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Containers at the Port of Montreal. (CHRISTINNE MUSCHI/REUTERS)
Containers at the Port of Montreal. (CHRISTINNE MUSCHI/REUTERS)

McMillan and Stalk

It’s time to privatize Canada’s leading ports and airports Add to ...

The falling Canadian dollar, weak economic growth, and high trade deficits, despite robust commodity exports, suggest the need for fresh thinking about future strategies for companies, governments, and national institutions. Globally, the worst of the 2008 economic downturn is over, but the recovery is tepid at best. Canada, by any standards, is well positioned to take advantage is this global rebound. But it can do more. It is time to make Canada’s leading ports and airports a global destination to serve wider markets. It is time to privatize Canada’s leading ports and airports.

By international standards, Canada’s two largest ports – Vancouver and Montreal – are relatively small. Canada’s largest airport, Toronto Pearson, with 35 million passengers, dwarfs smaller airports like Winnipeg or Halifax, or even Vancouver, with 17.5 million passengers. By comparison, cities like Atlanta (88m), Heathrow (66m) or Tokyo (62m) and a dozen other cities are larger than Toronto, which is only 20th in daily aircraft movements, i.e. landings and takeoffs. These gross figures disguise another key role played by ports and airports – the movement of cargo and freight, everything from food, toys, and medicines and pharmaceuticals and drugs to the transport of mail, packages to lobster, office equipment and electronics.

In the recent past, the federal government via the Department of Transport owned and managed all airports and ports. This labyrinth was dismantled in the 1980s, mostly through privatization into public listed companies. But the ports and airports still remain responsible to Ottawa but operate as quasi-independent authorities, with their boards representing a range of local stakeholders.

Toronto’s Pearson, for example, has board members nominated by municipalities like Toronto, York, Halton, Peel, who see the airport as a cash cow for taxes. But as the recent ice storm illustrates, is this the best governance model for the future? Isn’t it time to completely privatize Canada’s main airports and ocean ports? Or at least put governance in the hands of experienced professionals rather the deadening hand of patronage. Here are some reasons for doing so.

Consider the case of Vancouver, Canada’ largest port, or Toronto Pearson, Canada’s busiest airport. Each day, these vital gateways reach out to the global trade center’s, importing goods for manufacturing firms, retailers, research centers, hospitals, and governments, which in turn send their products and services to the leading markets across five continents. Not only do their create direct jobs and economic activity, they become a hub for industrial activity like tourism, trucking, rail, and storage sectors. More vitally, they create value added products and services and high paying jobs far beyond the local and domestic market. Properly organized, these two hubs and others could serve as an aggressive gateway not just for North America but for countries that need to export and import to North America using Canada’s multi-modal infrastructure.

Global firms are now increasing seeing North America as the world’s prime location site, with low cost energy, highly educated workers, relatively low land and office costs, access to broadband, etc. The fact that Canada was designated by the World Economic Forum as the second best tax environment adds to the attractiveness of Canada as a world class manufacturing base.

But Canada’s transport infrastructure needs to step up its game. The vast web of enterprises that encompass ports and airports need a new governance model that competes against global competitors. They need a global vision, a global talent base, and the tools to act quickly and smartly against rivals like Los Angeles, Singapore, Dubai or Amsterdam. Governments should focus on what they do best, including first class models of safety, security, customs clearance, and similar tools to make our airports and ports the best in the world, and seen as such by customers, governments, and leading multinationals.

Selective privatized airports and ports would disband their traditional political governance model, which the concurrence of the federal government and Parliament. That step would allow private firms and individuals to take shares in a governance model that is globally competitive and operates in a collaborative performance fashion with the main stakeholders, including its employees.

Such an approach, where warranted, is not a call for a national industrial policy or more government intervention. The privatizing mechanism may not apply to smaller ports and airports that serve local or regional needs. It is call for fresh thinking and better use of existing institutions and infrastructure. The time to win is now.

Charles McMillan is Professor of Strategic Management, Schulich School of Business, York University; George Stalk is a Senior Advisor with the Boston Consulting Group, Toronto.

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