One area I'm particularly interested in, highlighted by the New Zealand Initiative, was the OECD's call in 2013 on government to "Consider reducing local government ownership of port assets to bring more market discipline to the sector". This seems like an odd thing for the OECD to talk about (yes, I do all the time, but let's be honest, I'm pretty odd) but it has major downstream affects on the economy.
What's the status quo of New Zealand ports? I crunched the numbers - in terms of total seaport export and import value for the year 2014-15 - and looked at who owns each port:
|Port||Share of exports (NZ$)*||Share of imports (NZ$)*||Ownership|
|NorthPort (Whangarei)||1.66%||8.87%||Port of Tauranga (50%), Northland Regional Council (25%), Ports of Auckland (10%) plus other investors.|
|Ports of Auckland||14.29%||57.86%||Auckland Council|
|CentrePort (Wellington)||3.26%||4.76%||Wellington Regional Council|
|Port of Tauranga||37.56%||11.01%||NZX listed; Bay of Plenty Regional Council (54%)|
|Port Napier||9.26%||1.44%||Hawke's Bay Regional Council|
|Port Taranaki||4.68%||0.60%||Taranaki Regional Council|
|Eastland Port (Gisborne)||0.82%||0.00%||Eastland Group Ltd, owned by Eastland Community Trust|
|Port Marlborough (Picton)||0.19%||0.00%||Marlborough District Council|
|Port Nelson||1.55%||0.84%||Nelson City Council (50%), Tasman District Council (50%)|
|Lytellton Port Company (Christchurch)||11.13%||10.83%||Christchurch City Council|
|Port Otago (Dunedin)||9.04%||1.03%||Otago Regional Council|
|SouthPort (Bluff)||2.99%||1.85%||Southland Regional Council (65%); NZX listed|
|PrimePort (Timaru)||3.56%||0.91%||Port of Tauranga (50%), Timaru District Council (50%)|
As you can see, local government dominates the 13 major port businesses in New Zealand. Two of our ports are NZX listed - Port of Tauranga and SouthPort, which most are either directly or indirectly owned by local governments. Port of Tauranga has been active in seeking joint ventures; it now has two - NorthPort (Marsden Point, new Whangarei) and PrimePort (Timaru). Tauranga now dominates exports, while Auckland dominates imports.
Ports of Auckland was publicly listed from 1993-2005 (due to Waikato Regional Council selling 20% of its shares), and as most Aucklanders now know is currently 100% owned by Auckland Council Investments Limited. Christchurch City Council is considering selling a stake in the Lyttelton Port Company.
These complex ownership structures underlines the many problems for sea ports in New Zealand: with the exception of Auckland and Tauranga, our port companies are small and unable to expand to gain economies of scale. The multiplicity of ports makes it easy for the major international shipping lines to play ports off against one another. As smaller entities, our ports are price takers. This, as the OECD points out, makes life harder for New Zealand exporters.
Meanwhile, Tauranga's strategy appears to be to take business off both Auckland and Lyttelton (Christchurch) ports through its two joint ventures. Ports of Auckland doesn't appear to have much of a strategy other than filling in more of the Waitemata Harbour, and a joint venture with Port Napier, outside of Palmerston North, which appears to be a play at taking business off Wellington's CentrePort.
Add to this the looming problem of "mega" ships, which the Ministry of Transport recently argued should mean that the number of international container ports is significantly reduced, from 10 to 5. The Ministry of Transport suggested Auckland, Tauranga, Napier, Lyttelton and Otago would be the survivors, while other ports simply become "feeder" ports.
All of this points to a major restructure of how ports operate in New Zealand. My suggestion is that the ports are consolidated into two main companies - one consisting of Auckland, Wellington, Napier and Lyttelton, the other Tauranga, Taranaki, Marlborough, NorthPort, SouthPort and PrimePort - to create competition (both groups would have roughly 50% of all trade between them). The local authorities could band together to own a stake in each of these consolidated companies, which would be NZX listed.
The expectation would be that the port companies would consolidate their investment to achieve economies of scale in servicing larger TEU ships. Smaller ports would become "feeder" ports to the larger hubs (Auckland, Tauranga, Lyttelton and Timaru).