As shareholders of the Port of Melbourne Corporation (PoMC), taxpayers are entitled to a more rigorous analysis of the case for channel deepening (CDP) than provided by PoMC. The business case should include a realistic examination of the costs/benefits for all taxpayers but PoMC’s business case relies on an outmoded economic framework which is no longer applicable in the 21st Century.
The costs of losing or damaging the range of services presently provided by the Bay for free have been excluded from the economic modelling and decision making. PoMC has relied on a ‘business as usual’ mindset, projecting steady growth into the future. There is no lack of learned opinion that we can no longer subscribe to the business as usual mindset.
Estimating ‘net present value’ (NPV) in 2007, PoMC used a cost figure of $590m. Costs are now almost $1 billion so the claimed benefits must have diminished substantially. PoMC is advocating benefits based on cost reductions flowing to end users, whilst also introducing a container levy. End users will not benefit as importers and exporters costs have already increased via the levy, leaving no savings to pass on.
To achieve its benefit/cost ratio of 3.3, PoMC used the gross benefit figure of $1936, not the net benefit, and divided it by the total cost estimate less the ‘sunk’ costs already spent. PoMC also fails to point out that only one third of the economic benefit flows to Victorian interests.
Using the more conservative and realistic assumptions below the NPV is reduced to minus $540 million:
· Cost of around $1 billion, · Project valuation over 10 years with a terminal value · 12% discount rate not the 6% used by PoMC · Conservative estimate of future shipping fleet compositionOn these figures, this is a dis-benefit to Victorians. Clearly the project is already unjustifiable, even before any more costs blow-outs occur. I also have grave concerns about the Alliance between PoMC and Boskalis. During the SEES Inquiry Boskalis executives said they are now very aware of their responsibilities and had never breached any standards, claiming “zero incidents with environmental impact”. Boskalis failed to mention incidents where standards MUST have been breached, such as the sinking of a Boskalis dredge in Ponte Noir, Republic of Congo in 2006, where 3 people lost their lives, and the collision of Boskalis dredge Fairway in the port of Tianjin China in March 2007, resulting in the dredge being written off. Boskalis is also a joint venture partner in the controversial Jurong Islands project where sand has been illegally taken from Indonesia for land reclamation projects in Singapore. The secrecy surrounding the Alliance between Boskalis and PoMC must be investigated, otherwise Victorian taxpayers may be exposed to unlimited loss and our priceless Bay may be damaged irretrievably. It is noteworthy that both Boskalis and James Hardy Industries have their headquarters in The Netherlands, so in the event of any compensation claims against Boskalis, like the asbestos victims, many Victorians may face insurmountable difficulties in obtaining justice. The public, especially Victorians, can demonstrate their desire for accountability by cutting and pasting this article and emailing it, headed, "Re Port Phillip Bay Channel Deepening", to the following address:[email protected], (The Secretary, Standing Committee on Finance and Public Administration, Legislative Council, Parliament of Victoria, Spring St. Melbourne 3000) From a Blue Wedges press release
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