CPA and CPS Off to a New Start

After many years of negotiations, Curaçao Ports Authority, (CPA), and Curaçao Port Services, (CPS), have finally arrived at an agreement with regards to the long-standing monopoly held by CPS, over the island’s port containerization and stevedoring services. In September 2016, Minister of Economic Development, Eugene Ruggenaath, CPA Chief Executive Officer, Humberto de Castro and Fernando da Costa Gomes of CPS, signed a new port concession, which eliminates the exclusive rights previously held by CPS over all port services.

TEXT HELEN GRIFFITH

Just a few years after the establishment of CPA in 1981, an agreement was signed granting CPS the exclusive right to carry out all stevedoring services in the ports, and the handling of all containers and goods at the Container Terminal. Originally, CPA acted as a Tool Port and was responsible for the fixed port infrastructure including the quay walls, all harbor wharfs and the gantry cranes. CPS, on the other hand, was responsible for the operations of the port services and port buildings. This original agreement was to be automatically renewed every 10yrs, essentially granting CPS a permanent monopoly over the ports.

Several key stakeholders, including parliament, saw the need to revise this concession as quickly as possible in order to allow themselves the option to attract new container terminal operators to serve the transshipment market and to facilitate further economic growth.

After much negotiation between the parties concerned, CPA and CPS arrived at an accord, overseen by Minister Eugene Ruggenaath, that provides a number of key benefits to the harbor. This agreement eliminates the exclusive rights that CPS holds over the ports for the next 20 years and opens up the market to newcomers in the industry. It also clears the way for the development of container transshipment or bulk transshipment in Bullenbaai.

Due to the size of the harbor at the Annabaai, transshipment would not be possible because of the size of the larger vessels and the depth of the harbor. Bullenbaai is seen as an attractive alternative. Extensive feasibility studies have been conducted and the conclusion is that the development of Bullenbaai as a transshipment port could be a viable project with the consideration of 3 major factors. Firstly, the total investment required for the entire project would amount to 400-500 million dollars. The development of this port would require a huge investment, not just in port facilities at Bullenbaai, but also in infrastructure in the surrounding lands to facilitate easy access to the port. Secondly, a complete market assessment would be conducted to analyze exactly what potential markets could be served. In many instances it would not be beneficial for shipping companies to make an additional transshipment stop, with a resulting increase in price, when their ultimate destination is already within the region. Thirdly, the port’s ability to offer competitive pricing for their services must be taken into consideration, while taking into account the overhead costs of infrastructure. Neighboring countries with competitive ports can change their price structure almost overnight, rendering the Bullenbaai port unprofitable.

The conclusion of the study was that even though this is a very volatile investment to make, there is a scenario in which it is feasible, and therefore it would present itself as an attractive venture for a large shipping line or container terminal operator to invest. It is considered too high a risk for CPA alone to build the entire infrastructure, but it is seen as a more viable solution to set up the conditions that would make it attractive for foreign shipping companies to invest. As a result it is not foreseeable in the near future, but any future plans for the development of Bullenbaai should take these potential plans into consideration. So in actuality, it seems unlikely that CPS will run any major risk of loosing its market share in the harbor in the near future.

In addition, the concession also requires CPS to replace the existing gantry cranes. The cranes must be replaced within the next 2 years at a cost of 30 million dollars, and the surrounding infrastructure must also undergo major repairs to the tune of 20 million. Both the installation and renovation will be monitored and approved by CPA.

CPA’s, Humberto de Castro notes, “The cranes are nearing the end of their lifespan and are not in proper working order. There have been instances in 2015 and 2016 where vessels have had to divert in order to drop their containers in Aruba because of the cranes being out of order.” Over the course of 2016, CPA has made a significant investment in repairing the cranes so that they are sufficiently functioning in order to bridge the 2-year period in which CPS is required to purchase new ones.

One might ask, how does CPS benefit from this new concession with the task of having to make such a huge investment in the cranes, while no longer retaining their monopoly? But in reality it is very difficult for a newcomer to make a huge investment in the construction and installation of new containerization facilities in the port, while having to compete with CPS for a market share in what is already a very small market. If the purchasing of 2 cranes and repairing of the wharfs alone costs 50 million, one can only imagine what the investment would be for an entirely new establishment of port containerization services.

Another key benefit that the concession brings to the harbor is that CPS is also now required to meet a certain level of transparency in its operations. CPA will now have access to information on a variety of Key Performance Indicators, (KPI’s), which will serve as crucial to the assessment of all functions performed by CPS, and subsequent analysis on ways in which they can improve the efficiency of its operations and levels of customer service.

CPA acknowledges that at times, there may be a lack of sufficient chassis at the port to properly serve the number of customers and their incoming containers in a timely manner. Both CPA and CPS have agreed to work on a solution with the merchants on this issue. However it must also be noted that at times the lack of chassis is used as a scapegoat in order to dismiss other operational problems both within CPA and CPS, and with external shipping agents. There have also been many instances of customer complaints of CPS not delivering their containers on time, when in reality the customer has unrealistic expectations of the time it takes to process the container. Customers do not have sufficient access to information regarding the status of their shipment, and the paperwork required to process it. As a result, when an official complaint is lodged, it serves to discredit the reputation of the ports, when in some cases they are not at fault.

While there are always areas in customer service that need improvement, Mr. de Castro is of the opinion that the service levels at CPS are not as bad as is publicly perceived. However he notes, “At the end of the day it doesn’t matter. There is a perception that they provide bad service, so we need to be more transparent [to the public] to make it easy for customers to know the status of their containers [at any given time].” By providing the customer with readily available and up-to-date online information on the status of their containers, it is hoped that ideally the more informed a customer is, the less likely he or she will lodge an ill-informed complaint.

Mr. de Castro also keenly stresses the importance of the identification and analysis of the KPI’s, and is confident that this will serve to accurately identify areas within the operations of the entire stevedoring chain, and thereby improve the customer service levels of all parties. There is a commitment from both parties to focus on those KPI’s that will result in a true turnaround in the efficiency of operations. Their ultimate goal is to promote the ports of Curaçao as an attractive package for foreign investment with benchmarks of excellent customer service.

With all of the benefits that this new concession brings to the ports of Curaçao, CPA is looking forward to a new era of cooperation between the Port Authority, (CPA), stevedoring company, (CPS), transport companies and shipping agents.

Leave a Reply

Your email address will not be published. Required fields are marked *