THE INFLUENCE OF PORT POLICIES ON PORT PERFORMANCE AND INTERNATIONAL TRADE OF EAST ASIAN PORTS
by Robert van Kasteel
Submitted To: R.W. de Vries and J. Van Polen
Faculty of Economics & Business DDM China and the Global Economy
Date: 22-08-2016
ABSTRACT
The study examined different port policies and how they influenced the port performance of the ports of China, Singapore and Korea. This study also determined the effects of port policies on international trade of said countries. Using a mixed methods approach, the study measured port performance through port throughput, and analyzed the existing port policies of the three
countries in terms of port governance, pricing/rates, development and infrastructure, information and communications technology and environmental protection. Results of the study indicated that Chinese ports have dominated the port industry and have continued to grow through the years. It was also found that policies on pricing, tax exemptions and incentives, port
development and ICT influenced the performance of the ports in terms of number of cargo
throughput and containers. On the other hand, policies on port governance and port development
influenced participation in international trade. China which adheres to free trade in the operation
and management of its ports appears to have greater performance while Singapore and Korea
which retains protectionism in the port industry have lesser port performance.
Table of Contents
ABSTRACT ... 2
INTRODUCTION ... 4
Research Question ... 5
Background of the Study ... 5
Significance of the Study ... 8
Overview of the Study... 9
REVIEW OF LITERATURE ... 10
International Trade Theories ... 10
Free Trade ... 11
Protectionism ... 12
International Trade and Ports ... 14
Asian Ports ... 16
Port Policies and Governance ... 19
METHODOLOGY ... 22
RESULTS ... 24
Port Performance ... 24
ANALYSIS ... 30
Port Performance ... 30
Port Policies... 31
International Trade ... 33
CONCLUSIONS... 38
REFERENCES ... 39
INTRODUCTION
International trade had always been a lucrative business enterprise for most nations and the import and export industry’s growth had largely been associated with port policies. When port policies are too stringent, it drives potential customers away while policies that are responsive to customer needs are favoured. Business enterprises rely on international ports to deliver their products and at the same time receive raw materials for manufacturing or
distribution. As such, the increasing concern on the differing port policies and the legal
implications of such policies to international trade has necessitated the empirical examination of port policies.
Port policies are drawn up and implemented based on the nation’s existing laws on international trade and economic policies. Ports that cater to international markets subscribe to free and open markets and trading practices which serves as a framework for the legal and port guidelines. Whereas, nations that limit foreign trading would have stricter port policies and would limit the opportunity to realize the financial gains that results from international trading and markets. On the other hand, importers and exporters would prefer ports that enable them to maximize profits and lower costs, such that they do more business transactions with ports that have lower taxes and tariffs. Although a major consideration is the ease and speed at which products and materials are shipped and received. However, costs and relaxed policies are often given primary importance over distance and efficiency.
This paper examined the policies employed in the management and operation of ports in
China, Singapore and South Korea and how these policies have contributed to the growth of
international trade in the region. According to the latest ranking of the top performing ports in
the world, the top ten of which are found in Asia, the top eight are Chinese ports while the ninth
is Singapore and the tenth is South Korean. Considering that said ports have been found to be the
largest and most productive ports in the world, it is important to evaluate the kind of policies
they have and how it impacts their performance and contribute to the growth of the nation’s
economies and facilitate international trading. Moreover, this paper compares port policies on the
following areas: governance of ports, pricing or tariffs, infrastructure and development, information and communications technology, and environmental impact. The identified areas have been used as indicators for growth, the assumptions of which is that policies that promote free trade as compared to protectionism will lead to increased international trading activities and hence, economic growth for the country. The study aimed to provide empirical evidence to answer the following research question.
Research Question
How do existing port policies of the top performing ports in Asia, namely China, Singapore and South Korea contribute to the performance of the ports in terms of growth and development.
By trying to answer the research question, several sub-questions arose:
1. What is the profile of the top performing ports in terms of export and import volumes?
2. What are the port policies that have been implemented in the identified ports according to port governance, pricing, infrastructure and development, information and communications technology and environmental impact?
3. What is the impact of said policies to port performance for each of the top ports?
4. Do the existing port policies support free trade or protectionism for each of the top ports?
Background of the Study
Each year, more and more countries are opening its ports to international trade, and this has led to an increase in trade volume and economic activities. The geographical distribution of ports enables companies and business enterprises to gain access to a wide array of products and materials that in the past had been deemed too expensive or inaccessible due to the costs
associated in its sourcing and delivery.
In recent years, Europe and the United States have become hubs of international business
and inevitable destinations for finished products that has been processed and manufactured from
all over the world. The nucleus of international trade has consequently been shifted to Asia in
pursuit of the comparative advantage phenomenon, and Asia has since become the epicentre of
the global harbour. This is largely attributable to the fact that Asia is home to several
manufacturing and processing industries whose consumers do not necessarily reside within the Asian continental plate. The port of Shanghai has become the busiest port in the world and Singapore is second in hosting the operations of international trade activities around the globe.
Scholars would agree that Singapore’s main economic activity is in providing port services (Low, Lam and Tang, 2006).
Even in the early days of modern society, nations have engaged in international trading and this had often become one of the most important economic activities of the country.
International trading was born from spice trading in which the western and eastern world first engaged in business transactions. Centuries afterwards, international trading has reached greater heights due to the massive development in infrastructure and technology. At present, it is
commonplace to source materials from Asia or to import products from China with lowered costs and high efficiency. However, as much as international ports desire to provide services to foreign shippers and exporters, the port policies that are implemented in different ports in different countries still is a major hurdle for most companies. Most shipments go through a series of ports, and each port has differing port policies which may prove problematic for companies and
businesses.
As such, trade organisations and international agencies attempt to standardize and systematize port operations in various geographical locations such as the establishment of Port- operating Transnational Corporations (TNCs). TNCs are firms that operate various ports and terminals across the globe with standardized policies and procedures that must adhere and be in compliance with the nation’s laws on international trade (Oliver 2006). This has implications for regular importers and exporters, as it would enable uniform policies in whichever port their products and materials are found, hence, costs are kept at a minimum and the legal requirements are similar for each port, dispelling the issues on embargos and regulations.
Entities such as TNCs have allowed exporters and importers from all over the world to
bring their businesses to foreign countries and engage in global expansion. This is largely due to
improved communication channels, interconnectedness through the internet and real-time
interaction between traders. Global trade has improved and has led to economic growth for
countries with a strong international trading market. Moreover, ports are constantly being used to
connect countries to each other through the passage of goods. As such, international relations
between nations especially in Asia have been strengthened, thus it is of interest to examine
whether port policies in the top performing ports in China, Singapore and South Korea share similar policies and whether these policies drive growth in international trade.
The shipping of goods by sea is still the most cost-effective way of transporting needed materials or delivering products to foreign countries. This would entail determining costs and risks of using sea transport as part of production and marketing costs. In order to realize profits, companies have to ensure that costs are kept at a minimum, from receiving raw materials to delivery of products. It is of the interest of companies and traders to keep abreast of the changes in port policies at any given location as any last minute change would mean an increase in costs either financially or in the time-element of the shipped goods. Some companies ship perishables which need to get to the intended market in the shortest amount of time. Government sanctions or changes in economic policies will inadvertently affect the international ports and its activities, as well as the companies who use such ports.
Changes in port policies are relatively predictable, when states and governments
implement new economic and foreign trading policies it also influences the existing port policies.
The changes are often done either to increase control over international ports in terms of what products come in or go out of the country or region, or to lessen control and promote open trading. Most companies prefer to do business with ports that are open and support free trading, as it would mean less stringent port policies. On the other hand, this has not limited the growth of international trading in the form of shipping and the use of ports.
Shipping has become a primary logistical service of critical importance, one which cannot be dispensed with. Trade between countries in the Asian region and in other parts of the world has increased in recent years. On average global port traffic has shown an increasing trend of at least 3% per annum over the past few years (AAPA, 2013). This is indicative of the
increasing trend in the shipping industry and consequently in the use of international ports. Such that ports are becoming crucial aspects of trading, manufacturing and production.
Asian ports have become an important crux in international trade, and the development and growth of Asian ports has steadily increased over the years. Thus, port policies on cargo, taxes and rates are important considerations as it affects the economic gains of the nation.
Companies on the other hand would bring their business elsewhere if the changes in port policies
would significantly increase costs or would be detrimental to their business. This would also
mean a decline in trading and profits for the port and for the country.
Asian ports have become the premiere choice for importers and exporters since it boasts of highly efficient system, lowered tariffs, amenable policies, advance technologies and cheap labour, all of which contribute to the competitive advantage of the companies who patronize Asian ports. Ports across the region also compete with each other and ports which boast of advanced facilities, infrastructures and technology have the competitive edge over other ports.
However, some ports are strategically located wherein even with poor policies and infrastructure, still enjoy an increase in the market share since it is the only international port in the region.
Moreover, there is also an important concern on the ownership and management of ports, with differences arising when a port is privately managed or is operated by the government.
When ports are managed by private entities, the port operations are contracted to the private sector. Often this is done when the government in unable to build port facilities and utilize advanced technologies, as such privately managed ports have higher ratings than government owned ports (Strategy and Economic Research Division,2013). However, ports controlled by the government have more requirements, legal restrictions and bureaucratic processes that make it more difficult for most customers.
With the various factors that affect port operation and its business transactions, as well as how encompassing its implications to national economies and international trade are, it is
imperative that port policies implemented by the top performing ports in Asia be examined. This study would be able to contribute knowledge in the improvement and development of Asian ports and the policies which govern it. More specifically, this study investigated port policies in the top ten international ports, all of which are found in Asia, namely China, Singapore and South Korea. The policies concerning port governance, pricing, infrastructure and development, ITC and environmental impact have been systematically analysed to determine how these policies impacted the nation’s economy and international trade. Moreover, this study examined the existing port policies in the identified ports and compared it in terms of similarities and differences. Lastly, the port policies in these top performing ports were also analysed whether it supported free trade or protectionism.
Significance of the Study
To date, studies on port policies have been scarce, in a review of studies concerning port
operations from 1997 to 2008, there were only 67 researches conducted on port policies and
regulation (Athanasios et.al. 2011). Moreover, the scope of said researches were localized, in
that studies conducted were in their own country or region, and of which internationalization of ports and foreign trade were not included. This paper tries to fill a gap in the literature of port policies and its impact on international trade especially in the Asian region. Also, this study compares port policies across Asia. Lastly, this study aims to contribute to the growing focus on port policies and international trade, and how it will benefit economies in the Asian region.
Overview of the Study
The first section of this paper provides the background and significance of the current study. It discussed the key concepts and phenomena that have shaped the need for the
examination of port policies as it relates to international trade and economic growth for Asian ports. The second section provides a review of the pertinent literature on port policies. Included in the literature review are the theoretical frameworks of international trade such as free trade and protectionism, followed by studies that investigated different port policies. Furthermore it shows how port policies were developed and implemented and how they are linked to economic growth and increases in trading volume. Also, studies that assessed the operations and growth of Asian ports are included as it informs the present research. The third section provides the
methodology and the procedures used to source and analyse the data. The fourth section presents
the discussion of the pertinent findings of the study as well as its implications to practice and
theory building. The study ends with several conclusions and some suggestions for further
research.
REVIEW OF LITERATURE
This section presents and discusses the theoretical framework as it relates to international trade, more specifically free trade and protectionism. This provided the study with the needed theoretical basis for the examination of port policies. The section is then followed by the review of key studies and findings regarding port policy and governance, as well as port performance.
International Trade Theories
International trade theories are theories that attempt to explain why countries engage in trade and how this relationship drives economic gains and hence progress and development for different countries. International trade has become an indispensable economic activity of every nation and has been equated with globalization and the shrinking global marketplace. There are various international trade theories that have influenced the study of national economies, but these are categorized into traditional international trade theories and modern trade theories. The traditional theories (Stewart, 1989) favour the exchange of goods between nations and does not explain capital growth, trade between firms and intra-industry and intra-firm transactions. The modern trade theories (Fujimoto and Shiozawa, 2011) on the other hand say that trade is beneficial to both parties as it enables the specialization of production, takes into account economies of scale and the various products that can be traded, also, modern trade theories recognize the role of governments to set trade policies and regulations that would affect how trade is conducted.
Based on existing research (Lévy, 2007), it has been found that international trade does influence the economic growth of a nation by increasing capital, the building and upgrading of industries and manufacturing, advanced technological systems and even the development of governmental agencies. When a country engages in international trade it brings in capital which is used within the nation thereby providing an influx of income and source of funding. Also, the increase in raw materials which can be processed and manufactured in the country would lead to increased productivity and economic growth (Lee 1995). By engaging in the international market and encouraging exports facilitate competition and increases productivity (Wagner 2007).
International trade has been used as an indicator of the health and maturity of an industry and its
trading activities. As nations and states open their economies to foreign trade, the influx of
capital and development propel the economic growth of the nation, realize profits and secure more financial capability to continue with its trade activities.
Free Trade
Free trade refers to Ricardo’s principle of comparative advantage, which means that for the world over, free trade enables an increase in output and income than having no trade at all.
Moreover, free trade leads to the accumulation of greater number of products and increase the consumption of such products than if a country was closed or did not engage in any external trading. All things being equal, it could be assumed that free trade can provide impetus for world allocation of resources that would not occur without the opening of the market to foreign trade.
Free trade is of the assumption that it creates equality between nations through the rate at which transformations in production and substitution of consumptions are achieved or facilitated by the international terms of trade, hence MRT=MRS=ITT (Melitz 2003).
As the world economy becomes more inclusive, it is important that nations and states be able to include in their development plans the provisions to engage in foreign trade, however, before anything else, the said nations and state should be able to identify its competitive advantage and its weaknesses and harness foreign trade activities to provide products that are scarce and inaccessible to the nation, and to sell products that are in excess in the country.
According to Stagg, any country would benefit from exporting to another country or to another state, and this can lead to a new source of wealth for the country, which would not have been possible had the country relied on its local market alone (Cayusgil and Czinkota 2001). By exploring new markets, the country could expand the existing market base and have access to customers and investors which would not have been made possible without free trade.
It is a reality that international trade is an important aspect of development, in fact, not one country would probably attest to be self-sufficient, as modern economies have now been influenced by international trade. For example, the UK and Japan does not have the capability to adequately feed, care, dress and house their citizens without relying on other countries to provide them with what they need. Thus the UK and Japan rely on imports from other countries,
however, even if the UK and Japan were self-sufficient they would still need to ascertain their
role in the foreign trade (Root 2000). It has been found that countries who do not participate in
foreign trade show a decrease in its quality of living standards, this is due to the lack of better
products and luxury items that could be had through importation, moreover, the manufacturing
industry in that country would not be able to source its needed materials and hence would be forced to use low quality materials which would eventually lead to poor quality products and without foreign trade there will be no exportation (Henry 2000).
According to O’Neal and Davis, world exports have grown by more than a hundred percent in the last three decades; the most persuading argument that attempts to explain this phenomenon is that demand has only risen by a small margin and the exponential growth in the export volume is because the prevailing circumstances have enabled producers to sell more of their goods than they ever could. This is another way of saying that the improved infrastructural framework has enabled the supply of goods to those destinations that couldn’t be accessed before. Russet, O’Neal and Davis make reference to the African continent and electronics; they imply that the demand has not changed much only that now African markets can be accessed through her ports (Russet, Oneal and Davis 1998).
Protectionism
In contrast to free trade is the theory of protectionism, protectionism refers to the
interference of government to international trade by enabling or implementing trade policies that would protect the country from the possible risks of free trade. Trade barriers disrupt the free trade equilibrium and thereby controls the prices of goods that are included in foreign trade.
Henry (2000) found that protectionism is favoured by governments as it allows the redistribution of income, it is of the assumption that protectionism would result to economic gains that would be benefit the country more than the foreign traders and the global market than it could have in free trade. Thus, governments who wish to control the influx of foreign competition to their domestic market would favour protectionism.
Although there are much less support for protectionism in economic studies on international trade, some points that justify protectionism is offered in the history of the
development of nation-states and the world economy (Melitz 2003). In the past protectionism has
been used to justify the need to maintain adequate national defence or securing industries to
serve the nation. However, imposing trade barriers in the name of national defence had also been
abused in many countries, for instance, the US have instituted a policy of not doing any business
or trading with banks in Iran, in the opinion that income from such trade could be used to finance
terrorist groups.
Another justification for protectionism is when the industry is in its infant stage, the government is more likely to issue trade barriers to protect a new industry that will not have competitive advantage over foreign products. Say for example a country has a growing coffee industry, and the product is new to the market, the country may impose barriers on the
importation of foreign coffee products to protect its new coffee industry (Feenstra 2003).
However, this is said to be temporary, when the industry has reached a certain level of competence and maturity, then the country can be opened to free trade.
Diversification is also used to argue for protectionism over free trade, diversification means that import protection is used to diversify the exportation of the country’s products and to ensure that income from exportation increases (Deardorff 1984). With restrictions on
importation, the government protects the competition of foreign products with that of their local products but enables the exportation of their products to the world market. The diversification argument has been utilized by most non-industrial nations, to ensure that products that are in surplus in the country is distributed to the world market, however, foreign products that directly compete with their domestic industries are controlled.
The study of international economies has consistently found that free trade enables the direct competition of the domestic products to that of foreign products, and that this is more beneficial to the country. Theory and empirical evidence has found that income increases and is distributed more appropriately when a country engages in free trade (Davis and Weinstein 2002).
Comparative advantage is the foundation of international trade and one of the most universal principles in science. Nations, firms, or individuals that ignore their comparative advantage will be less efficient and ultimately not as well off as with specialization and trade.
Protectionism restricts the ultimate beneficial effects of exploiting comparative advantage through free trade. Protectionism restricts international trade, lowering national income and distributing income more unevenly. Economists have yet to persuade governments to give up protectionism (Cass and Haring 2000).
Tariffs, quotas, and other non-tariff barriers on imports are common government policy
(Anderson and van Wincoop 2004). The ultimate reason for protectionism is simple. Those who
benefit from the policy, the owners and workers in the protected industry, are organized and
willing to spend resources to lobby and influence political decisions. Disorganized consumers
and taxpayers do not generally realize the extent of their losses with tariffs. The amount of the
loss for each individual consumer is not large enough to spend resources lobbying against the harmful policy. The benefits of protectionism are concentrated but costs are thinly spread. The overall inefficiency of protectionism prevails (Henry 2000).
International Trade and Ports
Gasioworski argues that international trade is not just the possibility of trading of goods;
there are other social, economic and political ramifications that any well intentioned government must be desirous of. The position held by this scholar is to the effect that since international trade has a tendency of reshaping the social, economic and political welfares of the participating countries, and such is only made possible by opening up ports, then great care must be taken to safeguard efficacy at the ports (Gasioworski 1986). This reasoning converges with that of Russet, Oneal & Davis which suggests that trade flows among countries decrease the chances that those countries enduring political tension or getting involved in military conflicts with each other.
This strategy is mainly adopted by world business peasants. Smaller countries that would otherwise be overlooked are looking to create some sort of advantage over their rivals by
searching favourable trade agreements, and by changing their domestic policies. Baldwin (1986) and Ashworth (1987) disagree. The latter author concludes that bigger economies ascribe to this theory more accurately than smaller ones. As a matter of fact, the universal port policies fronted by the World Trade Organisations and the sanctions levied by international law on those who fail to abide are one way that the bigger economies force the smaller ones to perforate their borders.
Though the motivation if in furtherance of personal interests, the end result is that the ports put in place a policy dispensation that in turn opens up its markets.
The move towards free trade is the most essential transformation that has occurred in the
global economy. Economists like Adam Smith and David Ricardo highlighted the basis for
countries to trade freely with each other without there being any governmental restrictions. The
central conclusion of this discussion being that free trade has been considered by scholars as the
most desirable almanac. That is not to say that favourable port policies that aim to open up ports
is a risk free investment that once adopted, promise nothing but economic superiority. Authors
like Coughlin, Chrystal and Wood have expressed concerns about this arbitrary opening up of
ports to be one of the factors that allow illegal trade practices such as smuggling of contraband
and not to mention the environmental hazzards that may be realized upon careless opening up of
ports (Coughlin, Chrystal and Wood 2014). While they do not in any way oppose the opening up of port avenues and the subscription to the matrix of less beurocratic ports, they maintain that care must be taken to ensure that the exposure is not so pronounced that other risks are then posed by such a well intentioned economic strategy.
One might ask why there are still a lot of protectionist policies used by countries across the globe. Economists have generally agreed that restrictions on trade such as tariffs or quotas are detrimental to a country’s trade balances. Many are still sanctioning insurmountable efforts to protect their own industries and what better way to do this than to have in place a rigid trade restriction framework that cannot be overcome easily. According to The World Trade Organisation, the developing countries can get away with it but most Asian countries are not lucky or unlucky enough depending on the side of the coin you decide to look at it from, to be allowed such. As a matter of fact, it is the move by Asian based nations to open their ports that forces the hands of other countries to open up theirs (Coughlin, Chrystal and Wood 2014).
Coughlin, Chrystal and Wood observe that this is because the Asian region is home to a lot of finished products and that in this instance, are more favored to open up ports than the reverse.
There are three main determinants of the functionality of ports; these include, the extent of their connections to the hinterlands, Effectiveness of port operation and policies, and the state surrounding maritime forelands (Kassim 2015). The management of host cities with high
perofrming ports has become complicated with the implementation of trade interconnections. It is important to intergrate the transport network so that it improves market access. This has the effect of greasing the fluidity of trade and the intergration of the industrial network. The question of operationality of policies then becomes self explanatory. The strategic positioning of a port in relation to trade routes and the prospected markets also goes a long way to determine the success or lack thereof.
One of the most important indicator of globalization is transportation, together with free
trade, open communication and standardization of international economic activities (Kumar and
Hoffman 2002). Also, within the area of transportation, shipping is perhaps the most significant,
particularly in international trade as it is the most affordable means to move bulk goods. Many
studies have been conducted on the subject of port history and development especially on its
economic contribution to international economies. In recent years, ports in all key areas in the
globe have had extraordinary growth and expansion. For instance, in China the overall
throughput at all major ports increased by an average of 28.7% annually. This marked growth varies across countries, as several European ports saw their throughput decline by a significant margin.
This decline can be explained by looking at the policies adopted by the ports and also by major trading patterns from countries such as China and Japan. One important part of country´s competitiveness in trade lies in the way it can connect with trade partners around the world (Fink, Mattoo and Neagu 2002). Such a capability, which is denoted as connectivity in terms of transport, is mostly measured by the supply capacity of the regular shipping services that are at the disposal of a given market. China is the largest economy in trading goods followed by the European Union and the United States. Trade agreements such as NAFTA and the ASEAN have been instrumental in the massive improvement in the trade numbers of their memberships (Nunn, Easterly, Berger and Satyanath 2010).
Asian Ports
Traditionally, ports have been developed in the Asian region on the basis of either the maritime or continental perspectives of the ports in question. Some researchers (Kassim 2015), (Jeevan, Ghaderi, Bandara, Saharuddin and Othman 2015) have focused on maritime forelands while others put more emphasis on their hinterland connections in the perspectives of the ports development in the Asian countries. Due to changing distribution patterns of globalized firms in port selection and distribution, the renewed frameworks can be referred to as the value chains and integrated networks in the development of ports and their interconnectivity all over the world. The maritime forelands along with shipping networks have generally received less attention than those working as land-based transportation systems of the hinterlands and ports (Kassim 2015).
In the Hong Kong Port Cities Report, the researchers explore the competition that could arise throughout the maritime networks and make the systematic comparison of ports within their regional networks. The case study of East Asian ports indicates that the region holds specific importance in the context of ports and their maritime dynamics in comparison with North
American and European ports. It described the significance of ports in regions where continental
hinterlands can make huge impact on the competitiveness of Asian ports (Merk and Li 2013).
The regional port dynamics are more specifically documented and observed in the recent studies to formally analyze the importance of East Asian maritime corridors which is considered one of the largest maritime-based geographical entities The authors also looked at the relative attributes of the ports in their regional context and verified the existence of these corridors and how they can be assessed in the recent decade. Rapid growth of ports in the East Asian region has showed intense competition over the years due to transhipment activities and their modified patterns to a certain extent that is difficult to reveal the official statistics of the Asian ports (Ducruet, Lee and Ng 2011).
Lam & Yap (2011) identified port connectivity and shipping network dynamics in supply chain system in East Asian ports. The East Asian ports in the study of supply chains have gained inexplicable relevance such that scholars of the subject cannot afford to ignore the
progress. In days leading up to the recent years they have drawn more attention to overcome the issues related to port policies of the concerned countries. The authors presented new perspectives of port policies by examining prevalent patterns of the use of cargo services in the form of container vans and how it is moved from one port to another and to its final destination in the supply route. Four major ports of East Asia are observed in the study to draw empirical evidence on the dynamics of container shipping services and port connectivity. These four ports included the ports of Shanghai, Kaohsiung, Ningbo and the port of Busan (Yin 2003).
The report observed several indicators in determining the port connectivity in the shipping services of these ports through the intensity of inter-port relationships, the shipping capacity of these ports and liner shipping perspectives of these world international parts in the East Asian region. The research presents the strong relationship with the current study in determining the effects of port policies of the respective governments in the Asian ports on Cargo throughput within Asian ports. The report by Lam and Yap (2011) examined the similar patterns of port connectivity in the Asian ports by considering their shipping capacity,
geographical importance and their capacity to employ major east-west trade routes in two or four major ports in the East Asian region.
The study reported that port planners and terminal carriers should take advantage of the
current shipment prospects through the maximization of the mutual relationships of the ports,
which can be determined among four major selected ports in the East Asia. These ports offer
shipping services with uniform policies since the ports were owned by the same terminal
operators. The paper examined the policy implications of the port shipment routes along with recommendations of various stakeholders in the areas of port planning and regional development of world international ports in the Asian region (Lam and Yap 2011).
Other scholars identified the competitiveness of the port cities worldwide and explored the port of Hong Kong in observing the impact of port policies on the shipment procedures adopted throughout the Asian ports. The authors observed that Hong Kong has become the hub of industrial and economic activities in Asia. The trading activities between the port of Hong Kong and other world international ports have increased in the recent years due to growing economic relevance of the port of Hong Kong. This port accounts for 26.7% of the total exports of China and until 2011 it was identified as one of the largest port in the world, third only to Shanghai and Shenzhen. The importance of the implications of Hong Kong port is incredible in determining the exports and overall participation of this port in Chinese exports. This port is located closer to the fourth-largest container terminal and seventh-largest container terminal of China, known as Shenzhen and Guangzhou (Merk and Li 2013).
According to Merk and Li, the determinants of port performance can constitute a fundamental part in identifying port connectivity and performance of ports in improving the overall trade of the Hong Kong port with other ports around the globe. The access to and interconnectivity of the port of Hong Kong to other ports is a top consideration for determining port performance and port traffic. Ports that have a large network of connections are considered to be more attractive for exporters/importers and they are preferred for direct delivery of goods and services. If these ports are used for shipping sufficient volume of goods and services, the frequency of shipping can be increased with greater reliability of services.
If maritime ports provide more competitive services in the global trade arena, they can attract additional shipping services and competitive ports become attractive due to their
efficiency, attraction to new traffic and achievement of more maritime forelands in their worldwide operations. Despite the central location of Hong Kong port, Shenzhen is famous for increased maritime connectivity as both ports share large extent of same maritime connections, intensity and overlapping of their services. The researchers also observed several elements of port operational efficiency and all of them give a picture of port performance. Main performance metrics in port efficiency are observed on the basis of their contribution in the worldwide
shipment of goods and services through their existing level of cranes, berths, gates and gangs and
their utilization, productivity per crane hour, vessel service time and number of gangs to be used in moving a man per hour (Brooks 2004).
In a review of the maritime connectivity of East Asian ports (Ducruet, Lee and Koi Yu Ng 2011) it was found that in 1996, Busan, Singapore, and Hong Kong where the busiest ports in the area. The connectivity between Singapore and Hong Kong was stronger and more frequent while Busan’s port traffic volume was mainly from ships that continue on to other ports in the region since it is the gateway to Northeast Asia. Busan has been found to enjoy a certain level of centrality as it is surrounded by less able ports of Japan, China and Russia. Busan is highly preferred as it has advanced port handling technology and machineries. In the same study, when the port maritime connectivity of said ports was revisited in 2006, the port traffic in the East Asian corridor had changed. Busan still had the usual traffic volume and interconnections with other ports, however, with the opening and rationalization of Chinese ports, there is greater traffic between Hong Kong and the Chinese ports of Shanghai and Qingdao moreover, it was also found that Shanghai has assumed the central role rather than Hong Kong as evidenced by higher volume of shipment going through Shanghai.
Port Policies and Governance
Most countries that trade in high volumes invest in atleast one major port to balance the flow of goods in and out, usually incidental to this are the inevitabely essential largescale warehousing facilities. Over the years, certain developments have been made to shape the
shipping industry and its trade patterns. With the most important being containerization and trade liberalization. Another important aspect is the greater involvement of the private sector, as well as political and geopolitical shifts. Ports may be run by public entities and sometimes by private organizations. In this regard, they can be categorized into three groups landlord port, tool ports and service ports (Brooks 2004). They are distinguised by the level of independence, with landlord ports only owning the main infrastructure of the port and the rest is owned by private companies, tool ports owning infrastructure and the surrounding superstructures, and service ports own all assets and services and employ their own workers.
Brooks (2004) also argues that the best operating system from an efficiency perspective
is the landlord port, as it allows the market to play a role in the providing of services. Some
authors like Trefler however argue that this is not always the best choice. There are instances
when selfishness and overzealous business mentality may lead to monopolization of important
sevices and assets. Once basically necessary services have been monopolised, there is a tendency of them becoming more and mopre expensive which may not be good business for the port.
African ports are worst affected by this phenomenon because they outsource inportant services from international companies which in turn make these services unnecessarily expensive.
It was observed that when governments operate ports, its policies are often less attractive to exporters/importers as it is laden with beaurecratic processes and government officials
determine which policies to enforce at any given time (Everett 2007). Castillo-Manzano, Lopez- Valpuseta and Perez (2008) investigated whether changes in legislation resulted to a change in port traffic in Spanish ports. It was found that Spanish ports were able to gain competitive advantage when the ports were given full autonomy in its operation. These two authors disagree on a single point of preference. While one transcends the notion that government driven projects are prone to limitations prompted by the ever slow legislative process and the other bureaucratic procedures apparent with any governmental entity, the other relies on the expense to make an argument. The latter author avers that government provided services are cheaper and since low costs are the greatest attraction of the sea transport business, it serves to attract more compared to less procedural technicalities.
Both statements though are clearly in contrast of each other, are true. The one that comes out as the best port shall be the one that strikes a perfect balance to allow just enough
privatization to allow efficiency, and just enough governmental control to expel any monopoly tendencies. A port’s competitiveness and trade performance can be influenced by logistic structures, domestic and international trade policies, and certain competitive advantages. And while there is still more research needed to improve our understanding of the implications that come out of these trends. Overall ports are being influenced by certain events when it comes down to their long-run growth. The main driver is foreign trade, which in turn has a positive impact on the domestic economy. And this foreign trade is being influenced by different country trade patterns and policies (Everett 2007).
Ports that are owned by the state are considered as public ports, wherein the primary
driver for growth is in its services and interconnectivity. However, as Goss (1993) noted, public
ports are characterized by a bureaucratic system and are more concerned with survival and
expansion rather than gaining a competitive advantage, which is not influenced by market
changes and movements and is subsidized by the nation’s taxes that it does not concern itself
with high standards of performance or invest in advanced technologies or facilities.
METHODOLOGY
This study utilizes a mixed methods design, wherein both quantitative and qualitative data were gathered and analysed to answer the study’s research questions. The quantitative aspect of the study is in the measurement of port performance of the top ports of the world, which incidentally are all in the East Asian region. Based on industry reports, the top ten international ports for 2014 are in China, Singapore and South Korea. The reports used were mostly industry wide research such as the Containerization International Yearbook (2002-2014), the UNCTAD’s Review of Maritime Transport as well as Annual Reports from the different ports which are available on most of their sites. Some other sources of quantitative data were the Worldbank, the Census and Statistics Department of Hong Kong and the Port and Maritime Statistics of China’s Marine Department. The qualitative aspect of the study is the examination of the port policies of the identified Asian ports.
Indicators of growth rate, output and port performance are all quantitative which lends itself to descriptive analyses using graphs and reporting percentages and volume. Meanwhile, port policies are basically qualitative, in that these are set of guidelines on governance, pricing, infrastructure and development, information and communications technology and environmental impact. The port policies as qualitative data was analysed using thematic analysis wherein commonalities and differences were examined. The analysis of the port policies was two-fold, to determine how policies influence port performance and how the said policies support
international trade.
To measure port performance, port throughput was determined for each of the identified ports in the Asian region, data was gathered from published databases that are available from the World Bank and industry reports. Port policies on the other hand had been gathered through secondary sources, such as industry reports, country profiles and country economic reports.
Evidently, the premier international ports are in the East Asian region and thus provide adequate
research criteria with which to examine the effects of port policies to port performance and
international trade in the ports of China, Singapore and Busan.
Table 1. The Largest Ports in the World (2014)
Rank Port Name Country
1 Shanghai China
2 Shenzhen China
3 Hong Kong China
4 Ningbo-Zhoushan China
5 Qingdao China
6 Guangzhou China
7 Tianjin China
8 Dalian China
9 Singapore Singapore
10 Busan South Korea
13 Xiamen China
18 Lianyungang China
19 Yingkou China
24 Taicang China
(Based on world rankings of international ports, UNCTAD Review of Maritime Transport, 2015)
The analysis of the data for this study is in two parts, the first one examines the
differences and similarities of the top international ports in Asia in terms of throughput for the last three years. Graphs and charts are used to illustrate the changes in the performance of the identified ports in the study. The second part of the analysis would entail the identification of key port policies that have been implemented by the ports of China, Singapore and Korea and then determining whether the said policies contributed to port performance and international trade.
This in turn would provide adequate basis from which to conclude that port policies do have an
impact on port performance. Although, statistical significance will not be established in the
present study, it will provide the needed knowledge in which to further the study of port policies
and international trade.
RESULTS Port Performance
Performance of the top Asian ports was measured quantitatively through port activities, it was important however to first establish the port traffic and participation of different countries in international trade and hence infer that there is active trading across nations in the region. The graph below (Fig. 1) presents the participation of developing countries in the world seaborne trade from 1980 to 2014. The graph shows the percentage in tons of loaded and unloaded cargo for the corresponding years of developing countries mostly found in Asia and Africa. Evidently, prior to 2010, port activities were characterized by loaded cargo rather than unloaded cargo, however after 2010 there has been a surge of unloaded cargo from 37% to 61% in 2014. This would mean that there is now a very active exchange of goods, that, ports at present are not only being used for sending goods but also for the receiving of goods. With an increase in
international trading, it is expected that there is also increase in port throughput.
Figure 1: Participation of Developing Countries in World Seaborne Trade (from UNCTAD Review of Maritime Transport 2015)
The second graph (Fig.2), presents the distribution of the percentage of loaded and unloaded cargo in tons for 2014 by region. The graph showed that ports in Asia have had the highest activity among the region, while America and Europe almost had the same percentage.
0 10 20 30 40 50 60 70
1980 1990 2000 2010 2011 2012 2013 2014
Loaded (% Share in Tonnage) Unloaded (% Share in Tonnage)
The unloaded cargo in Asia was very large at about 58% while its loaded cargo was only 42%.
This would mean that there are more goods unloaded in Asian ports rather than loaded cargo to be sent to other ports. However, the difference is still not that big and it is a positive indicator of high activity and port traffic. Ports in Africa had the lowest activity in terms of loaded and unloaded cargo, this may be due to the fact that there are fewer number of international ports in Africa than the rest of the world. Clearly, the Asian ports have attracted a huge chunk of the market of international trading. Although, the rest of the ports around the world still have significant international trading activities, this fail in comparison to the volume of cargo that passes through Asian ports either as a hub or direct shipping.
Figure 2: World Seaborne Trade by region, 2014 (Percentage of Share in World Tonnage) UNCTAD Review of Maritime Transport 2015
The third graph (Fig. 3) presents the throughput of the container ports of China, Singapore and Korea from 2012 to 2014. It is evident that Chinese ports have the largest
throughput among the region, China had 75% of the market while Singapore had 15% and Korea with 10%. This would indicate that Chinese ports have dominated the international maritime industry, wherein about 75% of the world market prefer to use Chinese ports than any other ports in the world. Moreover, this performance has been consistent for the past three years, and there is
0 10 20 30 40 50 60 70
Asia America Europe Oceania Africa
Loaded (% Share in Tonnage) (Unloaded (% Share in Tonnage)
even a steady growth in the throughput. Singapore and Korea can also be observed to increase its port throughput steadily, but this rate is nowhere similar to the performance of the Chinese ports.
Figure 3: Cargo Throughput of Asian Ports UNCTAD Review of Maritime Transport 2015
The graph (Fig. 4) presents the port throughput of container terminals in East Asia which have been identified as the top performers for the last three years (2012-2014). The graph shows that in all of the ports, there is an evidence of increase in port throughput except for Hong Kong, which appears to be decreasing in volume although the decrease is not that large from year to year. However, this would mean that in terms of competitive advantage, Hong Kong appears to be losing its market share. The port in Singapore has showed positive growth and continue to be a top player in the port industry, however, there is a large increase of port throughput for
Shenzhen in 2014 which appears to equal that of Singapore in the same year. Shanghai remains to be the premiere port in the East Asia region but had higher port throughput in 2013 than in 2014. The port of Busan on the other hand, has lesser port throughput than the bigger ports of Shanghai, Singapore and Hong Kong, however, its port traffic had been increasing from 2012 to 2014 at a healthy rate. Busan shares the same volume of throughput and growth rate with
Ningbo, Guangzhou and Quindao. The top port terminals and its throughputs of the East Asia region indicate that the Asian ports dominate the industry, and that it has facilitated a significant number of exports and imports which also characterize a very active international trade.
0 20000000 40000000 60000000 80000000 100000000 120000000 140000000 160000000 180000000 200000000
2012 2013 2014
CONTAINER PORT THROUGHPUT
China Singapore Korea
Figure 4. Top Container Terminals and their Throughput from UNCTAD Review of Maritime Transport 2015
The port performance of Asian ports clearly indicates that international trading in this region is growing, and that, it is one of the most important source of economic stability of Asian nations. The data also showed that in terms of port traffic and throughput, ports in China have the largest values and therefore should be examined to determine why China has become a tough competitor in this industry.
Port Policies
The following table (Table 1) present the policies that the ports of China, Singapore and Korea had developed and implemented in order to improve and strengthen the management and operation of the ports and in order to attract more exporters and importers and to maintain competitive advantage.
It has been found that in terms of governance, China has resorted to joint ventures and attracting foreign investors to develop and operate Chinese ports, Singapore and Korea on the other hand retains a port authority system which is in part managed by the government but is operated by private corporations. Singapore however only has two port operators while Korea has just recently opened the ports to private corporations. All of the ports in China, Singapore and Korea have low pricing and a number of tax incentives and exemptions which makes them
0 5000000 10000000 15000000 20000000 25000000 30000000 35000000 40000000
Top Container Terminals and their Throughput
2012 2013 2014
