The Corporatized Australian Port System: Are there Legislative Constraints upon the Effective Operation of the Model? Tabatha Michelle Pettitt BSc (Monash) LLB (Monash) Macquarie Graduate School of Management Macquarie University Submitted in fulfillment of the requirements for the degree of Doctor of Philosophy (May 2014) Table of Contents Summary of Thesis 1 Statement 3 Acknowledgments 5 Chapter One Introduction 6 1.1 Thesis Rationale 9 1.2 Outline of the Thesis 10 Chapter Two Literature Review 12 2.1 Introduction 12 2.2 What is Corporatization? 12 2.3 The Evolution of Corporatization: The Picture Overseas 15 2.31 United Kingdom: Reform under Prime Minister Thatcher 16 2.32 United States of America: Reform under President Reagan 18 2.33 New Zealand: From 1984 to the present 19 2.34 Europe 20 2.35 Canada 21 2.36 Asia 22 2.4 Corporatization in Australia 23 2.5 Gaps in the Literature 27 2.51 The Concept of Effectiveness 27 2.52 The Effectiveness of Corporatization 29 2.6 The Australian Models: Statutory State-Owned Companies and Government-Owned Companies 31 ii 2.61 The Differences between the Models 31 2.62 Is there Agreement on an Appropriate Legislative Framework? 33 2.7 Why is this Research Required? 35 2.8 Research Questions to be addressed in this Thesis 36 Chapter Three Methodology 38 3.1 Introduction 38 3.2 The Case Study as a Research Method 38 3.21 Why use the Case Study Method in this Study? 39 3.22 Criticisms of the Case Study Method 41 3.3 Selection of Case Studies 44 3.4 Method and Data Collection 47 3.41 Sources, their Probative Weight and Reliability 47 3.42 Use of Multiple Sources 51 3.5 Data Analysis 53 3.6 Conclusion 54 Chapter Four The History of Reform 55 4.1 Introduction 55 4.2 History of Reform 56 4.21 Paradigm Changes 56 4.22 Reform in the United Kingdom and the United States of America 59 4.23 Reform in New Zealand 60 4.24 Reform in Australia 62 4.3 Reforming the Maritime Sector 63 4.4 Microeconomic Reform and The National Competition Policy 65 4.5 Restructuring Australian Ports 66 4.6 The 1990s and Beyond 70 4.7 Conclusion 71 iii Chapter Five The Corporatization Frameworks 72 5.1 Introduction 72 5.2 Privatization, Corporatization and Commercialization Frameworks in Place 72 5.21 Privatization 72 5.22 Corporatization 77 5.23 Commercialization 78 5.3 Port Restructure in the States 78 5.31 Victoria 78 5.32 Tasmania 82 5.33 South Australia 84 5.34 New South Wales 86 5.35 Queensland 89 5.36 Western Australia 92 5.37 Northern Territory 94 5.4 The Models 95 5.5 Implications of the Models and their Legislation 98 5.51 The Role of the Shareholding Ministers 100 5.52 The Issue of Potential Ministerial Interference 102 5.53 Government and Commercial Enterprises 107 5.6 Conclusion 108 Chapter Six The Port of Melbourne: A Case Study 109 6.1 Introduction 109 6.2 Reforming the Port of Melbourne 111 6.3 The New Channel Corp and the Port of Melbourne: A Split Port 114 6.4 The Reform Agenda 116 6.5 The Current Legislation and Aims 118 6.6 The Role of the Shareholding Ministers 120 iv 6.7 The Independence of the Board of Directors 122 6.8 Port of Melbourne Corporation Performance Data 124 6.9 Addressing the Research Questions 129 6.10 Conclusion 154 Chapter Seven The Ports of Tasmania: A Case Study 156 7.1 Introduction 157 7.2 Reforming the Ports of Tasmania 157 7.3 The Role of the Shareholding Ministers under the First Ports Act 161 7.4 Impact of the First Ports Act 166 7.5 Further Reforms – Merging the Port Companies 167 7.6 Proceeding with the Merger – The Tasmanian Ports Corporation Act 2005 (Tas) 170 7.7 The Role of the Shareholding Ministers in the merged port company 173 7.8 The Independence of the Board of Directors 175 7.9 Rationales for Reform 177 7.10 Tasmanian Ports Performance Data 178 7.11 Addressing the Research Questions 184 7.12 Conclusion 197 Chapter Eight Assessing the Success of Corporatization: A Framework for Further Analysis 199 8.1 Introduction 199 8.2 Has Corporatization Delivered an Appropriate Legislative Framework? 200 8.3 The Port of Melbourne: SSOC Model – 1995 Reforms 202 8.4 The Port of Melbourne Ongoing Reforms: 2003 and 2010 Models 203 8.5 Tasmanian Ports: GOC Model 203 8.6 Addressing the Research Questions 205 8.7 Corporatization Models: An Observation 214 8.8 Efficiency in Corporatized Ports 215 v 8.9 Corporatized Ports: A More Effective Business? 216 8.10 Corporatization Models: Some Issues 216 8.11 An Effective Legislative Framework 217 8.12 Conclusion 218 Chapter Nine Conclusion 221 Appendix One 227 Appendix Two 236 Appendix Three 245 List of Figures 254 List of Tables 255 Bibliography 257 vi Summary of Thesis Many of Australia’s government-owned port corporations operate under legislation that creates a corporatized business framework which aims to distance government from the daily operations of ports. Effective corporatization requires legislation which creates a framework that will allow government-owned port corporations to emulate the commercial conduct of private sector firms and be competitive and profitable. There is no uniform port corporatization framework existing in Australia because the frameworks in place have been customized to the needs of the governments in each particular case. As a result, a number of different versions have been implemented across the jurisdictions of Victoria, Tasmania, New South Wales, South Australia, Queensland and the Northern Territory. Whilst each state and the Northern Territory has enacted its own legislation and created its own port governance frameworks, these are all variations of two models: the Statutory State-Owned Company (SSOC) and the Government-Owned Company (GOC). SSOC port corporations are subject to the requirements of the specific legislation that created them. GOC port corporations are created subject to the requirements of the Corporations Act 2001 (Cth) which regulates Australian corporations. The SSOC and GOC models differ in the extent of the powers granted to each port corporation and its Board of Directors, as well as the role and degree of influence permitted to shareholding government Ministers. Under the SSOC model the responsibilities of government are embedded within the legislation and potentially allow more scope for political interference than with the GOC model where the scope for overt political interference is generally minimal. There has been little research undertaken from a legal or empirical perspective evaluating and measuring the function and role of government upon the operation of Australian ports. There is a real need to examine whether there are any constraints imposed by the legislation on port corporations. This thesis fills this gap by investigating whether the legislation in place has provided an appropriate framework 1 that will enable each port corporation’s business and commercial objectives to be fully realized. 2 Statement I certify that the work in this thesis entitled “The Corporatized Australian Port System: Are there Legislative Constraints upon the Effective Operation of the Model?” has not previously been submitted for a degree nor has it been submitted as part of the requirements for a degree to any university or institution other than Macquarie University. I also certify that this thesis is an original piece of research and that it has been written by me. Any help and assistance that I have received in my research work and the preparation of the thesis itself have been appropriately acknowledged. In addition I certify that all information sources and literature used are indicated in this thesis. Tabatha Michelle Pettitt Tabatha Michelle Pettitt Student ID: 41014065 Date: 21 May 2014 3 This thesis is dedicated to Harold Ernest Pettitt (1913-2002) & John Anthony Pettitt (1945-2014) 4 Acknowledgments I was working as a research assistant when it was suggested to me that I might like to consider undertaking a PhD. It was not something that I had ever considered and in fact I knew very little of what was involved. I accepted the challenge and now, despite various ups and downs, trials and tribulations, I can say that overall I have enjoyed the experience. To those who suggested that I embark on the task I shall be forever grateful. There are plenty of people whom I would like to thank for their support and assistance along the way. I would like to thank my two supervisors Professor Tyrone Carlin and Professor Guy Ford, now both of the University of Sydney. I am very thankful to Tyrone Carlin for reading many drafts of my thesis and for providing very detailed feedback and advice on it, as well as for coming down to Melbourne from Sydney to meet with me in person from time to time. I am very thankful to Guy Ford for giving me endless help in the process, particularly in relation to the submission process and examination process. I would like to thank my mum, dad and brother for their support during the whole process which no doubt appeared endless. They did eventually learn to stop asking me as to when my thesis would be finished. I would also like to thank my dad for his invaluable assistance with the calculations in Chapters Six, Seven and Eight. I would also like to thank other family members and my friends both here and overseas for their support and encouragement. I understand that to many my thesis seemed to be a never- ending project.