UNITED NATIONS ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC Capacity Building Workshop on Model Contract for Dry Port Development through Public-Private Partnerships (PPP) Bangkok

24-26 May 2016

Regional Dry Port Experience

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1. Dry port development in the region – why, where and how? 2. Essential goal – cost minimization through sustainable transport

connections 3. Financial success dependent on sound port planning

CONTENTS

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1. Dry port development in the region

Why? • Definition: “an inland location as a logistics centre connected to one or more modes of transport for the handling, storage and regulatory inspection of goods moving in international trade and the execution of applicable customs control and formalities” (Article 1 of Inter-governmental Agreement on Dry Ports). • In many countries of the UNESCAP region, dry ports and associated transport

links function as a conduit for international trade between inland trade origins or destinations and seaports

• In such cases, location of dry ports can influence relative use of road and rail transport in order to minimize overall logistics cost between inland trade origins/destinations and seaports

• In some countries (where distances between trade sources and seaports are short), dry ports often used as a means of reducing traffic congestion in and around seaports.

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Case of Port Rail Shuttle services to Port of Melbourne

• Involves establishing three intermodal terminals with an average distance of 30 km from Port of Melbourne and operation of container shuttle trains using paths vacated by metro rail passenger services during night time hours

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Where? • Major development concentrated in heavily populated countries with large economies,

such as India and China, where distances between trade sources in the interior and seaports are great (>1,500 km)

• Dry ports essential for landlocked countries where international trade must travel vast distances through neighbouring countries to find outlets to the sea (e.g. Almaty, Kazakhstan to Qingdao, China: approx. 4,200 Km; Ulaanbaatar, Mongolia to Tianjin, China: 1,700 km)

• In these cases, development of large rail served dry ports has become essential, • In Southeast Asia, distances between dry ports and seaports are comparatively short,

making it difficult to sustain rail transport of containers and hence cost minimizing function of dry ports

• Examples: Lard Krabang to Laem Chabang (Thailand) is 118 km by rail and even less by road, while Phnom Penh to Sihanoukville (Cambodia) is 264 km by rail and 225 km by road

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How? • Very few dry port ventures in the region are driven by PPPs (possible exceptions

are Dadri ICD in India, Uiwang ICD in the Republic of Korea and Lard Krabang ICD in Thailand)

• In India, two-thirds of the 52 dry ports licensed to handle international containers are operated solely by CONCOR – only one (Dadri) may be described as PPP and then only for CFS operation; remainder are wholly private

• In China, no existing or planned dry ports may be described as PPP – railway JVs with private entities involve pooling and sharing of all investment, with operation by CR intermodal; other dry port ventures are wholly private

• Private ownership and operation has dominated dry port development in Australia – but this is about to change with inception of the Moorebank Intermodal Terminal in Sydney

• Concept of PPP can be applied successfully to dry port development, but attraction of private investors will depend on potential financial health of the enterprise

• This in turn depends on optimal facility location and planning of infrastructure with sustainable transport links

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India – dry ports to seaports

Dadri – JNPT via Kathuwas : 1,493 km (rail); 1,536 km (road)

• 52 dry ports licensed to handle international containers (35 CONCOR; 16 private; 1 [Dadri] PPP) • Average distance from seaports: 1300-1500 km north; 300-400 km south • Handle about 20 per cent (2.2 mill.TEU) of all international container volume through seaports • Almost all rail-served • Overall CONCOR highly profitable, but some dry ports are less so

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China – dry ports to seaports

• 35 dry ports planned to handle international containers (18 railway/private JV; 17 private) • Of these, 21 are currently in operation (9 railway/private JV; 12 private); almost all rail-served • Joint stock companies formed to invest in and operate railway dry ports (CR Intermodal 37%, NWS

Holdings of Hong Kong, balance (33%) shared among three other companies • Average distance of western DPs from seaports 1,500-2,000 km: Urumqi 3,020 km • Nothing is known about profitability, except that Kunming rail terminal covers its costs

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2. Essential goal – cost minimization through sustainable transport connections

• Dry ports must be located close to trade sources, but remote from seaports in order to optimize use of road for local transport of containers and cargo and rail for mainline haulage of containers between dry ports and seaports

• Recent studies of mode operating costs demonstrate how overall logistics costs may be minimized through better dry port location and modal choice decisions

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Raily = 30.123x-0.7185

R2 = 0.9943

IWTy = 18.204x-0.64

R2 = 0.9915

Roady = 5.422x-0.4246

R2 = 0.9783

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100 200 300 400 500 600 700

Distance (Km)

US$

per T

EU-K

m RoadRailIWTPower (Rail)Power (IWT)Power (Road)

Relative operating costs, rail, road and IWT container transport– Cambodia and Viet Nam

Source: Presentation to IWT Regional Seminar Ho Chi Minh City, 10-11 September 2009

•Rail unit: diesel loco, power rating 1,839 KW, 30 wagons, container capacity 60 TEU

•Road unit: prime mover/semi, power rating 279 KW, container capacity 2 TEU

•IWT unit: motorized barge, power rating 883 KW, container capacity 96 TEU

Analysis shows that rail container haulage costs begin to fall below those of road at around 330-340 km, while convergence of rail and IWT costs occurs around 500 km

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Container transport optimization: case of Cambodia

• Doubtful rail will ever secure viable share of container haulage between Phnom Penh and Sihanoukville (distance 255 km too short to be competitive with road)

• Feeder shipping between Singapore and Sihanoukville is inefficient and costly • Restoration of rail link between Cambodia and Thailand will allow transfer of Cambodian

containers through Port of Laem Chabang (access to low cost mainline vessel services and economic rail haul distance of 675 km)

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3. Financial success also dependent on sound seaport planning

• Financial viability of dry ports depends on: • Location and design which will permit efficient operation as well as connection to

sustainable low cost transport; and also • Land transport accesses to seaports which will permit low cost and uninterrupted

operation to/from dry ports and in particular which will avoid multiple handling of containers transported by rail

• Despite port operator claims to the contrary, almost all of the

region’s seaports are “rail unfriendly” with rail accesses too far from berths and with high risk of multiple container handling

• Therefore need for seaport planning to be consistent with good dry port planning principles (example: Lard Krabang ICD in Thailand

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Example of good rail access planning: Lard Krabang Dry Port (Thailand)

• Tracks are one km long, permitting full length trains (loco plus 30-40 wagons carrying 60-80 TEU) to arrive and depart directly in/from the terminal

• Rail loading/unloading tracks centrally located, permitting working of handling equipment on either side

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…by contrast, rail accesses to Laem Chabang Port seem almost to have been planned as an after-thought

• Containers arrive and are discharged from trains at least 500 metres from container stacks

• If trailers not immediately available, containers will be grounded and will require at least two more lifts before reaching the stack

• By comparison, trucks will deliver directly into stacks, with only a single lift • As linehaul distance is short (118 Km), rail will be rendered un-competitive

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…Thank you for your attention!