When state-controlled China Overseas Shipping Group Co. arrived here five years ago, it was met with a month-and-a-half-long dockworkers’ strike and a banner along the waterfront: “Cosco Go Home.”
Today, a new Cosco-built container terminal here has created 1,000 jobs, silencing most union unrest. After pumping in a billion dollars and promising another half billion, it has also transformed the port, just outside of Athens, into one of the biggest and fastest-growing in the Mediterranean.
The investment now ranks as one of the most successful Greek privatizations in recent decades. It is also been a rare public-relations victory for Beijing. Critics have accused China-backed firms of overpaying for a number of big resource plays in the developed world—from oil fields in Canada to mines in Australia—and then bungling their management.
Industry watchers say Cosco probably overpaid in its Greek gambit, too. But its transformation of the Piraeus container terminal is being hailed an operational success so far, for both the company and the port.
Cosco, founded in 1961 amid China’s Great Famine, bet big on Greece after a decade of minority investments in a handful of foreign ports—in Singapore, Suez and Antwerp. Its investment in Piraeus has helped catapult the company into the major leagues of global port operators, alongside giants like Danish shipping giant A.P. Moeller-Maersk A/S unit APM Terminals, and Dubai-based DP World.
The investment has also been a boon to Piraeus, a struggling port scarred by decades of industrial decline and the country’s protracted debt crisis. The port’s proximity to Athens makes it the busiest passenger harbor in Europe, a leading cruise-ship terminal in the Mediterranean, and unofficial home port to the biggest merchant fleet in the world.
But before the Chinese investment, the container port was mired in inefficiency and outdated infrastructure. In 2008, the year before Cosco came to town, Piraeus moved just 433,582 containers. Last year, that number had grown more than sevenfold to 3.16 million containers—80% of that thanks to Cosco.
“We are successful in Piraeus,” said Fu Cheng Qiu, chief executive of Cosco’s Piraeus subsidiary. Things didn’t look promising back in 2009, when Cosco first arrived, he said: “There was the financial crisis; we had no business.”
After a few years of talks between Greek and Chinese officials, Beijing committed to making Greece a hub for Chinese exports. In 2008, Cosco put in a €490 million ($620 million) bid for a 30-year concession. Some industry and government officials familiar with the deal said the offer was about five times the market value of the concession.
Cosco has since tried to revisit the terms of the deal. The concession has been extended to 35 years, and the current government recently consented to an agreement that would allow Cosco to expand its operations. It has granted it the rights to build a third wharf at the container terminal, without going through a competitive tender.
In October of 2009, when Cosco took control of the container terminal, Greece’s militant dockworkers union, emboldened by the incoming socialist government that would win elections a few days later—launched a six-week-long strike that crippled the port. The strike left some 4,500 containers stranded at the terminal for weeks, and dented Greece’s already wobbling economy.
The Greek government, Cosco and the Piraeus Port Authority agreed to a deal that helped restore labor peace on the docks. Cosco was allowed to operate its part of the container terminal unfettered by the union wage scales. Most of Cosco’s workers are now hired through a third-party, nonunionized employment agency.
They earn around €1,200 a month, a better-than-average wage in Greece, but roughly a third of what unionized dockworkers earned five years ago, and less than what workers still earn at the rival PPA-controlled wharf abutting the Cosco docks.
The new jobs have helped reduce labor unrest. But some powerful opponents still complain about the deal.
“They have created a workers’ ghetto,” said Panagiotis Lafazanis, a senior member of parliament withhe main opposition, radical-left Syriza party.
Meanwhile, Cosco has further plans to expand—moves that the company expects will boost volumes to more than six million containers by 2016. Cosco has installed 11 new loading cranes that will put Cosco’s Piraeus operations roughly on equal footing with capacity at Rotterdam, Antwerp and Hamburg, Europe’s three busiest container ports.
“They are excellent at long-term planning,” said Athanasios Christopoulos, secretary-general of ports and investment policy at Greece’s shipping ministry.
Source: Wall Street Journal