Development of Port
Management System:
Corporatization in Port of Busan
and Port of Rotterdam
By
ABSTRACT
Globalisation in the world economy has brought the new trend in port
industry, which can be represented with ¡°the Port Reform¡± or ¡°the Port
Authority system¡± since 1990¡¯s. While it is the popular methods for port
management bodies to attract the private participation in order to secure its
own competitiveness.
This paper analyses the port reform of the Busan
Port in Korea
and the Rotterdam Port in the Netherlands. Because both ports
selected the Corporatized Port Authority as the way of the port reform at the
same period on January 2004, even though they have fundamentally different port
management system as well as have recorded higher performance in terms of cargo
handling and financial performance: the Busan Port was 5th and the
Rotterdam Port ranked 7th in world container throughput.
This paper highly concentrates on the more critical points of the port
reform with research questions: why the port reform is indispensable in the
port management? how both ports are corporatized? And what has changed in the
port governance as the result of the port management reform?
In detail, this paper has several purposes. First, the general concept of
the port reform and port privatisation should be illuminated to provide the clarified
understand. Second, it investigates the process of corportization with actual
cases of the Busan Port Authority and the Port of Rotterdam Authority.
It is very difficult to meet the previous studies, which dealt with the process
itself. Third, as a matter of course, we shows the differences and similarities
in both cases in terms of economic and political backgrounds, role of each
interested party, rights and duties of corporatized port authority, etc.
Fourth, the correlation between the port reform and the port governance also
need to be examined because governmental and political interventions are
getting increase in the port management. Finally, we emphasize the guideline,
which can suggest the preferable ways of the change to protect the indiscriminate
introduction of the port reform.
This qualitative study is elaborated using three major methodologies: analysing
the literature regarding the main questions, conducting interviews with several
persons who attended the corporatization process, and applying each case into
the given models under the rigorous criteria.
The last, special attention is paid
to my arguments, based on the findings and the results, which model is
preferable for the port reform in any case? and what can be recommended for the
Busan Port Authority and the Port
of Rotterdam Authority?
TABLE OF CONTENTS
ACKNOWLEDGEMENTS ------------------------------------------------------------------------
¥±
ABSTRACT ------------------------------------------------------------------------------------------
¥²
TABLE OF CONTENTS ---------------------------------------------------------------------------
¥³
LIST OF TABLES ----------------------------------------------------------------------------------- ¥¶
LIST OF FIGURES --------------------------------------------------------------------------------- ¥¶
LIST OF ABBREVIATIONS
--------------------------------------------------------------------- ¥·
CHAPTER 1. INTRODUCTION
------------------------------------------------------------------ 1
1.1. RESEARCH BACKGROUND
--------------------------------------------------------- 1
1.2. STRUCTURE of THESIS
--------------------------------------------------------------- 2
1.3. METHODOLOGY
------------------------------------------------------------------------- 3
1.4. LIMITATIONS and CONTRIBUTIONS
---------------------------------------------- 4
CHAPTER 2.
LITERATURE REVIEW on PORT REFORM ------------------------------ 5
2.1 DEFINITION of TERMS:
PRIVATIZATION, PORT REFORM ----------------- 5
2.2 MAIN PARTS of PORT
REFORM ---------------------------------------------------- 7
2.3 REASONS of PORT
REFORM (WHY) ---------------------------------------------- 8
2.4 OBJECTIVES of PORT
REFORM (FOR WHAT) --------------------------------- 9
2.5 OPTIONS of PORT
REFORM/PRIVATIZATION (HOW TO) ------------------ 10
2.6. GENERAL
BENEFICIARIES of PORT REFORM ------------------------------- 12
2.7 FINDINGS and
LESSONS ------------------------------------------------------------- 13
CHAPTER 3.
PORT MANAGEMENT SYSTEM-------------------------------------------- 15
3.1 DEVELOPMENT of PORT MANAGEMENT
--------------------------------------
15
3.1.1 Traditional Port Management ----------------------------------------------- 15
3.2.3 Modern Port Management ---------------------------------------------------- 15
3.2 MODALITIES of PORT MANAGEMENT REFORM
---------------------------- 17
3.3 VARIOUS
CLASSIFICATIONS of P PORT MANAGEMENT MODEL
---- 18
3.4 GENERALIZED
ALLOCATION under THE PUBLIC ROLE ----------------- 22
3.5 SUMMARY and FINDINGS
----------------------------------------------------------- 23
CHAPTER 4. PORT MANAGEMENT in
KOREA: PORT of BUSAN
---------------- 24
4.1. GENERAL PORT POLICY
----------------------------------------------------------- 24
4.1.1 Basic
Port System -------------------------------------------------------------- 24
4.1.2 Port Policy in Korea
------------------------------------------------------------ 25
4.1.3 Port Investment Policy in Korea ------------------------------------------- 26
4.2 CHANGE of PORT MANAGEMENT in KOREA
-------------------------------- 27
4.2.1 Development of Port Management ---------------------------------------- 27
4.2.2 Introduction of Korean Corporatized Port Authority System ---- 29
4.2.3 Present and Future ------------------------------------------------------------- 33
4.3 CHANGED ROLE of EACH PARTY
------------------------------------------------ 33
4.3.1 Central Government (including RMAFO)-------------------------------- 34
4.3.2 Local Government -------------------------------------------------------------- 35
4.3.3 Korea Container Terminal Authority
(KCTA) -------------------------- 35
4.4 PORT of BUSAN AUTHORITY (BPA)
--------------------------------------------- 36
4.4.1 General Situation ---------------------------------------------------------------- 36
4.4.2 Organisation ---------------------------------------------------------------------- 37
4.4.3 Business --------------------------------------------------------------------------- 42
CHAPTER 5. PORT MANAGEMENT
in the NLs: PORT
of ROTTERDAM -- 43
5.1 GENERAL PORT POLICY
------------------------------------------------------------ 43
5.1.1 Basic
Port System -------------------------------------------------------------- 43
5.1.2 Port policy in the Netherlands --------------------------------------------- 44
5.1.3 Related subjective for Port policy ----------------------------------------- 44
5.1.4
Investment policy -------------------------------------------------------------- 45
5.2 CORPORATIZATION of PORT of ROTTERDAM AUTHORITY ------------ 45
5.2.1 Processing of Corporatization ---------------------------------------------- 45
5.2.2
Present and Future of Corporatization ----------------------------------
49
5.2.3 Changed Role of each party ------------------------------------------------- 50
5.3 PORT of ROTTERDAM
AUTHORITY (PoR) ------------------------------------- 52
5.3.1 General Situation ---------------------------------------------------------------- 52
5.3.2
Organization ---------------------------------------------------------------------- 52
5.3.3 Business --------------------------------------------------------------------------- 57
CHAPTER 6. COMPARATIVE ANALYSIS ------------------------------------------------- 60
6.1 ANALYSIS of GENERAL FACTS in CORPORATIZATION ----------------- 60
6.1.1 Background of the Change -------------------------------------------------- 60
6.1.2 Direction of the Change ------------------------------------------------------- 61
6.1.3 General Features Analysis---------------------------------------------------- 62
6. 2 THEORETICAL ANALYSIS
---------------------------------------------------------- 66
6.2.1 The Corporatization
Criteria ------------------------------------------------ 67
6.2.2 The Criteria of WBPRTK Port
Model ------------------------------------- 68
6.2.3 The Function Matrix ------------------------------------------------------------ 69
6.2.4 The Position of Both
Port Authorities ----------------------------------- 71
6.3 SPECIFIC ANALYSIS on RELATIONAL CHANGE & INTERVENTION -----72
6.3.1 Composition of
Executive and Supervisory organization --------- 72
6.3.2 Change in Governance: Power keeping or
Businesslike ---------- 74
6.4 SUMMARY
-------------------------------------------------------------------------------- 76
CHAPTER 7.
CONCLUSIONS and RECOMMENDATIONS --------------------------- 78
7.1 CONCLUSIONS ------------------------------------------------------------------------- 78
7.2 RECOMMENDATIONS
----------------------------------------------------------------- 81
REFERRENCES LIST
--------------------------------------------------------------------------- 82
LIST OF TABLES
Table 2.1) Discrimination
of both terms --------------------------------------------------------- 6
Table 2.2) Key factors under the main private
sector participation options ---------- 11
Table 3.1) Historical relationship between Ports factors and Port management
--- 16
Table
3.2) Port Management Models
--------------------------------------------------------- 19
Table
3.3) Prevailing service providers under different Port Management Models- 19
Table 3.4) Advantage and Disadvantage of each port
model -------------------------- 20
Table 3.5) Port Function
Matrix ---------------------------------------------------------------- 21
Table 3.6) Allocation Map
under the Role of Public Sector
----------------------------
22
Table 4.1) Port investment types, responsibilities and financial
resources --------- 26
Table 4.2) Financial
Sustainability in Busan ------------------------------------------------ 31
Table 4.3) Korea Container
Terminal Authority ------------------------------------------- 35
Table
4.4) The Duties of BPA
------------------------------------------------------------------- 41
Table 4.5) Financial performance of BPA
---------------------------------------------------- 42
Table 5.1) Port investment types, responsibilities and financial
resources ---------- 45
Table
5.2) The Duties of RMPM (before corporatization)
-------------------------------- 55
Table
5.3) The Duties of PoR (after Corporatization)
-------------------------------------
56
Table 5.4) Financial performance of PoR
---------------------------------------------------- 59
Table
6.1) Comparison of Port Authority System
------------------------------------------
63
Table 6.2) Functional
comparison of port authority ---------------------------------------- 64
Table 6.3) Business
aspects
------------------------------------------------------------------- 66
Table 6.4) The result of applies both cases to the corporatization
criteria ----------- 67
Table 6.5) The result of applies both cases to the Port Model criteria
---------------- 69
Table 6.6) The result of
applies both cases to the Port Function Matrix ------------- 70
Table 3.6) the applied
Allocation Map under the Role of Public Sector -------------- 71
Table 3.7) Executive board
structure of the BPA and the PoR ------------------------- 72
Table 3.8) Supervisory board
structure of the Busan Port Authority ------------------ 73
LIST OF FIGURES
Figure 1.1) Structure of
study --------------------------------------------------------------------- 2
Figure 1.2) Comparison of
the Container cargo throughput ------------------------------- 3
Figure 2.1) Main concepts of the
port reform -------------------------------------------------- 7
Figure 2.2) Level of
private participation and efficiency ----------------------------------- 12
Figure
4.1) Flow chart of the budget process
------------------------------------------------ 27
Figure 4.2) Steps of
Korean port management reform ------------------------------------
31
Figure 4.3) Functional re-triangular position
of the port management subjects ----- 34
Figure 4.4) Tasks of BPA
------------------------------------------------------------------------- 37
Figure 4.5) Change in
the Number of Employees ------------------------------------------ 38
Figure
4.6) Basic mechanism for new Port Authority (as of July 2006) --------------- 39
Figure
4.7) Current Structure of Busan Port Authority (as of July 2006) -------------- 40
Figure
5.1) The Structure of RMPM (before corporatization) ----------------------------
53
Figure
5.2) The Structure of Port of Rotterdam Authority (after
corporatization) --- 53
Figure 5.3) The
change in the Number of Employees ------------------------------------ 54
Figure 5.4) Flow charter of Business Plan ---------------------------------------------------
58
Figure
6.1) Flow of change in port management
------------------------------------------- 62
Figure 6.2) Change of Governance Structure (BEFORE
port reform) ---------------- 74
Figure 6.3) Change of Governance Structure (AFTER
port reform) ------------------- 76
LIST OF ABBREVIATIONS
BPA: Busan Port
Authority
EDI: Electronic Data
Exchange
KCTA: Korea Container
Terminal Authority
KMI: Korea Maritime
Institute
MHR: Mainport Holding Rotterdam
MIS: Management Information
Systems
MOMAF:Ministry of Maritime
Affairs and Fisheries, in Korea
MPAS: Maritime and Port Authority
of Singapore
MPB: Ministry of Planning
and Budget, in Korea
PoR: Port of Rotterdam
Authority
PSAC: Port of Singapore
Authority Corporation
RMAFO: Regional Maritime
Affairs and Fisheries Offices
RMPM: Rotterdam Municipal
Port Management
UNCTAD: United Nations
Conference on Trade and Development
WBPRTK: World Bank Port Reform ToolKit
