EVOLUTIONS AND PORT CITY DEVELOPMENTS IN ASIA
4. Factors of Port Competitiveness and Development
In this section, we compile a list of port characteristics that past studies have found to be significant in influencing port traffic performance as well as the various measures of port performances.
4.1. Port location
The location aspects of ports have received considerable attention. Before the introduction and development of containerization of highly efficient
intermodal transportation system, a port’s site clearly defined its hinter- land.m [Weigend, 1958] suggested that an ideal site for a port should have sufficient space for its operation, easy entrance, deep water, a small tidal range and a climate that will not hamper port operations at any time of the year.
The roles of a port can be distinguished as that of a feeder port, regional or global hub port. A study by [Fleming and Hayuth, 1994] identified centrality, intermediacy and proximity as three key location attributes that confer competitive advantage to some ports and allow them to become hub. Relative to feeder ports, [Sutcliffe and Ratcliffe, 1995] pointed out that a successful (transshipment) hub port must be situated at a location where there is a minimum diversion from the main shipping lanes for the line haul vessels and distance to the markets served is short. In addition, [Cargo System, 1998] suggested a port that is ideally located with respect to the main axial truck routes and either the rich hinterland or the feeder connections, and supported with appropriate services is more likely to be chosen by carriers to be their hubs.
Location also affects the way a port should compete. Noting that ports in small island economies may be at a disadvantage compared to ports that are natural gateways to rich hinterlands, [Robinson, 2002] advocated that the former should position themselves in such ways to achieve cost leadership (economies of scale) or service differentiation (economies of scope) in order to attain growth in the fast changing and highly competitive environment. Meanwhile, some other researchers at that time reported the key success factors for the positioning of small-island seaports to achieve competitive advantage. By conducting two case studies with Bahamas Freeport and Malta Freeport, their findings suggested that small-island ports with no direct hinterlands must first focus on cost leadership and then develop value-added services after cargo has been attracted.
While ports with locations that are natural gateways to rich hinterlands are evidently in a better position to develop the sea-to-land interface and inland transport services, what was once a secure areanfor a port to draw traffic from is no longer the case with the advent of double-stacking of containers on rail-cars and the establishment of inland intermodal hubs.
Containers can now be shipped long distances across continents to make
mPorts situated at good geographical locations benefit from the advantages of a large local market and an opportunity to capture transshipment cargo at the intersection of major sea routes.
nThis area is determined based on land distance of the area from the port.
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connections with ports. Moreover, as larger and larger ships operating in alliances seek economies of scale, fewer ports will be served directly by the larger transoceanic vessels. These load-centered ports are able to send or draw their traffic far and wide, by water mode or rail or truck, thus expanding the hinterland of the port. Consequently, ports are not just in competition with ports in their local area and along their immediate seaboard, they also are in competition with ports on distant seaboards attempting to serve the same inland areas [Haynes et al., 1997] [Fleming and Baird, 1999].
As competitions among distant seaports intensify, there is a growing role of intermediacy in a port’s traffic structure that contributes to shrinking captive hinterlands. For load centers that depend on their intermediacy for cargo traffic, their positions are highly dependent on the ever changing service networks of shipping lines service network. In view of this, [Heaver et al., 2001] asserted that global carriers and forwarders challenge a port’s capacity to influence goods flow and that ports can no longer expect to attract cargo simply because that are natural gateways to rich hinterlands.
This point had also been noted earlier on by [Slack et al., 1985] and subsequently by [Carbone and De Martino, 2003].
With regards to the challenge from peripheral ports, spatial expansion on new sites may be brought about by two seemingly different factors.
Obsolescence of older facilities ties is behind the Bird’s ‘Anyport’–based explanations. [Bird, 1963 and 1971] postulated that a shift in activity comes about as a result of a search for new sites that could offer space for mechanized terminal operations and/or sites adjacent to deepwater channel that would allow access for ever larger ships. [Frankel, 1987] and [Baird, 1996] supported Bird in their argument that the deeper waterso and the ocean locations of downstream ports allow the shipping lines to deploy their largest vessels and save sailing times and improve port turnaround time. Compared to river or upstream ports, ships can avoid the need for transiting through the long, narrow, inland waterways. The [Hayuth, 1981]
model,p on the other hand, implies the congestion and diseconomies at
o[Notteboom et al., 1997] disputed the argument, noting that the increase in vessel capacity is accounted more by an increase in the beam of ships rather than a draught.
The authors cited the continued success of Hamburg and Antwerp as evidence for the persistence of upstream ports.
pIn the light of Hayuth’s five-stage load-center model, [Wang, 1998] examined the development of the Hong Kong container port in a regional context. The port-hinterland relationship between Hong Kong and China is found to be unique as the hub. Later,
Fig. 7 Location factors affecting port attractiveness and competitions.
established terminals as the causes of competition. Other factors that have been put forward include access to shipping lanes, the search for deep-water sites, labor cost differentials, and environmental restrictions. According to Hayuth, factors that are important for the development of a load center port are the large-scale local market, high accessibility to inland markets, advantageous site and location, early adoption of new technological and social systems, aggressiveness of port management and the economic and political incentives of ports. The geographical location factors affecting port competition may be summarized in Fig. 7.
4.2. Port efficiency
Port efficiency is an important determinant of shipping costs, especially with the ever increasing vessel sizes that increase the unproductive cost of vessels waiting for services at ports. According to [Voorde, 2005], improving port efficiency from the 25th to the 75th percentile can reduce shipping costs by 12 percent. Besides, inefficient ports may equal to be 60 percent farther away from markets for the average country.
Since its inception, containerization has gained popularity and has become an essential component of a unit-load-concept in international sea
[Slack and Wang, 2002] examined the concept of the peripheral port challenge from an Asian perspective by focusing on the local and regional competition faced by Ports of Hong Kong, Singapore and Shanghai. The authors confirmed that these ports are subjected to challenges from peripheral ports in accordance with established models of port development but also suggested that the causes go beyond the challenge those postulated by the Hayuth’s models.
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freight transportation today. Hence, many researchers have examined the issue of achieving port efficiency via operations optimization in the context of container terminals. Among these studies, the adequate provision and effective allocation of berthing facilities are seen to have received much attention due to the fact that berthing (including waiting time of ships to load and unload their cargo) accounts for a significant portion of vessel time at port and inefficient berthing entails unnecessary productivity loss.
[Steenkenet al., 2004] provided a detailed container terminal management and optimization review from more than 200 papers. His review described and classified the operations process in container terminals, and presented a survey of methods employed in the optimizations of quayside transport, the landside transport and crane transport, as well as, storage and staking logis- tics. [Viset al., 2003] also presented an overview survey on transshipment of containers at a container terminal, organized in accordance to the processes at container terminals: arrival of the ship, uploading and loading of the ship, transport of containers from ship to stack and vice versa, stacking of containers and inter-terminal transport and other modes of transportation.
Apart from the specifics in managing operations, it should be noted that the provision of up-to-date facilities, equipments and information technology (IT) infrastructures play an important leading role in enhancing the overall port efficiency. Nonetheless, investment in modern equipments to increase capacity is more complicated in practice as [Song, 2002]
demonstrated the value of intelligent facilities investment in a port’s success.
Figure 8 is a summary of significant infrastructural factors affecting port operations efficiency.
Fig. 8 Infrastructural factors affecting port efficiency.
4.3. Multimodal network
Ports often exist as part of a multimodal network, where various modes of transport (road, rail, water) are utilized in the successive movements of goods in an identical loading unit without any handling of the goods themselves during the transfers between modes. [Fleming and Hayuth, 1994], [Hayneset al., 1997], [Klink and van den Berg, 1998] and [Helling and Poister, 2000] suggested that the ability of the port to support intermodal services could be a major factor in the container liners’ choice of port of call.
As such, port choice becomes more a function of network costs. The ports that are being chosen are those that will help to minimize the sum of sea, port and inland costs. By supplying intermodal services, ports can also open new markets beyond their traditional hinterland and create a competitive advantage over other ports without access to intermodal system.
The intermodal (or multimodal) networks in EU and US have been explored in [Caramia and Guerriero, 2009]. However, these models devel- oped in the contexts of the EU or US may not effective in Asia because the regional patterns of market concentrations and/or logistic chains in Asia are fundamentally different from EU and US. In North America, markets are concentrated in east and west coast districts. These, the coastal cities, which are port cities at the same time, are connected by highway. In Western Europe, the Europe continent forms the hinterland, where markets are concentrated and linked to ports cities around the boundaries. In Southeast Asia, the concentrated markets are located at the port cities which are separated from one another.
Notwithstanding the unique characteristics of the EU, US and Asia continents, network optimization that has far-reaching implications on the development of ports remains as a substantial problem for any large scale of intermodal transportations. Broadly speaking, network operations take into account of infrastructure planning, service schedules, routing and pricing of services, location of international intermodal terminals, and their associated daily operations. Because of the inherent complexity that arises in international intermodal transportation, most of these network operation issues have been explored in the perspective of uni-modal transportation. Putting peripheral concerns aside, in comparison to local uni-modal transportation, international intermodal transportation faces a most strategic problem that is frequently characterized by (i) multiple (or conflicting) objectives such as minimization of cost and/or transport time and maximization transport capability; (ii) scheduled transportation modes; and (iii) time window constrains. Figure 9 is the multimodal
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Fig. 9 Multimodal transport network.
transport network of one origin, two destinations and four transport modes, constructed in the contexts of South and Southeast Asia.
Literature on the route optimization of intermodal network is rel- atively sparse. Based on the international intermodal transportation in Asia-Pacific region, [Min, 1990] developed a goal programming model with chance-constraint to choose the most effective intermodal route which min- imizes cost and risk while satisfying various on-time service requirements.
The author tested this model by optimizing the intermodal routes between suppliers in Japan and manufactures in New York. Later, [Bookbinder and Fox, 1998] contributed an intermodal routing study for Canada-Mexico shipments under North American Free Trade Agreement (NAFTA). In their research, a network is constructed between five Canadian origins and three Mexican destinations. A shortest algorithm is proposed to calculate routes which minimize cost and throughout time. Most recently, [Chang, 2008] formulated a multi-objective, multimodal and multi-commodity flow problem with time windows and concave costs. The author optimized the route from three LCD suppliers in Taiwan to PC manufacture located in Denver, USA.
For the regional intermodal transportation network problems, [Modesti and Scimachen, 1998] presented a model to find shortest paths between vari- ous origin and destination pairs within the urban intermodal transportation networks of Genoa. Specific to the regional maritime transportation network, [Al-Khayyal and Hwang, 2007] formulated a model for finding a minimum cost routing in a network for ships engaged in pickup and delivery of liquid products. Their research analyzed the trade-off between transport costs and inventory costs in maritime routing across the whole supply chain within the Korean maritime networks. For the regional intermodal network of rail and road, [Caramia and Guerriero, 2009] studied a long-haul freight transportation problem with multiple objective functions and a focus on the implementation of a service network design that best to satisfy specific customer requests.
In a nutshell, the two major factors affecting multimodal network are (1) proximity/integration to trucking, rail and air transport; (2) competitiveness of complementary and substitutable trucking, rail and air transport.
4.4. Maritime trade strategy and institutional settings
The existing economic foundation of maritime and supporting industries, to a fair extent, determines the degree of aggressiveness in the pursuit
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of expansionary maritime trade strategies. At the same time, maritime trade strategies set the direction and lay the economic foundation for the developments of port and maritime industry and the nation as a whole.
The effect of the undertaken maritime trade strategy may be reflected on the export production price and import price, import and export volume, open or protective trade mode.
[Francois and Wooton, 2001] proposed several maritime strategy models for different market structures to examine the implications of liberalization for profits, trade, and national gain from maritime trade. Using data from South Asia, Latin America and Southern Africa, Francois and Wooton confirmed that trade liberalization can lead shipping firms to capture a significant proportion of the benefits in multilateral trade concessions, and General Agreement on Trade in Service (GATS) negotiations in this area have important implication for multilateral efforts aimed more broadly at trade liberalization. By means of theoretical explicative and simulation modeling, [Coto-Millan et al., 2005] determined national and world income, prices of imports, exports and maritime transport services, and the utilizations degree of the productive capacity as the key variables that explain the behavior of maritime imports and exports for a particular economy. Quite recently, [Li and Cheng, 2007] collected data from 30 maritime WTO-membership nations and concluded that maritime policy is firmly based on economic conditions rather than the result of a rational analysis of policy makers in their relationship exploratory research.
An appropriate maritime strategy devised under considerations of the institutional settings will aid port development. As [Loo and Hook, 2002]
commented, the evolution and competitive position of a container port needs to be understood as the interplay of international, national and local factors. [Fung, 2001] attempted to provide a systematic treatment for the interactions between the ports of Singapore and Hong Kong, and to investigate how the rise of South China ports affects the demand for Hong Kong container handling services. By including the Shenzhen port’s throughput volume and various external trade variables as exogenous variables, the study also allowed for sensitivity analysis of their possible effects on the conditional growth path. Later, [Cullinane et al., 2004]
analyzed the port of Shenzhen using Robinson’s criteria for hub port development in an attempt to discern whether it will take over the role of Hong Kong to become the dominant regional hub. Their study concluded that despite Shenzhen’s current competitive advantages, Hong Kong would, in all probability, retain its dominant role owing to other institutional
Table 1 Port characteristics on performances.
Port efficiencies Frequency of Port Calls Port Berthing Time Length Labor Problems
Economies of Scale (e.g., Cargo Volume/Size of Port) Diseconomies of Scale (e.g., Cargo Crowding Out Effect/Port
Congestions)
Material Handling Efficiency Goods Loss and Damage
Flexibility of Operations Process — Large/Odd size Freight, Large Volume Shipment, Special Handling
Port productivity Rate of Container Movement Number of Cranes Moves per hour Port service Working (or Port Operations) Hours
Shipment Information
Provides Assistance in Claims Handling Offers Convenient Pickup and Delivery Times Port Service Coverage — Routes
Reliability
Port management Management Expertise and Aggressiveness Number of Port Operators
Privilege Contracts to Shippers/Carriers Government Taxes and Incentives
Bureaucracy, Custom Administration and Regulations Coordination Between Departments
Port-induced cost Port Charges Handling Charges Loading/Discharging Rate Inland Freight Rates
Others Port Reputation
Port Security (Port Safety/Terminal Security)
concerns. Other than direct head-on competition, [Song, 2002 and 2003]
examined the possibility of co-operation between adjacent container ports in Hong Kong and South China as another maritime strategy.
Section 1.4 has explored into the various factors such as port location, port efficiency, multimodal network and maritime strategy that may have a bearing on port development. Table 1 provides further descriptions of the port characteristics that promote port performances in various dimensions depicted in Table 2.