By Peter de Langen
COMMENT: In many countries, port development and the development of, often adjacent, sites for industrial activities is traditionally done by different, state-owned entities, writes Peter de Langen.
This is the case in South Africa, where one organisation is responsible for Coega port and another is responsible for the adjacent industrial zone. Similar examples can be seen in Brazil and Indonesia.
There are ongoing discussions about the benefits of an integrated model. I would argue that such an integrated model, where a government-owned port development company is in charge of developing and commercialising port infrastructure and industrial land adjacent to the port has huge advantages.
First, there is a strong mutual dependence of both: if the port is attractive, the companies in the industrial park will benefit, while a strong developing industrial cluster generates huge volumes for the port. Such strong mutual dependencies give rise to all kinds of friction regarding pricing, negotiations, and investment decisions unless developed by one entity.
Second, from a customer perspective, industrial customers purchase a bundle of a site in an industrial park and efficient and competitively priced port operations. Providing this bundle in one hand reduces risks.
Third, many stakeholders perceive port and adjacent industries as one integrated complex and demand involvement in the development of that complex. An integrated model provides a much better basis for building stakeholder support. Investments in safety, security and benefits for local communities, that are a necessary part of building stakeholder support, are more likely in an integrated model.
Fourth, often the separation between ‘port activities’ and ‘industrial activities’ is blurred and a separated model may lead to competition. That goes at the expense of the public interest of ‘the right company in the right location’. Also considerable uncertainty is part and parcel of the development of port infrastructure and industrial sites and land that was originally intended for industrial use may ultimately be more valuable for logistics activities. This was the case for the major port expansion projects of the 1970s in Rotterdam and Antwerp. So, an integrated model is better positioned for flexibility in land use.
Finally, sooner or later, developing infrastructure that connects the port and adjacent industries creates value for port users. Developing, and planning ahead for, such infrastructure is more difficult without integrated development.
For these reasons, taking a fresh look at integrating port and industrial development may be valuable for many countries.
First published by The Analyst in his Port Strategy column.