Skip to main content

The European Port Industry: An Analysis of its Economic Efficiency

Abstract

Because of their critical strategic role, ports have all traditionally been subject to some form of government control even if the legal form and the intensity of this control have varied across countries. The member countries of the European Union have not been different from the rest of the world in this respect. A significant difference however is the recurrent effort to integrate, in a coordinated way, the port sector in a trans-European transport network (TEN-T) through the adoption of a common legal framework. In this context, if the objective of the reforms is to ensure that port networks, integrated in combined transport networks, become competitors of the road network, the concept of port efficiency becomes central. This paper provides an overview of the evolution of the European Port Legislation and shows how comparative economic measures can be used to highlight the scope for port efficiency improvements, essential to allow short sea shipping transport to compete with road transport in Europe. To our knowledge, this paper is also the first effort of estimating technical efficiency of European Port Authorities. The average port efficiency in 2002 was estimated to be around 60%, denoting that ports could have handled 40% more traffic with the same resources.

This is a preview of subscription content, access via your institution.

Figure 1

Notes

  1. De Rus et al (1995) provide a detailed diagnostic conducted for the Spanish Competition Tribunal.

  2. The readers are referred to Everett (1996), Haralambides et al (1997), Baird (2000), and Notteboon and Winkelmans (2001). For a review of the existing literature on the menu of reform options in the port sector, see World Bank (2007).

  3. In this model, the Port Authority owns the facilities and either rents or gives in concession these facilities to private operators, leaving as many activities as possible in the private sector's hands.

  4. This debate is actually not new; see for instance Suykens (1986), Suykens and Van de Voorde (1998), Haralambides et al (2001), and Haralambides and Veenstra (2002).

  5. See Coelli et al (2003a, 2003b) for a discussion of the data requirements to assess performance in infrastructure industries.

  6. This analysis is usefully complemented by a recent equivalent assessment of the Spanish experience with a similar methodology but with a much complete database. See González and Trujillo (2004).

  7. For more information see a survey on efficiency measures in González and Trujillo (2007).

  8. http://europa.eu.int/comm/eurostat/newcronos/reference/display.do?screen=welcomeref&open=/&product=EU_transport&depth=1&language=en

References

  • Adler, N, Nash, C and Niskanen, E . 2003: Barriers to efficient cost-based pricing of rail, air and water transport infrastructure in Europe. Fourth Seminar of the IMPRINT-EUROPE Thematic network “Implementing Pricing Policies in Transport: Phasing and Packaging”, Bruselas.

  • ATENCO. 2001: Analysis of the cost structures of the main TEN ports. Public Final Report. Project funded by the European Commission under the transport RTD programme of the fourth Framework programme, see Section 3.6.1: North Sea container ports.

  • Baird, AJ . 2000: Port privatisation: Objectives, process and financing. Ports and Harbors 45: 14–19.

    Google Scholar 

  • Baños-Pino, J, Coto-Millán, P and Rodríguez-Álvarez, A . 1999: Allocative efficiency and over-capitalization: An application empirical evidence. International Journal of Transport Economics 26: 181–199.

    Google Scholar 

  • Barros, CP . 2003: Incentive regulation and efficiency of Portuguese port authorities. Maritime Economics & Logistic 5: 55–69.

    Article  Google Scholar 

  • Barros, CP . 2005: Decomposing growth in Portuguese seaports: A frontier cost approach. Maritime Economics & Logistics 7: 297–315.

    Article  Google Scholar 

  • Barros, CP . 2006: A benchmark analysis of Italian seaports using data envelopment Análisis. Maritime Economics & Logistics 8: 347–365.

    Article  Google Scholar 

  • Barros, CP and Athanassiou, M . 2004: Efficiency in European seaports with DEA: Evidence from Greece and Portugal. Maritime Economics & Logistics 6: 122–140.

    Article  Google Scholar 

  • Battese, GE and Corra, GS . 1977: Estimation of a production frontier model: With application to the Pastoral Zone of Eastern Australia. Australian Journal of Agricultural Economics 21: 169–179.

    Article  Google Scholar 

  • Battese, GE and Coelli, TJ . 1988: Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data. Journal of Econometrics 38: 387–399.

    Article  Google Scholar 

  • Bonilla, M, Medal, A, Casasús, T and Sala, R . 2002: The traffic in Spanish ports: An efficiency analysis. International Journal of Economics Transport 29: 215–230.

    Google Scholar 

  • Coelli, T, Estache, A, Perelman, S and Trujillo, L . 2003a: A primer on efficiency measurement for utilities and transport regulators. WBI Development Studies. The World Bank: Washington, DC.

    Book  Google Scholar 

  • Coelli, T, Estache, A, Perelman, S and Trujillo, L . 2003b: Una introducción a las medidas de eficiencia. Para reguladores de servicios públicos y de transporte. Alfaomega Banco Mundial: Washington.

    Google Scholar 

  • Coto-Millán, P, Baños-Pino, J and Rodríguez-Álvarez, A . 2000: Economic efficiency in Spanish ports: Some empirical evidence. Maritime Policy and Management 27: 169–174.

    Article  Google Scholar 

  • Cuesta, RA and Orea, L . 2002: Mergers and technical efficiency in Spanish saving banks: A stochastic distance function approach. Journal of Banking & Finance 26: 2231–2247.

    Article  Google Scholar 

  • Cullinane, K and Song, D-W . 2003: A stochastic frontier model of the productive efficiency of Korean container terminals. Applied Economics 35: 251–267.

    Article  Google Scholar 

  • Cullinane, K, Song, D-W and Gray, R . 2002: A stochastic frontier model of the efficiency of major container terminals in Asia: Assessing the influence of administrative and ownership structures. Transportation Research, Part A 36: 743–762.

    Google Scholar 

  • Cullinane, K, Song, D-W, Ji, P and Wang, T-F . 2004: An aplication of DEA windows analysis to container port production efficiency. Review of Network Economics 3: 184–206.

    Article  Google Scholar 

  • Cullinane, K, Wang, T-F, Song, D-W and Ji, P . 2006: The technical efficiency of container ports: Comparing data envelopment analysis and stochastic frontier analysis. Transportation Research, Part A 40: 354–374.

    Google Scholar 

  • De, P . 2006: Total factor productivity growth: Indian ports in the era of globalisation. Maritime Economics & Logistics 8: 366–386.

    Article  Google Scholar 

  • De Rus, G, Trujillo, L, Tovar, B, González, M and Román, C . 1995: Competitividad de los Puertos Españoles. Documento de Trabajo, Tribunal de Defensa de la Competencia, Madrid, España.

  • Editorial. 2002: EU port policy. Maritime Policy and Management 29: 1–2.

  • ESPO. 2004: Carta abierta a los Comisionados. Espo News.

  • Estache, A, González, M and Trujillo, L . 2002: Efficiency gains from port reform and the potencial for yardstick competition: Lessons from México. World Development 30: 545–560.

    Article  Google Scholar 

  • Estache, A, Tovar, B and Trujillo, L . 2004: Sources of efficiency gains in port reform: A DEA decomposition for a Malmquist TFP index for Mexico. Utility Policy 12: 221–230.

    Article  Google Scholar 

  • EU Commission. 1997: Green Paper on Sea Ports and Maritime Infrastructure. COM. (97) 678 final.

  • EU Commission. 1999a: The development of short-shipping in Europe: A dynamic alternative in a sustainable transport chain. COM. (99) 317 final.

  • EU Commission. 1999b: Report on the implementation of the action framework on intermodality and the intermodal carriage of goods in the European Union. COM. (99) 519 final.

  • EU Commission. 2001a: Proposal for a Directive of the European Parliament and of the Council on Market Access to Port Services. EU Commission: Brussels.

  • EU Commission. 2001b: On public financing and charging practices in the community sea port sector, SEC (2001) 324, 14/02/2001, Brussels.

  • EU Comisión. 2003: Comunicación de la Comisión. Programa de fomento del tráfico de cabotaje, COM/2003/0595 final.

  • EU Commission. 2004a: TEN-T Guidelines, April 2004.

  • EU Commission. 2004b: Proposal for a Directive of the European Parliament and of the Council on Market Access to Port Services, COM/2004/0654 final-COD 2004/0240.

  • EU Commission. 2004c: Comunicación de la Comisión al Consejo, al Parlamento Europeo, al Comité Económico y Social Europeo y al Comité de las Regiones sobre el transporte marítimo de corta distancia, (SEC(2004)875) COM/2004/0453 final.

  • Everett, S . 1996: Corporatisation strategies in Australian ports: Emerging issues. IAME 1996 conference shipping, ports and logistics services: Solutions for global issues. IAME: Vancouver.

    Google Scholar 

  • Fleming, D and Baird, A . 1999: Comment. Some reflections on port competition in the United States and Western Europe. Maritime Policy and Management 26: 383–394.

    Article  Google Scholar 

  • Friedrichsen, C . 1999: Benchmarking of ports. Possibilities for increased efficiency of ports. Transport benchmarking. Methodologies, applications and data needs. European Conference of Ministers of Transport, European Commission: Paris.

    Google Scholar 

  • González, M . 2004: Eficiencia en la provisión de servicios de infraestructura portuaria: una aplicación al tráfico de contenedores en España. Tesis doctoral, Universidad de Las Palmas de Gran Canaria.

  • González, M and Trujillo, L . 2004: Reforms and infrastructure efficiency in Spain's container ports. 3rd Conference on Applied Infrastructure Research, Berlín.

  • González, M and Trujillo, L . 2007: Efficiency measurement in port industry: A survey of the empirical evidence. Working paper series, Departamento de Análisis Económico Aplicado, Universidad de Las Palmas de Gran Canaria.

  • Haralambides, HE, Ma, S and Veenstra, AW . 1997: World-wide experiences of port reform. In: Meersman, H, Van de Voorde, E. (ed). Transforming the Port and Transportation Business. Acco: Leuven. pp. 107–143.

    Google Scholar 

  • Haralambides, HE and Veenstra, AW . 2002: Port pricing. In: Grammenos, CT. (ed). The Handbook of Maritime Economics and Business. LLP: London and Hong Kong. pp. 782–802.

    Google Scholar 

  • Haralambides, HE, Verbeke, A, Musso, E and Bennachio, M . 2001: Port financing and pricing in the European union: Theory, politics and reality. International Journal of Maritime Economics 3: 368–386.

    Article  Google Scholar 

  • Liu, Z . 1995: The comparative performance of public and private enterprise. The case of British port. Journal of Transport Economics and Policy 29: 263–274.

    Google Scholar 

  • Martín, M . 2002: El sistema portuario español: regulación, entorno competitivo y resultados. Una aplicación del análisis envolvente de datos Ph.D. Thesis, Universitat Rovira I Virgili.

  • Martínez Budría, E, Díaz Armas, R, Navarro Ibañez, M and Ravelo Mesa, T . 1999: A study of the efficiency of Spanish port authorities using data envelopment analysis. International Journal of Transport Economics 26: 237–253.

    Google Scholar 

  • Notteboom, TE, Coeck, C and Van den Broeck, J . 2000: Measuring an explaining relative efficiency of container terminals by means of Bayesian stochastic frontier models. International Journal of Maritime Economics 2: 83–106.

    Article  Google Scholar 

  • Notteboon, TE and Winkelmans, W . 2001: Reassessing public sector involvement in European Seaports. International Journal of Maritime Economics 3: 242–259.

    Article  Google Scholar 

  • Ritter, C and Simar, L . 1997: Pitfalls of normal gamma stochastic frontier models. Journal of Productivity Analysis 8: 121–129.

    Article  Google Scholar 

  • Rodríguez-Álvarez, A, Tovar, B and Trujillo, L . 2005: Firm and time varying technical and allocative efficiency and application for port cargo handling firms. FUNCAS Working Paper no. 201, Madrid.

  • Simar, L and Wilson, P . 2000: A general methodology for boostraping in nonparametric frontier models. Journal of Applied Statistics 27: 779–802.

    Article  Google Scholar 

  • Suykens, F . 1986: Ports should be efficient (even when this means that some of them are subsidized). Maritime Policy and Management 13: 105–126.

    Article  Google Scholar 

  • Suykens, F and Van de Voorde, E . 1998: A quarter of a century of port management in Europe: Objectives and tools. Maritime Policy and Management 25: 251–261.

    Article  Google Scholar 

  • Tongzon, JL and Heng, W . 2006: Port privatization, efficiency and competitiveness: Some empirical evidence from container ports (terminals). Transportation Research, Part A 39: 405–424.

    Google Scholar 

  • Tovar, B, Trujillo, L and Jara-Díaz, S . 2004: Organization and regulation of the Port Industry: Europe and Spain. In: Coto-Millan, P. (eds). Essays on Microeconomics and Industrial Organisation 2nd Edition. Physica-Verlag, A Springer-Verlag Company: Germany. pp. 189–205.

    Chapter  Google Scholar 

  • Trujillo, L and Nombela, G . 2000: Seaport. In: Estache, A and de Rus, G. (ed). Privatization and Regulation of Transport Infrastructure. Guidelines for Policymakers and Regulators. The World Bank: Washington, DC. pp. 113–170.

    Google Scholar 

  • Valentine, VF and Gray, R . 2001: The measurement of port efficiency using data envelopment analysis. 9th World Conference on Transport Research, Seoul, Korea.

  • Wang, T-F and Cullinane, K . 2006: The efficiency of European container terminals and implications for supply chain management. Maritime Economics & Logistics 8: 82–99.

    Article  Google Scholar 

  • World Bank. 2007: Port Reform Toolkit: Effective Decision Support for Policy Makers and Practitioners, 2nd Edition. World Bank: Washington, DC, USA.

Download references

Acknowledgements

We are grateful to A. Estache, M. M. Gonzalez, S. Jara-Díaz and G. de Rus for useful discussions, comments and suggestions. Also, we gratefully acknowledge partial financial support from the BBVA. The usual disclaimer applies.

Author information

Authors and Affiliations

Authors

Appendices

Appendix 1: Location of EU's Ports included in the sample

Figure A1

figure 2

Appendix 2: A Brief Overview of the EU's Port Systems

The Belgian port system is made up of seven major ports, of which only four handle an annual traffic of over a million tons. In the sample, Belgium is represented by Antwerp's port authority. This port handles two-thirds of the products handled in the four largest ports. Antwerp is also on the main actors on all traffic types handled in the Le Havre–Hamburg axis.

Denmark is characterised by a dense network of public ports which are managed and organised under a very wide variety of arrangements. Of the 123 public ports, only 22 handle more than a million tons a year. The two port authorities representing Denmark in this sample are Copenhague and Aarhus. They represent about a quarter of the port freight traffic handled by Denmark in 2002.

Finland's port system is made up of 55 ports, of which 21 handle annually more than a million tons. The only Finnish port authority covered by the sample is Helsinki. It is an average size port in terms of freight but handles over 50% of Finland's passenger traffic. It ranks 11th in Europe in terms of passenger traffic.

The French ports are located along the most popular maritime routes in the world, the North Sea, the Channel, the Atlantic Ocean and the Mediterranean Sea. The French port system is made up of 56 ports, of which 20 handle annually more than a million tons. There are 10 autonomous ports that function as autonomous public enterprises. They handle 80% of France's maritime traffic and compete directly with the main European international ports. Two of these ports are dry ports (Paris and Strasbourg) and two others are in France's overseas territories. Our sample includes two port authorities: Marseilles and Le Havre. These two represent 45% of France's annual traffic and they are ranked 3rd and 5th among the top 15 European ports in terms of freight traffic.

Germany counts 80 ports of which 17 handle annually more than a million tons. Our sample includes the port authority of Bremen-Bremehaven and Hamburg. Together, they represent about 55% of the total German traffic. Moreover, Hamburg is ranked 4th among European ports in cargo volume handled.

Greece is at the centre of traffic between Europe, Asia, the Middle East and North Africa. It counts 199 ports of which only 20 handle annually more than a million tons. Its two main ports authorities are included in the sample: The Piraeus and Thesalonic. Together they handle about a third of the traffic. The Piraeus is also ranked 12th in terms of passenger traffic.

The Netherlands’ port system is made up of 48 ports, of which 10 handle annually more than a million tons. The port administration is usually delegated to a municipality. Only two of these have an independent authority to handle their port: Amsterdam and Rotterdam. They handle 90% of the Dutch port traffic and Rotterdam is Europe's first port in terms of traffic, with 27% of the traffic handled by the top 15 ports. Both port authorities are in our sample.

The Portuguese port system counts 13 ports. Only half handle annually more than a million tons. Five ports share the bulk of the traffic. We count two port authorities of them in our sample: Lisbon and Setúbal. They represented a third of the total traffic in Portugal in 2002.

Spain has 27 port authorities which manage 47 ports of general interest. Of these, 26 handle annually more than a million tons. The port authorities included in our sample are Algeciras, Valencia, Barcelona, Bilbao and Tarragona. They represented 51% of the traffic in 2002.

Sweden enjoys the longest coast line of the EU. It counts 107 ports of which 28 handle annually more than a million tons. We have two ports authorities which represent about a third of Sweden traffic in our sample: Stockholm and Göteborg. Both of these ports authorities also have a significant volume of passenger traffic. Stockholm is ranked 13th in Europe.

The UK's port system is made up of 115 ports, of which 48 handle annually more than a million tons. About two-third of the capacity of the system is controlled by private operators. Unfortunately, the only port authority for which we could get data was Belfast which only represents 2% of the total traffic.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Trujillo, L., Tovar, B. The European Port Industry: An Analysis of its Economic Efficiency. Marit Econ Logist 9, 148–171 (2007). https://doi.org/10.1057/palgrave.mel.9100177

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/palgrave.mel.9100177

Keywords

  • Technical efficiency
  • European ports regulation
  • Trans-European transport networks
  • motorways of the sea