Stakeholder Relations Management in ports: dealing with the interplay of forces among stakeholders in a changing competitive environment

Theo E. Notteboom, Associate Professor, ITMMA – University of Antwerp, theo.notteboom@ua.ac.be Willy Winkelmans, Dean of ITMMA – University of Antwerp and Chairman of the Flemish Ports Commission, willy.winkelmans@ua.ac.be

ABSTRACT

A whole series of changes in the field of world economics such as the globalisation of production and consumption and the structural changes in inter-port relations, port-hinterland relationships and logistics, have strengthened the role of ports as nodes in the global transport system. These tendencies and the expansion of the role of the private sector in port activities have forced ports to become more market-oriented and to cope with a lot of risks and uncertainties. At the same time, one can observe a growing awareness for external effects of port activity and the related risks and harms for community groups. As a result, port authorities have to cope and to interact with a large number of internal and external groups, each with their own interests and objectives.

This paper deals with the interplay of forces among different stakeholders directly and indirectly involved in port activity and port development. The stakeholders approach is applied to the port sector, in particular to landlord ports. Furthermore, it demonstrates how different stakeholders are repositioning themselves in the interplay of forces and how landlord port authorities can cope with the new port environment using Stakeholder Relations Management (SRM).

Keywords: port management, stakeholders, port policy

Paper for IAME PANAMA 2002 ‘Maritime Economics: setting the foundations for port and shipping policies’, Panama City, Panama, 13-15 November 2002

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INTRODUCTION

The interest in stakeholder approaches to strategic management is growing around the world (Mills & Weinstein, 2000). Organisations possess multiple goals and those can only be achieved by the co-operation of a group of people commonly known as stakeholders, each with their own specific goals. The stakeholders approach meets the need for more open communication between employers and employees, between governmental authorities and public or private companies, between authorities and civilians or citizens, etc. In the framework of a global economy such an approach becomes even more important. There is no clear definition of ‘stakeholders’, so the use of the expression ‘stakeholder’ is certainly not univocal. The classification of stakeholders depends on the purpose. This inevitably leads to a wide diversity in interpretations of who can be classified as a stakeholder (see e.g. Donaldson & Preston, 1995). In the broad view stakeholders are described as any individual or group having interest or being affected by the corporation. The narrow view only recognises stakeholders whose relationship is primarily of an economic/contractual kind (Shankman, 1999).

This paper deals with the interplay of forces among different stakeholders directly and indirectly involved in port activity and port development. The stakeholders approach is applied to the port sector. Furthermore, it demonstrates how different stakeholders are repositioning themselves in the interplay of forces and how landlord port authorities could cope with the new port environment using Stakeholder Relations Management (SRM).

This discussion paper does not provide the reader with straight answers to all aspects of SRM. Moreover, the paper is focussed on landlord ports and does not touch on the issue of operating ports. It should therefore be regarded as a step towards further research in this field on a case-by-case basis.

THE STAKEHOLDERS APPROACH IN THE PORT SECTOR

Port managers are increasingly faced with the dilemma of how to reconcile the competing claims of all kinds of stakeholders, certainly when it comes to port development and especially to port extension.

A port both technologically and economically is in fact a node for contacts and contracts, whereby every stakeholder is driven by his own interests and priorities. Ports are associations where a multitude of individuals and interests (should) collaborate for the creation and distribution of wealth. Hence, the value creation process in ports is dependent upon the support of the different stakeholders groups. Each group of stakeholders however merits consideration for its own sake.

In a port context, one could argue that stakeholders are groups/persons with legitimate interests in procedural and/or substantive aspects of port activity and port development. In the narrow view the port’s stakeholders include: shareholders, managers, employees, port users, service providers and other economic players in and around the port (including port customers, etc..). In the broad view on stakeholders

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also community stakeholders should by included (e.g. community groups and environmentalists), because they may experience actual or potential harms or benefits as a result of port action or inaction. It is possible that some community stakeholders may be unaware of their relationship to the port until a specific event - favourable or unfavourable - draws their attention. Striking examples of such third party impacts exist in relation to large investments in port infrastructure (cf. in terms of environmental harms and economic benefits that may be experienced by communities). The broad view should also include producers and consumers of products that move through the port, as they are often cited as the political basis for financial support.

Figure 1: The port as a node for contacts and contracts (from the perspective of a ‘landlord’ port authority)

Source: authors

Figure 1 depicts a port as a coalition of interest groups based on the broader view on stakeholders. The perspective is that of a landlord port authority. The functional

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INTERNAL STAKEHOLDERSGroups inside port authority organization Managers Employees Board members SHAREHOLDERS

EXTERNAL STAKEHOLDERS SEA (IN/OUT) PORT HINTERLAND (OUT/IN)Groups not part of port authority organization

TRANSPORT OPERATOR GROUPS(including branch organizations)

Maritime transport Transhipment & storage RailShipping line Stevedoring companies Railway companies

Inland shippingValue-added activities Inland barge operatorsLogistic service providers Road haulage

Trucking companies

TRANSPORT ORGANISATION GROUPS(including branch organizations)

Shipping agent Freight forwarderLogistic service providers (3PL and 4PL)

SUPPORTING SERVICES Towage companies(including branch organizations) Pilotage services

Ship chandlersRepair services (cf. shiprepair, container repair)

Waste reception facilitiesInspection services

Banks, insurance companies, ...Legal firms (lawyers, ..)

INDUSTRY GROUPS industries in foreland industrial companies in port industries in hinterland(including branch organizations)

(PUBLIC) INFRASTRUCTURE COORDINATION, port authorities of other seaportsFACILITATION & MANAGEMENT GROUPS Inland terminal authorities

Rail infrastructure management companiesCentral, regional and local public authorities (cf. roads, (inland) waterways, ..)

Supranational public organisations (cf. EU, World Bank)

LEGISLATION & PUBLIC POLICY GROUPS central and regional governments (including port commissions)European Union

Trade negotiations groups (cf. WTO)

COMMUNITY GROUPS Local inhabitants groupsConsumers/ tax payers

Environmentalist groups of a local, regional or global scaleThe press

= the 'port' or 'port community' as perceived by many external entities

relationships among the different stakeholders groups are not indicated. A graphical representation of all contractual and non-contractual relationships among the individual groups is hardly possible as there are so many of them.

Internal stakeholders

The internal stakeholders are part of the comprehensive port authority organization. Apart from the aim to realise port authority objectives the top management of a port authority might also envisage more personal goals such as salary, prestige and power. The employees are interested in their wages, working conditions and personal development. A good human resources management (HRM) with an eye for motivation and reward is indispensable.

The public, semi-public or private shareholders pursue goals such as return on investment, shareholder/stakeholder value and/or welfare creation. The identification of the true shareholders of a port authority is not always an easy task. A large number of landlord port authorities are of the (semi-)public kind with strong links to a municipality, a city, a region or province. The true shareholders of a public port authority de facto are the taxpayers on the relevant geographical level. As such, the general public has a univocal role to play: in many cases the (local) public is at the same time external stakeholder and indirect shareholder. The same kind of reasoning is valid in case of public investments in port infrastructure by local, regional, national or supranational government bodies.

Economic/contractual external stakeholders

Structural changes in the market environment make economic external stakeholders wonder about their specific role in the competitive process. The inter-organisational relationships among economic/contractual external stakeholders are characterised by two forms of interaction: physical (i.e. related to the physical transfer of cargo) and incorporeal (Martin & Thomas, 2001). The latter type of interactions consists of contractual, supervisory or information based exchanges. The interactions between port authorities and the first order port players are mainly of an incorporeal kind. For instance, port companies involved in physical operations are linked to the port authority via concession agreements (esp. in case of landlord port authority).

There are the different port companies and supporting industries who invest directly in the port area and who generate value-added and employment by doing so. Some of these companies are mainly involved in physical transport operations linked to cargo flows (e.g. terminal operators and stevedoring companies - including the carrier/terminal operator in case of dedicated terminals). Others solely offer logistical organisation services (e.g. forwarding agencies, shipping agencies, etc...). Industrial companies in the port area (e.g. power plants, chemical companies, assembly plants, ..), supporting industries (e.g. shiprepair, inspection services, etc..) and port labour pools also belong to the group of the first order economic stakeholders.

A large number of these in situ economic stakeholders are represented by branch organisations and/or regional associations for specific industries. Managing the relations between different branch organisations is a challenging task. Both the regional associations for specific industries as well as the existing port cluster

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umbrella associations (e.g. Deltalinqs in Rotterdam and AGHA in Antwerp) play an important role in the governance of the port cluster and can have a huge impact on the competitiveness of the cluster (De Langen, 2002).

Other economic stakeholder groups include port customers, trading companies and importers/exporters. They are less directly involved than the in situ economic groups as they normally do not invest directly in the port. Nevertheless they follow the port evolution carefully, because port activity can influence their business results. Moreover, they exert strong demand pull forces on port service suppliers and as such ‘dictate’ the market requirements to which the port community has to reply.

Public policy stakeholders

Economic literature supports the idea that the public sector has its role to play in a market-oriented port industry (cf. Notteboom & Winkelmans, 2001b). A rationale for government intervention emerges when, in certain circumstances, the competitive market mechanism ‘fails’ (Goss, 1990 and Haralambides et al, 1997). Practical evidence shows that even in case of quite extensive privatisation schemes, the public sector has not withdrawn entirely from the port industry. The debate in Europe on government intervention in an efficiency-oriented port industry focuses especially on the issue of market liberalisation, the monopoly issue, the public goods issue and the port financing issue.

Public policy stakeholders do not only include government departments responsible for transport and economic affairs on a local, regional, national and supranational level. Hence, the scarcity of resources such as land and nature has increased the impact and involvement of environmental departments and spatial planning authorities on decision processes (in particular in case of port expansion plans).

The potential overlap in jurisdiction between the various geographical levels in public policy making is another issue that needs careful attention. A vague division of jurisdiction or bad co-ordination among the various levels can have a detrimental impact on port development processes, in particular when a court contests the validity of earlier (political) decisions because of procedural errors with respect to public policy making.

Public policy stakeholders typically follow a political management system based on the principle of distributional equity. The organization structure in a political system is often based on the administrative heritage and on structural shocks caused by powerful individuals or pressure groups. Port authorities partly rely on political organizations for their survival, as ports are often considered as strategic assets in the process of community welfare creation and as appropriate tools for achieving a higher distributional equity. The challenge is for technocratic port organizations to work constructively with political managers by forming alliances of effective operating organizations.

Community stakeholders

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Community stakeholders include community groups or civil society organisations, the general public, the press and other non-market players. They are concerned about the port’s evolution, i.e. mainly about its expansion programmes, for reasons of well-being. They pay a lot of attention both for getting and distributing information about port activity trends and port development plans. Environmental considerations are very prominent in the relationship of these groups with port authorities.

As in many organisations, community groups are often guided by local rationality and opportunistic behaviour. Local pressure groups often defend their local interests in such a fierce way that the individual well-being of a few people is becoming an even bigger driving force than the well-being of the greater community. For instance, the omnipresence of the NIMBY syndrome (“not in my backyard”) can seriously complicate the development of new hinterland infrastructures, even if these infrastructures will generate a positive impact on the modal shift from road to environment friendly transport modes.

Community groups can have a large impact on port city development programs. The waterfront redevelopment of older port areas is valuable to (re)establish a physical link between port activity and other economic functions such as housing, recreation, etc.. . The local community typically perceives waterfront redevelopment as a positive thing enhancing local quality of living. Port authorities should take such opportunity to form a sound basis for dialogue with community stakeholders, resulting in goodwill and mutual respect. As such, waterfront redevelopment projects can help to activate public acceptance/awareness of seaport activity. They might even generate more local economic benefit than the renovation of outdated port infrastructure (outdated in the sense that draft conditions and terminal surfaces of older quays/docks are often too small for allowing modern transhipment activities).

STAKEHOLDER RELATIONS MANAGEMENT (SRM)

Basic principles of SRM

Stakeholder relations management aims to hold the balance between various groups and take due note of their rights (Argenti, 1997). As port management is characterised by complex decisions and is regularly confronted with many stakeholders, achieving a balance between the interests of all stakeholders is becoming an important job for port managers. The quest for a port’s survival will encourage port managers to treat its employees well, to act fairly and honourably towards port companies and port users, and conduct itself responsibility in relation to the environment and society. Many port managers are well aware of the fact that socially responsible behaviour can be the basis for a competitive edge in both market and public policy relationships. Stakeholder Relations Management has close ties with sustainable management, i.e. sustainable port development is not possible without a well-balanced and integrated stakeholders approach.

One of the keystones in SRM in ports is to ‘measure’ the influence of various stakeholders on the port’s functioning and performance and on each other and then to effectively manage the linkages between these influential relationships.

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SRM in ports as such requires simultaneous attention to the legitimate interests of all appropriate stakeholders, both in the establishment of organisational structures and general policies and in case-by-case decision making. Port managers should listen to and openly communicate with stakeholders about their respective concerns and contributions, and about the risks that they assume because of their involvement in port activity and port development. However, this principle does not imply that all stakeholders should be equally involved in all processes and decisions.

In a first step, port managers should discriminate between stakeholders with genuine legitimate interests in the process considered and those who only claim to have a legitimate interest. This exercise can turn out to be very difficult, because the simple act of classifying a group as not relevant for a specific process (e.g. the planning of a new port infrastructure) in itself can become a major source for conflicts. For instance, a party with no direct legitimate interest can have a large political influence (e.g. a party who has the capacity to ‘mobilize’ the press can have an impact on the political level). In order to avoid such situations, port managers often opt for a maximum approach whereby both the legitimate groups and the non-legitimate groups are invited to take part in the process. In many cases, the active role of the latter groups is rather limited. The main purpose or role is that of generating transparency in the fluxes of information.

Figure 2: A classification of stakeholders based on their involvement in and impact on a process/decision

High

Involvement inprocess/decision

Low

Low High Impact on process/decision

Source: authors

Secondly, port managers will also have to decide on the role attributed to each stakeholder in the decision-making processes. Figure 2 provides an example of how stakeholders could be classified based on their involvement in the process/decision and their possible impact on the process/decision.

The classification of various stakeholders in the matrix of figure 2 is just a first step in a comprehensive SRM process. Designing a well-balanced time planning for the

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Groups that are taking

part in deciding

Groups that are thinking

along

Groups that are

informed

Groups that give

direction

structuring of stakeholders’ participation in port activity and development processes is one of the key actions in SRM. A port authority can decide to involve all stakeholders right from the start of a port development project. The advantage is that no stakeholder will feel neglected. However, a ‘slow start’ due to long pre-negotiations rounds in the early phases of the project is the main disadvantage of this approach. Alternatively, a port authority might decide to draw up detailed plans in-house. Stakeholders will only be involved in the process once these plans have gained maturity. The strength of this approach is that stakeholders are confronted with rather concrete development plans, so there is less room for stakeholders to introduce unrealistic alternatives. However, some stakeholders might not feel at ease: such a top-down approach might give the impression that the decisions have already been taken, thereby leaving the stakeholders’ participation process as a formality/diversion.

An effective SRM strategy is not possible without good port governance structures1. Stakeholder relationship management in fact partly deals with questions of corporate governance, i.e. mainly the processes of stakeholder input and participation. The corporate governance framework should recognise the rights of stakeholders and encourage active co-operation and participation of stakeholders in creating wealth (Brooks, 2001).

Port authorities should develop organisational processes and entrepreneurial cultures that enhance stakeholder satisfaction. Port managers today have the obligation to deal openly and honestly with the various stakeholders, thereby avoiding as much as possibly purely self-serving actions. In modern port policy and the decision making processes one should emphasise the interdependence among the various stakeholders.

Positive and mutually supportive stakeholder relationships will encourage trust, and stimulate collaborative efforts leading to relational wealth, i.e. organizational assets arising from familiarity and teamwork. Conflict and suspicion among stakeholders will stimulate formal bargaining resulting in time delays and increased costs. Formal bargaining often appears when stakeholders demand compensation for incurred risks or harms. Port managers should work cooperatively with other entities, both public and private, to insure that risks and harms arising from port activities are minimized and, where they cannot be avoided, appropriately compensated. Consequently, compensation policies often play a crucial role in SRM (in particular in relationship to community groups). Unfortunately, in many cases, compensation claims are subject to highly politicised negotiation rounds, characterised by a lack of trust and an absence of solid deals/arrangements among the stakeholders. Under these circumstances port authorities and government departments might be tempted to use compensations as a tool to ‘neutralize’ (at least temporary) some community groups, whereas community groups might use the negotiations rounds as a tool to consolidate their position as legitimate interlocutors in port development debates.

SRM and the port management objective struggle1 Brooks (2001) refers to the OECD definition of corporate governance: ‘the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the corporation, such as the board, managers, shareholders and stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing so, it also provides the structure through which corporate objectives are set, and the means of obtaining those objectives and monitoring performance’.

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Port managers should acknowledge and whenever possible actively monitor the concerns of all legitimate stakeholders, i.e. they should take the interests of certain stakeholders appropriately into account in decision-making and operations. They are obliged to examine all claims and criticism carefully before passing judgment on their validity. In taking particular decisions and actions, port managers should give primary consideration to the interests of those stakeholders who are most intimately and critically involved.

This balancing exercise is far from easy, given the latent danger of a struggle between port management objectives as a function of group interests. The underlying common interest of stakeholders of any port is the port’s survival, but it is too simplistic to assume that all parties accept that the main port development objective is ‘to provide port facilities and operating systems in the national interest at the lowest combined cost to the port and port users’ (UNCTAD, 1985:27). Conflicts of interests among different stakeholders may overshadow the community of interests (see figure 3). The objectives of port authorities are becoming increasingly scrutinized as a result of government involvement as well as increased complexity of the industry and its environment (Frankel, 1987). Some examples:

The final or primary objectives of environmental pressure groups are often conflicting with that of the port authority: for the one the less expansion the better, for the other almost continuous extension is required to cope with market opportunities in the foreland-hinterland continuum;

The central government usually pursues socio-economic objectives, aimed at an increase of the societal value-added of the national seaport system through an active seaport policy. The aim to increase national socio-economic welfare may in practice be influenced by a number of economic and political considerations (Frankel, 1987). Through their port policy, some larger European countries for example also aim at increasing the national control of foreign trade. As most West-European central governments intervene in seaport policy, through the allocation of resources in function of objectives related to socio-economic welfare, the central government objectives may conflict with or at least diverge from objectives of the port authority;

The objectives of the port industries and operators usually relate to traditional micro-economic goals such as a mix of shareholder value, maximization of profits, growth, increase in market share, productivity, etc.. .

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Figure 3: The port management objectives struggle (*)

(*) Tentative representation of main objectives per category of stakeholders in order to detect potential conflict situations

Port authorities do not always have explicitly specified objectives nor do they have a good defendable strategic intent. Municipal ports may be instructed to provide the community with the best possible port service that is consistent with the municipal policy and financial capability.

The lack of clearly specified ambitions or a clear mission statement makes it extremely difficult to develop sustainable stakeholders relationships. As such, it might be very important to formulate accurately a mission statement for the whole port. In formulating its strategic intent a port should try to go beyond extrapolation of the current role of the port. A good mission statement can help to avoid wasting resources due to the port management objectives struggle (Winkelmans, 2002). The port’s ambition as specified in the strategic intent must be accepted by internal and external stakeholders. Personal effort and commitment of the stakeholders involved in the port sector can only be gained if they can identify themselves with the strategic intent.

Since the formulation of a comprehensive and effective mission statement generates a positive commitment under the most concerned actors, it might help to achieve the goal of competitive advantage. A good mission statement always should contain a clear message toward the stakeholders of the company/organisation formulating the strategic intent. This message should be valid and controllable.

Nr Objective Rating Actor Comment Rating 1 maximise throughput PORT AUTHORITY conflict : 82 maximise net profits SHIPPING LINE3 operate at least cost SHIPPING LINE4 maximise employment level UNIONS5 secure national independence

as regards matitime transportGOVERNMENT

6 promote regional economic development GOVERNMENT7 maximise quality of service to shippers PORT AUTHORITY8 minimise vessel's time in port PORT AUTHORITY conflict : 19 reach financial autonomy ALL

10 minimise total cost of maritime transport SHIPPERS conflict : 1611 maximise return on capital invested PORT AUTHORITY12 minimise required capital investments GOVERNMENT conflict : 1313 ensure full environmental protection PRESSURE GROUP conflict : 1214 minimise port user cost SHIP OWNER15 minimise cargo delays SHIPPERS16 maximise pay levels UNIONS conflict : 1017 …

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DEVELOPMENTS AFFECTING STAKEHOLDER RELATIONS MANAGEMENT

The increasing need for effective stakeholder relationship management is a fairly normal development given the globalisation and liberalization of economy. These structural changes are pushing seaports to deal with new kinds of social, political and economic stakeholders in a different way. As such, SRM will prove to be a keystone in a port’s functioning and development.

On the one side the expansion of the role of the private sector in port activities has forced ports to become more market-oriented. On the other hand non-market forces still exist. Despite the growing market and customer orientation the non-market environment remains important. Government interventions at different levels as well as external pressure groups such as the ecological pressure groups may still interact without incurring the demand for efficiency (e.g. think of the non-market force incurring severe delays on the implementation of the dredging program for the port of New York and New Jersey by so-called "green" actions).

This section points to some developments in the port environment that need special attention in the framework of SRM. The list of issues raised is not complete, but it provides a first step towards further discussion and research in this field.

Integration at the level of market players

A lot of market players in the foreland-hinterland continuum aim to integrate either vertically or horizontally all kinds of activities to reduce costs, to improve efficiency and by doing so to deliver value and a ‘one-stop shop’ service to the customer.

The observed vertical integration strategies of the market players have blurred the traditional division of tasks within logistic chains. For instance, the European stevedoring market is witnessing an influx of new entrants including railway companies (e.g. Belgian Rail), shipping lines (e.g. dedicated terminals of Maersk SeaLand in Bremen, Algeciras and Rotterdam), logistics companies and investment groups. A lot of shipping lines, stevedoring companies and transport operators are now offering forwarding services to the customer. Freight forwarders no longer act as agents of the shipper, but are principals in their own right. Road hauliers have in many countries become professional service providers with whom the shipping line or the shipper can outsource part or all of its inland distribution operation (Notteboom & Winkelmans, 2001). It is important to add that the provision of integrated services does not always need to coincide with the ownership of the related assets. In many cases, the integration is achieved through close partnerships with other players.

This integrated approach has created an environment in which ports are increasingly competing not as individual places that handle ships but as nodal points within a complex of supply and demand chains, including various transport chains. While co-operation at the operational level between the actors in the supply chain may have increased, this has not necessarily resulted in increased commitment to a long-term future relationship with the port. In this competitive environment, the ultimate success of a port will depend on the ability to integrate the port effectively into the networks

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of business relationships that shape supply chains. In other words, the success of a seaport no longer exclusively depends on its internal weaknesses and strengths. It is more and more being determined by the ability of the port community to fully exploit synergies with other nodes and other players within the logistics networks of which they are part.

In terms of stakeholder management this observation does not only imply that the port authority will have to manifest itself as an important stakeholder to others. It also means that port authorities will have to consider more market-related external stakeholders than ever before. At the same time, port managers will increasingly encounter new challenges while identifying and classifying the relevant stakeholders.

For instance, it is no longer straightforward to make a keen distinction between port suppliers and port demanders. If a shipowner operates a dedicated terminal (here defined as a port terminal that has been reserved by the port authority for a single port user or shipowner), it is becoming less clear who is then the basic port customer, since the shipping company itself is taking care of the required port (cargo) handling capacity. In addition we should notice, that due to the many vertical and horizontal integrations in the maritime industry (including the so-called strategic alliances) fewer but bigger players are intervening, i.e. using the new interplay of forces, and as such are creating new challenges in the framework of port development and management.

The emergence of powerful players

Port managers aim at making the port attractive to users, by providing a competitive supply of services for carriers and shippers. However, several ports are becoming increasingly dependent on external co-ordination and control by (foreign) actors who might extract a substantial share of the economic rent (wealth) produced by ports and who are often only guided by the aim of creating a maximum shareholder value.

Given the increasingly footloose character of (maritime) traffic, it might be inappropriate for a port trying to keep this kind of traffic at any cost. If powerful actors in a specific logistics chain exert strong pressure on a port, because of economic rent generated elsewhere in the chain, it might be wise for the port to ‘opt out’ of this chain. For instance, the port community is rarely involved in load centring decisions of shipping lines. However, many of the costs arising out of hub selection are borne by the (port) community (Slack, 1990). The port’s ability to raise tariffs, even when justified by rising costs, is very limited as a function of concrete market considerations. If the costs and benefits of achieving hub status cannot clearly be distributed equally between shipping lines and ports, the position of the port is no longer sustainable.

The increasing bargaining power of some market players (in particular shippers and carriers) undoubtedly will reshape the relationships with port authorities and even with the government. Powerful market players will more and more step to the foreground as direct interlocutors not only on the operational level of port activity, but also in strategic matters related to port planning and port policy. They will more than ever establish the base lines for pricing. All this will certainly have an effect on the necessary stakeholder relationship management.

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The increased bargaining power of some market players is clearly illustrated by looking at the concept of a dedicated terminal. By means of dedicated terminal shipping companies can establish port infrastructure at their own expense (cf. e.g. Maersk Sealand in Algeciras, Bremen and Rotterdam). This may create quite specific legal problems with regard to property law and the territorial competence of the public port authority. An important issue in this context is the question whether the port operator-user in possession of a dedicated terminal holds a dominant position. In general terms, a dominant position means that a player is able to prevent effective competition in the marketplace due to the fact that he can act largely independently from competitors and customers, and ultimately from consumers too (Huybrechts et al, 2002: 125). It all depends on the substitutability of the facility, whence - once again - the importance of applying SRM in order to avoid conflicting (c.q. dominating or abusing) situations.

The distribution of benefits and costs related to ports

The external spill-over effects of ports never have been greater. At the same time, the economic effects of seaport activities are no longer limited to the local environment (i.e. the port region and the local market players), but are spread over a much wider geographical area and among a large number of international players. In other words, the economic benefits of port activities are expanding from the local port system towards a much larger economic system (Benacchio & Musso, 2001).

The geographical dispersion of economic effects is very apparent when a port does not concentrate on developing local value-added activities linked to transit cargo (intermediacy-based as well as centrality-based flows) or on establishing a strong local industrial and logistic cluster. In that case cargo flows are just passing without generating a lot of employment and value-added for the local community. The changing distribution of benefits is also illustrated by the development of logistics zones in the vicinity of seaports or in inland locations along the main corridors towards the hinterland (supported by growing containerisation and inter-modality). These logistics sites and zones in many cases generate considerable economic effects by providing low-end and high-end value-adding logistic activities and only use large load centres as a transit point for their cargo. Nevertheless, it is quite unlikely that these sites and zones would have developed were it not for the presence of seaports. For example, the functional interactions between the ports of Antwerp, Rotterdam and logistics zones in the hinterland have created a large logistics pole. Antwerp and Rotterdam are the central nodes driving the transport dynamics in this logistics pole. But at the same time Antwerp and Rotterdam rely heavily on the hinterland nodes to preserve their attractiveness (Notteboom, 2000).

The benefits tend to become less concentrated in the local port region but at the same time negative side-effects of port activities are primarily felt at the local level.

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A large part of the population takes seaports for granted and is woefully ignorant of how the port is organized and operated and to what extent the port contributes to the local economy2. More attention is given to the fact that the growth of a port in many cases goes hand in hand with increasing negative effects for the local community, such as road congestion, intrusion of the landscape, noise and air pollution and the use of scarce land. Some community groups argue that there is a clear imbalance between the benefits and costs for the local community of having larger and larger ports. This viewpoint is a breeding ground for major socio-economic confrontations related to port development.

In view of developing sustainable stakeholder relations, port managers and government bodies nowadays (have to) spend a lot of time in trying to make sure that new port developments are socially broadly based. Ports cannot and must not take broad public support for development plans for granted. This aspect of port competitiveness will undoubtedly become more important in the near future as resources such as land are becoming scarcer and as broader social and environmental functions are challenging the economic function of seaports. The more international the maritime and port industry becomes, the more energy will have to be put in embedding the port in the local community.

The increasing pressure on local resources

Ports use resources in order to consolidate their position in worldwide logistic and transport networks. The question remains whether the local community is getting a fair input payback for the scarce local resources used for creating economic rent. For instance, land for new port developments has become very scarce. Nevertheless, land sites for port activities are sometimes ‘sold’ on the market for less than their intrinsic value. By doing so, port managers hope to attract new clients. Once a new port client starts operations, the less than correct input payback for port land would be compensated abundantly by value-added creation (local employment, investments, taxes and profits). However, one has to keep in mind that many powerful port users are extracting a large part of the economic rent produced by ports, so the issue of a correct input payback for the local system remains a tricky one.

Stakeholder relationship management should take into account the increasing pressure on local resources. Port authorities should make the relation between the price for scarce resources on the one hand and the socio-economic payback on the other more transparent both to port users and community groups. Lack of transparency feeds the suspicion among port companies and clients on the existence of price discriminating behaviour in favour of some companies (e.g. in terms of land lease agreements or port dues) and might lead to harmful socio-economic confrontations in this field.

2 Sometimes ports like to overestimate their economic impact. The question is not that ports add economic value – but, given the level of economic subsidy, could there have been more economic value created by an alternative deployment of the subsidy ? The answer to this kind of question is far from straightforward. There might be industries with higher value-added per invested or subsidized unit, but the high returns in such industries in many cases partly relies on the performance of a port system that takes care of cargo handling and logistics.

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Investments in port infrastructure

Economic theory proves that optimal working conditions only exist when a fairly good equilibrium exists between supply and demand. Achieving such an equilibrium in real world conditions never has been an easy task.

In the past, most European governments have predominantly funded the majority of large infrastructure works in European container ports. These governments now want to curb their financial participation in terminal development projects as they face declining available funds. Moreover, this development is enhanced by the European Commission’s statement that the assumed high level of distortions in European inter-port competition results from public interventions (including subsidies for port infrastructures) at the national and sub-national levels in various EU Member States. The expected gradual withdrawal of governments in the financing of terminal infrastructure might confront even the largest and most prosperous ports in Europe with severe financial pressures to keep their competitive edge.

Even with the current rise of self-financing investors in port infrastructure (being autonomous public port authorities) it remains extremely difficult to install a comprehensive port capacity regulation and to lower the apparent danger of structural overcapacity. It is more than an open question whether port authorities will take action to co-ordinate their ambition in capacity (building) with other ports or whether it will be primarily up to the market mechanism to reduce overcapacity.

The changes to be expected in the way port infrastructures are financed, urgently require reconsideration of the many stakeholder relationships, i.e. with governments and shareholders, with primary economic stakeholders and the indirect or community stakeholders as well. Much of the port policy debate in European countries is directed toward the establishment of effective relationships between the private port industry, public or private port authorities and central government.

SOME REFLECTIONS ON SRM IN THE FLEMISH PORT SYSTEM

The Port Decree as a tool for SRM among port authorities

The seaport system of Flanders consists of four ports: Antwerpen, Zeebrugge, Ghent and Ostend. Total cargo throughput in 2001 amounted to some 190 million tonnes of which 130 million was generated in the port of Antwerp. The Flemish port authorities operate basically as landlords. In recent years, their position and role has changed as a result of developments on the international markets, including a general concentration in the maritime container transport sector, greater port volatility on the part of container shipping companies, the allocation of dedicated terminals in competing ports, etc.. .

The former instant fights for public support between the Belgian (since 1990 Flemish) government and among the four Flemish port authorities has come to an end by structuring the relationships between port authorities and governments in the

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framework of the Port Decree (March 2nd of 1999). The Port Decree has moved the Flemish ports towards full corporatisation. The decree covers the rules and conditions for a higher managerial autonomy for each Flemish port, via a shift towards an independent legal status. As a result the public port authorities have been transformed towards a more autonomous status. Although port authorities still have strong ties with their respective municipalities through the ownership structure, decision in the last three years are made on an independent basis and port managers are accountable for these decisions.

The Port Decree’s objectives are equal working conditions for the Flemish ports, the creation of clear and transparent relationships among Flemish ports and some general guidelines with respect to investments in port infrastructure and maritime access routes (Flemish Port Commission, 1998 and 1999). The final aim is the creation of an independent port management system with a sound commercial strategy - including the possibility to diversify in other ports or activities via financial participation - and full accountability for the results of administrative and operational activities (Winkelmans & Poelvoorde, 1994).

The Port Decree not only promotes better port governance structures, it also gives each port authority more space to develop its stakeholders relationship management autonomously, under more or less equal starting conditions as the other Flemish ports.

It is still too early to measure the full impact of the Port Decree and associated port management reorganisation on the competitiveness and governance structure of the Flemish seaports. One of the consequences of this new port policy framework is that all four Flemish seaports are clearly in speaking terms about co-operation much more than ever before. The Flemish Ports Commission has carefully built the foundations in this field. Since 1990 this commission indeed has made several recommendations regarding ‘the establishment of long term port strategy’ (1992), ‘port subsidisation’ (1992), ‘port management’ (1992), ‘a first draft of port decree’ (1993), ‘toward a new port policy and management’ (1993), ‘about strengths and weaknesses of the Flemish ports’ (1997), ‘on financing port investments’ (1997), and ‘about strategic port planning’ (2002).

The Flemish Ports Commission as a stakeholders meeting point

The Port Decree of the Flemish government includes paragraphs on the role of the Flemish Ports Commission as an interface between the public administration of ports, the port authorities and the (trans)port industry in the renewed policy framework and the changing market environment.

The current composition of the Flemish Ports Commission is depicted in Figure 3.

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Figure 3: Composition of the Flemish Ports Commission as from 2001

Source: the authors’ own representationLegend: formal relationships informal (informative) relationships

The compositional structure of the FPC is rather original in the sense that (1) neither public departments/ministries nor external experts can exert any direct influence on the decision making process of the commission, (2) the port authorities never possess a majority of votes - even if they exceptionally would all fully agree, and (3) strategic and administrative confrontations are fostered in view of gaining a sound balance in potentially conflicting interests. The majority of votes belongs to representatives of trade unions and employers, not to those who are directly involved in (or committed to) one specific port. These representatives are indeed expected to consider port policy, port development and management not as the final aim but as means to enhance regional and societal welfare. The civil servants from various relevant ministries, who are expected to act in the same direction, however are expected to inform their relevant minister(s) of transport (infrastructure) and mobility, and as such they can be asked – whenever considered necessary - to inform the Commission, which will then come to its own conclusions under the form of advice or a recommendation to its minister. If this recommendation is formulated by unanimity

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Board of Ministers

Minister of Public Works, Transport

andSpatial Planning

Department ofMaritime Transport

and Seaport

PortAutorities (11)

Representativesof Inland (3)

Transport Modes

FLEMISH

PORT (30)

COMMISSION

Externalexperts

Representativesof trade unions (8)

Representatives of Employers (8)

Working groupport

projects

Working groupcompetition &management

then the minister is compelled to follow it. He or she is also compelled to ask for advice whenever the (port) project involves public means of more than 10 million €.

During its rather short period of existence FPC succeeded in producing a whole series of advices, recommendations and reports, which have had a very positive influence. Since the installation of FPC, port authorities show less opportunistic behavior and local rationality when port (extension) projects are at stake. The confrontation of ideas, proposals and plans in the bosom of the FPC finally have created a constructive climate and a growing mutual understanding, esp. with respect to the existence of many common interests in the field of the ever changing maritime world. At the moment a series of strategic plans for every seaport in Flanders are at stake. In accordance to the proposed stakeholders approach it should become very clear that economic and ecological reasoning is to be compromised. The best way to come to consistent and coherent conclusions is to start from a well understood long term strategic vision and to integrate as much as possible into the debate the relevant shareholder and stakeholder visions. Such strategic studies are to be fulfilled neither top-down nor bottom-up, they should reflect the so-called goals-down, planning-up approach. Top-down planning typically results in incoherent compilations of local port plans. Bottom-up planning at first sight looks more promising, but due to local rationality and opportunism macro- and socio-economic objectives are under pressure. The ‘goals down - plans-up’ approach is to be preferred. In that case the government e.g. proposes to define first of all the “strategic intents” in collaboration with the individual ports concerned and asks the port authorities and port industry to come up with their own strategic plans that comply with this intent. In view of getting the necessary structured strategic and administrative confrontations, the government can establish a coordinating body. The final aim is to achieve a dynamic balance between on the one hand macro-economic objectives and on the other hand micro-economic goals. Port operators and port authorities are no doubt the core actors in the development of specific port projects, nevertheless other stakeholders - amongst which the government - play a very important role and therefore should get a full but well-structured opportunity to fulfil their role in the interplay of forces and to ensure that essential macro-economic goals are not neglected.

By means of a well-structured SRM a wider socially relevant port planning can be achieved. In that case the port could find out how to defend and how to bring into operation the thesis, that not only well-being, but the degree of welfare too is important as a focus in achieving sustainable development.

A result of SRM-activities could be that the strategic port planning process could include a new kind of studies, i.e. an “IER-study” (Infrastructure Effect Reporting) in addition to the classical “MER-study” (Environmental Effect Reporting). Indeed, both the protection of the environment and the requirements of infrastructure are today affected by considerations of scarcity and the concepts of public good and merit good.In Belgium more than one port project is hampered by the sudden application of new environmental regulations (e.g. the habitat and bird regulations) even in cases where it concerns port areas, which have been reserved for port extension since long ago. Apparently the possible mutual interests – of the port in terms of space needs and of the community in terms of safeguarding free spaces - are not finding any hearing so

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far. This might be due to the non-existence of any good SRM policy in the context of port development.

CONCLUSIONS

A port both technologically and economically is a node for contacts and contracts, whereby a multitude of individuals and interests (should) collaborate for the creation and distribution of wealth. Port managers should carefully take into account that new politico-economic situations exist, which make the success of a port no longer dependent exclusively on its own performances. Many other (f)actors and situations determine a port’s success, including pro-active behaviour of environmentalists, the non-expert vision on port extensions by « men in the street », etc.

The quest for a port’s survival will encourage port managers to develop Stakeholder Relations Management tools that allow them to treat the employees well, to act fairly and honourably towards port companies and port users, and to conduct responsible in relation to the environment and society.

Keystones in SRM include the identification and classification of internal and external stakeholders, the measurement of the influence of various stakeholders on the port’s functioning, the management of the influential relationships with stakeholders and the development of appropriate time plans for the structuring of stakeholders’ participation in port activity and development processes.

Some developments in the port environment urge a well-balanced SRM. These developments are related to horizontal and vertical integration at the level of market players, the emergence of powerful players, changes in the distribution of benefits and costs related to port activity, the increasing pressure on local resources and the investment issue in port infrastructure.

This discussion paper did not provide the reader with straight answers to all aspects of SRM. It should therefore be regarded as a step towards further research in this field on a case-by-case basis.

LIST OF REFERENCES

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DE LANGEN, P., 2002, Port competitiveness and cluster governance, presentation at the ITMMA conference ‘Port competitiveness’, Antwerp, February 5, 2002

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DONALDSON, T., PRESTON, L.E., 1995, The stakeholder theory of the corporation: concepts, evidence and implications, Academy of Management Review, 20 (1), 65-91

FLEMISH PORT COMMISSION, 1998, Annual Report, Brussels, SERV

FLEMISH PORT COMMISSION, 1999, Annual Report, Brussels, SERV

FRANKEL, E.G., 1987, Port Planning and Development, New York, John Wiley and Sons

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HARALAMBIDES, H.E., MA, S., VEENSTRA, A.W., 1997, World-wide experiences of port reform. In: Meersman, H., Van de Voorde, E. (ed) Transforming the port and transportation business. Leuven, Acco, 107-143

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SHANKMAN, N.A., 1999, Reframing the debate between agency and stakeholder theories of the firm, Journal of Business Ethics, 19, pp. 319-334

SLACK, B., 1990, Intermodal transportation in North America and the development of inland load centres, Professional Geographer, 42(1), pp. 72-83

UNCTAD, 1985, Port Development: A Handbook for planners in developing countries, New York.

WINKELMANS, W., NOTTEBOOM, T., 1994, Ports as nodal points in a Global Transport System, paper presented at EMIP-94, Rotterdam, 24 June 1994, 11 p.

WINKELMANS, W., 2002, Strategic Seaport Planning: in search of core competency and competitive advantage, Ports and Harbors, IAPH, April 2002, 47(3), 17-21.

WINKELMANS, W., POELVOORDE, E., 1994, Port Reforms in Belgium, a Search into New Management Structures and Decision Procedures, Maritime Transport and Logistics in the New Europe (Ed. University of Gdansk), Gdansk, 155-181.

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This paper is part of the

IAME Panama 2002 Conference Proceedings

The paper has been anonymously peer reviewed and accepted for presentation by theIAME Panama 2002 International Steering Committee

The conference was held on 13 – 15 November 2002

in Panama

The complete conference proceedings are published in electronic format under http://www.eclac.cl/Transporte/perfil/iame_papers/papers.aspFor further information contact jhoffmann_eclac@yahoo.com

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