|
BY THE HONOURABLE NOEL HYLTON
33rd ANNUAL GENERAL MEETING OF
THE
CARIBBEAN SHIPPING
ASSOCIATION
2003 OCTOBER 13
HALF MOON HOTEL, JAMAICA.
Firstly, I wish to congratulate the CSA for
its unique contribution to the growth and development of the regional port
and shipping industry over the past 33 years. I am of the opinion that among
the durable symbols of Caribbean integration, are not only the University of
the West Indies and West Indies Cricket, but also the Caribbean Shipping
Association.
There is no doubt that the Caribbean port and
shipping industry has made giant strides since the inception of the CSA,
which in themselves reflect changes in the global industry. We can all be
proud of the recognition currently being conferred on Caribbean ports by the
international community.
Since the late 1980’s into the decade of the
1990’s, the Central American and Caribbean region has become one of the most
active areas in container port expansion. During the decade of the 1990’s
alone, approximately US$1.7 billion was spent on new port capacity.
It is difficult to identify any territories
in the region that have not undertaken some major capital port programme,
either in new ports, or expansion and upgrading of existing ones.
These substantial investments in new
container capacity resulted directly from significant growth in container
traffic through the region, linked to reforms in maritime policy and
legislation in Latin American countries, which were also experiencing
buoyant economic performance.
In the 1990’s, throughput grew from 3.7
million TEUs to 9.9 million TEUs in the year 2000, and reached 10.5 million
TEUs in 2002.
CHALLENGES FOR CARIBBEAN OPERATORS
 Notwithstanding
the apparent positive market environment and significant growth in volumes,
Caribbean port operators, shipping agents and stevedoring companies are
presently facing fundamental challenges which threaten their very survival.
This is so because the “playing field” is far from being level.
Among these challenges are: > Earnings down
considerably. > Port employment down. > Returns on investment inadequate to
facilitate retooling and re-investment.
In some cases, some long-standing traditional
business activities linked directly to the industry have ceased to exist,
and by all indications the fallout is likely to continue in the near future.
This seems to be a contradiction of the classical business principle. Trade
is growing, accompanied by market expansion, invariably at a rapid rate. Why
then has investment, given this present business climate, not been growing
but is in fact declining?
Before we review the factors that cause this
phenomenon, I would like to suggest a solution to the problem:
Very simply put, it is my view that the
solution resides with the CSA, and I challenge you today to work towards a
solution. The Association must move to harmonize the Caribbean shipping
industry into one consolidated, integrated community. Our history as
Caribbean people records many experiences which have hindered our efforts
towards genuine integration, not only politically, but also commercially.
We need to take a leaf out of the book of the
shipping lines operating in our region. Their negotiating power is enormous.
This power is developed through mergers, alliances, and by some lines
operating within mega international business conglomerates which virtually
dictate terms and conditions to the entities that provide them with
services.
Over the years, the lines have been competing
among themselves, not by the service they offer but by indiscriminate
reduction of rates, and in turn exerting tremendous pressure on ports,
agents, and stevedoring companies to reduce cost.
In the negotiations with the lead line of an
alliance, the port operator, agents, and the stevedoring company, are almost
at their mercy, and are compelled to accept the terms and conditions
proposed by these alliances as they cannot afford to lose business.
At the same time, shipping lines enjoy the
luxury of moving their business from one port to another. Port operators
enjoy no such option, and must face all the obligations related to
expenditure resulting from satisfying the demands made by the lines.
Ladies and gentlemen, there is no rational
market justification for the competitive wars that shipping lines wage in
obtaining cargo by massive freight rate reduction. A recent survey shows
that freight cost in a manufacturing account fell from an average of 10-15%
to 3-5% per annum. Ask a member of the Box Club for a rationale and he will
readily admit that there is none - it is probably an issue of lack of trust.
From time to time, we hear that the lines are
losing money, while at the same time we hear that they are spending huge
sums of money on procurement of new ships.
In the year 2002, the World Container Fleet
recorded 2,782 vessels with total capacity of 5.3 million TEUs This includes
303 vessels with capacity of 4,000 TEUs and over. The current World
Order Book stands at 522 container vessels. Of this number, there are
109 vessels with capacity of 6,000 TEUs, and 61 vessels with capacity of
8,000 TEUs and over.
The rationale for the trend of deploying
large vessels in world trade is that lines are searching for economies of
scale. The larger vessels facilitate lower slot costs, but there are other
incentives. The bigger the line and the cheaper it operates is the more
likely it will be to put smaller lines out of business.
The Caribbean Shipping Association has a
unique opportunity within our region to motivate its various member
territories to begin operating our industry as an integrated community.
There is strength in unity.
PORT SECURITY
I
would like to touch very briefly on a subject that has been dominating the
headlines since 9/11, and that is the subject of Port Security.
Port operators will find that to operate
within the framework of the U.S. Maritime Transportation Security Act of
2002, with regulations that incorporate the IMO I.S.PUS. Code, will be
indeed expensive, to say the least. In our Port, we have already spent close
to US$50 Million in our efforts to meet the standards by the July 2004
deadline.
The level of security required of the ports
is far above the security necessary for the protection of cargo. Therefore,
port operators should not be called upon to meet the cost of the overall
port security, which now requires more sophisticated systems and equipment
at extremely high cost.
The state should be called upon to meet the
obligation for the second level of security, that is, the security required
for the prevention of the movement of ammunition, explosives, and
bio-chemical and other weapons of destruction, and the shipping lines that
benefit from this security should also be required to contribute to the
cost.
THE FUTURE
Finally, I would like to leave you with my forecast for the future:
(1)
All entities that provide service for shipping lines will find that their
business will gradually shrink, particularly agents and stevedores.
(2)
Major lines and alliances will provide most of the service functions
traditionally undertaken by agents.
(3)
Terminal operators will be required to perform some transactions which
previously were the role of agents.
(4)
The major role of agents will be to provide sales and marketing services.
(5)
Wharf companies will be forced to merge with stevedoring companies, to
further rationalize their cost structure.
(6)
More lines will open tonnage offices in various regions.
(7)
There will be 5 or 6 major hub ports dominating world trade, with all other
ports operating as feeder ports.
In closing, it is my earnest wish to see the
Caribbean Shipping Association become even more proactive than before in the
pursuit of regional integration. It may be an old saying, but there remains
a lot of truth in the maxim “United we stand, divided we fall”.
_____________________
Hon. Noel Hylton is Chairman
of the Port Authority of Jamaica; founding Secretary of the Caribbean
Shipping Association and the first Executive Vice President of the Caribbean
Shipping Association.
|
