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Port and Terminal Management

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Port and Terminal Management

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Course Instructor

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Introduction

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There has been fundamental transformation in the port sector over the past few centuries. Over the past few centuries ports were perceived to be instruments of regal power and its outlets were used to be in command of markets. During that era there used to be minimal port competitions. Comparison between ports related services and the cost of ocean transport yielded results that revealed a mammoth difference in costs. Port related costs were cheaper when compared to the relatively high cost of inland and ocean transport (Transport Research Centre, International Transport Forum & Organization for Economic Co-Operation And Development, 2009). Due to the aforementioned statement the state conferred modest enticement towards developing ports competence. Since then the port sector has undergone mammoth transition. In the 21st century ports are competing against each other on a global scale. Currently ports are considered to be the sole convenient element that can develop the recent ocean transport logistics. This fact has been the driving engine behind the numerous developments made on ports to improve its efficiency. The numerous developments made to the ports tend to be capital intensive thus the ports are usually unbound from bureaucratic management of public entities. This has led to the encouraging of the private sector to get on board in matters relating the ports activities.

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Assess the level of competition between the two ports

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Singapore’s amazing economic prosperity is attributed to its port. Other than the lucrative casinos, Singapore’s port is the foundation of all the country’s wealth. The port was established in the 19th century as a trading station by the British colonial masters. Since then the state has managed to cement itself as the maritime hub of the Far East European trade. The port has offered jobs to as many as 180,000 people.

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The Singapore port faces stiff competition from Shanghai. Earlier this year the port in Shanghai recorded a higher container handling number than the Singapore port. This proved to knock the Singapore port out of its perch as the busiest container port in the globe. In the year 2010 alone, the Shanghai port handled well over 29.07 TEUs as compared to Singapore’s 28.43. TEUs as applied above refer to the standard measure of container traffic which is twenty foot equivalent units. The main driving force behind the sudden shift in position as a maritime hub was contributed to China’s speedy economic development as compared to Singapore’s. If China’s economic growth experiences an incessant improvement of its economy it is evident that other ports as well in China such as Shenzhen and Guangzhou will overhaul Singapore as well. Currently, a little bit more than a half of the globe’s top ten container ports are Chinese (Yap, 2009).

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Despite the new competition experienced by the Singapore port from the Chinese counterparts they have a contingency plan. The Singaporeans have adopted a business model in their port administration that will ensure that get through the current port building enthusiasm. First and foremost, the port operators in Singapore have gave an insight into the distinct port operations of the Shanghai and Singapore port. Noticeably, the Shanghai port is referred to as a ‘through port’. This simply means that this port acts as a point where al raw materials are assembled to give a final product. On the other hand, the Singapore port is a trans-shipment port. In this port containers are offloaded from one vessel and loaded into another one so that they can resume with the onward voyage. Even though the Singapore port is facing a challenge from the Shanghai port, it still remains the sole port globally that possesses the largest trans-shipment. This fact enables the Singapore port have a better spread of risk when compared to its competitor.

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Singapore is not likely to be exceeded in a period of time due to the secondary services that the country can offer. Singapore is the world’s biggest petrol station; in 2010 the nation had 40.9 billion bunker sales and the nation has the best ship repair yards in the world (cite). The PSA wants to build a huge extension on reclaimed land. This would increase capacity at the nation to about 50m TEUs per year. The Singapore government is quite aware that there is increasing competition and it would not be possible for the country to uphold the competition with volume alone.

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To manage the competition, Singapore is investing in soft power maritime supremacy in so far as hard power of the metal boxes. The city is also becoming a center of maritime green technology and maritime architecture as complementary factors on the nations lead in terms of financial and legal characteristics of the maritime technology. For instance MAERSK, being the world’s biggest container operator moved its regional container operations to Tantung Pelepas where it’s cheaper but built the biggest ship designed office in Singapore. The organization’s global stowage operations direct the movement of all the containers throughout the world from the Singapore offices. Just like the German Mittelstand companies, Singapore port operators plan to endure the offensive of the new competitors by always staying a step ahead of the competitors (Lun & Cheng, 2010).

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External factors other than competition that should also be considered by the two ports’ management in developing their development plans

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Hinterland market access

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Only in some conditioned situations can a single port logically provide entrée to hinterland markets. This may be as a result of geographical features, inadequate transport infrastructure in other ports except for the particular port and political issues among other factors. For instance, due to the conflicts between Eritrea and Ethiopia, Djibouti has virtual monopoly on access to the Ethiopian market. Another reason for the virtual monopoly access to the Ethiopian market is due to lack of infrastructure in the neighboring Somalia (Reveley & Tull, 2008). In other types of situations, many ports would be able to provide access to a common hinterland and in turn creating intense rivalry among other ports for market share. In a situation like Djibouti’s there is less or minimal rivalry for market share. For instance several large ports in northern Europe compete for the European hinterland (International Navigation Association,1999).

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Rivalry for hinterland markets can at times be limited, while rivalry for transshipment business can be intense even in ports that have established and leading positions as load centers. Singapore was able to establish is role as a major player as the world’s biggest transshipment center due to its advantageous location. Singapore is located on the Europe/Asia trade route and its proximity to the regional origin and destination centers in the Southeast Asia (Huybrechts, 2002). Malta Freeport was able to establish its position in the Mediterranean transshipment market due to its location on the Asia/trade route but this time on the southern Europe and northern Africa markets. the strategic positioning of these ports has not eluded them from market rivalry for the markets and business.

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Willingness to subsidize operations

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Another external factor other than competition that may influence the management of a port and it terminals is the willingness of a port to subsidize its operations. The ease of use of public funds to compensate any incurred losses in the ports operation impacts the port management. The Government should be able to intervene in the situation and subsidize ports on the basis that they are instruments of stimulating economic growth. The management of the port must ensure that the policies put in place encourage the growth of the port sector. The implementation of the subsidies determines whether a port will have a fair share of its success in the global plane or not (Haezendonck, 2001).

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Capital expenditure for new port facilities

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The port management should consider the accessibility of capital when it comes to new port facilities. The availability of such capital impacts the development of a port especially when it gets to the port development (Ducruet & Notteboom, 2009). The port should be developed so as to cope with the contemporary issues in the port sector. A large upfront capital cost is required for such activities to be implemented. This factor usually inhibits entry of new players in the port sector. Contrary to the aforementioned fact, in Pelabuhan Tanjung Pelapas in Malaysia, an investor has earmarked $750 million intended to construct a container port. This move is seen as an opportunity to impeach on the container port sector which is to a large extent controlled by the Singapore port.

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Establishing new distribution patterns

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The port management should consider tapping into new distribution channels so as to keep up with its ever changing market. The only risk that such a move creates is the revelation of new competitors. In relation to containerized trade, when a developer establishes a new distribution pattern he/she can draw off flow of cargo from the traditional ports in the area (Bergh & Pacces, 2012). A good example would be the establishment of the new port in the Red Sea. New load centers have been created in Salalah and Aden. This move threatens to siphon the flow of containers to Africa. The trans-shipment business in that region will potentially be diverted the new load centers. The positive element that a port manager should take into account when establishing new distribution pattern; is that competition is good for business (Port Business, 2013).

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Conclusion

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The port plays a vital role in the transfer of goods from on to another. In addition to the aforementioned fact the port is the point where the goods change the mode of transport from the ocean to inland. Economic globalization witnessed the evolution of ports activities from traditional sea or land crossing points to sources of absolute logistic network. In addition to all this ports have to keep up with the transitions in shipping, environment and ports infrastructure.

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Bibliography

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(2013). Port business. [S.l.], Books On Demand.

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BERGH, R. V. D., & PACCES, A. M. (2012). Regulation and economics. Cheltenham[England], Edward Elgar. 

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DUCRUET, C., & NOTTEBOOM, T. (2009). Ports in proximity: competition and coordinationamong adjacent seaports ; [papers presented at the conference]. Farnham [u.a.],Ashgate.

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HAEZENDONCK, E. (2001). Essays on strategy analysis for seaports. Leuven [u.a.], Garant.

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HUYBRECHTS, M. (2002). Port competitiveness: an economic and legal analysis of the factorsdetermining the competitiveness of seaports. Antwerpen, De Boeck.

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INTERNATIONAL NAVIGATION ASSOCIATION. (1999). Environmental managementframework for ports and related industries. Brussels, Belgium, PIANC General Secretariat.

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LUN, Y. H. V., LAI, K.-H., & CHENG, T. C. E. (2010). Shipping and logistics management.New York, Springer.

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REVELEY, J., & TULL, M. T. (2008). Port privatization: the Asia-Pacific experience.Cheltenham, UK, Edward Elgar.

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TRANSPORT RESEARCH CENTRE, INTERNATIONAL TRANSPORT FORUM, &ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT.(2009).Portcompetition and hinterland connections. [Paris], OECD/ITF.

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YAP, W. Y. (2009). Container shipping services and their impact on container portcompetitiveness: thesis submitted in order to obtain the degree of Ph.D. in Transport andMaritime Economics on 3 November 2009 at 15H00. Brussels, UPA University PressAntwerp.

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