Thirteen – that’s how many boats I saw last Thursday in Carthage harbor. Many people say that the number 13 brings bad luck. Is this true? I don’t want to give credence to this superstition, but one might be tempted to associate this ill-fated number with the breakdown in port operations in Tunisia.
At the high-level webinar held on May 15, 2020 on the reorganization of global value chains in the wake of Covid-19 and the associated opportunities for Tunisia, discussions focused on the adverse impacts of the coronavirus crisis and the potential for Tunisia to reposition its economy in response. The country is in fact well placed to respond to the new reality facing us: the proximity of European markets, together with the search for shorter supply and distribution chains, a diversified economy, and relatively strong human capital. Unfortunately, the country’s poor logistics performance, particularly the management of the port of Rades, could weaken these advantages.
Like many other countries, Tunisia’s economic situation is in a fragile state because of Covid-19. It would be unforgiveable if, as a result of poor port management, the country were to miss out on the opportunities associated with the reorganization of international value chains.
Although the port of Rades handles over 80% of container traffic and is the critical link to Tunisia’s participation in regional and global value chains, its performance indicators have been falling for the past 10 years.
The average annual turnaround time for containers at Rades port is 18 days (compared to 10-12 days 10 years ago and 6-7 days for countries such as Morocco). The cost of these inefficiencies weighs heavily on the Tunisian economy and can be attributed to a number of different actors (including customs, technical control centers, Tunisia Trade Net (TTN), the Tunisian Stevedoring and Handling Company (STAM), the Office of the Merchant Marine and Ports (OMMP), and banks). A 10% reduction in import turnaround times would result in a reduction in import prices of around US$500 million, equivalent to 1.25% of GDP, or even more.
Not only would this be a boon for Tunisia’s citizens and importers, it would also help exporters that use intermediate inputs and capital goods to become more competitive. Improving the efficiency of the port would also cut down export clearance times. Research has shown that a one-day reduction in export clearance time would enhance Tunisia’s export income by US$400 million, equivalent to 1% of GDP.
In addition to the slow turnaround times, there is the issue of berth waiting times, which is mainly the responsibility of STAM. Between 2016 and 2018, average waiting times were 13 days. According to the MarineTraffic AIS ship tracking system, some 9 or 10 ships were waiting for a berth at Rades on May 22, 2020, while no vessels were waiting at Marsaxlokk, Malta’s hub, or at Valencia in Spain. These long wait times lead to additional costs for STAM and for business operators. For example, the ATLANTIC WEST, which arrived in Tunisia on March 28, 2020, remained at port for 36 days (19 days waiting to berth and 17 days unloading and loading), while the berthing fees charged by STAM are calculated from the date that unloading starts.
The same ship, with the same volume of cargo and the identical port infrastructure, would remain a maximum of two days in Valencia, and the berth waiting time would not exceed 4-6 hours. These inefficiencies lead to additional costs for the shipowner that have to be paid for by STAM in foreign currency, and ultimately, by the private sector. Companies therefore have two choices: increase their stock of raw materials and parts to offset the delays, thereby tying up financial resources and severely weakening financial indicators, or incur penalties for late delivery and risk losing clients and markets.
In view of the losses generated by the inefficiencies of the port, why is it taking so long to carry out the necessary structural reforms? I would like to highlight the main points:
- It is necessary to invest in modern equipment and technical solutions, but this is not enough. STAM has invested in modern equipment and operating platforms (RTG cranes, Terminal Operating System (TOS), Smart Gates, etc.). Nevertheless, unless the overall organizational model is reviewed in order to promote greater specialization and separate the roll-on/roll-off and container workflows, the impact of such investments will not be sufficient to fulfill the port’s potential or to meet the expectations of investors.
- Setting up a Public-Private Partnership (PPP) management model may appear to be a difficult exercise. However, such a model would represent a win-win solution for the port of Rades, as it would benefit the Government, through more effective performance-based resource management, while at the same time assisting the private sector and boosting the Tunisian economy in general.
- It is critical to maintain an independent and open dialogue among all economic and social partners to facilitate the smooth implementation of reforms. In the past, Tunisia has shown that it is able to overcome difficult political issues and press ahead with complicated reforms, and was even awarded a Nobel Prize for its efforts. The country must find a way to build on that momentum in order to overcome the current economic and social challenges.
- Coordination among the different actors involved in port operations and clearance processes is suboptimal or even non-existent. Each entity operates in a silo and is more concerned with its internal constraints than with the overall impact on Tunisia’s competitiveness. It is therefore essential that the reforms be led at a sufficiently high-level to ensure greater coordination.
- In order for the private sector to benefit from the reforms, digitalization should be approached and implemented holistically. The objective is a “zero paper and zero contact” process from the filing of an application to the unloading of the goods, and including all the stages involved in processing and issuing permits. Even though, 20 years ago, Tunisia emerged as one of the first countries of the Middle East and North Africa to use a single electronic window for foreign trade and transport—the Tunisia TradeNet Platform (TTN)—the country has still not completely digitalized all its foreign trade procedures.
Programs to promote financing and support for institutional reforms by STAM, customs and other stakeholders involved in port and international trade operations have been prepared with the support of development partners. It is now up to the Government to put in place a new port management model that will allow Tunisia to position itself in the post-COVID world. Unless the country is able to significantly improve the performance of the port of Rades, Tunisia will find it difficult to strengthen its competitiveness and to be recognized as an essential link in regional and global value chains.
 Hummels; “Trading on Time” by Djankov, Freund and Pham, 2006