High Time for Poland to challenge Hamburgs supremacy and develop a regional ambition for its Port sector

22-nd January 2010

Original text of article published in “Namiary na Morze i Handel” (02-2010):

High Time for Poland to challenge Hamburg’s supremacy and develop a regional ambition for its Port sector

For many years, Poland has prided itself on Gdynia being its major port as well as a major port in the Baltic, and cheered new record container volumes each year. Unfortunately, the reality is that while the Gdynia port community was busy celebrating, Hamburg quietly but rapidly developed as Poland’s largest port. Since 2008, Hamburg handles more Polish containers than Gdynia, and that does not account for the Polish volumes that enter Poland from Bremerhaven, or that come through regular block trains from Rotterdam to their destination in Poland. One can wonder, what was there really to celebrate since Polish volumes were in fact flowing away from Polish ports faster than Polish ports were growing. For too long, Gdynia has taken pride of being the biggest fish in a small pond, without realizing that the pond was in fact part of a bigger lake. It is time to change these old mentalities and put to rest the old jealousies and rivalries that opposed Gdansk and Gdynia, and to adopt a more ambitious vision that will elevate Poland to a hub port country status.
Poland is one of the most important countries in Central & Eastern Europe (CEE): it has one of the largest territories and population, its geographic location makes it a natural gateway to the whole CEE, and it has one of the strongest economies of the region. There is no reason it should satisfy itself with the current status quo and continue to celebrate the meager successes of its port industry, while the bigger share of polish volumes continues to be handled by foreign ports. Hamburg makes no secrets of its ambition to continue to rule in the Baltic and to serve as a necessary gateway to all Polish volumes, so does Poland wants to remain subject to domination from German hubs and become even more marginalized as Russia resumes its exponential growth?
Poland should in fact have the ambition for its port sector of playing tomorrow the same role as Germany is playing today. Polish ports should not only serve as the main gateway to Polish volumes, but also to all its southern and eastern landlocked neighbors; being in the heart of the Baltic sea, Poland should aim at becoming the main hub for volumes to other coastal nations in the Baltic.
This ambition is not only of a maritime nature, it is also geo-political and will be a deciding factor in Poland’s standing in the European Union (EU) and future influence in the CEE region. There is a good reason why Hamburg is so determined to maintain its domination over the Baltic: it is all about the economy and prosperity of the Hamburg region; such ambition would also strengthen Poland’s economy longer term in a similar way. At present 7 out of 10 jobs in Hamburg’s 1.7 million population are related to the Port sector, Hamburg has the highest GDP in Germany and in 2007 Hamburg was the German city which attracted the highest share of foreign investment: these successes are the result of Hamburg’s strong port sector which developed with the vision of becoming a main hub to western and central Europe, and to the Baltic sea nations. Germany had the ambition 20 years ago with the fall of communism to dominate the Eastern European and Baltic markets. Achieving similar results for Poland could also take a long time, but the most important decision at this stage is to engage the process by starting to implement the right strategies towards Poland achieving this goal.
In addition to adopting a new port strategy, Poland needs to recognize and address the factors currently limiting the development of its port sector. There are at least 4 sets of factors that hinder the development of Poland as a regional hub port country: seaport infrastructure capabilities, inland infrastructure and in particular connectivity of seaports, bureaucratic obstacles to cargo clearance through Polish ports, and unfair market competition supported by Polish authorities.
Seaport Infrastructure
Gdynia’s port infrastructure cannot accommodate any larger vessels than 5,000-6,000 TEU panamax vessels: it is irremediably limited by its draught of less than 13 meters and the small size of its turning circle. Since most vessels on the Asia – Europe trade route are 8,000 TEU and up vessels requiring over 14 meter draught, none of these vessels can actually call at a terminal in Gdynia. Unlike common perception, DCT Gdansk SA was built not to compete with Gdynia, but to complement Gdynia’s weakness specifically by being able to efficiently accommodate larger vessels that could not call Polish ports.
The start of a first weekly 8,000 TEU vessel direct service by Maersk at DCT Gdansk on 4th January 2010 has for the first time broken Poland’s dependence on Northern European hub ports and demonstrated that the same vessels that call German and Benelux ports can come directly to Poland. In addition to Polish cargo from Maersk not being transshipped in Northern European ports, DCT Gdansk also acts as a hub to transship Far East cargo to Russian and Finland, in replacement of traditional Northern European hub ports.
DCT Gdansk has a current infrastructure capacity of 1 million TEU, which can be expanded to 4 million TEU through additional phases. As the only terminal in Poland with 16.5 meter water depth able to accommodate ocean going vessels of 8,000 TEU and larger, and such unrivalled expansion capabilities, DCT Gdansk has already resolved the most significant limitation to Poland adopting a regional hub strategy.
Inland Infrastructure
The poor quality of Poland’s roads is already notorious, but what is most significant about road infrastructure in Poland is the East-West priority which has so far prevailed to the detriment of North-South. This policy has significantly contributed to the development of Hamburg as Poland’s major port as the major cities in the center and south of Poland are in fact today better connected to German Ports than to Polish ports.
It is essential that Poland adopts right away a North-South priority in relation to road infrastructure development, and considers road infrastructure in the context of linking Polish ports to consumer and production centers in the center and south of the country. Additionally, in the context of Poland positioning itself as the future gateway to landlocked countries on the south and east of its borders, such infrastructure priorities must also include connectivity with major transport corridors of these neighboring countries.
The Polish rail network is dense but the infrastructure very aged, and requires important renovations. Again, the priority of the renovation of the rail infrastructure should be carried out with a North-South priority, as applying East-West priorities will just strengthen the advantage of Hamburg to service the Polish hinterland at the expense of Polish Ports.
DCT Gdansk is very conscious that its aim of becoming a major gateway to the CEE is largely dependent on critical inland infrastructure development. It is in this context that DCT Gdansk is campaigning to raise awareness at the regional and central government levels to ensure that the economic and geo-political opportunities created by the development of a base port in Gdansk are understood by the Polish authorities and reflect in the national infrastructure development priorities.
Harmonization of regulations affecting clearance of cargo via Polish ports
Although Poland joined the EU in 2004 and is therefore subject to the same EU regulatory framework as Germany and Benelux, clearing cargo through a polish port can sometimes take days or weeks, while it only takes hours in Germany. DCT Gdansk is reputed for the quality and dedication of its Customs department among Polish forwarders, and has developed advanced web-based tools to accelerate clearance of cargo, however in order to rival with the efficiency of clearance at German ports, Customs regulations need to be reformed and modernized to accelerate the clearance process and make better use of technology at the expense of paper. Poland’s legislators need to harmonize Polish Customs regulations with that of Germany and Benelux, so that it becomes as easy and fast for a Polish forwarder to clear cargo at a Polish port than it is today at a German port.
The same applies to veterinary and various other border inspections: DCT has just inaugurated on 20th January 2010 its brand new dedicated veterinary facility, however despite veterinary inspections at the EU borders being subject to the same EU framework as in Germany and Benelux, it is a lengthy process in Poland which discourages many Polish forwarders from using Polish ports.
VAT rules in Poland are also an important obstacle to the use of Polish ports: while in Germany, VAT on imports can be cleared after around 90 days, allowing the cargo to be sold and collected VAT being offset with VAT to be paid on import, Polish VAT rules require VAT on imports to be paid within much shorter periods. This means that a forwarder using Polish ports must be able to finance VAT from his cashflow, while it is not the case using a German port.
In 2009 DCT Gdansk has taken the initiative to regroup all Polish container terminals around the issue of VAT on inland services in order to challenge the Ministry of Finance’s application of the VAT regulation, as this would constitute yet another disadvantage to Polish ports as opposed to German ports. DCT Gdansk is also committed to lobby for a change in all Polish regulations that affect the competitiveness of Polish ports.
Unfair competition
The development of a true hub port in Gdansk will require important additional investments in port infrastructure. DCT Gdansk’s present infrastructure can accommodate traffic of 1 million TEU per year,
but to be an effective competitor to multi-million TEU terminals in Hamburg, Bremerhaven and Rotterdam, more capacity will have to be created to accommodate deep sea vessels as more Lines look at shifting their Baltic traffic from northern European hubs to DCT Gdansk.
Only a fair competitive environment can foster a climate favorable to investment. Some local operator in Gdansk that was not required to make any sizeable investment, and benefits from very low costs with the support of the Port Authority and its affiliate operating company, creates unfair competition to other operators in Gdansk and Gdynia. It is essential that, as Landlords, the Port Authorities create a fair playing field where all private operators are subject to similar investment requirements and rental obligations to ensure a healthy competition.
It is high time that Poland sets higher aims for its ports, and in this context, the historic rivalry between Gdansk and Gdynia port authorities is just distracting Poland from confronting the real competition that is presented by German and Benelux ports. It is high time for Gdansk and Gdynia ports to cooperate and unite to develop a credible competition to Hamburg and other northern European hubs and regain all the Polish volumes lost to foreign ports.
Boris Wenzel
CEO, DCT Gdansk SA
January 2010