Introduction
East Asia was one of the fastest growing regions in the past decades thanks to the export-led growth strategy of various developing countries. With most of the world’s traded cargoes being carried by sea, East Asian ports had also undergone substantial transformation and development. Indeed, their direction of development was closely knitted to global and regional economies. This article provides an overview of different phases of port development in East Asia.
Historical background
In recent decades, major ports in East Asia underwent a phase of massive neo-liberal management and institutional reforms. The core objective was to enhance efficiency and financial investments so as to complement the trend of containerisation, increase in international trade and globalisation, of which many developing countries in East Asia undertook economic reform programmes with the objective to transform respective economies based on export-led growth. Especially in the 1990s and early 2000s, one could witness a substantial increase in the privatisation of new container terminals through concession agreements (like BOT, BOOT and BOO). Good examples included Singapore, Shenzhen and Shanghai.
Changing philosophies
Complementing management reform was the changing philosophy, aiming to readdress the traditionally bureaucratic nature of port governance. It is important to note however, that many such ports were only partially privatised, with the public sector still retaining significant presence and overall control due to the perceived strategic importance of ports to respective countries or regions. For example, before joining the World Trade Organization (WTO) in 2002, the Chinese government imposed a 49 per cent ceiling on foreign ownership of all newly established container terminals in Chinese ports (except Shenzhen). Such a concern also explained why manysuch reforms were modelled in accordance to the ‘landlord port’ model as proposed by the World Bank’s port reform toolkit, of which it resulted in most of the concession agreements being arranged under public-pr ivate partnerships (PPP). Hence, during this period, it was a normal phenomenon that the day-to-day operations of terminals were given to private terminal operators (like HPH and PSA) while port authorities remained fully public and continued to own the port’s land, as well as maintaining customs, regulatory, safety and security functions of ports. Under such a system, a number of East Asian ports developed quickly. In the 1990s, Hong Kong, Singapore, Kaohsiung and Busan had already established themselves as leading ports around the world, while one could also witness the fast development of Shenzhen and Shanghai, both in terms of throughputs and capacity.
Current challenges
However, past success often creates new challenges nowadays. As mentioned, management and institutional reforms of ports in the 1990s and early 2000s were largely adopted so as to complement the development of export-led growth economies. Simultaneously, there was a realistic need to develop some port infrastructure capacities to some developing countries within the region, notably China. Since the mid-2000s, it was clear that some significant changes became visible which made such a direction of development obsolete. After nearly two decades of capacity building, the region started to experience an oversupply of port facilities. For example, by 2005, within the Pearl River Delta (PRD) with a small area of about 150 x 150 square kilometres, nearly 20 container terminals with highly overlapping hinterlands had been established (see Figure 1), thus intensifying inter-port competition within the region.
This was not helped by the changing industrial and economic landscapes. Living expenses in PRD have been growing fast, forcing manufacturing firms to increase salary levels continuously at an annual rate of 17 percent. Also, preferential policies from local governments were gradually removed. As the latter started to reserve lands and resources for service-oriented industries, the rapid fading away of PRD’s labour-intensive industrial landscape occurred. This forced manufacturing firms to explore alternative, notably western and more inland, locations like Hunan, Sichuan and Chongqing. Such a development would bring significant challenges to major ports in East Asia which had substantially benefited from export-led growth due to the region’s manufacturing boom, as it would significantly affect the competitive landscape of ports.
Shifting traffic and the rise of regional rivalry
Intra-regionally – like PRD, there would be a substantial decline in the already overlapping hinterland, and thus demand for stevedoring services among ports. For example, since the turn of the century, Hong Kong port faced considerable challenges from its geographically proximate, and initially peripheral, neighbours, notably Shenzhen and Guangzhou, not helped by the economic turmoil in 2008 which accelerated the industrial transformation of PRD. In the past five years, in terms of container throughputs, Hong Kong’s ranking had gradually slipped from first to third behind Singapore and Shanghai, with Shenzhen rapidly snapping at its heels. Simultaneously, the inland relocation of manufacturing plants, with the expected hinterland access costs, implied that ports from far away regions, of which competition of any significance hardly existed before, had gradually become serious market rivals. In this case, as the Yangtze River traditionally offered competitive inland shipping services to major inland cities and provinces in China, manufacturers relocated to these regions found that the transport cost to Yangtze Delta (YRD) ports, like Shanghai and Ningbo, could be lower than PRD ones. This could cause substantial shift of traffic from one region to another.
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