2.2.1. Some identified causes of KSSL Poor financial performance
Some of the causes of poor financial performance of the shipping division may include the following:
• Lack of competitiveness of shipping as the port is subsidising its losses. In fact, the public did not realise the fact that they are the ones who bear the cost through tariff rates and tax for Betio port dredging etc.
• Poor cost control. A number of consultants like DANPORT, JICA and ESCAP have repeatedly pointed out the same problem but it seems that action is
painstakingly slow.
• Tariff rates are very low because of lack of consideration of port maintenance and upgrading costs. Tariff rates are not differentiated due to lack of added-value port businesses.
2.3. Betio Port Performance Indicators
There is no available port performance indicators (Francou, 1999) showing berth output, ship output and most important port equipment performance statistics showing the equipment utilisation, equipment availability, down-time or immobilisation time, replacement strategy etc. The only available port performance indicators is based on the DANPORT (1991, 9.18-9.21) estimates as follows:
• Output indicator: Gang output for break bulk is 12 tons/gang/hr for loading and discharging. For container cargoes is 5 containers/hr for loading and 4 containers per hour for discharging. About 12 men per gang per shift and 1-3 gangs per ship.
• Indicators of service: Ship turn-around time of 2 to 3 days to load FCLs and empties.
• Average dwelling time of containers in the port storage is 45 days. To reduce the dwelling time the following can be considered: reduce administrative and
documentation procedures, set punitive storage tariff, reduce acceptance period and move cargoes to alternative areas such as in-land container depots.
• 5 days free storage period: The charges started after Custom’s clearance is done. However, shippers are using the port as a free-storage warehouse by delaying the Customs clearance. That means, hardly any charges paid by shippers to the port as the Customs clearance is subject to the shipper’s fulfilment of all customs formalities after which storage charges can be levied. Usually the delay is one basic document: original copy of the invoice to be presented by the shipper to the Customs. This is another bottleneck that needs to be addressed by KPA on its establishment, see appendix 15 where the storage operation forms an integral part of any berth operation. A realistic free storage period and tariff should be
ESCAP proposed the following to be taken into consideration when assessing the cost effectiveness and efficiency and organisational structure of KPA:
• Most of the waiting time is due to rain, vessels awaiting inward clearance, and lack of night arrival and departures
• Copra carriers have the highest average total time in port per trip. Two copra ship calls in 1994 took up some 21% of the total handling time of 45 ship calls. And 3 copra ship calls in 1995 took up 35% of total handling times of 44 ship calls
• Cumulative total ship-call-days is not more than 4 months, per year which includes say one month cumulative waiting time and
• Possible solutions: ship time in port can be substantially reduced: I) If all navigational aids were operational thus allowing night navigation and II) If new port facilities were available for quay side berthing of the larger vessels, thus avoiding or minimising lighterage operations.
2.4. CONCLUSION:
Betio port can be considered as an import type of port due to the country’s huge trade deficit estimated in 1996 at A$41,766,000. KSSL share of the foreign cargo is 30% whereas its share of the domestic market is 70%. The decreasing number of calls from overseas ships at an annual average rate of 34% should be seriously considered by KPA. These trends show that it is better for KSSL to concentrate on the domestic market. The decreasing number of overseas ship calls will adversely affect the operation of KPA. The more shipping calls to Betio Port the more revenue KPA can generate and thus stimulating economic growth through value-added port activities that are hardly seen as yet.
For the foreign market, co-operation with interested foreign shipping companies such as forming an alliance, a merger, outsourcing of shipping management consultants, partnership through joint ventures, slot-sharing as currently practised in the developed countries should be considered to improve the financial position of KSSL without cross-subsidisation.
Thus based on the above findings, there is indeed an urgent need for separation of a Government owned shipping company (KSSL) from the envisaged port authority to improve the performance of both entities. Separation of KSSL from the Port authority is a better remedy to motivate both entities to operate on a competitive commercial basis.
The financial problems, lack of adequate statistical data such as poor record for port performance indicators should be seriously considered by KPA if it want to operate successfully as a commercial entity.
CHAPTER 3: EXAMINATION OF BETIO PORT ORGANISATIONAL