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Reforms aimed at amximising ports

[Loydlist Marinetime Asia : November ,2002]

Tony Gillotte in Bangkok erports on sweeping initiatives to enhance Thailand’s cargo handing capabilities

           Seeking to keep his election compaign promise to improve government efficiency, Prime Minister Thaksin Shinawatra recently pushed through the most far-reaching bureaucratic reform package in recent memory and one that could have a major impact an the Thai maritime sector.

           The two main bureaucratic reform laws signed into law in October were the Restructuring of Government Agencies Act and the National Administrative Regulations Act.
“We have reached a point where we must be able to act quickly to take advantage of the opportunities that await us, says Dr. Ruth Banomyong, professor of Thammasat University.
“Especially with Intra-Asian trade growing fast, the ASEAN Free Trade Agreement coming into full effect, with China joining the WTO and other new markets opening up”

Transport reform
           THE INITIAL IMPACT has been dramatic. The old MOTC for example, has lost half its name to become simply the Ministry of Transport (MOT)
The new MoT has been completely reorganized with Suriya Jungrungriangkit appointed with Minister of Transport, and two new deputy ministers who will now oversee seven related transport departments.

           Although no new maritime policies have been announce yet observers say a feeling of sweeping changes permeates the air within the MoT’s maritime departments.
The emphasis say observers, will be on clear goals and strategies, with transparent practices intended to ease corruption problems. If got, Mr. Thaksin has vowed that heads will roll.

           “We think the Minister of Transport will now be able to employ faster decision making and quicker analysis of problems in the maritime sector” says Teerayudh Dummanonda, newly appointed managing director of Laem Chabang Port (LCP)

Success at Laem Chabang Port
           On The Strength of a steadily improving Thai economy LCP has become an unabashed maritime transportation success story.

           LCP’s throughput totaled 2.7 m teu tor fiscal year 2002, up from 2.3 m last year. Growth is expected to continue at over 10% next year, reaching nearly 3.1 m teu.
Recently, the US Customs Department nominated LCP as one of the top 20 ports in the world, making it eligible to be included in the new US security initiatives proposal.

           And LCP has also been listed among the top five lastest growing ports worldwide. “We can do nearly everything that Singapore and Hong Kong can do.” Says Mr. Teerayudh, “Our productivity is high (average of 25-27 lifts per hour) and our costs (port tariffs) are cheaper.”

           Opened in 1992, and situated on the eastern seaboard of the Gulf of Thailand, LCP is a sprawling, modern deepsea facility. The LCP masterplan calls for a coordinated Phase II and III expansion program. When completed, LCP will be able to handle 8m containers by the year 2020. But, that figure may be in need of serious revision, according to recent growth projections.

           “We recognise that LCP’s Phase Interminals (B-1 to B-5) have reached full capacity.” Acknowledges Mr.Teerayudh, “and as Thailand’s economy continues to grow, we will need more operating terminals.”

           After three apparently premature offerings last year, LCP has once again opened its Phase II, C-3 Terminal for bids. With a deeper draft (14m) to handle post panamax side vessels, C-3 has attracted four bidders (PCIT, TIPS, Hutchison Port Holdings and Bangkok Modern Terminal). A Port Authority of Thailand (PAT) committee will announce the winning bidder by the end of November.

           Remaining Phase II terminals (C-0, C-1, C2 and D-1, D-2 and D-3)have been compieted and are awaiting their new private sector occupants, following the LCP masterplan time schedule or the demands of the market.

           But, a new approach to terminal concessions is being bandled about, one that could also lower freight rates “With post panamax vessels getting bigger and bigger,” says Mr Teerayudh, “I have proposed to offer an entire block of Phase II terminals (D-1, D-2 and D-3) t the highest bidder. So far, Maersk Sealand has shown interest in this idea.”

           Meanwhile confusion reigns over LCP’s A-5 Terminal, where Nam Yuen Youg Co, the local agent for COSNAM, was reported to have bought the concession contract from Banpu plc, a Thai energy company which used the terminal as a 10-10 facility and to import coal for its power generators.

           Observers say Nam Yuen Yong has entered negotiations with PAT to change A-5 to container usage. But, PAT’s asking price to make the switch is reported to be in the neighborhood if 1.4bn baht ($33.3m). Negotiations continue.

Exports up
           Thailand’s economy continues to bounce back nicely, especially compared to US and European economies. This makes it not entirely unreasonable to expect export volumes to continue apace.
Commerce Minister Adisoi Bodharamik expects the country’s export value to grow by as much as 4.5% to $68.12 bn this year, higher than the previous projection of 3.5% to $76.64bn

Multimodal nexus
           The key to understanding LCP’s success has two elements. First, the continued growth of eastern seaboard industrial zones, which tunnel a wide variety of goods including electronics, more and more automobiles, spare parts and garments to LCP and secondly the increasingly efficient road and rail connection between Lad Krabang inland container Depot (LKB ICD) and LCP.

           Since LKB ICD opened in 1995, many Bangkok metropolitan area shippers have switched from using Bangkok Port (BP) to bringing their containers to LKB ICD, where they are processed and put on loaded trucks or trains for a quick trip to mainline vessels calling at LCP terminals, only 127 km away.

           “This transport corridor utilises the quickest container processing and delivery system in Thailand” says Suvit Patanachinda, chief executive officer of Profreight int’l , which operates a terminal at LKB ICD. “And it relieves Bangkok of excess traffic congertion and pollution”

           LKB ICD, located only 25 km east of Bangkok, has six terminals, which are operating at near full capacity. “Our (TIFFA ICD) terminal is handling approximately 13,000 boxes per month,” says Mr.Suvit, “and the terminal’s capacity is 15,000 tue. We expect LKB ICD to handle over one million boxes by the end of the year.”

           The State Railway of Thailand (SRT) landlord of LKB ICD, has already drawn up plans to construct a nearly duplicate sized facility just month of the original site.

           The project, estimated to cost $78.6m, has been approved by parliament and awaits final cabinet endorsement.

           Meanwhile, at the LCP end of the rail line, PAT has urged the creation of a new single rail operator (SRO), which would perform the lift-on and lift-off box services now provided by the LCP terminals.

           Others, however, disagree about the value of this project. “We don’t need it,” says Chris Langford, ceo of Laem Chabang international Terminal Co.,Ltd (LCIT), the largest terminal operator at LCP. “It will cause more problems than it solves and it will cost more”

           While rates are nearly competitive between trucks and rail service to LCP, trucking costs remain lower for two-way trips. Currently, 20% at containers from LKB ICD are carried by rail to LCP, while 80% continue to use trucking services.

           Meanwhile, the SRT is constructing it double tracking system that will make it. Easier for trains to make two-way container deliveries and lower delivery costs.

Bangkok Port Threatened
           Post world war two, BP became fully established as a thriving river port facility, busily supporting Thai economic growth until it reached its box handling peak of 1.4 m tue in the early 1990s.

           BP ushered Thailand into the modern era of containerisation, but its central city location caused huge trafffic congestion and pollution in Bangkok. Meanwhile, the Chao Pharaya river’s draft limitations made it inadequate to carry the nation’s growing national economy into the globalisation era – a new deepsea port was needed.
Today, the two ports have dramatically reversed their roles, with BP losing a high percentage of iots container volume to LCP.

           Some observers have even suggested that BP ought to close. Others say it should join forces with its deepsea rival by moving its opreations to a terminal at LCP.
While BP’s days may be numbered there is also a strong political factor involved (unions, civil service bureaucracy vested interests) which keeps BP’s hopes alive to remain where it is.

           “I think it would be best for BP to move its throughput and staff down to LCP.” Mr. Teerayudh says. “That way our higher volumes could attract larger vessels to LCP and recure freight rates.”

           While BP has not solved all its problems, its recent efforts to transform itself have been encouraging “We have established new small and medium enter prises (SME) services, added cold storage facilities, bonded warehouse space for the private sector.” Says Mana Patram director general of PAT.

           BP’s throughput is forecast to react 1.1 m teu by the end of calendar year 2002, up from last year’s figure of 1m.

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