The network concept

The EMLPF are LPF belonging to the proposed network of Mediterranean logistics platforms (Medlog).

This study proposes a Euro-Mediterranean network of co-operation in the logistics sector, whose physical basis will predominantly consist of a certain number of EMLPF located in the MPC, and whose main function will be to service the flows between the MPC themselves and the EU (and beyond).

The Medlog network project is based on an original approach, and the criteria for its success have to be defined:

• its attractiveness must be proven both to the partner countries in which the platforms are installed and to the Member States of the EU,

• its feasibility must also be proven,

• the first stages of its implementation must be identified.

The network concept

The network concept usually refers to the capacity of units (of production, for example a hydroelectric plant, or distribution, for example an airport terminal) to generate an increase in productivity not by enlarging the size of the facility itself (economies of scale) but by increasing the interactions between similar units (productivity grows merely through belonging to the network).

Two different forms of network operation suitable for the EMLPF can be distinguished:

• The technical network, such as a transport, wastewater or electricity distribution network, etc.

It requires an infrastructure, operational techniques, methods of regulating its operation, and a shared provision of information.

The functions of the EMLPF in a technical network require a strong partnership and are based on the acceptance by all the MPC governments of the principle of collective operation, and on a consensus on the type of organization to be adopted.

• The cooperative network, such as the partnerships between research centres, medical centres, etc. It represents a collective operation limited to certain activities (a company’s R&D, the sharing of best practice).

It requires meetings and regular means of communication rather than any specific infrastructure.

In spite of its limited structure, this type of co-operation is essential to the installation of a long-term EMLPF network and should not be neglected: the EMLPF network will be both an infrastructure network and a network of the people involved in its creation and who wish to participate in its operation.

For the network to be effective, it is necessary to have:

• Rules governing the collective operation: certain activities will deploy several platforms simultaneously (marketing, exchanges of standardized information, training, etc.),

• Standardized equipment and status: the platforms have many common characteristics and standards (which are based on the organizational models of international logistics platforms). Only the minimum adaptations to fit local conditions must be made.

The smooth running of these two types of network, either on a technical level (sharing of infrastructure) or in terms of co-operation (ad hoc sharing of certain resources or functions), relies on one of these two characteristics but frequently on both of them simultaneously. The proposed network of platforms combines these two types of organization – technical and co-operative – in a way which will enable extensive joint activity.

Benefits of the Medlog network:

The positive effects of a Euro-Mediterranean network of logistics platforms are as follows:

• The access to recent, less polluting technologies for the equipment and the services offered by the platform; more efficient technologies (handling, data transmission systems, general or specialist warehouses) standardized throughout the network. The overall performance of the logistics sector is enhanced, the costs of international transport are reduced, and environmental efficiency is improved.

• The technologies introduced and mastered by EMLPF users will be more easily shared with the other national logistics operators; membership of the Medlog network will make it possible to upgrade the overall performance of the transport and logistics sector.

• Improvement of staff skills through a training programme tailored to international standards, hence better productivity and improved working conditions for employees.

• The marketing efforts of each EMLPF are supported and underwritten by its membership of the Medlog network: international operators can be certain of having access to the same technologies and logistics services in all EMLPF in the network, and of benefiting from the same commercial terms and conditions for the leasing of warehouses (leases, improved monitoring services, security services, etc.).

• Reinforcement of the commercial links with Europe thanks to a better service in terms of value for money, and increased trade between the MPC themselves.

• A more rapid improvement of each MPC’s general international competitiveness. Improved reliability of transport to consumer markets will be a factor enhancing the competitiveness of manufacturers in the MPC.

The establishment of Euro-Mediterranean logistics platforms will help national and international operators achieve a more rapid mastery of the supply chain, giving them specially-designed tools to develop international trade.

The network effects from the sharing of the technical infrastructure are genuine at the national level, but are limited on an MPC scale.

In the case of the MEDA countries, intra-Mediterranean flows are limited whilst flows between Europe and the South Med countries are a more important – sometimes even a dominant – part of the overall foreign trade of each country.

The platforms which are envisaged will thus firstly contribute to reinforce North-South Mediterranean flows, and to improve transport productivity for national and local traffic. They will also have an impact on South-South flows, although this will be limited in the short term.

The risks of the Medlog network

Within the framework of this project, three different types of risk can already be identified:

• A “Medlog Network” risk related to the political acceptability of the principles of the project by the various constituencies involved in the Euromed partnership.

All European Union Member States, MEDA countries, the Commission, the EIB and other financial backers have direct input via the Euromed Transport Forum. It is vital that a consensus be achieved on what is essentially an innovative project, and one which incorporates very wide-ranging recommendations ranging from training to the project’s contractual status.

• A “country” risk in particular related to administrative implementation of the project.

Implementation requires various administrations to be involved in several areas of activity:

effective availability of public finance for the project, use of the loans agreed by the financial backers,

supporting measures to be implemented at the national level (training, transport control, modernization and simplification of procedures, etc.),

classification or acquisition of land reserves, implementation of the infrastructure,

involvement of the Customs services, acceptance of new legal status for the operation and management of transport equipment, etc.,

The dispersion of responsibilities, the diversity of sources of government funding, and the inevitably slow pace of any complex public project are potential sources of delays in the implementation of the project, and could even be a threat to its successful completion. A decentralised independent management and implementation could possibly contribute to reduce this risk.

A first issue to be solved is to allocate responsibility for launching the project (even if it is shared in some areas) to the best qualified and most legitimate administration.

The effective implementation of certain supporting measures (sectoral reforms, adaptation of the legal framework, and the modernisation of certain administrations such as the Customs) is an essential aspect for the national and international credibility of the project.

• A risk related to the economic viability of the project. Economic viability is mainly related to the quality of the location of the platform, the capacity of national and international operators to invest in (and promote) the project, and the response of the local and national market.

A badly located project (remote from the main economic and industrial markets or transport networks) can suffer from the competition of better located sites.

It is this type of deviation from the original platform implementation plan which is most frequently seen in this type of project; it is also the only one which cannot be rectified at a later date.

It is almost inevitable that pressure will be exerted by the national authorities to select a site which has lower logistics potential but which fulfils the demands of local development policy.

An unsuitable site can compromise the financial profitability and the interest of the project for the community. It also gives competing projects the opportunity of establishing themselves in the best locations, despite the fact that they do not offer the same guarantees in terms of urban integration, accessibility to the transport networks, and quality of equipment as the Medlog project.

Lastly, a site on which it is not possible to build warehouses able to receive heavy goods will entail costly foundation works which could compromise the profitability of the investments planned.

• A miscalculated commercial offering is also a risk frequently seen in this type of project. Excessively high rents, unsuitable warehouses and equipment, and oversized facilities in relation to the short-term needs of the local and national markets all represent serious threats to the financial viability of the project. This can, however, be rectified quickly ex post.

A further risk can arise if the commercial offering and manager do not offer sufficient guarantees to the future users, and in particular to international operators. Failure of the manager can have a durable impact on the project in terms of its image and from an operational point of view. Rectifying this situation “ex-post” is expensive and can take time.

• Risks of overruns in the construction costs of the platform. These can arise from design problems, technical feasibility studies, or implementation of the project and are also very frequent in infrastructure projects.

The nature of the facility – its technical sophistication – the quality of its promotion and the infrastructure works which a logistics platform requires should provide effective protection again this type of risk. It is reasonable to predict that this project should not present any greater risks than investments in large-scale engineering structures such as marine breakwaters, tunnels or bridges whose expected life extends far beyond the economic forecasts on which their viability is based.

It is however certain that:

• should the Customs system remain opposed to any improvement and simplification or modernization of controls, and

• should the demands for security exceed the capabilities of modern surveillance systems, and

• if, in general, the need to eliminate trade barriers within the Euro-Mediterranean single market were not agreed and implemented,

it would be very risky to make investments without the assurance of some simplification in these fields.

The feasibility of the network

Most of the representatives of the administrations involved have welcomed this project.

The notion of the network was generally understood by our contacts as was the development of standardized Mediterranean logistics platforms across the various countries.

It is also clear that in the short term the network effects would be limited if we only considered trade between the MPC. However, the network will help reinforce the links with Europe and will support the growth of South-South trade.

A network of public logistics platforms on an international scale is a new project with no equivalent in Europe or anywhere in the world.

Networks of platforms exist but they are private networks and are generally on a small scale. Their management is centralized by a single operator, but the aim is not that they should be operated collectively. Moreover, objectives linked to government regional planning policies or local economic development are not part of the priorities of private platform managers.

There are, however, a number of reasons for believing that this network is possible and desirable for both private operators and MPC governments, as well as for the EU Member States.

These reasons are as follows:

• The rapid growth of containerized transport allows the emergence of new methods and new transport capacity in the Mediterranean area. The use of port hubs allows the repositioning of containers at a regional level, providing benefits to Euro-Mediterranean transport.

• International Mediterranean operators have emerged, with the systematic presence in all MPC of:

the three leading global ship-owners: Maersk, MSC and CMA right across the Mediterranean basin,

international transport/logistics operators at the sub-regional or regional level (SDV, Kühne &

Nagel, Gezairi, Agility, Aramex, DHL, UPS).

All the services are not necessarily offered and the agencies can have a different status, but there is a pool of major players with a Mediterranean culture.

Summary: The Medlog network and its feasibility

A project whose principle has been approved by public and private transport operators in the MPC.

Mediterranean operators in the logistics and transport sector already exist.

The Medlog network will firstly reinforce the North-South links and later South-South ones.

A co-operative and technical network, with rules governing its operations and standardized characteristics.

The advantages of the network lie in the rapid marketing of the platforms, the possibility of obtaining substantial simultaneous investment from international operators, the implementation of international service standards and education levels, and the strengthening of commercial links with European operators and shippers.

The risks of the network are linked to its status as part of a multilateral international cooperative venture (Euromed), to its implementation on a national level and to its economic viability.