Joining China's economic drive could unlock Italy's port potential

As part of a $2.8bn investment pledge under its memorandum of understanding with Italy, China will look to enhance the competitiveness of the two largest deepsea ports in the northern Italy, Trieste and Genoa

The non-binding agreement, with its promise of Chinese investment in the country’s infrastructure, looked attractive to the Italian government

ITALY’s deal with China to become the first G7 country to formally join the ‘Belt and Road Initiative’ has the potential to raise the country’s port prowess hopes in the hotly contested Mediterranean.

Covering infrastructure, trade, and investment links between China and 65 other countries — which together account for more than 30% of global GDP, 62% of population and 75% of known energy reserves — the initiative is an ambitious programme aiming to improve the co-operation and connectivity between Asia and Europe.

It consists primarily of the ‘Silk Road Economic Belt’ between China and Europe via central/south Asia and the ‘New Maritime Silk Road’ via Southeast Asia, the Arabian Gulf and North Africa.

The agreement signed in Rome last week raised eyebrows among some European Union member states apprehensive about potential Chinese economic dominance, but also Washington, as its trade spat with China continues.

Trying to agree a co-ordinated a response to the deal, EU leaders met in Brussels. The Financial Times reported that at this meeting French President Emmanuel Macron said: “The time of European naïveté is ended. For many years we had an un-coordinated approach and China took advantage of our divisions.”

At the same time, concerns have also been raised in Italy by opposition parties.

The main concern being the vulnerability in which Italy could find itself if it allowed China to invest in strategic assets without well-structured governance procedures. In response to these criticisms, the Italian prime minister gave assurances that the potential deals, seen as being essential to boost the Italian economy, would be transparent.

The non-binding agreement, with its promise of Chinese investment in the country’s infrastructure, looked attractive to the Italian government.

The collapse of the Morandi bridge in Genoa last August, claiming dozens of lives, brought the poor state of Italian infrastructure to the top of the political agenda. Furthermore, the gloomy state of the economy — Italy slipped into recession at the end of 2018 and its public debt is among the highest in the eurozone — was another key factor to signing.

The Italian government is an alliance of the Eurosceptic Five Star Movement and Matteo Salvini’s League, which formed in June 2018. The coalition announced ambitious spending plans when taking power, however, these were put on hold amid a stand-off with the EU, raising the importance of the China deal in the process.

The agreement with Beijing comprises 29 deals amounting to €2.5bn ($2.8bn). One such deal involves the state-owned infrastructure group China Communications Construction Company and its plan to invest in the ports of Trieste and Genoa, which are the largest deepsea container ports in the north of Italy.

The agreement, as indicated by the president of the two Italian port authorities, will improve the infrastructure and extend the reach of the two ports to the Central European market.

The Adriatic port of Trieste reported a throughput of about 700,000 teu in 2018, up 18% compared with the previous year. In 2018, the port attracted nine services (up from six in 2006 before the global economic recession), of which two are from the Far East (only one in 2006); the total capacity offered by these services was about 1.6m teu in 2018 up from approximately 400,000 teu in 2006 (304%), according to the MDS Transmodal Containership Databank.

The Tyrrhenian port of Genoa, a major port in Italy in terms of throughput, moved 2.6m teu in 2018, down by 0.5% compared with the previous year. MDS data shows that the port attracted 45 services in 2018 (down from 48 in 2006), of which six were from the Far East (nine in 2006); the total capacity offered by these services was of circa 9.1m teu in 2018, up from 3.8m teu in 2006. This represented a rise of 143%.

The port of Venice is not included in the agreement with China. However, last February the port signed a pact with the Greek port of Piraeus aiming to create synergy between the two ports.

The agreement, which extends to information technology, attracting investment and communications, comes a few months after Cosco launched a dedicated weekly feeder service between the two ports, deploying a vessel of 1,300 teu. Venice does not have adequate draft to accommodate the largest deepsea vessels that call the North Adriatic and so appears to be seeking to strengthen its links with the largest regional transhipment port.  

Both the port of Trieste and the port of Genoa are close to other Italian ports, with Trieste, for instance, only 63 nautical miles from the port of Venice.

Pino Musolino, president of the North Adriatic Sea Port Authority, recently said that the port of Trieste and the port of Venice serve two different markets, with Venice being the gateway of the manufacturing industry of the Pianura Padana importing raw materials and exporting high-quality final goods around the world, and Trieste facing the Central European market.

The potential Chinese investment could have an impact on the competitive position of neighbouring ports such as La Spezia, Livorno and Marseilles-Fos in the Tyrrhenian Sea and Venice, Koper and Rijeka in the North Adriatic. However, the Chinese investment could also help the two Italian ports to become more efficient gateways to southern, central and eastern Europe in competition with the northern range container ports, that is to say; Hamburg, Bremerhaven, Rotterdam and Antwerp.

Trieste, Genoa and Venice vs key North European ports (Q1 2019)