Tuesday 13th Nov, 2018

INDUSTRY OPINION: Pitiful Port Proposal a national disgrace

TWENTY years ago, BHP proposed developing a container terminal on its former Newcastle Steelworks land as the best economic use of this deep-water port site after steelmaking finished in 1999. Now, 12 ha is being developed for a storage yard.

It’s a national disgrace.

Port leaseholder, Port of Newcastle Investments Pty Ltd (PON), is contractually committed to paying the NSW government $1m per container ship visit to the port, which the government then pays to NSW Ports Pty Ltd, the Port Botany leaseholder.

This “cross-payment” was secret until disclosed by the Newcastle Herald last July. It has the purpose and effect of substantially lessening competition in the NSW container shipping market by maintaining the Port Botany container port monopoly.

More importantly, it is destroying economic development potential in northern NSW because 90% of world trade in non-bulk commodities is conducted using containers. No container port means no job-creating investment, which explains why jobs growth is concentrated in Sydney.

Nothing is preventing PON from immediately leasing the former steelworks site for the purpose intended by the government in 2009: building a multi-purpose terminal, including a container terminal with minimum capacity for one million containers per year.

Container terminal operators are willing to spend $1 billion on such a development. Conditions of consent were made by the government in 2012.

The government rightly says PON can develop a container terminal “if it wishes to do so”. PON fails the test of corporate responsibility by giving no reason for not acting in the best interests of the community in which it operates.

Despite repeated requests, the government, and the NSW Auditor-General, which approved the “cross-payment” deal, are yet to justify the government’s contractual commitment to pay compensation to NSW Ports “in respect of future container capacity development at the Port of Newcastle”. There is no justification.

The “cross-payment” deal was created before the government announced its decision, on November 5 2013, to lease the Port of Newcastle. PON leased the port on April 30 2014.

Between 2009 and November 2013, the government was conducting a “Public Private Partnership” – where the private sector funds, builds and operates government-owned infrastructure over an agreed period – for a multi-purpose terminal including container terminal, on 71 ha of the former steelworks site. A PPP has rigorous requirements for public benefit that must be approved by the Auditor-General and the Cabinet. These requirements were met when the government was conducting the PPP negotiation with the preferred proponent, Newcastle Stevedores Consortium (NSC).

But when the government required NSC to pay $1 million per container ship, it became apparent that this requirement met the conditions for contravening the “Competition and Consumer Act 2010” (CCA). Only a court can determine a contravention of the CCA. The government terminated the PPP before the lawfulness of the charge could be legally tested.

In the same month (November 2013) that the government terminated the PPP, it released the “NSW Freight and Ports Strategy”. This Strategy depends on Port Botany remaining the state’s only container port. If the government unlawfully required NSC to pay $1 million per container ship, this makes the Strategy invalid.

The government is exempt from the CCA when it is privatising an asset, such as the Port of Newcastle. Because of this exemption, competition watchdog, the ACCC, says its “hands are tied”. But the government was not exempt from the CCA while it was conducting the PPP. This explains why the government terminated the PPP before announcing its decision to lease the port on November 5 2013.

The ACCC is responsible for enforcing the CCA. The ACCC is failing in its responsibility by refusing to disclose the date upon which it claims the government became exempt from the CCA in respect of leasing the Port of Newcastle.

* Mr Cameron is an independent consultant and analyst

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