Capacity building seminar on planning, design, development and operation of intermodal freight interfaces, including dry ports Part 2: Policy Issues and Financing of Dry Ports Peter Hodgkinson, Consultant Transport Economist UNESCAP 1
Content – Part 1 1. Policy initiatives to assist dry port development 2. Infrastructure issues related to dry port development 3. Good practices of dry port development in the region 4. Financing - PPP and other financing methods 2
Item 1. Policy initiatives to assist dry port development Commonly applied initiatives Description Intention to support: Remarks (Policy initiative) Establish- Commence Longer ment -ment of term operations financial viability √ Land transfer Most benefit in short term √ √ Tax waiver Short term benefit √ √ √ Priority development of Vital benefit in short-long transport connections term √ Incorporation into export ? May have long term benefit processing or other FTZs (depends on location and market possibilities) √ √ Regulation for sustainable Will favour most efficient transport connections transport in longer term 3
1.1 Problems with policy formulation and application • Generally fragmented authority for coordination and planning of dry port development in region – many separate agencies and regulatory authorities involved • Limits ability to formulate and apply consistent and effective government policies and initiatives • Need in majority of countries to set up inter-agency coordinating committee under single government authority, preferably Ministry of Transport or equivalent • India and Islamic Republic of Iran provide good examples of countries which have succeeded in co-ordinating the dry port planning and regulatory functions of different agencies under a single ministry: In India, functions co-ordinated within Inter Ministerial Committee under Ministry of Commerce and Industry In Islamic Republic of Iran, functions of multiple agencies co- ordinated within inter-agency committee under the Ministry of Transport 4
1.2 Effectiveness of various policy initiatives • Land transfer Transfer of land from public sector to private sector made either as grant or lease or sale, at concessional rates Often a pre-requisite for private sector investment in dry ports, due prohibitively high land prices (often fuelled by speculation) Is usually a public sector obligation in PPP contracts Highly effective in short term (establishing dry ports), but can also secure viability in longer term • Financial incentives (e.g. tax waivers) Can include business tax or land tax holidays, for limited period of time Considered to be ineffective or at least of only short term benefit Few countries have applied such incentives to assist dry port development, one exception being Australia, where local government land taxes are sometimes reduced to assist establishment of dry ports 5
Effectiveness of various policy initiatives (cont’d) 1.2 • Priority development of transport connections Adequate connections of dry ports by road and rail, or (where possible) inland waterways, essential for their financial viability in short, medium and long term In case of some PPP contracts, development of external transport connections an obligation of public sector partners In some cases, governments assist infrastructure development through financial grants to private developers (e.g. branch-lines in Islamic Republic of Iran) • Incorporation into export processing or other free trade zones Application with mixed success Often FTZs located near borders with limited, or no, industrial base – therefore limited, or no, demand for dry port services • Regulation for sustainable transport connections Most countries restrict truck weights and dimensions to limit road damage or enhance safety (not to divert traffic to sustainable transport modes) Problems of enforcement and limited effect in terms of traffic diversion to sustainable modes Some countries of the region (e.g. Australia and Tajikistan have actually relaxed truck weights and dimensions to encourage larger and more efficient trucks (these policies need to be reversed) 6
Are regulations on truck weights and dimensions going the wrong way? B-Double, overall length 24 metres, capacity 3 TEU Super B-Double, or B-Triple, overall length 30 metres, capacity 4 TEU 7
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0.1400 0.1200 0.1000 0.0800 $A 0.0600 0.0400 0.0200 0.0000 Rail Rail Road Road (B- (single (double (semi- double) tier) stack) trailer) Operating cost per net 0.0792 0.0457 0.1365 0.1178 tonne-km - $A Single tier rail as % of: 100% 174% 58% 67% 9
Item 2. Infrastructure issues related to dry port development Key benefit of dry ports is reduction in logistics costs* of moving cargo from trade origins to trade destinations • Can only be achieved if different transport modes can be utilized for parts of journeys which will minimize their operating costs, implying that: 1. Dry ports should be connected to cargo sources by short-distance road haulage services (either small break-bulk trucks for de-consolidated cargo or trailer trucks for containers) 2. Dry ports should be connected to seaports (or dry ports in other countries) by long-distance railway container haulage services • Realization of transport efficiency and related cost savings will depend on dry ports being connected to high quality seaport, road and rail infrastructure * Comprises all transport, handling and storage costs incurred between a consignment’s origin and its destination. 10
2.1 Seaport Linkages An important function of dry ports: to facilitate access to the sea for land-locked countries and regions, by consolidating cargo and by providing cost effective land transport linkages to seaports • Throughput and storage capacity of a seaport as well as capacity and efficiency of its cargo handling systems can have critical effect on growth of inland trade • In case of some seaports (e.g. Chittagong), capacity is over- stretched • In case of others (e.g. Shahid Rajaee) capacity is under-utilized • Seaport managers have responded to capacity shortages in different ways, but most involve re-location of container stuffing/unstuffing outside of port • Has sometimes led to re-location of congestion from port to highway system (case of Bangladesh) 11
2.1 Seaport linkages (continued) Two problems associated with rail accesses to seaports: 1. Lack of adequate track length inside ports • All seaports reviewed in UNESCAP studies have rail connections, but none can accomodate full length trains in loading/off loading sidings inside port boundaries • Imposes on railway operators need to break up trains outside of the port before placement of wagons in loading/off loading sidings and to re-marshal trains outside of the port after retrieval of wagons from loading/off loading sidings • Results in substantial additional operating time and cost (not recoverable in railway charges) 2. Poor location of rail tracks inside ports • Few, if any, of the region’s seaports locate rail sidings close to container stacks adjacent to berths (in most cases they are 500m to 2 km distant) • Results in multiple handling of rail-delivered containers (typically 3 lifts per container to/from stacks as compared with only a single lift for road-delivered containers) and a significant competitive disadvantage for rail Need for port managers to commit to improving rail accesses to their ports 12
2.1 Seaport linkages (continued) Example of restricted rail access to a seaport Rail access line Distance rail sidings to cont. berths • Satellite image of a major seaport (container berths on left) • Rail access line (purple) is 1.5 km from container berths • Off-loaded containers must be transported from rail sidings by prime mover and yard trailer • Other cargo piers (to right of the container pier) have railway sidings running their full length, off the access line 13
2.2 Road linkages • Dry ports need good quality local road linkages to cargo sources • In case of countries lacking a comprehensive rail network, dry ports also need access to seaports via multi-lane highways • Asian Highway network appears to provide good coverage of region’s dry ports • No “missing links” in AH network preventing seamless transport between dry ports and seaports, or between dry ports in regional network, identified • Upgrading of primary road links between seaports and inland trade generating centres recently undertaken in several countries of region (mostly involving extra lane construction) • However, limited road capacity persists in some countries, particularly those located in mountainous areas (e.g. Afghanistan, some countries of Central Asia, and southwestern China) 14
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