Saturday, June 20, 2020

NEWS from Maritime Economics & Logistics (MEL)


As MEL is moving into its third decennium, we take pride in launching two high-profile projects, mapping somewhat our history and our contribution to the development of maritime research during the past two decades.  

Professor Adolf K.Y. Ng of the University of Manitoba (Canada) will be working on the history of our PhD Competition (launched in 1999). He aims to acknowledge not only all persons who have been involved in those unique events, but also to trace the career development of our winners and the way MEL has contributed to their advancement.

P
rofessor Thanos Pallis of the University of the Aegean (Greece) will be developing a similar project, this time tracing the recipients of the MEL-Palgrave Macmillan Springer Prize for best IAME Conference paper, awarded each year at the annual conference of the International Association of Maritime Economists (IAME).

With years, memories weaken and records and archives might prove to be incomplete. We would be grateful therefore if ‘maritime economists’ and of course anyone else who has been involved in any of the two projects, and in possession (or recollection) of interesting anecdotal information of any type, to contact Adolf, Thanos or me. Their assistance will be duly recorded in the two projects. 

HH


Thursday, June 18, 2020

China-India tensions: A game of chess?

Admiral James Stavridis (author of the Bloomberg article, link below) is a wise man and his article is exquisitely written and worth reading. I wouldn’t agree with parts of it however. I read: […]One Belt, One Road has one big problem: India, which sits athwart the trade lanes China wants to use to dominate in the 21st century. In that sense, the Himalayan dispute is about control of the Indian Ocean[…].
We have addressed all these issues in our (with Olaf Merk) forthcoming Working Paper (already on the website of ITF-OECD). Assuming naval control was indeed the issue, the Indian Ocean (Bay of Bengal) could be much more effectively controlled through China's investments in Sri Lanka and Myanmar, rather than from the Himalayan plateaus, 5 km above sea level! And it is precisely for this reason India has deployed her navy in the Andaman Sea (Andaman and Nicobar islands), outside the Hambantota-Kyaukpyu notional line that connects the two ports (in Sri Lanka and Myanmar respectively), and, in her view, in a way 'fences off' the Bay of Bengal.
Instead, we believe the ‘message’ of the current Himalayan tensions to PM Modi is a different one: “If you want a good neighbor who doesn’t put his music too loud in the evening, please don’t get too much in bed with the US”.
That simple.
HH
Here is the Bloomberg article of Admiral James Stavridis
Here is our OECD paper


Wednesday, June 17, 2020

Dovetailing European and Global Transport Infrastructure Networks


When China’s president Xi Jinping visited Rome and Brussels last year, many politicians expressed to him their concerns about China’s investments in ‘strategic’ sectors, such as ports. Italy’s president, Sergio Mattarella was crystal clear in voicing these concerns: «we are deeply Europeans», he said, «we have our own plans» (NB: apparently referring to Trans European Transport Networks- TEN-T), «to which we fully adhere, and we are nations living under the rule of law. These said and out of the way, we are open to discuss with you anything you like». 

President Xi’s answer came the following day in Brussels: «It is not China’s intention to cause problems and disrupt your infrastructure plans; on the contrary, we wish to work “with” you and dovetail those plans with our Belt and Road Initiative (BRI), so that win-win outcomes are achieved in the end».

With Paolo and Roberto we thus decided to write this paper, meant as a ‘roadmap’ towards a revision of our European transport network, dovetailing two extremely complex systems: Our Trans European Transport Network (TEN-T) and China’s Belt and Road Initiative (BRI). The reasons that made us believe such an undertaking would be worth its salt were: a) TEN-T will be revised in three years (2023) anyway; b) Europe’s economic center of gravity moves towards its eastern end; c) it is Europe’s eastern end too that attracts China’s interest, as evidenced by its investments in the port of Piraeus, as well as in Serbia, Hungary, Slovakia, Poland and the Baltic States. I am not sure if we achieved our objective. It would be rather naïve anyway to believe that issues of such complexity could be addressed comprehensively through a short paper. At any rate, though, we believe that a step in the right direction has been taken, even in the form of ‘advice’ to policy makers in Europe and China. 

HE Haralambides
June 2020


__________________
Costa, P., HE Haralambides and R. Roson (2020) ‘From Trans-European (Ten-T) to Trans-Global (Twn-T) Transport Infrastructure Networks. A Conceptual Framework’ in: Francesco Saraceno and Floriana Cerniglia (eds) ‘A European Public Investment Outlook’. Open Book Publishers, Cambridge, UK. https://doi.org/10.11647/OBP.0222.

Oliver Blanchard said about the book: […]Let’s stop being penny wise and pound foolish. Read the carefully argued set of essays contained in this book, and you will understand why increasing public investment is a high priority…(Olivier Blanchard: Robert Solow Professor of Economics Emeritus, Massachusetts Institute of Technology).







Saturday, April 25, 2020

Delineating the dynamic hinterlands of container ports


[free to download in the next 50 days; see footnote]

In our newest research, published in the Journal of Transport Geography, we have attacked afresh the fundamental issue of port hinterland; that is, the areas of origin or destination of the cargoes passing through the port.[1] Our objective was to see if novel research methods, such as the membership degree method and the Huff Model could be used to demarcate a container port’s hinterland more accurately than what earlier research has achieved. Today, such knowledge is paramount to a port’s planning and development endeavors, in a landscape of intensifying port competition.

And this is why.[2] 

Thirty years ago, when port hinterlands were captive, thus giving ports a considerable degree of monopoly power, my students could easily calculate the optimum size of a port, based on a country’s trade, population and growth data. Today, with land transport infrastructures expanding at an impressive rate, and with containerization and the footloose nature of the container, hinterlands have become stochastic and thus difficult to define: they may be expanding or contracting, they are shared among ports, and, more importantly, from the captive hinterlands of the past, they now become increasingly contestable hinterlands (i.e. shared by more than one ports). In Europe, for example, the whole continent constitutes, potentially, the hinterland of each major port, from Rotterdam to Piraeus and, as I have calculated years ago, there are 147 different ways to bring a bicycle from Wuhan, China, to Paris, France.  

A port’s hinterland is therefore the manifestation of the demand for the port’s services. In an era of ‘demand-driven’ port investments; of ‘assigning roles’ to ports; and of increasing cooperation and coordination among them, so as to avoid unfettered and wasteful expansion, the boundary lines of the hinterlands of container ports -for as long as these exist- serve as reference points for future port development and infrastructure planning. In such a landscape, knowledge of one’s demand is the single most important factor determining the future development of port business, as well as the future of the port itself by and large. 

As said above, in this paper we use the membership degree method and the Huff Model to delineate the hinterlands of ports, using China's 20 major foreign trade container ports as an example, albeit in a fully generalizable approach. Among others, this has allowed us to ‘assign roles’ to ports and classify them in four novel categories: international hubs; regional hubs; node ports; and feeder ports. 

Our research has important policy implications for central- and local governments, as well as port authorities. This is particularly true for those countries (like China) who aim for better ‘coordination’ of port activities among neighboring ports, seeing unfettered port competition as a waste of scarce resources, and believing, as we do, that ports (as well as infrastructure by and large) are there to facilitate competition among companies, rather than competition among themselves.

And, to finish this little introduction with a merry note, those of us who might complain about ‘concerted business practices’ among ports don’t have to look much further than the ‘business  practices’ of the ports’ main clients, i.e. the container shipping companies and their consortia and alliances.

HH



[1] For a discussion on the various types of hinterlands and their significance for port competition, see: Haralambides (2019) ‘Gigantism in container shipping, ports and global logistics: a time-lapse into the future’. Maritime Economics & Logistics, 21(1), pp. 1-60. (freely downloadable at: https://doi.org/10.1057/s41278-018-00116-0).
[2] This is a simplified introduction for the general reader. The technical paper can be downloaded freely (for the next 50 days) from: https://www.sciencedirect.com/science/article/pii/S0966692319308518?dgcid=coauthors.

Thursday, April 16, 2020

Dovetailing Trans European Networks and China’s Belt and Road Initiative


When China’s president Xi Jinping visited Rome and Brussels last year, many European leaders expressed to him Europe's concerns about China’s investments in ‘strategic’ sectors, such as ports. Italy’s president, Sergio Mattarella was crystal clear in voicing these concerns:

«we are deeply Europeans», he said, «we have our own plans» (NB: apparently referring to Trans European Transport Networks- TEN-T), «to which we fully adhere, and we are nations living under the rule of law. These said and out of the way, we are open to discuss with you anything you like».

President Xi’s answer came the following day in Brussels:

«It is not China’s intention to cause problems and disrupt your infrastructure plans; on the contrary, we wish to work “with” you and dovetail those plans with our Belt and Road Initiative (BRI), so as win-win outcomes are achieved in the end».

With Paolo and Roberto we thus decided to write this paper, meant as a ‘roadmap’ towards a revision of our European transport network, dovetailing two extremely complex systems: Our Trans European Transport Network (TEN-T) and China’s Belt and Road Initiative (BRI). The reasons that made us believe such an undertaking would be worth its salt were: a) TEN-T will be revised in three years (2023) anyway; b) Europe’s economic center of gravity moves towards its eastern end; c) it is Europe’s eastern end too that attracts China’s interest, as evidenced by its investments in the port of Piraeus, as well as in Serbia, Hungary, Slovakia, Poland and the Baltic States.

I am not sure if we achieved our objective. It would be rather naïve anyway to believe that issues of such complexity could be addressed comprehensively through a short paper. At any rate, though, we believe that a step in the right direction has been taken, even in the form of ‘advice’ to policy makers in Europe and China.-

ΗΗ

P.S. Paper under review, to be uploaded soon as a preprint in ResearchGate.

Tuesday, February 25, 2020

Port-Hinterland Transport and Logistics


[…]In spite of the sustained growth of port throughput worldwide, as well as of the substantial infrastructure investments of ports and their efforts to reform and modernize, hinterland transport—representing 60% of the costs of the global maritime supply chain—has not kept pace; productivity in the maritime leg of the supply chain has not been followed by productivity in its hinterland part, apart from the introduction of double-stack trains in the US in the 1980s, or the adoption of the dry port concept in the 2000s.

Moreover, the gigantism in container shipping is straining port infrastructure and cargohandling capacity, causing significant diseconomies of scale, which propagate throughout the supply chain. For many seaports, the weakest link in their transportation chains is hinterland access, due to congested roads and inadequate or non-existent rail connections, causing delays and increases in transport costs.

[…]A reversal of trends can recently be seen however. From the earlier days when ports were obliged to move downstream to find space, ports now look back to their hinterlands to find the additional space they require. Inland intermodal terminals (or dry ports) are thus mushrooming, connected to seaports by rail, road or inland waterways. As such, inland intermodal terminals are usually developed close to railway and motorway junctions to facilitate the transfer of containers between modes of transport, favouring, to the extent possible, the more environmentally friendly transport modes, such as rail and inland waterways[…]


HE Haralambides




Friday, February 7, 2020

Georgia's Anaklia mega-container facility on the “Belt and Road” backpack?

The 2.5 billion deep-water mega container facility at Anaklia has been shelved. The ‘official’ explanation is that the Anaklia Development Consortium (ADC) has been unsuccessful in securing finance. The true reasons, however, may be quite different, having more to do with regional geopolitics rather than anything else.

In a surprise move, the Georgian government has issued an authorization for the development of Anaklia’s southern rival, the port of Poti. The bid has been won by APMT (Maersk group). Looking at the latter’s plans, I cannot say I am very impressed however. These are about an initially general cargo facility, eventually developing a 300m container berth of limited drafts (11m).

The Poti authorization is a strategic move of high complexity, given that, at the same time, the Georgian government is talking to various international institutional investors (including China), in an effort to secure the financing of Anaklia. I am certain the government will succeed, and a new bid will be launched soon. Anaklia is a very strategic node on what I have earlier called  “a missing link of BRI”, i.e. that of connecting the Caspian and the Black seas, continuing to central Europe through the Romanian port of Constanza on its western part, and connecting to the Bandar Abbas (Persian Gulf)-Tehran-Baku (Azerbaijan)-Moscow North-South Corridor  on its eastern part (also strongly eyed by India). I launched this idea 4 years ago in Kuwait, and we were happy to see, last year, an implementation agreement signed between the governments of Turkmenistan, Azerbaijan, Georgia and Romania.

I expect that the Anaklia project will be re-launched very soon. One of the requirements would be the upgrading of the Baku-Tbilisi-Anaklia railway. If this happens, the Poti project will have to be scaled down, limiting itself to general cargo throughput only. The distance between the two ports is too short and, to my view, there is not enough room for container facilities in both ports.
This would be a waste of good money.

HH

Tuesday, January 14, 2020

Decision-making in container shipping: reactive or proactive?


The best monopoly profit is a quite life” used to tell me Sir John Hicks many years ago when, as a student, I was writing my thesis -The Dynamic Stability of Competitive Equilibrium- based on his book Value and Capital.[1]

In our present research, Mike and I have tried to say something similar, albeit with different words: In imperfect markets (collusion, concentration, etc.), mistakes do not cost that much, and they can be easily corrected. Here, carrier short-run capacity deployment decisions could be described as ‘reactive’, or as ‘steady as she goes’. In other words, carriers’ approach is fairly mechanistic:  ‘let’s see what we did in the previous years, or what our competitors our doing, and do the same’. Expectations regarding future developments in their markets do not matter so much and, in a way, decisions are made reactively, like someone who tries to drive a car forward by looking in their rear view mirror. This is the essence of adaptive expectations.[2]

On the contrary, competition obliges you to stand on your toes; to sit on the edge of your chair; to bite your nails; to look around and ahead and try to fathom every scrap of information coming your way which could impact your bottom line. Here, mistakes cost; sometimes they cost a lot, as the bankruptcy of Hanjin Shipping has taught us. Such a decision-making approach reflects  the fundamentals of rational expectations.[3]

Mike and I therefore thought that if, through the use of shipping capacity deployment data, we could discover how shipowners form their expectations on future developments in their markets, i.e. adaptively or rationally, we should also be able to say something about the structure of their industry (imperfect or competitive). Such information, particularly today when the European Commission is considering extending for another five years its antitrust concessions to international shipping, might be of a certain value.

Admittedly, our results are not as strong as we would like them to be, but this is a good thing and a good starting point for other researchers who would like to follow us. We  however have been able to show that, in the more competitive Pacific market, carriers may tend to decide rationally; in the Atlantic market, instead, this could not be established and carriers there seem to be reactive rather than proactive, forming their expectations adaptively.

If true, the latter finding (Atlantic) comes only to validate, for one more time, what we said 15 years ago in our Erasmus Report:[4] “the disbanding of liner conferences from European trades has done little to increase competition in liner shipping”.

Hercules Haralambides
January 2020

PS. The complete paper is freely downloadable here: doi.org/10.1186/s41072-019-0057-2



[1] J.R. Hicks (1939) Value and Capital: An inquiry into some fundamental principles of economic theory. Oxford: Clarendon Press, 1939.
[2] See Milton Friedman (1968). The Role of Monetary Policy. American Economic Review, 58 (1): 1–17.
[3] See John A. Muth (1961). Rational Expectations and the Theory of Price Movements. Econometrica 29 (6): 315–335, and Thomas Sargent (1986) Rational Expectations and Inflation. New York: Harper and Row, 1986.
[4] The Erasmus Report: Global Logistics and the Future of Liner Shipping Conferences. DOI: 10.13140/RG.2.1.3225.3200 (Report prepared for the European Commission’s Competition Directorate General “for assistance in processing public submissions to be received in response to the “consultation paper” on the review of Council regulation 4056/86)”.