PRIVATIZATION OF PORTS

Abstract

Privatization has become a worldwide trend since the early eighties. In both communist and non-communist countries, developed and under-developed countries, privatization is being practiced to varying degrees. Theoretically, everything can be privatised.

This thesis discusses the issue of port privatization, which is becoming a global trend. The main objectives of privatization are to improve efficiency and reduce government intervention. Port operators have identified efficiency as the key factor to improve port performance. On the other hand, many state-owned ports are not able to capture the growing container business outside their countries since they are subjected to many laws which restrict their ability to engage in foreign investments. It appears that the only way to solve this problem is through privatization.

Regression analysis will be used to identify the production functions for Port Klang and PSA Corporation and we will show that privatization of Port Klang has indeed improved its port performance. In the case of PSA, we will also show that improvement of port performance due to other factors other than privatization.

The main contribution of this exercise is to provide an understanding of how port performance can be improved through privatization and their implications. Although PSA has not been privatized yet, it should bring forward its privatization plans in order to sustain its performance and further improve itself given the benefits of privatization. Hence, we conclude that stopping at corporatization is not enough and eventual privatization of PSA Corporation is necessary.