Australian ports are unfairly penalised by the World Bank’s latest Container Port Performance Index because it doesn’t take investment into account, or so the critique goes.
We’ll skip over the problems of insisting that one thing is bad because it is not some other thing, or that a pure report should be contaminated with nonrelevant material (we cover both of these elsewhere in this Annual Review).
The criticism is that about A$4 billion has been invested in Australian ports over the last five years, and that these investment dollars were used to improve and expand port infrastructure. It has been further claimed that the A$4 billion figure isn’t the whole sum. A lot more has been invested, the claim goes, by other parties for the purposes of inducing greater levels of productivity and sustainability at container terminals. A series of implications would then logically follow.
An (il)logical ladder
If the CPPI does not take into account the high levels of investment in the Australian containerised seaport sector, then: First implication: Australian container port performance should be ranked higher than the CPPI currently ranks it. Second implication: that’s not fair! Third implication: the Index is misleading, maybe invalid. Fourth implication: the CPPI ought to be disregarded.
Shipping Australia obviously does not agree.
Job done
It’s all rather clever. Make a bland statement about the size of investment in the Australian port sector. Then, sit back, wait, and, without taking any further action, let the pernicious ideas percolate into the minds of the audience. “Job,” as they say, “done”. Really? Let’s unpack it.
A critique of pure relevance
Firstly, it is a claim that’s hard to verify. Without explicitly being told exactly how many dollars have been invested by who, into what, and when, it is beyond the limits of human knowledge, experience and reason to understand how much has been invested into port infrastructure.
There clearly has been investment over time and quite a lot of it too. So, we will just take that claim at face value, and we will accept it as true. There has been huge amounts of investment in Australian container ports over time.
Now let’s look at the World Bank Report from “5.4 Interpreting the CPPI”, which starts on page 52. It states: “the objective of the CPPI is to provide an objective measure of container port performance based on vessel time in port” which can indicate which “aspect of the port call process is relatively better or worse”.
It says nothing there about investment. Nothing about whether it is good or bad, fair or unfair, necessary or unnecessary. Nothing at all in fact.
It doesn’t say anything because the index itself excludes investment as a factor globally and not just in Australia. And that’s because the CPPI isn’t about investment, it’s about operational efficiency on the marine-side based on observable facts – how long ships spend at anchor, and how quickly ships come and go from port. The index is calculated from data.
The first, and the kindest, critique of the investment argument is that it is simply not relevant.
Narratively speaking
Even though investment is not relative to the index itself, we will nonetheless follow the argument to see where it leads.
We already know for a fact that the CPPI itself is data-based and looks at vessel time in port, so the index itself does not help in assessing the investment argument.
So we will look at the narrative in the report surrounding CPPI. There we do find numerous, explicit, illustrative examples of, and references to, investments in container ports around the world.
On page 18, under “Selected ports that improved their CPPI,” the World Bank talks about the benefit of investment in various high-performing and highly ranked ports around the world, such as, for example, at Port Said, Mersin, and Posorja. There are many other references and examples.
On page xv the World Bank report comments on seaport investments. It says that ports with rising CPPI scores have “often combined investments” with other factors, and a paragraph or so down, it says, “this year’s CPPI report can help identify where… additional investments may be warranted”. While this isn’t proof that capital investment inevitably leads to performance improvement, it does imply that investing can have a beneficial effect.
But remember the original claim and it’s logical implications: that the CPPI system under-ranks Australian containerised seaports (and, by implication, is invalid) in the context of criticism that billions of dollars have been invested into Australian containerised seaports and.
It logically follows that opponents of the World Bank Report believe that Australian investment has improved local port performance even if the CPPI ranking doesn’t reflect it.
Face value
If we take the claim that there has been high investment in the Australian containerised seaport sector over recent years (true) and if we take at face value the implication that the CPPI therefore under-ranks that sector (not true as the CPPI is based on marine-side performance data) then an unresolved tension appears.
Why would seaport investment in container ports overseas improve the performance of container ports in other countries but not in Australia? And that’s especially puzzling as large investments have been made by the same companies that own and operate containerised seaports both around the world and in Australia.
One reason could be that investment here has been focused on things that don’t benefit marine-side efficiency, like landside infrastructure such as roads, roundabouts, fencing, or shore power. It is all valid land-side investment, but it doesn’t do anything for marine-side operational efficiency. If that’s the case, then the argument that the marine-side focused CPPI under ranks Australia because it doesn’t take account of non-marine-side investment would be obviously irrelevant.
But if it is marine-side investment? Damning, not exculpating?
Well, you could imagine that marine-side investment would improve marine-side productivity. However, unlike other nations, marine-side investment does not appear to have done so. It could be that Shipping Australia is flat-out wrong in that assessment. Perhaps, unknown to us, marine side investment has in fact improved marine side port performance, but that suggestion doesn’t seem to be supported.
The CPPI does show extensive multi-year underperformance in Australia relative to global container ports. ACCC reports have also shown multi-year box moves per hour per crane around the 30 TEU mark, which is low relative to other ports around the world. Shipping Australia has also seen presentations from a wide range of parties showing container ships have held up for many hours, in some cases, for multiple days. Bad weather will explain some of it, but not all of it. The argument that investment into the Australian sector has not improved domestic container port performance would appear to be strongly supported.
Any person who would want to argue that investment has in fact improved marine side performance but hasn’t shown up in reports, analysis, and the operational experience of shipping companies needs to explain how, and why, and provide evidence of the same.
Moving on, perhaps the investment has been into something that does not expand marine-side productivity. Once again, the burden of answering those questions and providing evidence should fall upon those who rely upon the investment argument.
The next step in this analysis is consider the scenario that large amounts of capital have been invested into something that ought to have improved marine-side productivity, but hasn’t.
If that’s the case, then (a) the managers of ports may have some serious explaining to do to their shareholders and stakeholders as to why; or alternatively (b) there could be something very seriously wrong with Australia, namely, why is it that Australia appears to be failing to convert marine-side capital investments into marine-side productivity?
Is it a governance matter? Is it some kind of market failure? Are the problems with institutional incentives? Are there structural problems with the sector? What? How? And why? Such matters are squarely within the remit of the Federal Government. Canberra would therefore be well advised to carry out an inquiry to get to the root cause to enable the application of a remedy.
Australian welfare is at stake.
At this point, we have pretty much followed through the logical implications of large investments into Australian ports not showing up in the CPPI. Without further evidence and argumentation from critics of the CPPI we can go no further.
What we have shown, so far (which is rebuttable if new evidence is presented), is that, currently, the investment argument is irrelevant.
At worst, it is not exculpating. It is highly concerning.
