For Yong Xin Harbour Co Ltd, a Ningbo-based private company which is engaged in a multi-purpose pier project in the harbour city, there is almost nothing that is impossible.

"We are busy building up the necessary facilities, and once the dust settles, finances required may exceed 200 million yuan (US$24.2 million)," according to an account manager at the firm.

Companies like Yong Xin remain in the minority, since the threshold for investing in port facilities is extremely high and much patience and time is required to get a return.

Xu Qiang, an official from the Ningbo Reform and Development Commission, said that until now, the major investors in local port construction are still State-owned enterprises (SOEs).

"For the time being, even overseas companies are not playing a leading role in funding harbour construction, let alone smaller private investors."

"Besides some specialized piers, almost no private capital is involved in harbour investment in Ningbo so far," the official said.

The situation is in sharp contrast to the scarce harbour capacity confronting China as the nation's economy continues to grow.

Last year, transportation demand at coastal harbours was 2.7 billion tons in terms of capacity, while the actual figure was 2.2 billion, which means a gap of 500 million tons, according to statistics from the China Ports and Harbours Association.

The sector is also short of specialized ports infrastructure and facilities designed to handle commodities such as coal, oil and raw mineral materials.

Based on the fact that by 2010, market demand for more harbour capacity will keep mounting, it is now high time for the authorities to create an even more favourable environment for investment with different backgrounds to enter the sector, experts suggested.

"There are no more policy obstacles against investing in port projects by overseas and private capital. In fact, the government has drawn up a number of industrial policies and laws to attract money. But more flexible implementation is required to put all the favourable policies into practice and to diversify investment sources," said Wang Yuanjing, deputy director of the Policy Research Office under the Investment Research Institute of the State Development and Reform Commission.

According to investment analysts, the scarcity of harbour capacity is not as serious as the lack of an agile mechanism to maintain a long-term and sustainable development of the harbour sector.

Although the Harbour Law that took effect on January 1 last year, encouraging the entry of diverse investment, State capital still plays a decisive role.

Because of the high investment threshold and various problems such as the right of actual management and pricing of daily business operation, diversified investment sources remain hard to maintain.

"It is an industrial sector featuring a 'natural monopoly'. It is a must to introduce more investors from different backgrounds and to make them really responsible for the daily operation of the projects they fund," Wang commented.

Harbour investment and management are formally subject to government willingness and mandate. Investment in this sector used to come from either bank loans or State financial subsidies.

The situation has to be changed, and implementing mechanisms favourable to more diversified investment have to be sought out.

"Only in this way can various projects be better financed," Wang asserted.

Zhang Xiaowen, an official with the planning department of the Ministry of Communications - the industrial watchdog governing harbour planning - suggested that instead of keeping tight control over the sector, the industrial authority should further liberalize its mindset and leave more space for market-oriented manoeuvres.

"The authority's major responsibility lies in overall industrial planning and layout and safeguarding a full utility of the coastline resources. Specific business operations, such as attracting investment and harbour management, should be more market-based," Zhang added.

To lend due support to the Harbour Law, the ministry is gearing up efforts to draft industrial regulations to better cope with faster development of the country's harbour construction.

One proposed regulation is to address the coastline resources administration.

"The coastline is even more precious than land resources, since the amount of coastline suitable for harbour construction is diminishing," Zhang said.

The other proposed document is about the overall planning and management of the nation's harbours.

"We are busy working out details regarding the two regulations. We hope that they should come out by the end of this year," Zhang said.

The infrastructure part of harbour projects, such as fairways, anchorage and breakwaters, usually falls within the government's domain.

And business facilities, such as logistics and storage setups, will be more suitable for social investment, Tu Deming, director of the China Ports and Harbours Association, told China Daily.

"For this public infrastructure, SOEs will remain major investors, while foreign and private investors can get involved with those business projects.

"Maybe the authority can offer them more management freedom and preferential policies, such as the power to decide the operation price by themselves," Tu added.

The central government used to subsidize the normal operation of important harbours. Perhaps regional administrations can follow suit by lowering taxes for those ports not running in the black, the association director suggested.

Harbours in China used to be under the direct control of the central government. The situation changed about three years ago. The regional governments now monitor harbours' daily operations.

How to invest

"Investing in port construction does not mean that money will come easily. It requires in-depth analysis, sound feasibility studies and other supportive conditions."

That is advice from Gao Hujun, a senior researcher with the water transportation research institute under the Ministry of Communications.

"Those interested in pouring money into harbour-related businesses have to figure out whether they can find experienced partners and enough cargo business for shipping and also make sure they know how to manage logistics," Gu suggested.

Because coastline resources are not renewable, the authority has to do everything to ensure the quality and economic efficiency of the projects built on it.

That is another reason why the threshold for funding harbour projects is so high, Gao explained.

Despite never being easy, investing in port projects remains a promising business. "The market is just there. And the capacity demand will keep mounting till five years later, triggered by fast development of the country's trade and economy," Tu said.

For private investors, those small and medium-sized port projects may be a better choice to start with.

"Those small projects are, in fact, in desperate need for transporting particular commodities, such as building materials," Tu added.

The construction and expansion of major coastal harbours will be intensified around areas including the Yangtze River Delta, Pearl River Delta and Bohai Bay, Ren Jianhua, vice-director of the planning department of the Ministry of Communications, was quoted as saying.

According to the ministry's plan, the loading capacity in the three major harbour groups will be further enhanced, reaching 3.5 billion tons by 2010.

(China Daily March 3, 2005)