Dynamic Shipping and Port Development in the Globalized Economy

Over the past decades, maritime trade experienced significant growth due to globalization and economic development of nations. Maritime transport contributes to the sustainability of the world trade system through its impact on the economic, social, and environmental well-being of nations. Playing a crucial role as trade facilitators, ports and shipping are important parties in the global economic system. Correspondingly to the growth in maritime trade, the port industry encountered tremendous increase in demand with regards to both physical infrastructure investment and cargo handling. Since the birth of con-tainerization, the port industry and cargo handling methods became more standardized and efficient. This development accelerated the expansion of containerized trade.

China’s engagement in the transportation infrastructure and energy sector in Africa and South America has grown dramatically over the last two decades. Chinese companies, both state-owned and private, along with influxes of Chinese workers and capital, have spread throughout Africa (Shinn and Eisenman, 2012). In March 2013, China invested USD 10 billion into the construction of a port in East Africa, with the aim of strengthening economic relations with Tanzania and landlocked countries such as Malawi, Zambia, Democratic Republic of Congo, Burundi, Rwanda, and Uganda. In addition, in May 2014, China concluded a USD 13.1 billion investment in Nigeria for a high-speed coastal railway (1,385 kilometer of single-track line). These investments reveal the fact that as a new lender and investor China is becoming a “locomotive” developing the African economy. Indeed, China pledged to more than triple aid to Africa during the period 2006-2014. In line with economic ties with Africa, visits by President Xi Jinping in March 2013 and Premier Li Keqiang in May 2014 have increased China’s political influence in Sino-African relations, demonstrating that international trade and international politics go hand in hand.

Contemporary ports are required to operate their ports more environmentally friendly due to increasing awareness and concerns of their stakeholders arising from global warming and climate change issues. Therefore, more ports are investing in environmental facilities to respond to the needs and concerns of their stakeholders. Many countries, regions, and international organizations have adopted more stringent regulations to address air-polluting gases from ships.

There has been a recent increase in the number of papers focusing on port competition. Port competition and port competitiveness are recognized as two of the main port policy problems. There are several approaches to analyzing port competition. One approach defines a port’s competiveness and uses performance measurements to examine each port. A second approach is to construct theoretical models that provide certain implications that are subsequently applied to real port policy or to port competition situations. This chapter focuses on the latter approach, particularly game theoretic models.

Maritime security is defined as

the advancement and protection of a nation’s interests, at home and abroad, through the active management of risks and opportunities in and from the maritime domain, in order to strengthen and extend the nation’s prosperity, security and resilience and to help shape a stable world.

The purpose of this work is to develop a descriptive theory of corporate finance and corporate governance for the world transport industry. More specifically, we examine the economic, institutional, and industrial factors behind a transportation company’s choice of different financing mechanisms and governance structures (collectively called “financing methods”). This combined treatment of corporate finance and corporate governance is in line with Williamson (1988), who argues that “the supply of a good or service and its governance need to be examined simultaneously”. This is a step further than the traditional approach in corporate finance, which tends to limit its investigation of a firm’s choice of financial structure (i.e., debt vs. equity) in aggregate, with no follow-on inquiry into the resultant governance structure at an individual firm or industry level. The value of the level of aggregation and abstraction in neo-classical financial theory, along with the simplifying assumptions that are usually made, lies in their potential for clarifying difficult analytic issues, but it also rules out important practical considerations which influence financial system form and functions (Neave, 1991).

Maritime ports and investments to target their expansion are often deemed by governments not only as an important enhancement of their national assets but also as a means of establishing a gateway to the global shipping network. In the last two decades, ports have grown rapidly to become increasingly specialized, highly capital-intensive, and able to carry out a wide range of value-added activities. The recent financial crisis and the consequent restricted availability to credit highlights a major long-term challenge for port investment, which is how to attract the private sector in the financing of port developments in order to maintain and increase market share while achieving profit margins. Foreign direct investment (FDI) in ports is generally very successful, and effective strategies, particularly in developing countries, where international terminal operators (ITOs) in Africa and South Asia are responsible for over 75 percent of privately handled containers and cargo (Drewry, 2010), are proof positive of this success. But, as observed by UNCTAD (2011), although an attractive option, FDIs are not always simple to implement.

The maritime logistics associated with the international trade of container cargoes are concerned with the flows of cargo, information, finance, and images among stakeholders. The stakeholders include shippers, consignees, freight forwarders, third-party logistics providers (3PL), land and sea carriers, ports, and government agents and customs officers.¹ The seamless, smooth flow of container cargoes and related information among the stakeholders contributes to reduced logistics costs and, consequently, to the improved competitiveness and productivity of each stakeholder and increased competitiveness in international trade. In this regard, we propose three innovative concepts of economies in maritime logistics — namely, the economies of flow, economies of connection, and economies of fusion technology. ² Numerous stakeholders share the cargo information on the origin and destination of internationally sea-transported container cargoes, which relates to economies of flow and economies of connection. Information technologies (ITs) such as radiofrequency identification (RFID), global positioning systems (GPS), cargo tracking systems, and electronic data interchanges (EDIs) (Lee et al., 2000) have been applied to maritime logistics. Moreover, the single window system (SWS) collaboratively operated by the private and public sectors in Singapore and Korea has contributed to accelerating the flow of container cargoes and the sharing of the container information among the stakeholders.