What’s behind plan to adopt multi-operator model for Panama Canal ports?

Panama is aiming to mitigate geopolitical risks and respond to US pressure by adopting a multi-operator model for its strategic canal after nullifying the concession granted to Hong Kong’s CK Hutchison to operate two of the ports, analysts have said. Panamanian President Jose Raul Mulino was reported to have vowed on Thursday that his country would “never again” grant concession contracts to run the Balboa and Cristobal terminals at each end of the Panama Canal to a single company. The country’s Supreme Court of Justice last week stripped the rights from the Panama Ports Company (PPC), a subsidiary of the conglomerate led by Hong Kong billionaire Li Ka-shing’s family. The PPC has managed the ports since 1997 and renewed the contract for 25 years in 2021. While Beijing slammed the court’s decision and vowed to take all necessary measures to safeguard the rights of Chinese enterprises on Friday last week, Mulino offered up a strong response, according to Reuters. “Panama is a dignified country and will not allow itself to be threatened by any country on Earth,” he said. It remained unclear when the ruling would take effect, and Mulino said the PPC would continue to operate the ports in the meantime. Previous reports suggested the court order could take effect this month. Wilson Chan Wai-shun, co-founder of the Pagoda Institute think tank, said the move was an effort to balance pressure from the United States and other countries. The US had repeatedly vowed to “take back” control of the strategic waterway since Donald Trump returned to the White House in January last year. “The most ideal solution would actually be for the two ports to be controlled by companies from different countries or by entities closely associated with different countries,” Chan said. He said Panamanian authorities could grant concessions through open bidding and invite all parties to participate, so the country’s vital national resources would not be monopolised by a single side. Lau Siu-kai, a consultant to the semi-official Chinese Association of Hong Kong and Macau Studies think tank, said the move to diversify operators underscored US efforts to rein in Beijing’s influence in Latin America and the expansion of the Chinese shipping industry. “To diversify operation companies, at the end of the day, it means two companies that the US accepts and that can safeguard the American interests,” Lau said. He added that the Panamanian authorities’ diversification strategy was aimed at justifying the court ruling, which declared PPC’s concessions to operate the two ports “unconstitutional”. “It is to justify why they are targeting CK Hutchison,” Lau said. “They now claim that awarding the concessions to CK Hutchison poses a risk. If you awarded them to another single company instead, why would that not pose a risk?” Surinder Brrar, a professor of practice in global shipping and logistics at Polytechnic University, echoed that the move appeared to address political pressure from the US. “My assessment is that Panamanian authorities are trying to show the US administration that they are doing something about it, but now it is in the hands of the arbitration process,” Brrar said. “Panama could be trying to de-escalate pressure from the US and de-risk itself from geopolitics by breaking their single operator to a multi-operator model.” The PPC said on Wednesday that it had initiated arbitration proceedings against Panamanian authorities, but it was uncertain whether they would participate. While legal experts said it generally took two to 2½ years to settle an International Chamber of Commerce arbitration involving a party state, Brrar described it as a delaying option until a possible cool-down once Trump’s term ended in 2029. “[CK Hutchison] has a chance to extract value in the years before any arbitration ruling,” Brrar said, adding the ports’ efficiency and competitiveness would be harmed as it was not economically rational for the operator to invest further. He described the saga as a temporary setback for China, as its significant commercial influence and interests in shipping and infrastructure would lead to an eventual recovery, but said prolonged uncertainty and inefficiencies could lead to higher shipping costs in the long term. Shipping and logistics scholar Joseph Lau Yui-yip said diversifying port operators would break CK Hutchison’s current dominance and benefit shipping companies by driving down costs through competition. He added that competition among operators could also enhance port service quality and reliability, strengthening the region’s supply chain.

What’s behind plan to adopt multi-operator model for Panama Canal ports?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Panamanian president reportedly vowed his country will ‘never again’ grant concession contracts to run terminals to single company

Panamanian president reportedly vowed his country will ‘never again’ grant concession contracts to run terminals to single company