in Finland making money or spending money? Pekka Levikangas Dr. - PowerPoint PPT Presentation

Presentation at the Institut Teknologi Sumatra, August 22, 2019 Port Governance & Business in Finland – making money or spending money? Pekka Leviäkangas Dr. Tech., Dr. Econ., Principal Scientist, Docent VTT – beyond the obvious 15.8.2019

Congratulations Indonesia, 74th Independence Anniversary! Diplomatic Reception to celebrate Indonesia’s independence on August 9 in Kalastatorppa, Helsinki hosted by Ambassador H.E. Wiwiek Firman All material for educational purposes only, Fair Use -principle

Items covered • Ports in Finland – an overview by this • Ownership & governance presentation • Financial performance • Conclusions

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Kilpilahti Port: oil refining industrial area – the largest port in Finland measured by exported and imported tonnes 7 VTT – beyond the obvious 18.8.2019 All material for educational purposes only, Fair Use -principle

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Ports are unique and ‘fit for the purpose’ 3 main points for a successful port: 1. Location 2. Fit for the purpose = infrastructure + services 3. Marketing

Ports are ’ service centers ’ 10 VTT – beyond the obvious 19.8.2019 All material for educational purposes only, Fair Use -principle

Stevedoring companies in Helsinki port 11 VTT – beyond the obvious 19.8.2019

• Study on the economics, ownership and governance of the most significant ports in Finland https://www.vtt.fi/inf/pdf/workingpapers/2011/W164.pdf 12 VTT – beyond the obvious 19.8.2019

Port ownership models (Finland) • Most ports are municipality / city owned companies (MOC), and operate as landlord ports • Some private ports associated with specific industries and corporations (one way or the other, the industrial company is owning the port) • There are about 50 ports in Finland • 80% of the marine transports goes via 10 largest ports <= Typical public debate in Finland: • “too many ports” • “too expensive network” • “too much redundant port capacity” • “suboptimal logistics”

Example: 100% owned by the City of Helsinki Business segments: • Passenger traffic • Mainly leisure, some business travellers • 6 terminals • Cargo Diversification strategy • Container • Ro-ro (full trucks & trailers) • Bulk The Board • Project deliveries • 6 terminals / port locations All material for educational purposes only, Fair Use -principle

Key financial ratios Turnover Investments Balance sheet (assets) Change in turnover Turnover / employee (1000 EUR) Return on investment (%) Equity / Debt (%) Profit after taxes (mill. EUR) 11 11 Profit / turnover (%) 11.4% 11.6% 15 VTT – beyond the obvious 18.8.2019

Example no. 2: Specialised to serve one steel mill 100% owned by the City of Raahe Operating income / Turnover turnover (%) Turnover Operating income 16 VTT – beyond the obvious 18.8.2019 All material for educational purposes only, Fair Use -principle

All material for educational purposes only, Fair Use -principle ”… but we knew all this much earlier …” Analysis on financial performance of Finnish ports for 2002-2009 Traditional = a municipality unit MOE = municipality owned enterprise MOC = municipality owned limited liability (ltd.) company P = private port (ltd. company) Table figures from 2009; Rönty, Nokkala & Finnilä: Port ownership and governance models in Finland - Development 17 VTT – beyond the obvious 18.8.2019 needs & future challenges. VTT Working Papers 164. 2011.

Ownership model does not dictate financial performance 18 VTT – beyond the obvious 18.8.2019 All material for educational purposes only, Fair Use -principle

The empirical facts: The admin & economic reality: About 80% of Finnish imports and 90% of exports travel through the ports (when measured in tonnes). Ports are governed mainly by the municipalities and cities.  The macroeconomic importance is paramount! The state governance is minimal, considering mainly safety, fairway The empirical facts do not support the pricing and environment. hypothesis ” bigger is better ”. The ports are ’ cash cows ’ for their owners. Empirical research does not support the hypothesis ” private is better ”. Ports have substantial spill-over benefits, e.g. tax revenues, jobs.

How about the Indonesian context? Perceptions (some highly personal): • Many small and medium-sized ports • Short sea shipping and island connectivity is crucial for the country’s logistic efficiency and internal market • …and even for the national unity • For Indonesia, investing in ports is ’a sure bet ’! 20 VTT – beyond the obvious 18.8.2019 All material for educational purposes only, Fair Use -principle

Terima kasih! Kiitos! www.vttresearch.com/vehicle-systems #vttpeople / @VTTFinland VTT – beyond the obvious 18.8.2019.