Fonterra freight plan condemned as central planning by importers

Friday 4th November 2011 3 Comments

Fonterra's plan to form an alliance of container freight users to counter the power of shipping lines is being condemned as an attempt at central planning bound to fail, and an example of poor business leadership, importers say.

Fonterra is combining with other exporters, led by Silver Fern Farms, in a limited partnership called Kotahi Logistics to be a “mechanism for the demand” to do business with shipping lines, the suppliers of services.

The Importers' Institute is urging the Commerce Commission to turn down the plan.

“Without exception, every economy that has ever attempted to replace markets with central plans devised by experts has ended up in total failure,” the Importers' Institute says.

“Fonterra is New Zealand's biggest exporter. Can't they just use their muscle to achieve those objectives?”

The institute said “obvious” efficiencies from central planning never materialise.

“As someone said, if you introduce central planning to the desert, nothing much will happen at first, but after a while there will be a shortage of sand,” the Institute said.It urges the government to take steps to free up the economy, including the break-up of export monopolies.

“We would expect our largest corporation to share these aims. Sadly, Fonterra has failed to exercise business leadership, in this case,” the Institute said.

Fonterra's competitor Synlait’s submission argues that the selection of additional partners to the alliance should be on a non-discretionary open-access basis.

The scope for authorisation should be clearly defined, Synlait said.

“We are not suggesting that Kotahi must offer common pricing for all,” Synlait said.

But the proposal must not result in other exporters and importers subsidising better prices and a negotiating vehicle for Fonterra.

Fonterra says shipping capacity to New Zealand has reduced because of a proliferation of vessel-sharing agreements, which are effectively code-sharing arrangements on ships. MSC maintains the only single-carrier service of any scale to this country.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

On 4 November 2011 at 5:59 pm Alberre said:

So the others want to ride on someone else's back.How come they want to participate if they think it is going to end in failure ? And why don't they do something positive like forming their own group instead of grizzling ?

On 4 November 2011 at 8:01 pm Neil Ward said:

I think this is great an they should get a vessel built [with as much input as is financially possible to NZ companies].Can wee call her Moo Cow?aswell.

On 5 November 2011 at 1:39 pm Ian - Rotorua said:

The Importers' Institute (whatever that is) needs to be reminded that central planning hasn't stopped the Chinese outforming that bastion of the free market, the USA. In NZ, central planning also did a far better job of organising the electricity sector than what has replaced it. Ask any electricity consumer!