Mumbai port swarms with barefoot dockworkers and relies on cranes that elsewhere would be museum pieces. Yet because there are few alternative means of importing and exporting some types of cargo – including the products of India’s fast-growing automotive industry – frustrated shipping lines have to put up with the expense and inconvenience of using the facility perched near the end of the peninsula that houses the country’s commercial capital.
There are different problems on the other side of the bay at Nhava Sheva international container terminal. The terminal – one of three serving container ships in the relatively new Jawaharlal Nehru Port – has equipment as good as anywhere and loads and unloads ships at world-class speeds. Huge grabbers whir down on ropes from cranes by the quay, snatch containers from waiting trucks and lift them to the right place on the ship, moving a container every two minutes.
Yet demand for the terminal’s services is higher than it can comfortably handle: it was designed when it opened in 1999 to handle a maximum 1.1m twenty-foot equivalent units of containers annually but last year shifted 1.32m TEU. As a result, congestion can be bad.
The two scenes display the difficulties facing many emerging economies in transporting the cargo flows generated by rapid growth, both in demand for their products abroad and the appetite at home for imports. The majority of the infrastructure in many fast-growing economies – such as India, Vietnam, Russia and Brazil – remains in state ownership. Like publicly owned Mumbai port, much of it is suffering from a mixture of poor stewardship and a shortage of cash.
There are, meanwhile, often islands of efficiency paid for and run by private investors: Nhava Sheva, India’s first privately operated container terminal, was built by P&O, the British container ports and ferries operator bought last year by Dubai’s DP World. Some Latin American countries boast excellent toll roads built by European investors.
But in most countries there are far too few of these and they are linked to sub-standard publicly owned infrastructure. A privately owned four-lane Mexican toll road will sometimes end abruptly, forcing traffic on to a battered single carriageway. Outside the gate at Nhava Sheva, the roads are potholed, while the water in the bay has not been dredged deep enough by the state-owned port authorities.
The task is to match the achievements of China, the emerging economy whose export handling capability attracts the fewest complaints. It has married government determination to improve transport efficiency with an openness to private investment and a surprising willingness to relinquish state control.
The result has been vast new ports – including a showpiece container port on an island off Shanghai – and a growing network of toll roads. It is also working with foreign manufacturers to improve its railway rolling stock.
Many emerging economies could be enjoying even faster economic growth if they addressed these problems. Representatives of Japan’s NYK Line, the world’s biggest operator of car-carrying ships, shake their heads over how Mumbai port holds back their efforts to export Indian cars. Its total annual capacity is 10,000 vehicles, while just one of NYK’s biggest, most efficient ships would be able to take 5,000 if it could negotiate its way into a port designed for the vessels of many decades ago.
In Brazil, international development experts blame the overcrowded port of Santos, the country’s busiest – it lies near São Paulo – for hitting the competitiveness of soyabean production. Brazilian soyabeans are some of the world’s most efficiently produced but, by the time they have sat in queues of trucks many kilometres long to reach the port, the added costs mean they struggle to compete. A report by the United Nations Conference on Trade and Development quotes Brazilian shippers as estimating that the country’s port congestion cost them $1.2bn (£620m, €910m) in 2004.
In Vietnam, exports of clothes and shoes lose some of their competitive edge because of transport problems. According to research commissioned by Neptune Orient Lines, the Singapore-based shipping company, it costs $1,070 from Ho Chi Minh City and $1,480 from Hanoi to move a 40ft container to Yokohama in Japan, against only $940 for the same journey from Singapore, even though Vietnam’s labour costs are far lower.
The extra costs are incurred largely because Vietnam lacks a deep-water container port. Goods have to be shipped expensively in small vessels to a port such as Singapore, Hong Kong or Kaohsiung in Taiwan, where they are put on a larger ship bound for their eventual destination.
At the heart of the problem for many countries is the need for the public sector to approve, finance and construct infrastructure projects much more speedily. Many governments also remain reluctant to encourage foreign private investment in parts of their infrastructure. Neil Davidson, ports analyst at London-based Drewry Shipping Consultants, says the factors are common to many emerging economies but worst in India. “India has the issue of being more bureaucratic than anywhere else and a lot bigger,” he says.
The failings are, nevertheless, becoming so obvious that they have moved up governments’ agendas and some action is being taken.
Kenneth Glenn, president for South Asia of APL, a container line owned by NOL, says that in India there has been a real change of political mood. “Transport infrastructure is now recognised as one of the top issues, not just related to transportation but to the entire development and growth of India’s economy,” he says.
At Mumbai’s JNP, the state-controlled railways have recently upgraded the line entering the port from single to double track, increasing the number of trains able to call each day by 50 per cent. There are also plans for a dedicated line for freight trains hundreds of miles from the port to Delhi, while a toll road is being built to take trucks coming to and leaving JNP off the area’s many potholed single carriageway roads. In Vietnam, the public sector is building roads, particularly around Ho Chi Minh City, the commercial capital.
However, few believe states can solve the problems on their own. Bent Flyvbjerg, a Danish academic who studies infrastructure projects, says the public sector is inevitably more influenced by political considerations than market demands. Politicians also tend to prefer spectacular projects to ones that make incremental but useful changes.
Since the public sector owns most existing infrastructure, it can also be reluctant to encourage new facilities. Vietnam faces a capacity crunch in its ports partly because the existing facilities’ public sector owners were reluctant for some time to admit the need for alternative, privately financed ports able to take larger ships.
The pitfalls are illustrated by the fate of Mumbai’s Bandra-Worli Sea Link road, meant to open in 2001 to relieve the city’s chronic congestion and take traffic sweeping on to a viaduct above Mahim Bay. After engineering problems and legal challenges, the ambitious project is still no more than a line of concrete pillars in the Arabian Sea. The Maharashtra State Road Development Corporation, which is behind the project, now estimates it will open no earlier than next year.
Such failures have brought the private sector some unlikely supporters. Maya Sinha, a civil servant who is deputy chairman of the public sector Jawaharlal Nehru Port Trust, which owns the port land, says there is a case for greater private involvement in road and rail-building to improve access to her port. “It’s the rail connectivity [and] the road connectivity where we’re not meeting customers’ expectations,” she says.
Yet even if they were more open to foreign investment, many emerging economies might still find their transport developments tripped up by concerns over the overbearing and unpredictable role of the state. Large financial institutions do sometimes fund projects in relatively untested markets but have to be comfortable with the regulatory set-up. “We need arrangements that are clear and stable and based on understandable principles that are not suddenly going to change for no sound reason,” says Martin Stanley, head of European infrastructure funds at Australia’s Macquarie.
The reluctance of the public sector to comply extends to China, where many in the transport industry think shipping on the Yangtze River could be growing faster if the rules for operators were less onerous.
India, as in many other areas, is far worse. Anil Devli, executive director of Shreyas Shipping, a container line, says India requires 39 documents to move a container between ships. “The legal framework is probably the biggest barrier [to better transport],” he says. “I would even put this one step above the lack of physical infrastructure.”
Yet China illustrates how even seemingly minor reforms can trigger significant progress. From January last year, the country started permitting foreign companies to own 100 per cent of China-based logistics companies. As a result, foreign-owned operators can marry their expertise to direct control of a fleet of trucks using the country’s rapidly improving roads.
One of many results has been that Toyota, the Japanese car manufacturer, can supply its dealers in most of China overnight with parts ordered the previous afternoon. The service allows dealers to fix cars faster and to hold far smaller stocks of spares. That would, according to those involved, have been unthinkable even two years ago.