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Chinese Investment In Piraeus Port Facing Local Challenges

Chinese investment in Piraeus port facing local challenges

Chinese Investment In Piraeus Port Facing Local ChallengesSource: Hellenic Republic Asset Development Fund

Piraeus, Greece (PortSEurope) April 30, 2019 – Greece’s Prime Minister Alexis Tsipras has visited China and attended the Second Forum of the Silk Road Initiative (new Silk Road) – his third trip to China in as many years.

The new Silk Road (part of the Belt and Road initiative also known as One Belt, One Road, or OBOR) is a Chinese economic strategy to seek better access for Chinese-made products in European markets, which includes acquiring stakes in ports and other transport facilities, and cooperation agreements with countries along the Silk Road routes.

Whilst other European leaders were also present seeking a new or expanded role in the new Silk Road, the relationship between Greece and China is more mature, and is facing challenges around Chinese investment in Piraeus port.

In October 2009, Greece leased docks 2 and 3 of the Piraeus Port Authority SA (PPA) to COSCO Shipping Ports Limited for a 35-year-period. COSCO agreed to buy 51% of PPA in April 2016 for €280.5 million ($312.51 million) under a deal signed with the HRADF, Greece’s privatisation agency, and is expected to increase its stake to 67% over the next five years.

Should COSCO fulfil certain conditions set out in the agreement, including the successful completion of the mandatory investments up to €300 million, it will pay an additional €88 million and increase its stake by 16% to 67%. COSCO said it would invest up to €612 million in Piraeus port to upgrade cruise and shipping container facilities, and construct hotels, shopping facilities and a COSCO-dedicated logistics centre.

Challenges started when Greece’s Central Archaeological Council (KAS) ruled that some proposed projects at the port of Piraeus would affect local archaeological sites, and rejected PPA’s plan to create a shopping mall, a floating ship repair dock and a luxury hotel.

The Greek government gave approval to COSCO to convert three buildings at the Piraeus port into luxury hotels. KAS approved plans to convert the 1960s “Pagoda” terminal building into a 300-room hotel and conference centre, provided its character and outward appearance are not changed.

KAS said that the area scheduled to become a large cruise ship passenger station in the port’s south zone cannot also accommodate a large shopping mall, of nearly 24,000 m². A luxury hotel planned at Porto Leone must be lower in height and smaller in area, KAS added.

Local traders and shop owners object to the construction of a mall within the port authority and close to where tens of thousands of cruise ship passenger enter and leave on a seasonal basis. Port sources suggest a mall with high-end retail stores catering to more affluent cruise ship passengers, and therefore, not direct competitors with Piraeus’ merchants – hardly a comment likely to endear local residents and businesses.

COSCO’s plan to build a 12-hectare (29.65-acre) logistics centre in the adjacent Keratsini municipality is opposed by a shipping ministry-affiliated committee, which has an alternative plan.

COSCO will resubmit its masterplan to the government, most likely challenging comments by the authorities, and has added that additional investments are necessary, as there can be no major commercial port without a railway link and modern logistics facilities.

The port has been performing well under Chinese management. Profits before tax were €42.3 million in 2018, compared to earnings of €21.2 million in 2017. The port’s container throughput stood at 3.36 million 20-foot equivalent units (TEUs) last year, up from 880,000 TEUs in 2010, so traffic has increased and the port has become more competitive.

During the first three months of 2019, the under concession Piers II + III, which are the most important source of revenue of PPA S.A., achieved a new record handling 1.25 million TEU bringing Piraeus closer to first place in the Mediterranean.

Whilst this investment issue has been developing, China has been busy developing other relationships with other partners. In March 2019, a total of 19 institutional agreements and 10 commercial agreements were signed during the state visit of President Xi Jinping of China to Italy, covering a wide range of themes and industry sectors – all dominated by an overall non-binding agreement for Italy to cooperate with China in the latter’s new Silk Road.

The clear beneficiaries from the Italy-China are the ports of Genoa and Trieste, which both signed commercial agreements with state-owned China Communication Construction Company (CCCC). Both of these ports are in a position to offer developed and expanding cargo rail connections with central and northern Europe, key markets for China.

If the delays in Greece were to continue, China could review its wider Mediterranean port investment strategy and pay more attention on investing in Italy, but also in France and Spain – both with excellent and fast rail and road connections to the rest of Europe.

COSCO Shipping Ports Limited is a leading global ports operator with a terminals portfolio covering the five main port regions in Mainland China, Southeast Asia, Middle East, Europe and the Mediterranean. Its Mediterranean terminal operations are located in Bilbao and Valencia (both Spain), Vado Ligure (Italy), Kumport (Turkey), Suez Canal (Egypt) and Piraeus (Greece).

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