Local authority ownership of ports such as Port Otago and Lyttelton Port of Christchurch has been criticised as parochial and their shareholdings should be scrapped to encourage operational efficiencies and more beneficial port-to-port relationships.
The 60-page "Port Performance and Ownership" report by the New Zealand Institute of Economic Research for Local Government Forum appears destined for controversy.
Not only will dividend-receiving local bodies see red, but the report criticises existing stevedoring procedures and it also calls for use of offshore port managers, suggestions likely to raise the ire of Maritime Union of New Zealand and the labour movement in general.
Port Otago and Lyttelton Port feature in the country-wide analysis of 13 ports singled out for their ongoing investigation of a merger - negotiations and reports of which have been kept from the public eye for 22 months because of commercial sensitivity.
Lyttelton Port of Christchurch is 78% owned by the Christchurch City Council and 15% by Port Otago, while Port Otago has been 100%-owned by the Otago Regional Council since reforms in 1988.
Local Government Forum chairman Charles Finny said that, contrary to some views, port problems were not mainly about inadequate return on capital, a point often raised by analysts.
"Rather, the study finds that the problems of local authority ownership are reflected mainly in barriers to port rationalisation and the introduction of experienced international operators into the management of ports," he said.
Mr Finny said there had been major improvements in ports' efficiencies following reforms in the late-1980s and early-1990s, including corporatisation of the former harbour boards, partial listing of some port companies on the sharemarket, and waterfront labour reforms.
"At the time, it was expected that most port companies would eventually be privately owned.
"The NZIER study finds that efficiency improvements in the industry appear to have stalled, with some evidence suggesting New Zealand ports may rank towards the bottom end of the ports of developed countries," Mr Finny said.
The NZIER report, by Dr Brent Layton, claims local authority ownership is detrimental to port rationalisation, and has stymied the potential use of inter-national operators to manage New Zealand ports.
"Most New Zealand ports have considerable scope to improve the quality of their services and efficiency," Dr Layton said.
One of four options from the NZIER was to require local authorities to divest their shares in port companies.
"This would reduce the extent to which parochial interests inhibit the introduction of more efficient operational procedures," Dr Layton said in the report.
An example of more efficient operational procedures, was the expectation Lyttelton Port would have benefited if Hong Kong-based Hutchison Port Holdings Ltd, the world's largest port management operator, was sold a stake in Lyttelton which would have put Lyttelton in a better bargaining position with powerful shipping lines.
However, to analysts at the time, that proposal appeared to have backfired on the Christchurch City Council.
Dr Layton said there was a "hostile reception" from the public and the proposal became a local body election issue.
Then Port Otago "stymied" the proposal by purchasing 15.5% of Lyttelton Port shares to block Lyttelton from delisting and selling to Hutchison.
"The move by Otago has been credited with stifling the overall proposal and the sale of the operating company to an entity controlled by Hutchison," Dr Layton said.
The proposed merger of Port Otago and Lyttelton Port last week prompted former port company chairmen Ian Farquhar and Sir Cliff Skeggs to call for the merger to be scrapped, on the basis Port Otago operated competitively, delivered consistent dividends and jobs and its head office would be compromised by a merger.
To port analysts, it appears the major shipping lines, the top three of which in New Zealand hold a 34% container-trade market share, can pick and choose the ports they service, on their own terms.
However, Dr Layton said local authority politicians were "mistaken" in the significance they placed in the potential loss of one shipping line; as not all trade would shift elsewhere and alternative shipping lines would fill any void at a major port.
"This policy [of local authorities divesting shareholdings] would also remove the concern that the involvement of local councillors as owners may lead to inefficiently low prices in order to obtain and retain shipping services for the region," Dr Layton said.
Other options to improve port operations outlined in the report include a requirement for major port companies to promote competition for provision of container stevedoring (as opposed to general stevedoring, which is competitive at all ports) and periodic tendering of that container work.
In 2001-02, and again in 2003, the use of North Island-based Mainland Stevedoring at South Island ports sparked a widespread and bitter dispute.
The then Waterfront Workers Union (now Maritime Union of New Zealand) claimed the casualisation and loss of southern jobs while Mainland called for open competition using local labour.
Mr Finny said improvements in New Zealand's port industry performance were "imperative to improve international competitiveness and export growth".
The NZIER report is to be presented to the ministers of infrastructure, transport, agriculture and local government for consideration.
It is available on www.localgovtforum.org.nz soon.
