Planning processes potential barriers to entry at Melbourne and Hastings: ESC

Lengthy planning and approval processes for new development at the ports of Melbourne and Hastings were potential barriers to entry for new service providers, the Victorian Essential Services Commission’s (ESC) has found. The report also found that: The ESC did not consider local government planning schemes to be a potential barrier to stevedoring competition There did not appear to be a competitive problem in the port supply chains but that the government should consider new opportunities to increase competition where appropriate and Any land constraints at either the Port of Melbourne or the Port of Hastings were not due to port planning frameworks. The ESC was directed to undertake a review of the impact of port planning on competition in Victorian ports in July last year. The ESC identified two main potential barriers to entry that may arise from the port planning frameworks, including the policy of &#8220sequential development&#8221 contained in the Victorian Ports Strategic Framework (VPSF) and the State Planning Policy Framework (SPPF). Possible impacts on the terminal development options, and the cost of entry arising from the rail mode share target, were also identified as barriers to entry. &#8220Commercial arrangements may be limited through permit approval processes for proposed container terminal developments,&#8221 the report, submitted to port minister Tim Pallas on December 31, 2007, found. &#8220At the port of Melbourne, a container terminal development at Webb Dock will require a permit issued by the minister for planning, and at the port of Hastings, any port terminal development will require a permit issued by the Mornington Peninsula Shire Council. &#8220The responsible authority for approving planning permits may have regard to the VPSF and the port plans, which suggests that it is a potential influence on planning decisions that will, in turn, affect the feasibility of entry.&#8221 Both Port of Melbourne Corporation and the Port of Hastings Corporation were government business enterprises and as such, any proposed capital expenditure over a threshold of $10m was subject to a review process, the report said. &#8220One of the matters that may be considered as part of this process is `strategic fit’ with government policies,&#8221 the report said. &#8220Hence, regard could be had to the VPSF through this process, and this could affect potential container terminal projects.&#8221 Stevedore involvement The long lead time associated with building a new terminal at the port of Melbourne and high market concentration of stevedores Patrick and DP World, also represented barriers to entry. However, the threat of competitive entry &#8220may not represent a significant constraint at present&#8221, the ESC found. &#8220Although the stevedores’ principal customers, the shipping lines, appear to be able to exert some countervailing power, substitution possibilities are limited for most of the port’s throughput because the distance between ports is too great to allow competitive land-bridging of containers between ports,&#8221 it said. The ESC’s analysis also suggested that the demand for stevedoring services was highly inelastic, primarily because charges by stevedores were only a small proportion of the value of container trade. &#8220Hence, demand sensitivity is not likely to be a constraining factor that will inhibit the exercise of market power.&#8221

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