The economics of port has greatly influenced the world’s economy over time. Oceans have always been an alien realm for humans. Ancient humans dared not sail too far into the ocean for fear of falling off the edge of the world. As science progressed, humans began to understand more about this unknown world and Ancient civilizations had more trade relations between the coastal cities and nations due to better and cheap modes of transportation, there is no doubt in the fact that transport sector is always a crucial sector for any nation which act as a catalyst in the balanced economic and regional development with a great influence on national integration to the world economy.
Asia has a rich history of trade through sea where economic activities along a coastal belt via ports are significant and with the passage of time, this dependence on ports is growing at a high pace. But the higher the throughput of goods and passengers year-on-year, the more infrastructure, provisions, and associated services are required. These will bring varying degrees of benefits to the economy and to the country. Ports are also important for the support of economic activities in the hinterland since they act as a crucial connection between sea and land transport. As a supplier of jobs, ports do not only serve an economic but also a social function. In terms of load carried, seaway transportation is the cheapest and most effective transportation system compared to other systems. Industries require a safe and cheap means of exporting finished goods and importing raw materials. Hence the majority of industries in the world are located in the coastal belts, in the vicinity of major ports. These industries, in turn, influence the lives of employees and indirect benefactors.
Ports are not only one of the primary components of the general transportation sector but are nowadays linked to the expanding world economy. Ports are basically a means of integration into the global economic system. The maritime sector encompasses a wide range of services, the transportation of goods and passengers being the primary one. Other related services included in this sector are various port services (such as pilotage, towing and tug assistance, emergency repairs, anchorage berth, and berthing services, etc.) and auxiliary or supporting services (such as storage and warehousing, maritime cargo handling services, customs clearance services, etc.). While many countries have opened up some auxiliary services, such as storage and warehousing services to Foreign Service providers, custom clearance services are mostly regulated by government policies. Within the port area, a great diversity of activities are performed: infrastructure services, generally provided by port authorities, cargo handling services, in most ports provided by private firms, and other services such as mooring, towage, etc. Each of these activities shows well-differentiated features and its own technology. It has been estimated that around 90 percent of the world’s merchandise and commodity trade is transported by ships. This percentage has remained fairly constant over the last century, yet the volumes have increased enormously in the last two decades. This rise in global shipping volumes resulted from the disintegration of production and the integration of world trade. Ports have two main advantages. First of all, they perform roles as important links of hinterlands to points overseas. On the other hand, countries also require inner linkages, such as links to other ports, airports, and railway connections if they are to perform their role efficiently. Secondly, sea conveyance is the cheapest way of transportation when considered in terms of fuel consumption and investment. When compared to other transportation systems, railway transportation requires twice as much energy consumption, while road transportation requires ten times as much as sea conveyance.
During the past few decades, the world has become increasingly environmentally conscious and, with its lower energy consumption, marine transportation is obviously more environmentally friendly than other means. Greater transport costs lead to lower levels of foreign investment, a lower savings ratio, reduced exports of services, reduced access to technology and knowledge, and a decline in employment. It is estimated that a doubling of transport costs leads to a drop in the rate of economic growth of more than half a percentage point. This impact may appear low, but it should be noted that lower growth over the long term results in sizeable variation in per capita income. It is also an important aspect that efficient seaports are clearly associated with lower freight costs after controlling for distance, type of product, liner services availability, and insurance costs, among others but the recent world tendencies in cargo transport are heading towards deployment of large and fast container ships and reducing the number of ports of call. As a result of the reduced number of calls, the total costs of cargo handling in the seaports can be substantially decreased and the total time required for port operations can be shortened.
As the Ports are a key component of the logistics chain and, therefore, their operation has a direct effect on relevant economic variables such as export competitiveness and final import prices, thus affecting economic development but in general, if we want to highlight the visible economic contribution of any port in an economy than its impact are visible on employment, wages, output or revenue, and tax revenues, etc.
It is concluded that ports are a vital part of a country’s economy. The growth of ports will unerringly boost the country’s economy. The growth and development of ports lead to greater trade activity, increased supply, greater foreign reserves, and reduced prices for commodities as a whole where outcomes of improvement in the port infrastructure are always reflected in the GDP.
In this globalized world, where companies look to expand their businesses overseas through export tactics. As a result, a country’s GDP is significantly affected by the ability of companies to export their goods and services globally. Convenient, effective transportation ports have the potential to significantly increase the economic growth and success of nations. As a result of intense competition in the port industry, the container shipping industry has changed significantly. Major shipping conglomerates have attempted to globalize their services through joint ventures, mergers, etc., facing slimmer profit margins. Concurrent with this movement has been an increase in the deployment of larger vessels in order to enhance cost efficiencies through economies of scale. Ports continue to play an important role in the economic status of a country, and their effectiveness can lead to significant economic benefits or failures. Additionally, any country that wishes to increase its global economic footprint faces the challenge of constructing large, efficient ports for export purposes. Also, the competitive battle among ports will increasingly be fought ashore. Rising concerns about capacity issues have led market players to secure terminal and corridor capacity. Ports have become more dependent on intermodal carriers. Thus, port authorities must be connected with logistics networks to promote an efficient intermodal system to secure cargo under conditions of high competition.
Exports have a profound effect on a country’s GDP. When we compare the change in the percentage of China and Brazil’s GDP and exports, there is a consistent trend that suggests a link between the two sets of data. Port efficiency, which ultimately affects total exports, is important when attempting to increase GDP. Countries with more efficient and numerous ports also tend to have higher overall GDPs like China that is, the greater number of highly recognized ports in a country, the higher the GDP. If port systems are not continuously updated, they face the threat of becoming obsolete and eventually too inefficient to run. As a result, ports require constant upgradation and maintenance to be competitive.
The Author is MD IRP/ Faculty Department of H&SS, Bahria University Karachi