Government urged to liberalise port tariff

THE Government should liberalise port tariff to be more market driven and enhance the competitiveness of local ports.

“Local port operators seem ready, willing to stand on their own two feet to compete on a level playing field,” said Nazery Khalid, a senior fellow of the Maritime Institute of Malaysia who undertook the study entitled, To liberalise or not to liberalise? An assessment of port tariff in Malaysia.

Nazery said most senior officials of port- operating companies interviewed in the study agreed with the idea that tariff rates be determined by market forces.

“As it stands, some federal ports are already performing very well, the emergence of Port Klang among the world’s top 20 container ports is a reflection of that. I am confident that they can do a lot better if they can be more competitive tariff-wise,” he told StarBiz.

Nazery Khalid

While the idea to enhance ports’ competitiveness via tariff liberalisation is promising, certain quarters wondered whether a liberalised tariff milieu would merely be a “bottom line-oriented exercise” and lead port operators to charge higher tariff without a corresponding improvement in their services.

“Despite the pledge of port operators to improve their services with higher tariff, there is no telling if their interpretation of ‘better services’ would match the expectation of their users,” Nazery said.

“Some port users are anxious that a relaxed tariff environment would lead to port operators arbitrarily and unilaterally imposing higher charges and introducing new ones.”

He suggested that to protect port users, port operators could consider differentiating or itemising various chargeable services if they were allowed to fix their own tariff.

“As it stands, different port operators package their ‘service menu’ differently in order to create differentiation in their service offerings and in their marketing mix,” he said.

The use of port tariff as a potent tool for port operators to gain competitive edge was demonstrated to its full effect when Port of Tanjung Pelepas (PTP) managed to pry Maersk and Evergreen away from the Singapore Port when PTP began operating. This triggered a “pricing competition” between the two ports, which underscores the importance of tariff as a key “strategic weapon” in the armoury of port operators to attract port users.

Nazery also said that regional ports were expanding their capacity to offer quality services at competitive prices to attract main line operators (major shipping lines) and to enlarge their share of the lucrative intra-regional trade.

This has become a matter of priority as regional ports jostle for position to capitalise on the prospect of greater regional trade volume once the Asean Free Trade Area is fully implemented and trade in the Asean region is completely liberalised.

Nazery said most of the operators of privately-owned ports in Malaysia felt that their current tariff structures were at the right level, while operators at federal ports thought their charges were too low. “The reason for this is simple – private ports have the liberty of fixing their own tariff according to their capacity and clientele, while federal ports are bound by tariff structure fixed by the Government many years ago,” he said.

In support of a more market-driven tariff, it can be argued that inefficient port operations may lead to an increase in terminal charges.

“This is due to the fact that terminal operators need extra funds to cope with various costs, including port charges, to attain break-even points,” he said.

Nazery also cautioned that low tariff might lead to inefficiency not only to port users but also to port operators, and might even extend across the trade supply chain.

“Port users will have to invest in additional capital to cope with inefficiency at ports where tariff is low and their operators do not have the motivation to invest in extra capacity and improve service.

“In short, when it comes to ports, good services are not cheap and cheap services are not good,” he said.

“For a country like Malaysia which depends heavily on its ports to facilitate much of its trade, tariff liberalisation must be judiciously applied to ensure that its ports are competitive and will continue to enhance their competitiveness.”

Source: Star Online