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The impact of Privatization on the Port Systems of the World

Journal: Quarterly Scientific Journal "Economic Herald of the Donbas" (Vol.65, No. 3)

Publication Date:

Authors : ;

Page : 110-114

Keywords : port privatization; marginal costs; public-private system; private port; port regulation.;

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Abstract

The maritime freight industry plays an important role in world trade, allowing countries to use the relatively cheap option of moving goods from one part of the world to another. Seaports play an important role in this process. It has been argued that port privatization promotes foreign investment and infrastructural development of the country, as well as provides access to technology to improve overall operational productivity. For many, if not all, coastal countries, ports are critical hubs for international trade flows. If they work effectively, the economy, the electorate and the country as a whole will benefit – but, unfortunately, the opposite is also true. In essence, ports have been nominated as ideal candidates for privatization because, by exchanging millions of tons of cargo and passengers each year, their level of productivity and efficiency affects the entire economy. In addition, with extremely large investment portfolios due to the nature of the infrastructure and superstructures required for the efficient operation of the port, long-term return on investment is critical to justify sustainability. Standard economic theory assumes that under highly competitive market conditions, marginal costs will be equal to marginal revenue, and a fully competitive quantity of goods or services will be supplied and purchased. Ports can perform various functions. Land ownership applies to tangible assets such as embankment walls, berths, terminals and parking areas. The regulation of the port concerns navigation and ensuring compliance with such issues as waste removal, safety of crew members, operation of vessels. In the above models, a purely state seaport will be a port where all three elements are under state control. A purely private port would be the opposite of the above, where all three elements are under the control of a private organization. A complication may exist when all three elements are provided privately by the same entity, which may develop a monopoly and lead to market failure. The public-private port system will be one where the land is state-owned, the port is regulated by the state, while the actual operation is performed privately. This allows the state to have a controlling stake in key elements such as land, infrastructure and regulation, while operations are improved in terms of efficiency because they are performed privately. There are two models of port management or regulatory management: complex, lease and "tool". The analysis shows that there is no clear directive as to whether private ownership prevails over state ownership, and any privatization decision must take into account its objectives, unique market conditions and the general constraints encountered in privatizing the firm.

Last modified: 2022-01-11 19:03:33