins by consolidating services?

As the Government encourages more focus on the BRIC and other non EU markets, more trade will flow to/from Ireland through the major European hub ports. This will have the effect of increasing the relative importance of how EU ports policy is implemented in those ports.

Funding issues

Unsurprisingly the document states that there is one area of Government policy on ports that is not going to change and that is the absence of Exchequer funding. In relation to financing the next phase of port development, the Policy continues to be that port operators will themselves have to finance any developments required to help them prepare for Ireland’s recovery and the resulting growth in the volume of people and goods moving on and off the island by sea. Nevertheless adopting a ‘proactive’ policy risks new questions being asked of individual port managements by those they are asking to provide the necessary funding, such as:

· Is there sufficient regulatory certainty for investors to be comfortable about the projected capacity of individual port companies to repay and/or generate promised returns?

· Consolidation and/or innovation are two proven responses of operators seeking to strengthen their business, so how and where will new selective policy approaches facilitate either, or both, in the ports sector?

·If the State needs more money in the future will they turn to profitable port companies?

Conclusion

The movement of goods and people by sea to and from the island of Ireland via competitive, sufficient and globally connected maritime services is a strategically essential economic policy goal. Effective, efficient and well-managed ports are vital to successfully completing this task. The implementation of policies that successfully facilitate the managers of port companies, service providers and investors to do so, is a clear and visible goal. The challenge this new proactive policy sets for the Department is that, having decided to no longer leave the sector to follow its own course, it must now advise the Minister on how to be a very good chart marker in what are already stormy seas with many cross currents and no sign yet of the return of consistently fine weather.

Michael D’Arcy is principal of D’Arcy Smyth & Associates and an expert in policy and regulation.

Mary Gallagher is a director of Strategic Transport Solutions International, a consultancy specialising in the maritime sector.

This article appeared in the April edition of the Public Affairs Ireland Journal. To view this Journal, click here.