The NSW Coalition government’s decision to privatise two large ports was announced in July last year. It expected to receive $3 billion from the sale.
NSW Treasurer Mike Baird said on April 12 that the consortium NSW Ports would buy 99-year leases for two of the state’s international ports — Port Botany for $4.31 billion and Port Kembla for $760 million. The total cost of the sale would be $5.07 billion.
An additional yearly lease payment of $5 million would be paid to the government and the annual on cap container movement of 3.2 million would be abolished for Port Botany.
As part of the deal some employees from the Sydney Port Authority and the Port Kembla Port Authority covered by the Australian Maritime Officers Union would transfer to the new private owners. They will receive a two-year job guarantee under enterprise agreements, up to 30 weeks’ pay, and retain superannuation and other benefits.
Those covered by the Maritime Union of Australia would remain with the relevant port authorities and would not be impacted by the privatisation.
NSW Ports consortium is led by Industry Funds Management, Australian Super and QSuper — three of Australia’s biggest superannuation funds — as well as a minor share holder in Tawreed Investments, a wholly owned subsidiary of the Abu Dhabi Investment Authority, whose assets are estimated to be more than $700 billion.
In November 2010, a similar consortium paid $2.1 billion for a 99-year lease on the Port of Brisbane. The composition of the consortium varied only by the replacement of Australian Super by Global Infrastructure Partners.
A win for NSW taxpayers?
The combined impact of the privatisations is the substantial loss of the profit-making activities of the ports. The most expensive activities will remain in public hands — the liabilities, risks and costs of marine safety, emergency pollution response, harbour master and marine pilots, vessel traffic control, navigational buoys and markers as well as port landside infrastructure.
There is a further fundamental question not addressed. Australia is an island nation and its sovereignty over both federal and state development is heavily influenced by import and export decisions.
This exists in a globalised economy particularly in the area of trade and the logistics of transportation and supply chain management. How are community development, regional planning and environment protection decisions to be taken by privatising such crucial infrastructure whose primary interest is profitability?
There may be a few marketing campaigns to demonstrate corporate social responsibility, but this in no way addresses the questions of governmental responsibility to the public to maintain real control over developmental needs and job creation. Instead, short-term political stopgaps are used to bandaid infrastructure neglect and disasters.
Nowhere is this more clearly seen when the issue of how the money generated from the privatisation is to be spent.
After debt repayment, Baird will be left with a $4.3 billion fund to invest in infrastructure. Baird has already outlined his spending list:
• $1.8 billion to the $10 billion WestConnex motorway between Port Botany and the M4;
• $400 million for the Pacific Highway;
• $170 million for the Princes Highway bypass at Berry;
• $135 million for the bush bridges refurbishment; and
• $100 million for unspecified projects in the Illawarra.
This leaves $1.695 billion still in the kitty. The most interesting aspect on the specified list is that virtually every item is spending on roads.
Port Botany is the main container port for NSW. Port Kembla handles more bulk freight movement such as coal, grain, steel, cars and flammable gas.
For both ports, the major transportation of goods coming in and out of the port is by road.
Road traffic is already clogged, and residents are subject to noise and air pollution and are pressuring the government for curfews, restrictions and alternative solutions such as rail transport.
Lifting the cap on Port Botany’s container movements is only going to raise the pressure. And, of course, the public pays for the ongoing maintenance of roads destroyed by the volume and weight of truck transportation.
Baird’s priorities mean the government is paying a bonus to the private sector to cover the lack of infrastructure spending on port transportation in the tender and the cost of overloaded trucks and public safety issues in the destruction of properly maintained roads.
Why were these ports privatised? The government’s market-driven ideology says the private sector is “more efficient”. Baird said the price of the sale was 25 times the annual earnings from the ports. That means the ports’ yearly earnings is $203 million. And that is just for 25 years. What about the income generated for the other 74 years of the lease and then increases in inflation and costs over the 99-year period.
Competition and jobs
What has been left out of these privatisations of ports is the challenge to the existing duopoly of terminal operators in Australia — DP World and Patrick Port. DP World is a Dubai based company that expanded during the 2000s into a global entity whose main focus is container handling and logistics.
It acquired P&O Maritime Services in 2006, which created its leading position in Australian terminal operations.
Patrick was subsumed in 2006 by Toll Holdings and was then split into a second company, Asciano, in 2007.
The new entry into the market is Hutchison Port Holdings (HPH), the world’s leading port investor, developer and operator. It is a subsidiary of the multinational conglomerate Hutchison Whampoa Ltd operated out of Hong Kong.
Having secured a 42-year lease in 2008 under the name of Brisbane Container Terminals, it already has a new international container terminal in Brisbane in operation this year and expects to double capacity.
Similarly, HPH signed a 30-year lease in 2009 under the name Sydney International Container Terminals, which is due to start operations by the end of this year with an expected 50% rise in capacity. It is also expected that HPH will be shortlisted in the bid to operate a new container terminal in the Port of Melbourne, due to be announced next year.
HPH is incorporating new automated technology in container management, which raises productivity and reduces the workforce dramatically. In Brisbane in 2005, Asciano introduced automated straddle technology that operated remote-controlled container movements by radar and laser guidance technology.
This technology is now being introduced at Port Botany and will result in Patrick sacking 270 of its 511 workers in the port over the next 18 months.
How aggressively this new competition will operate is not clear but the potential for lowering stevedoring charges to gain customers is a typical strategy for gaining market share in what is seen to be an expanding terminal trade in Australia. The real cost will be to jobs, logistical expertise and national development decisions in the public interest.
