Thursday, 21 January 2016

The privatization of the Piraeus Port Authority in Greece: What's really happening


I am posting this on behalf of Dockers Hangarounds


The privatization of the Piraeus Port Authority in Greece: What's really happening 


Greek trade unionist Anastasia Frantzeskaki made this contribution on the situation of the port of Piraeus to the panel discussion organized by the parliamentary group of the German Left Party (die Linke) at the Bundestag on 2.11.2015, on the topic of privatization of electricity, ports and railways in Greece.
Greece has 12 ports with the status of national port, two of which, Piraeus and Thessaloniki, have the status of international port.
1958

The Piraeus Port Authority (PPA) is one of the largest passenger ports in the world and one of the largest ports in Europe. It has 44 km of quays, [PP1] and its port facilities cover four municipalities.  It serves annually 40.000 ships, 18.000.000 passengers, 3.000.000 vehicles, 500.000 vehicles as goods (car-terminal) and 5.000.000 containers (PCT and PPA). The port of Piraeus operates in 7 sectors of port activity: (a) Coastal shipping, (b) Cruise, (c) Car-terminal, (d) Ro-Ro, (e) Containers, (f) Ship repair and (g) Environmental and Logistics operations. It is the main port for coastal shipping, connecting mainland Greece and the islands, the main cruise port (50%), the main port for containers (90%), and the main port for cars (95%) of the country. It is the only Greek port that offers all the required port services: water, fuel oil, solid and liquid receptacle tankers, residual oil, electricity, fiber optics and internet, victuals, repairs, environmental services and it is fully connected to all activities with modern computer systems.
The port of Piraeus has been certified by ESPO and Lloyd's as ECOPORT. It employs 15 continuous and revolving programs of environmental protection for land, water and atmosphere, at a cost of 2.224.000 euros. The port of Piraeus, under the management of PPA SA, is one of the few companies in the country which operates 365 days a year, with 24 hours of continuous operation, applying all Community and national rules of transparency.  Its cruise terminal is certified with ISO 14001:2004, and the car terminal is in the final phase of this certification process.
The PPA and ThPA are essentially dual legal personalities: There are simultaneously an enterprise and an authority. Through or in conjunction with other public bodies they exercise public authority (free zones, customs, port, health, fire, points of entry and exit of the country, security, environmental, towing, shipwrecks, etc.) and are in fact the dominant Regulatory Authority in their area of responsibility.
 
  Piraeus is the centre of the world for Greek-flagged and Greek-owned shipping, in which 900 shipping companies have their headquarters. 60% of imports - exports of the country move through the port of Piraeus. The extensive set of facilities (infrastructure and equipment) were constructed with public funds, PPA own funds and community resources. If it is fully privatized, then a unique expertise of the country will be lost for 40 years. The port of Piraeus has twice the turnover of all other ports in the country put together.
The Hellenic Republic Asset Development Fund (HRADF), which for convenience I will refer to as “the Fund”, owns 74% of the shares of Piraeus and Thessaloniki ports and 100% of the share capital of the remaining ports.
Privatisation is used as one of the ways to repay creditors and the Fund had undertaken the appropriate procedures
I will open a parenthesis here and explain a few things about the status of the Fund.  Two members of the Troika are participating in its board.  In all board meetings express their will.  In several aspects the Fund set aside the official government.  For instance, it was the Fund and not the ministry of Maritime Affairs that ordered studies about the development of the port industry of the country.  The Fund alone decided that will proceed with this model of privatisation instead of another one less strict that was propoted by the studies.  The Syriza government did not challenged this status.
The tender process for the sale of 67% of the shares of the Piraeus and Thessaloniki Port Authorities was launched with the announcement of the respective Invitation for the Expression of Interest.  This process took place in March 2014. The chosen model of privatisation, which is to sell the whole port to one private bidder, is highly unusual.
Quick recap
The ports in the European Union take various legal forms, but mainly they are corporations. In terms of shareholding structure:
• 90% of public character
• 7% fully state owned
• 3% completely private
In the public character ports, shareholders are the State, Local Government, the Chambers and operators and users in the area of Logistics and Shipping. In public ports operating licenses or public land are allocated through long-term concessions from the government to the port operators.
The usual model of privatization, which is also applied in German ports, is the landlord system where the state retains ownership of the land. The local Port Authority is a public entity and operates a system of concessions whereby more than one operator are allowed to manage the various port activities, such as the container terminal or car terminal. 
The idea is that the competition among the different operators will ultimately produce better services at better prices.  This system also assures a certain level  of labour protection based on the freedom to establish a trade union, and to negotiate and sign a collective agreement.  There is a framework of health and safety rules, and a process of training. This model was initially proposed to the Fund through the studies it ordered, and was rejected.
The Greek ports currently belong to the second model, fully state-owned. I’ve reviewed their characteristics already. Labour relations are regulated and trade union activity is protected. Collective agreements are negotiated and signed between the PPAs and the trade unions.  They have high standards of Health and Safety, and training procedures exist.
The third model, completely private, is what the Troika wants to impose on the ports of Greece.  The majority of their shares are to be sold to one buyer.  This buyer takes the master concession.  Then he can proceed to make sub-concessions to other operators.  Thus the public monopoly is replaced by a private monopoly.


2009
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In January 2015 when SYRIZA came to power it declared the end of the privatisation process for both ports and challenged they very existence of the Fund.  However, a month later the Fund remained and two months later the issue of the privatisation of the ports re-emerged after the visit of the vice-president of the government in China.  Then it was declared that the privatisation process of the port of Piraeus will proceed, but the conditions of the sale will change.  Instead of one sale of 67% of the shares, the government will sell 51% of the shares and then another 4% every year until 67% are in private ownership.
Last summer during the negotiation of the3rd Memorandum the sale of the two ports (Piraeus and Thessaloniki) was among the terms.  Again the same model of privatisation was imposed. The Troika had strong views about the governance model of the ports and they insisted that both of the Port Authorities should be privatised.  At they end of the day the Greek side gained the right to create a public Port Authority.  Until now we haven’t seen any initiative towards this direction.  On the contrary in all the draft documents circulated by the Fund there is no reference to the public Port Authority.  Furthermore, responsibilities that should be linked to a Port Authority either pass to the private owner, like the expansion and the maintenance of the port infrastructure, or they are given to other bodies, as in the case of hoisting shipwrecks.
At this point I want to refer again on the status of the Fund.  The Fund alone is playing a leading role in the privatisation procedures of the Greek ports.  The Ministry of Maritime affairs gained limited access to the discussion only last month, after a period of public conflict with the Fund.  The two Port Authorities, the local communities and the dockworkers have no access at all.  For instance, two weeks ago the Fund decided who will have access to the final draft of the HR Concession Agreement to be signed between the PPA and the Greek State.  The PPA and the workers are not among those who can see the text.  Two other important documents, the Share Purchase Agreement and the Shareholders’ Agreement are handled exclusively by the Fund.
No one outside of the Fund has any information about the character and the content of negotiations that are occurring between the Fund and the Qualified Parties. Only last week the Fund consulted an independent valuer to find out how much the Port of Piraeus is worth as a whole. Until recently they were selling the main port of the country, negotiating, and suggesting prices, without knowing what the port is worth!  Furthermore, in the discussion paper before the memorandum they hope to get 610 mil euros for the sale of both ports plus the 10 other that have a national status.
Two points related to the value of the Piraeus Port.  The current value of the PPA under two different valuation methods amounts to 1150 million euros excluding capital gains and investments of third parties through part concessions.
The picture is more complete if we add another factor: The Attica Port System.  In accordance with the provision of L.4150/2013 voted by the previous Government, the “Attica Port System” must be created, by the merger listed on the Athens Stock Exchange of PPA with all the ports of Attica.  Activation of the above law leads to the full control of the port system of Attica by the private monopoly that will control the majority of the shares of the PPA.
Despite the above, when the Fund refers to the money it hopes to receive from the privatisation of the PPA they mention numbers between 300 and under 500 million euros, plus 250 million euros in investments.
Furthermore the Fund says nothing about the rent that Cosco pays to PPA for the part of the Container terminal that is under its management.  Officially the new owner will take the rent.   The rent for the period 2015-25 will surpass the 500 million euros.  Thus Cosco in ten years time will buy back its current concession and the rest 30 years will make profits.

Effects of Privatisation on:
Job pay and conditions
In the case of the Port privatisations until now there is not a single reference to labour.  There are hints that the workers will be transferred to other areas of the public sector, or those who are old enough will be encouraged to make use of an early retirement scheme that will be offered to some of them.
The attitude so far in port labour relations is extremely negative.  In 2009, when Cosco took control of the major part of the Piraeus container terminal through a concession agreement, again there was not a single reference to the workers.  The terminal was given to Cosco with its infrastructure and the major clients but without workers.  There was a very general reference in the concession agreement regarding workers’ rights that Cosco will “respect the legal framework of the country”.  That reference was not respected already at the time.  Cosco used subcontractors.  Later, with the excuse of the crisis, Greece experienced a dramatic deregulation of labour rights.
Cosco’s Piraeus facilities are notorious for their sweatshop working conditions with accidents being a common occurrence.  Cosco did not hire full-time workers, signed no collective agreement, did not train its personnel. They just started doing business, working as haphazardly as one can imagine. Now out of 1000 employees, around 200-250 work full time with individual contracts, not collectively negotiated. Their employer is a Cosco subsidiary called SEP in Greek or PCT (Piraeus Container Terminal). The remaining 700-800 employees are hired by a complex web of subcontractors, again with privately “negotiated” contracts, and very low paid. The money they receive each month is fixed in advance. It corresponds to 10, 12, sometimes 16 workdays irrespective of when they are called to work – nightshift, Sundays, anything goes. The main subcontractor, Diakinisi, has hired 4-5 other smaller subcontractors providing personnel, so that between each employee and Cosco there are 2 or 3 intermediaries. Out of one man’s wages, 2-3 layers of contractors get their cut. 16 hour shifts it is not an unusual phenomenon.  Finally they are denied the status of the dockworker.  On July 2014 after a revolt/strike our colleagues formed a trade union, but they still have not managed to sign a collective agreement, or impose a training process, or achieve any major improvement of health and safety conditions.
It must be clear to all that if Cosco take control of the whole PPA these working conditions will be expanded to the whole port, setting a strong precedent for the rest of the country as well as for the rest of the European ports.

Quality of service to consumers
Several services of PPA have a very strong social aspect.  For instance, the passenger port serves the numerous islands of the Aegean Sea.  None of them has either economic or administrative autonomy. Their connection with the mainland is vital for the quality of life on the islands, as well as for the cohesion of the country.  This service cannot be run with market criteria.  The public port assures excellent quality and continuity of services, no mater the cost. The private sector we do not think will act the same way.  The Cosco experience from the container terminal, where despite the financial crisis they increased by 30% the fees on domestic cargo while decreasing the fees on transit, make us wonder what will happen with the fees of the passenger port.
We have a few more signs of worry.  For instance several services in Piraeus Port are ISO certified.  In the Invitation for the Expression of Interest, that fact was included in an early draft and later disappeared. The excuse was that the investors did not feel comfortable with this.
As already mentioned, Piraeus is certified as an ecoport and each year PPA invests more than 2 million euros into actions that support this status.  We are not sure that under private ownership the same attitude will be continued.  Again we have a negative experience from Cosco.  The part of the container terminal that is under their management is off limits to the inspection bodies of the PPA.
In this point I would like to discuss another issue:  The relation between ports and the cities that are around them.  Across Europe and Greece, ports are maritime edges of cities.  Most cities have developed thanks to shipping and ports.  But the transformation today of cities to urban centres and ports to network hubs has created new facts, which can only be resolved by consensus.  City and Port are different legal and economic entities, however they must operate in a coordinated way and with a shared purpose to serve the national economy and the local and regional societies.  An economic logic without collective social relations can not be accepted in areas of increased national and social co-responsibility.
National security and the ability to act as a state
Greece is an external border of the EU in a very problematic area.  Its ports have a strategic role, in the old fashioned sense of the word.  This argument is not so easy to illustrate because thankfully a military crisis is a rare occurrence.  However, each time a crisis occurred in the past the port of Piraeus played a crucial role.
With the refugee crisis of the last few months we can see how the Greek state is able to handle such a difficult problem in a more or less smooth way, through public ownership of Piraeus Port. All the refugees from the islands passed through Piraeus Port to enter the mainland. A significant part of the port infrastructure and workers are assigned to this task. The public port stayed open in order to assist the refugees and gave free entrance and facilities to the volunteer networks that try to help all these people in need.  At the end of the day, PPA absorbs the bill.  If the port was under private ownership things would be run differently and eventually the bill would be sent to the central government.
 http://tlaxcala-int.org/upload/gal_12635.jpg
TO PARON, 17 March 2014:
They are gifting the port of Piraeus to the Chinese!
The tender is rigged with procedures drawn up by Cosco
They are selling off the entire port for 250 million euros when its worth is over 1.63 billion
They changed the terms to rule out any other investor.
The sale is unconstitutional rules the Council of State. 
Loss of public finances from selling profitable public companies
Both ports, no matter the problematic management of previous decades, are still profitable entities.  A significant part of their annual profits is re-invested for the maintenance and expansion of their infrastructure as well as for the relief of the local community.  Under public ownership and better management both ports could flourish for the benefit of the local societies and the regional economy.
In case of privatization the state will lose a tool for growth, through which it can schedule and implement policies regarding domestic freight, connectivity with the islands, tourism, and so on.
 
16 May 2015: Stavros Theodorakis (M), leader of Potami (River) centrist opposition party visits PCT at Piraeus. He is welcomed by Chinese Ambassador to Greece Zou Xiaoli (R) and COSCO PCT CEO captain Fu Chengqiu (L). (Xinhua/Marios Lolos)
Your strategic perspective to try to stop the privatizations from being carried out, and how we as the German Left can play a role in that
From the very beginning the trade unions in the ports tried to create an alliance among them and the local communities, as well as with the regional government.
We focus on explaining the impact of the privatisation of the ports on the local communities and regional economies.  We have considerable success, although the vast majority of the mass media are against us.  It’s worth noting that even now they’re openly bulling anyone who dares to support the necessity of the public port.  No matter who is he.  The minister of the maritime affairs, the head of the regional government, and the PPA’s CEO were targeted a couple of times over the last few weeks because they dare to speak for the necessity to create a public Port Authority, or because they insist on pointing out that the sale of the port in not a good idea.  There are threats that if the projects will not be concluded on time the country will be confronted with non-fulfilment of the terms of the Troika program and thus with bankruptcy.  Therefore we’re pressured to accept any terms and allow the deals to be completed as soon as possible and in any price.
The alliance against the privatization of the ports is still there, although after the signing of the 3rd Memorandum by the Syriza government a certain amount of unease among the people is obvious.  But social mobilization is rising again.  We think that in the coming weeks things will become more vigorous. Besides the privatization of the ports, the issues of increased taxes, new rules for the social insurance system, imminent changes to pensions, and the issue of red loans that are linked with protection of the primary residence from foreclosure, are all issues that will mobilise the people again.
Do not allow to be imposed on the Greek ports a set of policies that do not exist in your port system.


smile emoticon

Greece has accepted a “significantly improved” offer from China’s Cosco Group for the state’s majority stake in the Piraeus Port Authority.
The Hong Kong-based company will pay 22 euros per share, or 368.5 million euros ($402 million), for the 67 percent shareholding in the operator of Greece’s largest port, the state privatization agency said.
This represents a premium of 70 percent on Wednesday’s closing price on the Athens stock exchange of 12.95 euros.
The privatization agency had asked Cosco, the sole bidder for control of the top ten European container hub, to improve on its initial offer, said to be around 300 million euros.
The total value of the agreement amounts to 1.5 billion euros, including mandatory investments of 350 million euros and expected revenues from the operating concession of 410 million euros.
Cosco, which already runs two of the three containers berths in Piraeus under a 35-year concession signed in 2009, will initially acquire a 51 percent stake for 280.5 million euros. It will buy the remaining 16 percent after five years for 88 million euros provided it has made the required investments.
The Chinese terminal operator handled 2.73 million 20-foot equivalent units in Piraeus in the first eleven months of 2015.
Contact Bruce Barnard at brucebarnard47@hotmail.com.



For Global Solidarity among Dockers and Supporters follow Dockers Hangarounds:http://tinyurl.com/ng3n5sk IDC International Dockworkers Council: A very good article on the situation of the port of Piraeus by Greek trade unionist Anastasia Frantzeskaki and member of IDC. For those of you who would like to have more info!






Cosco Ups Its Offer for Piraeus


Image Courtesy: Port of PirauesImage Courtesy: Port of Piraues
Greece accepted on Wednesday the improved offer tabled by China’s port operator Cosco Group (Hong Kong) Limited for the obtaining of 67% stake in the country’s largest port of Piraeus.
Cosco, which was also the sole bidder in the tender, submitted the offer last week, however the fund requested that the bid be improved.
As a result, Cosco Group submitted an improved binding offer, offering a price of EUR 22 per share, ie EUR 368.5 million (USD 402.3 million) for the 67% stake, the country’s privatization body said.
The Hellenic Republic Asset Development Fund declared Cosco as the highest bidder and invited it to submit the documents required, in order for it to be designated as a preferred investor, according to the terms and conditions of the tender.
The improved bid brings the Chinese port operator closer to privatization of Piraeus Port, which is one of key conditions of the country’s bailout plan with the EU lenders.
Cosco has been operating the port since 2009 and has earmarked an investment of EUR 230 million to build a second terminal at the port.
The tender process for the sale of 67% of the shares of the Piraeus Port Authority was launched in March 2014, but the stake has since been downsized to 51 percent.
The selected winner has the option to purchase additional 16 percent stake over five years, however the company has to invest around EUR 350 million in port development.
World Maritime News Staff

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