Wednesday, November 2, 2016

One Belt One Road, Port Capacities, and Industry Relocation along OBOR

The complexity of the OBOR network -both its land and ocean part- is such that the map is changing by the day. A very unstable and unpredictable geopolitical landscape is of course playing its role in this too.

Groundbreaking research, appearing soon in Maritime Economics and Logistics expands actual (physical) transport networks in malleable ‘super-networks’, able to identify shifts in manufacturing activity along the OBOR, as a function of port investments and rising land and labor costs in China. User equilibrium traffic assignment models estimate production impediment functions, analyze the path choice behavior of products in the super-network, and determine industrial relocation (and regional development) which minimizes generalized costs (production-transport-distribution).

Sri Lanka and its Port of Colombo, pivotal in OBOR, is used as a case study. The research shows that were Colombo to invest in an additional 8 berths, and price Terminal Handling Charges at 111 USD/TEU, the port could achieve incremental annual profits of USD 0.73 billion, with a Return on Investment of 7.3%. Total impact on the country’s GDP is estimated at USD 30 billion, while wages of manufacturing workers could rise from their current level of USD 420/month to USD 625/month as a result of higher labor demand.

Research is continuing on other countries and ports along the OBOR network.