Valletta Gateway Terminals Ltd (VGT) took over the port services contract at the Grand Harbour on 1 July 2006. Port services - or rather, their cost - have become something of a political hot potato, and the centerpiece of any port reform process has to be the provision of more efficient port services. Peter Darley, VGT's Managing Director is the man who has taken on this challenge. He explained the company's strategy to the Malta Economic Update.

VGT is a joint venture between TF Shipping, the maritime arm of the Tumas Group and Singapore's Portek International, with the Tumas Group holding 45% of the shares. The Tumas Group is not known for its involvement in the maritime sector. It is best known for its hotel operations, as well as car sales and a wide range of other businesses. The maritime and port operations experience comes from the majority shareholder, Portek, which already manages four other ports, three in Indonesia and one in Algeria.Portek's core business is port equipment, including cranes. The company modifies, refurbishes and relocates the equipment.

Experience

The company was established in 1989, supplying an array of ports across the globe with state of the art container handling equipment and cargo cranes. "We provided the cranes on the basis of an operational lease," Mr Darley, who is also a director for the Singaporean firm, told the Malta Economic Update. "This meant that we not only supplied the equipment, but we managed and maintained it. We did everything except supply the fuel and the operator!"About 10 years ago, Portek decided to capitalize on the experience it had acquired. "We decided to move up the value chain and help ports we were equipping even more efficient," Mr Darley said. Portek took over the management of a number of Indonesian ports, in Jakarta, Banten and Makassar, and more recently also won a contract to manage an Algerian port, at Bejaia."Our expertise is in running small ports with high throughputs. We work on making the operations efficient," Mr Darley explained.This is the expertise that Portek is bringing to the Grand Harbour. The Tumas Group is a valuable partner in this, supplying what Portek cannot have: knowledge of the Maltese market and business environment. "The Tumas Group is a prominent Maltese business organisation. They are well known, and people are happy to do business with them," Lai Wye Keong, Portek's manager of business development told the Malta Economic Update.

Concession

The new port services contract covers the Deep Water Quay, located between the Menqa and the Valetta Waterfront at Pinto Wharf, and Laboratory Wharf and Magazine Wharf under Corradino, on the other side of the Grand Harbour. This translates to 488 metres of quay length at the Deep Water Quay, with depths between 8 and 9.5 metres, and 630 metres at Laboratory and Magazine Wharves. Depths on that side of the harbour range from 7.5 to 14 metres.At Deep Water Quay, VGT will be handling mostly general bulk cargo and RoRo traffic. There are limited container stacking facilities at Laboratory Wharf. Currently, the Grand Harbour's container throughput is approximately 30,000 TEU per annum. Most container traffic destined for Malta goes through the Malta Freeport, with 80,000 TEU piggybacking on the 1.5 million TEU in transshipment traffic - the Freeport's main business. "The traffic going through the Freeport is unlikely to be redirected through the Grand Harbour, because it comes on the large ships along with transshipment cargo," he explained. "But even if that traffic came to the Grand Harbour, it represents a very small part of the Freeport's business - less than 5%."

Competition

In this light, there is in fact little competition between Malta's two commercial ports. They operate in essentially different markets. If anything, there is more scope for cooperation: two well run ports in Malta will enhance Malta's standing and reputation, making the island a more attractive destination for shipping services."The EU is trying to get container and trailer traffic off the roads," Mr Darley explained. This is behind the EU's promotion of what is referred to as "short sea shipping" and the "Motorways of the Sea" project. "This means that we should be looking at an expansion of the RoRo traffic," he added.
Last year, the Grand Harbour handled approximately 34,000 trailers, a number VGT will be working hard to increase. "We expect the core business at the Grand Harbour to remain RoRo and general cargo," Mr Darley explained. "We will be handling containers, and we will be working to increase the business there. But there is very little space available for container stacking."Mr Darley, along with his colleagues from Portek, have been on an intensive round of meetings with the many port users and operators, as they work hard to get ready to take over the operation of port services. The new contract was only signed on 10 June, giving the company a handover period of just 20 days to 1st July. Mr Darley himself had only been on Malta for 10 days when he met the Malta Economic Update."We will be taking on the staff of Cargo Handling Company Ltd," Mr Darley said. "We were very pleasantly surprised at the reaction we got from them."

Reception

Among many meetings, VGT has also met the staff of Cargo Handling Company Ltd, a General Workers' Union owned company that had held the port services contract for the past 30 years until 30 June 2006. The scope was to explain what the company was planning, and how it intended to go about improving port services efficiency."We were very well received, both by the workers and the union. We found good cooperation from Cargo Handling's port workers. Compared to many other places we have worked, especially where there was a strong, established union, this was very pleasant," he explained."VGT now has the right to handle cargo all the way from the hold to the gate," Mr Darley said. This is a change on practices of the past. The Cargo Handling Company did not unload certain categories of cargo from the ships, essentially because it did not have the capacity or equipment to do so.As a result, this business was subcontracted to the hauliers - the burdnara. VGT will, however, be handling this itself.There are certain restrictions on the concession offered to VGT. The agreement and the Port Notice issued on 22 June 2006 makes it clear that cruise liners, ferries, other ships "in port not necessarily for cargo operations" and naval vessels on courtesy visits will be able to berth at Deep Water Quay, and Laboratory and Magazine Wharves. The agreement, however, requires VGT be given 48 hours' notice, "and must not affect adversely the commercial operation and other activities of the Operator".

Reductions

The scope of the new contract is that the port services charges will be reduced, Mr Lai said. VGT has already made a commitment to reduce costs, and believes it will be able to do so by introducing state of the art port and terminal management principles and work practices. "We will be doing this with full respect for the staff," he explained.VGT will be charging a single tariff for the full range of services they will be offering. That tariff was due to be published on 1 July, and was not yet available when the Malta Economic Update went to print. It is, however, widely expected to be significantly lower than the current charges.To achieve this, the company has committed itself to an extensive investment programme. It intends to put Lm6 million into the port, both on the infrastructure and the superstructure - the cranes, software and systems required for efficient operation. "Our expertise is in running small ports as efficiently as is possible. We will be working on improving the usage of the berths in the Valletta harbour. In the ports we operate in Indonesia we achieve a throughput of 1,000 TEU per meter length of quay. This is the sort of productivity that can be aimed for in a small port."Large ports manage to achieve higher productivity levels essentially because the ships are larger," Mr Darley concluded.

The original document can be found on the Malta Economic Website ( Click here ).