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James Debono
A typical bill showing the costs incurred to transport a container from ship to warehouse could easily run up to Lm300.
A bill seen by MaltaToday for the handling of a 40-foot container issued in May 2006, lists the various charges owed to different agencies, monopolies and categories of workers operating at the port, each taking their cut from the Lm300 an importer has to pay.
Back in 2001 a study conducted by the Malta Development Corporation had established that an importer has to pay Lm35 to port workers. This includes a levy of Lm15 on each container to finance the port workers’ pension and contingency fund.
Since 2001 there have not been any changes in legislation and charges remained practically unaltered.
A typical bill shows that 82 per cent of the costs are paid in charges within the port itself. Only 18 per cent of the costs are paid to cargo haulers who transport merchandise from the port to the warehouse. (See table one)
Shipping agents are responsible for 36 per cent of the charges in what are known as FIOS (Free in Out Stowed) fees. It is the shipping agent who than pays the various other stakeholders in the port.
These FIOS charges are incurred in moving containers from the vessel’s hold to the ship’s ramp. Such charges include costs related to the Port Worker Scheme as well as costs related to the shore foreman, tally clerks, overtime allocation and customs (table 2).
Yet Shipping Agents also make their own profit margin. According to the MDC’s 2001 estimate shipping agents get a generous Lm20.50 on each 40 foot container.
26 per cent of costs at the Freeport and 34 per cent of the costs at Grand Harbour end up in the Cargo Handling Company’s coffers.
These terminal handling costs are related to the pulling of the cargo from the vessel’s ramp to stack. There are also Cargo Handling Company charges for the shifting of the containers to quay and then to stack.
Strangely enough it costs about Lm17 more to transport goods out of the Grand Harbour than to transport goods from the Freeport due to double charging.
At the Grand Harbour, importers have to pay a Lm10 charge on heavy lifts. But since Cargo Handling does not possess any such lift, they also have to pay an additional Lm12 to Salvu Meli Ltd for the unloading of containers on trucks.
Protagonists at the port
The main players at the port are the Malta Maritime Authority, shipping agents, port workers, the Cargo Handling Company and cargo haulers.
The Malta Maritime Authority which acts as a regulator of this sector also imposes its own charges on berthing and pilotage. It also administers the port workers pension fund.
The 300 strong port workers are the only persons in Malta licensed to unload merchandise from ships at the port.
They are effectively self-employed workers whose cut from the costs are enshrined in the Port Workers Regulations.
Malta is not unique in this respect as in many European ports stevedores enjoy similar monopolies. Safety reasons are often cited as justification for keeping this monopoly.
Yet advances in shipping and port handling such as pumping cement in silos have not reduced costs in Malta but only relieved port workers of part of their work.
Their work now mainly consists of lashing containers to stabilise them while they are being lifted - a difficult and potentially risky job which comes with a handsome reward that sees most port workers earning between Lm15,000 and Lm18,000 annually.
Port workers are engaged by Cargo Handling Company Ltd, a company formerly owned by the General Workers Union. The GWU’s union monopoly on cargo handling was officially ended after the government issued a call for tenders for this service.
The GWU’s bid to retain its hold in the port by teaming up with the Hili Group failed as the union was not among the two companies short-listed for the contract. The two short-listed consortia are La Valletta Terminal Co (Malta) Ltd, which is made up of Salv Bezzina & Sons Ltd, Salvu Meli & Sons Ltd and Joseph Paris and TF Shipping Agencies Ltd which consists of Tumas Group Company Ltd, Portek Ports (Mauritius) Ltd and Portek International Ltd.
This was a hard blow for the GWU’s finances and strategic strength in the country.
But according to industry sources, the new company, which will be taking over in June will not be able to lower charges if other port charges are not reformed.
A small number of shore and ship foremen-numbering less than 30 also take their cut from any container entering Malta. Ship foremen get a Lm5.40 cut on each container while shore foremen get Lm1.90.
Cargo Haulers, known as burdnara are also granted a licence which effectively gives them a security pass to a restricted port area to load their trucks with merchandise. While some industrialists lament of cartels in this sector, haulers insist that there is stiff competition in this sector which drives prices down.
Business leaders react
The Malta Employers Association, the GRTU and the Federation of Industry are all united in calling for a radical reform of work practices at the port.
According to GRTU Director General Vince Farrugia the port structure is laden with monopolies.
“These monopolies are not consonant with European structures,” Farrugia told MaltaToday. Farrugia insists that the GRTU has always spearheaded the drive to reform out dated practices at the port.
Farrugia would not single out port workers as the sole culprits. He even adds the Malta Maritime Authority itself to the list of monopolists in the port.
“Since it replaced the Department for ports the MMA has increased costs.”
Farrugia absolves cargo haulers, who are represented by the GRTU from any charge of monopolistic practices.
“Competition exists between cargo haulers. Although they possess a licence, importers are free to load merchandise on their own trucks. They are not forced to rent the services of a hauler as is the case with port workers and others at the port,” insists Farrugia.
FOI Director General Wilfred Kenely considers removing archaic and inefficient work practices at the port as a pressing need for the country. He also considers exorbitant port charges as an unnecessary hurdle to Malta’s export oriented industry.
“At present, the local port ranks as one of the most expensive operations when compared to other ports in Europe, adding additional pressures on our already fragile competitiveness,” says Kenely.
According to Kenely, the global market place has become so sensitive to price movements that firms exporting goods from Malta stand to lose markets if they only attempt to pass on our ports’ inefficiencies to their overseas clients.
As regards the port workers’ monopoly, Kenely points out that the current legislation dates back to the post war era and does not reflect today's reality in terms of the cost of services against the actual operation.
“The FOI looks forward to having a more professional approach by allowing the new operator to conduct its business on more modern market-driven operation.”
The Malta Employers Association also concurs that outdated port monopolies and work practices are stifling competitiveness.
“The interests of the few should not prevail over those of the many,” insists Director General Joe Farrugia.
Competitiveness at risk
The claim that port charges are eroding Malta’s competitiveness is supported by an international cost comparison of handling imports from ship to port gate. (see table 3)
The Malta Freeport emerges as more expensive than European ports like Marseille, Barcelona, Rotterdam and Antwerp. For 20-foot containers, port charges in Malta are three times higher than those in Antwerp and twice higher than those in Rotterdam. Costs in Marseille and Barcelona are 50 per cent lower. When it comes to 40-foot containers Malta is five times more expensive than those in Antwerp and more than three times as much those in Rotterdam. Costs are also more than double those in Barcelona and Marseille.
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