Port Governance Reforms in Diversified Institutional Frameworks: Generic Solutions, Implementation Asymmetries:

TL;DR: In this article, the authors investigate the recent corporatisation process of three seaports in Asia and Europe, focusing on whether the newly established seaport governance structures follow a path largely affected by the local/national institutional frameworks and the political traditions in place.

Abstract: Bringing in neo-institutional perspectives, this paper investigates the recent corporatisation process of three seaports in Asia and Europe. We focus on whether the newly established seaport governance structures follow a path largely affected by the local/national institutional frameworks and the political traditions in place. Findings confirm that path-dependent decisions largely preserve the institutional characteristics of local/national systems, resulting in implementation asymmetries when different countries seek generic governance solutions.

Summary

1 INTRODUCTION

• Global economic changes, technological development and the consequent restructuring of transportation process pose significant implications on seaport (hereinafter called ‘port’) management and policies.
• The EU single market triggered the necessity to introduce new structures within Rotterdam and Piraeus when decision-makers adapted to the new political reality.
• Section 4 discusses the findings and their theoretical implications.
• The paper concludes by providing suggestions for further research on the interplay between institutions and port governance structures.

2.1 Worldwide Port Reforms: Applying Generic Solutions

• Decision-makers implement new port governance and management structures to positively adapt to changing circumstances via a process similar to other economic activities.
• In the pre-reform setting, particular structures and strategies coordinate relations and behaviours between stakeholders in a way matching the original economic and operational environment.
• Reforms and a post-reform setting were the means to address an unsustainable setting shared by the industry globally via new port governance structure and strategy.
• Important questions are yet to be satisfactorily answered.

2.2 The Impact of Institutions: Questions and Theoretical Perspectives

• Empirical examination of the impacts of political traditions and relevant frameworks on port governance between (or within) nations has only recently attracted academic interests, with Airriess (2001b), Hall (2003), Jacobs (2007a) and Jacobs and Hall (2007) examining Singapore, Baltimore, Dubai and Los Angeles/Long Beach respectively.
• Lee et al. (2008) observe that port evolution in advanced western economies has been different from those observed in developing ones, while Ng and Gujar (2009) highlight the danger of implementing ‘western solutions’ in developing economies without 140 investigating fundamental regional differences.
• In new institutionalism (March and Olsen, 1989; Steinmo et al., 1992; Hall and Taylor, 1998),3 institutions pose systematic constraints on individual and collective choices, promoting certain actions and outcomes and pushing non-institutional actors towards strategic calculations to ‘optimally’ fit into new environments .
• Yet, they are rarely the sole cause of outcomes.
• Reform instruments should be (and are) used differently depending on the differentiation in strategic priorities between authorities locked in diversified institutional frameworks (also: Henderson et al., 2002).

3.1 Pre-reform Port Settings

• Korea, the Netherlands and Greece share diversified institutional and political traditions.
• Business develops according to political needs, though the degree of ‘leadership’ in Korea is more pivotal.
• Ownership, operation and planning were under the direct leadership of the national government via the Ministry of Land, Transport and Maritime Affairs (MLTM), executed through the Regional Maritime Affairs and Port Offices located in different ports.
• Each country historically assigned different roles to respective nation port systems.
• In the Netherlands, port competitiveness – particularly Rotterdam – has been a core part of national industrial politics since WWII.

3.2 Establishment of Port Authority Corporations: structures and functions

• Facing analogous challenges, policy makers in all ports seem to have adopted similar reforms - the establishment of Port Authority Corporations (PACs) in line with corporatisation as defined by UNCTAD (1995) and endorsed by the World Bank Port Reform Toolkit.
• The establishment of BPA allowed increasing participation from Busan’s municipal government on port-related matters, mainly supporting port development through financial incentives, like granting profit tax exemptions to BPA for three years.
• The new management structure was designed so that PoR would be efficient and sensitive to cost, opportunities, customer satisfaction, and social responsibilities (PoR, 2004).
• Port expansion and governance reform became strategically and politically coupled with the national-state taking this equity but only after power changes at local level worked in favour of this development.
• Many personnel regulations (organograms, operational practices, dockers’ payment schemes) remained the same, though port managers had long claimed that labour reforms were essential (Pallis and Vaggelas, 2005).

3.3 Commonalities in the reform contents

• First, despite the differences between the political systems, decisions in all cases were to 360 include previously peripheral stakeholders into new systems.
• In the more corporatist state of all (The Netherlands), a powerful coalition in favour of reforms was present.
• In the most centralised-state cases (Korea and Greece) this backing was neither present nor essential.
• Recognising that any financial difficulties would jeopardise PACs’ autonomy and thus affect genuine changes, all PAs were granted limited financial autonomy and the right to prepare independent budgets.
• In PPA, trade union structures provided an institutional restriction towards this manifestation, prompting the national government to prioritise the need of PAs to become SAs.

3.4 The corporate nature of the PAs

• Table 1 provides a comparison of the PACs, supporting legal documents and shareholding structures.
• Korean and Greek governments attempted to preserve their political characteristics.
• BPA had neither genuine power in auditing the executive branch, nor appointing or removing the only authorised executive member, the CEO.
• The CEO was part of an Executive Board (EB) involving a senior hierarchy and expected to make all decisions in consultation with all other EB members.
• While the Greek national government could be regarded as interventionist, it was far from being state-developmentalist.

3.5 Power sharing between different levels of governments

• Table 4 illustrates the established powers and responsibilities of national governments within the respective PACs and ports.
• It was also MMM which proceeded to direct negotiations with multinational operators and foreign government about concessions.
• The provisions of tax incentives, nominations of Port Committee members, and advising the National President regarding the choice of CEO serve as main ‘authorities’.
• Limited roles of the municipal government were also observed in the Greek post-reform setting, as devolution did not imply significant willingness of the national government to share power with local authorities.
• There were no other institutional infrastructures for the active participation of either the municipality or the prefecture of Piraeus in PPA’s daily or strategic decisions.

3.6 The role of national governments in port development projects

• Cultural political economy posits that different countries or regions would interpret similar concepts differently, thus invoking a critical stand to hegemonic discourses.
• For Maasvlakte II - a major project of a size having the potential to transform the features of the port system in North Europe - the Dutch government regarded the project as ‘conventional business’ and invested corresponding amount to only part of the project through the purchase of 19% of PoR shares.
• On this issue, Piraeus shares similarities with Rotterdam.
• The linkage between the project and the Greek national administration was not significant, even though the state was the major PPA shareholder.

4 FINDINGS AND THE THEORETICAL FRAMEWORK IN RETROSPECT

• The reformed governance models in each of the cases is not dissimilar with the respective pre-reform models, with the ‘plays and rules of the game’ (Williamson, 2000) restricting the respective corporate and power-sharing structures of the reformed ports within certain paths.
• Apparently, structural variations of port governance reform implementations are ‘locked-in’ (Pierson, 1993) the respective norms, practices and forms of public and private actors’ interaction in local polity and economies.
• The findings strongly recommend that decision-makers need to go beyond simple predicaments of the collective effects of policies, and understand the institutional characteristics - requirements and limitations - at the early stage of reform possible, as they can affect comprehensively the implementation of their choices.
• How to measure the outcomes is also subject to further research though, with Ng et al. (2009) providing constructive insight.
• This research emphasized the former developments, quintessentially acting as ‘exogenous factors’ faced by all ports around the world including those studied: apart from being global hubs, Busan and Rotterdam are very important regional hubs, precisely as Piraeus is.

5 CONCLUDING REMARKS

• The comparative examination of recent reforms in the case of three international ports of three countries with different institutional traditions, works in favour of the new institutional hypothesis that (port) governance association is associated with implementation processes dependent on the path that is established by the broader institutional frameworks in which the economy develops.
• This study suggests that, similar reforms follow divergent paths of trajectory in different regions with political-cultural traditions standing as causal factors.
• It is worth using this account further, examining why particular options had been in the first instance chosen at the expense of others.
• As such discourses are altered – in the early 2010s the shift towards ‘sustainability’ is evident – a discourse analysis in a comparative CPE fashion would further advance knowledge about port governance formations within specific polities and institutional contexts.

Figures

Table 4. Power and responsibilities of national governments within the respective PACs and ports

Table 1. The corporate structures of different PACs

Table 2. The supervisory institution and its key appointments within different PACs

Table 5. Power and responsibilities of municipal governments within their respective PACs and ports

Table 3. Key executive appointments within different PACs 420

Table 6. Role of national governments in port development projects executed and managed by their respective PACs

Figure 1. The road to management reforms and governance

Full text

1
Port Governance Reforms in Diversified Institutional Frameworks:
Generic Solutions, Implementation Asymmetries
Adolf K.Y. Ng
Department of Logistics and Maritime Studies
The Hong Kong Polytechnic University
Hong Kong, China
Tel: +852 34003625
Fax: +852 23302704
E-mails: lgtan@polyu.edu.hk
/ adolfng@gmail.com
Athanasios A. Pallis
Department of Shipping, Trade and Transport
University of the Aegean
Chios, Greece
Tel: +30 22710 35275
Fax: +30 22710 35299
E-mail: apallis@aegean.gr
(Word count of the article: 8699) 20
This is the Pre-Published Version.

2
Abstract. Bringing in neo-institutional perspectives, this paper investigates the recent
corporatisation process of three seaports in Asia and Europe. We focus on whether the
newly established seaport governance structures follow a path largely affected by the
local/national institutional frameworks and the political traditions in place. Findings
confirm that path-dependent decisions largely preserve the institutional characteristics of
local/national systems, resulting in implementation asymmetries when different countries
seek generic governance solution.
1 INTRODUCTION
Global economic changes, technological development and the consequent restructuring of
transportation process pose significant implications on seaport (hereinafter called ‘port’)
management and policies. The worldwide response is reforming governance structures,
aiming to enable ports to provide specialised services, integrate in complex supply chains,
and execute both public and private responsibilities. The several distinctive variables of
the sector - as exemplified in this journal (Olivier and Slack, 2006), and elsewhere (cf.
Bichou and Gray, 2005) - and the increased commonality of the problems faced by
international ports
1
leads various institutions, including inter-governmental organisations
like the World Bank, to recommend prototype practices that may be employed by all.
Studies suggest that public agencies, port authorities (PAs), and relevant managing bodies
often apply generic solutions, differing from those happening in other sectors of the
40
economy on the basis of the unique characteristics of the port sector (Brooks and
Cullinane, 2007).
Despite the similarities of problems faced, reform objectives pursued, and generic
solutions endorsed, the reform ‘substance’ observed varies significantly. Searching for an
1
For a detailed review on the challenges faced by ports, see: Heaver (1995), Panayides and Cullinane
(2002), Ng (2006 and 2009).

3
explanation, this paper examines whether the newly established port governance
structures follow a path affected by institutional frameworks and political traditions. It
does so based on a systematic analysis on the corporatisation process of three ports,
namely Busan (South Korea), Rotterdam (The Netherlands) and Piraeus (Greece), which
allows for both inter- and intra-continental comparisons. The latter is useful, as political
tradition may differ even within a continent where economic and political integrations
progress.
In the 1990s, reforms were undertaken in these ports as the intensification of competition
was evident in respective regional market shares. Meanwhile, regional political and
economic developments added extra dimensions to competition, affecting the power of
managing bodies to deal with new pressures. For example, the EU single market triggered
the necessity to introduce new structures within Rotterdam and Piraeus when
decision-makers adapted to the new political reality. The presence of diversified
institutional frameworks preceded the decisions of stakeholders to embark on port
reforms. While economic geographers gradually re-figure economic issues with relations
and cultural terms, this is lacking from port geography’s literature (Olivier and Slack,
60
2006). Although studies on the effects of ‘nesting’ on private firm behaviours during
port/terminal investments are available (Airriess, 2001b; Wang et al., 2004), similar
studies on institutional legacies are found wanting. It is only recently that scholars (i.e.
Hall, 2003; Jacobs, 2007; Jacobs and Hall, 2007) focused on a concept previously applied
in the context of transportation (Heritier et al., 2000) and maritime (Pallis, 2002) policy
evolution: institutional settings do matter. Generalisation and further theorisation can
enhance and further establish these findings in port governance.
Following the neo-institutional approach that institutions structure the relationships
between actors within various units of polity and economy (see Hall, 1986), and with the
help of the cultural political analyses of the economy (see Jessop and Oosterlynck, 2008),

4
this paper concludes that observed asymmetries of port governance, even with generic
solution, are results of variations of institutional frameworks within which the
restructuring strategies are nested.
Section 2 develops the theoretical foundations. The cases provide evidence on the shapes
that the restructuring of respective ports have undertaken in the light of the key features of
political and broader institutional frameworks. Attention is on the implementation
asymmetries and any restrictions posed on the initially stated adjustments. Section 4
discusses the findings and their theoretical implications. The paper concludes by
providing suggestions for further research on the interplay between institutions and port
governance structures. 80
2 THEORETICAL FRAMEWORK
2.1 Worldwide Port Reforms: Applying Generic Solutions
Decision-makers implement new port governance and management structures to
positively adapt to changing circumstances via a process similar to other economic
activities. Three settings unfold over time (Figure 1). In the pre-reform setting, particular
structures and strategies coordinate relations and behaviours between stakeholders in a
way matching the original economic and operational environment. Evolving
circumstances affect (often unexpectedly) market demands and stakeholders relations.
The original setting finds difficult to execute stated functions and therefore the sector
adjusts to fit in the new conditions.

5
Original
Structure
Original
Strategies
Fit Misfit
Changing
Environment
New
Structure
Decisions/Strategies
(Mis)fit
New
Strategies
Reform Objectives
UnSatisfactory
Outcomes
Institutional
Frameworks
Reform Options
Satisfactory
Outcomes
Original
Environment
Keys:
Pre-Reform Setting
Unsustainable Setting
Post-Reform Setting
Reform process
Matching configuration
Process looping path
Implicit effect
Figure 1. The road to management reforms and governance

Frequently asked questions

Q1. What are the contributions in "Port governance reforms in diversified institutional frameworks: generic solutions, implementation asymmetries" ?

In this paper, the authors examine whether the newly established port governance structures follow a path affected by institutional frameworks and political traditions. 

Q2. What are the future works in "Port governance reforms in diversified institutional frameworks: generic solutions, implementation asymmetries" ?

By enlightening the correlation and causality between institutions and governance reforms implementation, this study also provides a platform for future port research. The issue of causality needs to be further established by research in other dimensions as well ; for instance Hall and Jacobs ( 2009 ) conceptually turn the analysis on the emerging institutional proximity of ports themselves and the effects that ‘ too much ’ and ‘ too less ’ of this proximity may have on inter-port competition in infrastructure upgrading and innovation. The case studies serve as an ideal base to extend similar analysis towards other regions, including currently under-researched emerging markets, and develop a general theory explaining the ways institutional frameworks and political traditions affect the process of reforming a unique in certain respects economic sector and, not least, better understanding the evolution of port development. This study suggests that, similar reforms follow divergent paths of trajectory in different regions with political-cultural traditions standing as causal factors. 

Q3. What was the main reason for the reduction in permanent staff?

Since corporatisation, the endorsed policy of non-replacement of retiring personnel had led to persistent reduction in permanent staff population. 

Q4. What is the role of ports in national industrial politics?

In the Netherlands, port competitiveness – particularly Rotterdam – has been a core part of national industrial politics since WWII. 

Q5. Why does this paper only examine the corporatization process of the stated cases?

Because of space limitations, this empirical analysis only undertakes a critical comparative examination on the corporatization process of the stated cases. 

Q6. What are the implications of the restructuring of transportation process?

Global economic changes, technological development and the consequent restructuring of transportation process pose significant implications on seaport (hereinafter called ‘port’) management and policies. 

Q7. What was the main purpose of the new management structure?

The new management structure was designed so that PoR would be efficient and sensitive to cost, opportunities, customer satisfaction, and social responsibilities (PoR, 2004). 

Q8. What were the main factors that led to the development of the port?

Along with containerisation and technological innovations, they resulted in shipping strategies demanding ports integration in spatially expanded supply chains. 

Q9. What is the role of the structure in the pre-reform setting?

In the pre-reform setting, particular structures and strategies coordinate relations and behaviours between stakeholders in a way matching the original economic and operational environment. 

Q10. What was the role of the municipal government in the Greek post-reform setting?

Limited roles of the municipal government were also observed in the Greek post-reform setting, as devolution did not imply significant willingness of the national government to share power with local authorities. 

Q11. What was the first time that the Greek government argued for an autonomous port entity?

Since the early days of reform (1999), both socialist (until 2004) and neo-liberal (2004-2009) governments argued for autonomous port entities.