Role of Port Authorities Essay

Ports usually have a governing body referred to as the port authority, port management, or port administration. Port authority is used widely to indicate any of these three terms. The definition of port authority has been defined in various ways. In 1977, a commission of the European Union (EU) defined a port authority as a State, Municipal, public, or private body, which is largely responsible for the tasks of construction, administration and sometimes the operation of port facilities and, in certain circumstances, for security. This definition is sufficiently broad to accommodate the various port management models existing within the EU and elsewhere. (http://www.ppiaf.org/sites/ppiaf.org/files/documents/toolkits/Portoolkit/Toolkit/module3/port_functions.html#2)

Ports authorities may be established at all levels of government: national, regional, provincial, or local. The most common form is a local port authority, an authority administering only one port area. However, national port authorities still exist in various countries such as Tanzania, Sri Lanka, Nigeria, and Aruba. The United Nations Conference on Trade and Development (UNCTAD) Handbook for Port Planners in Developing Countries lists the statutory powers of a national port authority as follows (on the assumption that operational decisions will be taken locally): (http://www.uctc.net/research/diss131.pdf) * Investment: Power to approve proposals for port investments in amounts above a certain figure. The criterion for approval would be that the proposal was broadly in accordance with a national plan, which the authority would maintain.

* Financial policy: Power to set common financial objectives for ports (for example, required return on investment defined on a common basis), with a common policy on what infrastructure will be funded centrally versus locally, and advising the government on loan applications. * Tariff policy: Power to regulate rates and charges as required protecting the public interest. * Labour policy: Power to set common recruitment standards, a common wage structure, and common qualifications for promotion; and the power to approve common labour union procedures. * Licensing: When appropriate, power to establish principles for licensing of port employees or agents.

* Information and research: Power to collect, collates, analyze, and disseminate statistical information on port activity for general use, and to sponsor research into port matters as required. * Legal: Power to act as legal advisor to local port authorities. Increasingly, central governments implement seaport policies through the allocation of resources rather than through the exercise of wide-ranging regulatory powers.

While central governments should pursue macroeconomic objectives through an active seaport policy, port authority objectives should be more narrowly focused on port finances and operations. It is a widely accepted opinion among port specialists that a port authority should have as a principal objective the full recovery of all port-related costs, including capital costs, plus an adequate return on capital. The full recovery of costs will help a port authority to: (http://www.businessnz.co.nz/file/1947/100813%20Port%20Performance%20and%20Ownership.pdf) * Maintain internal cost discipline.

* Attract outside investment and establish secure long-term cash flows. * Stimulate innovation in the various functional areas to guarantee a long-term balance between costs and revenues, especially when faced with innovations by terminal operators, port users, rival ports, and hinterland operators. * Generate internal cash flows needed to replace and expand port infrastructure and superstructure.

* Compete according to the rules of the market system, without excessive distortions of competition. * Put limits on cross-subsidization, which may be rational from a marketing point of view (market penetration, traffic attraction), but which can undermine financial performance. * Avoid dissipation of the port authorities asset base to satisfy objectives of third parties (for example, port users demanding the use of land in the port area without regard to the lands most economic use or port and city administrations using port authority assets to pursue general city goals).

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Ownership of the Port of Koper

The port of Koper is the largest and the only public cargo port in the Republic of Slovenia. The ownership transformation of the port of Koper was finalized in 1995. Before the ownership transformation, the government of the Republic of Slovenie brought a decree that the shores, land and water territory around the port are also a public asset in the sense of state ownership. The value of the port infrastructure was set at the amount of USD 180 million.

A part of the port infrastructure was defined as “infrastructural bases”, and they included:

* Haulage roads,

* Railroad tracks,

* Entryways,

* Partitions,

* Sewage

* Water supply systems,

* Electric power facilities,

* Lighting and telecommunication facilities

The mentioned part of the port infrastructure, the port superstructure, machinery and other assets were evaluated in 1995 in the amount of USD 220 million. The total capital was divided into 14,000,000 shares at a nominal value of Sit. 1000. The Republic of Slovenia is the owner of 6,860,000 shares, which is a 49% ownership in priority shares and 2% in ordinary shares. The ownership structure of the Port of Koper; – 51% the state,

– 17.33% government funds,

– 7.65% municipality of Koper,

– 7.48% internal distribution to employees and pensioners,

– 10.20% internal buyout from employees and pensioners,

– 6.34% public sale.

In addition to shares in ownership of the state, the Port of Koper deals with shares on the Ljubljana stock market, hence its ownership structure is subject to daily changes The state has decided to sell its share in the ownership of the Luka Koper d. d. in 2003. During the transitional period the state, with its 49% ownership has decreased its ownership share down to 25% + 1% but in the form of ordinary shares, which enables it to gain control of functions connected to certain more important business decisions that are in close association with status changes of the enterprise.

Luka Koper d. d. is the manager of the port. On Nov. 21,2002 a Decree was issued according to which the Government Administration allocated concessions, and the decision was reached that the first concession be given to enterprise Luka Koper d. d. for a period of 35 years. Luka Koper d. d. does not have Port Authority in the classical sense of the term.

According to the Statute of the Luka Koper d. d., the enterprise has a single-member management supervised by a supervisory board of 9 members in the structure of which there are three representatives of the state, a representative of the local administration of the municipality of Koper that is itself a 7% owner of ordinary shares, a member representing small shareholders, a representative of the funds that the Luka Koper d. d. holds in its portfolio and three representatives of the employees of LukaKoper d. d. Such a structure of the supervisory board that chooses the president of the management of the joint stock company does not allow the predominance of state power over the management of the port. The state has minimal rights in bringing decisions on occasion of shareholder assemblies of the enterprise Luka Koper d. d, with merely 2% of votes.

From this we may assess that the autonomy of port management in the Luka Koper d. d. is very high.

Managerial responsibility of the port ofKoperLuka

Koper d. d., as the sole port operator manages the entire port. The Management of the enterprise Luka Koper d. d. has complete freedom in conducting its economic policies, policy of superstructure development, and the right of bringing forth a medium- term plan of development of the port infrastructure that is previously acknowledged by the Government of the RS. The port management is also responsible for maintenance of the port infrastructure. The Port of Koper can be evaluated as a Full service port.

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