Regional development: port-industrial complexes
Michael Dunford and Godfrey Yeung
Department of Geography
School of Social Sciences and Cultural Studies
University of Sussex, Falmer, Brighton BN1 9QN
Tel : (44) (0)1273 606755
Email : [email protected]; [email protected]
Introduction
A port is essentially a gateway with facilities for receiving and transferring passengers and
cargo between water and land transport. As such it is also a place where related industrial
activities are found giving rise to port-industrial complexes. To identify the nature and
development of these complexes, attention must first be paid to the nature of ports and the
economic activities associated with them.
Analysing ports and their industries
A port is an intermediate location in the global flow of passengers and freight (on which we
shall concentrate). These freight flows can be construed as steps in commodity, value or supply
chains and as elements of the logistic systems put in place to manage them. A commodity chain
is a functionally integrated set of production, consumption, distribution and exchange activities
extending from the acquisition of raw materials through to the sale of finished goods and
services. At each stage in a chain there is a pressure to drive down costs and add value. The
organisation and management of these sequential processes involve the development of
complex logistic systems which embrace all of the activities involved in the physical movement
and handling of raw materials, goods and services and the related information flows: ordering,
scheduling, loading, movement, trans-shipment, warehousing and storage, inventory
management, and so on. As in the case of commodity or value chains as a whole, these logistic
systems (whose costs amount to some 10-15% of world Gross Domestic Product) are subject to
strong pressures to secure time economies, eliminate inventories (in a context of just-in-time
supply chain management), integrate activities (to permit door to door freight distribution) and
ensure reliability, amongst other things. As shipments by sea account for about 80 per cent of
international trade by volume, sea ports are vital nodes in global supply/logistic chains, as well
as in supra-national and regional trade.
In the framework of these ever changing economic and logistic systems, each port serves and/or
competes for a share of the traffic generated in its own hinterland and in the market area made
up of ports and port hinterlands throughout the world with which it is connected. To survive in
market societies ports must engage in a competitive struggle to expand their market shares. The
outcome depends on the capacity/quality of the ports and their infrastructures, of the road, rail
and water communications infrastructures linking a port with their hinterland (land access), of
1
their maritime interface (length of berths and quays) and of their conditions of maritime access
(tidal range, and channel and berth depth, protection from wind, waves and storm surges).
These capacities/qualities are themselves the result of massive investments, and involve
frequent redevelopment and relocation of the port itself, as is indicated by successive phases in
the development of Europe's major port of Rotterdam (Figure 1). As a result of this expansion,
Rotterdam's port (which concentrates on trade in oil and chemicals, containers, iron ore, coal,
food and metals) and its industrial complex cover 10,500 hectares and stretch 40 kilometers
from the city to the Maasvlakte along the Nieuwe Waterweg canal. The development of
individual ports also depends on a range of technological factors, geopolitical developments,
trends in regional/world trade and passenger movements (reflecting the degree of global
economic integration) and shifts in the relative economic strength of the areas ports serve: shifts
in the centre of gravity of world economic development (measured by GDP per capita of market
areas and hinterlands) will have a profound influence on the evolution of ports.
Figure 1 The phases of development of the port of Rotterdam
In general what has resulted is the development of regional port systems (Robinson, 1976) and
associated industries comprising a major hub port, several feeder ports and their hinterlands,
and a strong process of concentration of traffic on a small number of major gateways (due to the
existence of high fixed capital costs, scale economies and high entry costs in the port and
related industrial sectors). Table 1 records the 2004 cargo and container traffic of the world's
most important ports, while Table 2 reports the strong increases in container traffic of the
largest gateway ports. Amongst other things these tables also indicate the remarkable share of
Chinese and East Asian ports, which is largely due to the growth of manufacturing industries in
these areas. Alongside these developments there have been important changes in the structure
and governance of port, transport and logistic systems with in particular movements in the
direction of deregulation and a withdrawal of governments and public authorities from the
ownership and management of ports.
All ports are also focal points for economic activities and for associated industrial development.
This combination of activities is sometimes formally recognised in the designation of Maritime
Industrial Development Areas (MIDAs). The economic activities associated with ports fall into
2
several groups. The first includes cargo and passenger handling and storage and distribution
activities directly related to the port function, ship repair and a host of transport-related services
located in port itself and in their city centres. A second group comprises a set of processing
industries that transform imported material before their onward shipment/re-export taking
advantage of the inter-modal, trans-shipment and break of bulk functions of ports. A third group
of industries located in port-industrial complexes are those whose inputs comprise bulk
commodities imported through the port. Examples include oil refineries and related chemical
industries, iron and steel mills and sugar refineries.
Alongside the direct attraction of port-related industries two more general mechanisms also
shape the development of port-industrial complexes. The first is the existence of external
economies: the availability of shared infrastructures generates external economies that can
attract other economic activities and encourage processes of agglomeration, although ports and
their associated industrial areas also generate a series of negative externalitites in the shape of
noise, pollution and visual blight that can also deter further economic diversification and
development. The second relates to the way in which the concentration of port-dependent
economic activities can itself attracts customers and suppliers. Indeed the existence of backward
and forward linkages was often seen in growth pole theories as creating the possibility
cumulative processes of industrial development. In practice the degree of downstream
diversification actually achieved was quite limited, making employment in port-industrial
complexes particularly dependent on the fortunes of a few industries.
Monopolvilles: the development of Maritime Industrial Development Areas
The development of port-industrial complexes was a striking featureof economically advanced
and rapidly industrialising economies in the 1960s and 1970s. European examples include
Teeside in the UK (Beynon, Hudson and Sadler, 1994), Dunkirk (Castells and Godard, 1974)
and Fos-sur-Mer in France (Bleitrach and Chenu, 1975; Dunford, 1988) in France, and Taranto
and Brindisi in Italy (Dunford and Greco, 2006). At that time projects for the development of
MIDAs were a result of a coming together of developments in industries producing intermediate
goods such as steel and chemicals and a restructuring of maritime transport and sea port systems
on the one hand and state strategies of support for national champions and (often) for the
development of economically disadvantaged areas on the other.
In a context of increasing demand, intermediate goods industries experienced strong processes
of concentration and centralisation of capital. The emergence of a smaller number of larger
groups was designed to permit the devalorisation of outdated plants and the creation of a
smaller number of large integrated complexes capable of reducing handling and transport costs,
speeding up the turnover of capital and of realising scale economies. As these new complexes
drew on imported raw materials (for reasons of the availability or the comparative cheapness
and grade of imported materials), coastal sites with undeveloped flat land and natural deep
water channels were sought out. The creation of these plants encouraged in turn the growth of
3
upstream industries providing energy and gas and downstream metal and chemical-using
industries, although the degree of diversification and of long-term employment creation were
often limited, with some zones remaining largely mono-industrial.
In the maritime transport and port sectors a related quest for scale economies and a competitive
struggle to reduce the time and costs of circulation and to increase the speed of turnover of
capital saw a series of related developments: a growing use of extremely large and specialised
vessels whose time at sea had to be maximised to secure a normal rate of return on the large
amounts of capital locked up in them, and the development of ports capable of receiving them
and of ensuring ensure rapid access and fast turn-around times, so that the amount of time they
spent in the port was minimised. To meet these needs ports required deep access channels and
berths, specialised handling equipment and large amounts of space. The associated
reorganisation of port operations in turn provided the occasion for a recomposition of the dock
workforce.
These projects also involved significant state intervention. MIDA projects were in many cases
major components of corporatist national or sectoral economic development plans. At the same
time many MIDA projects were promoted as growth pole projects for depressed or less
developed areas. As a result these projects were often co-planned by regional planning agencies,
and were financially supported by regional development funds: state funds financed
infrastructural investments receiving less than the normal market rate of return and/or provided
grants and low interest loans to companies locating in these zones.
MIDA projects diminished in importance after the mid-1970s economic crisis. The stagnation
of demand for intermediate goods along with the creation of new capacity for refining oil and
for producing primary chemicals and steel in less developed and newly industrialising countries
saw the rationalisation of the industries that underpinned MIDA development and a movement
of investment into other areas of economic life. As a result port development projects were
refocused.
Supply-chain management and port-industrial complexes
In the last five decades two other waves of significant innovation in sea freight transport have
had profound implications for the supply chain management and for the development of portindustrial complexes.
Containerisation was the first wave of innovation. The idea of a container was conceived in
1956, when an American trucking magnate (Malcom McLean) calculated that the cost of
loading his 'cargo-contained metal box' onto a ship was less than US$0.16, compared with the
US$5.83 for loading cargo piece by piece. The widespread adoption of containers in cargo
transport led to the containerisation of significant parts of the logistic network. The deployment
of supporting infrastructure, such as gantry cranes, warehouses, railway, motorway and or
canal/riverine connections promoted new industrial sectors dedicated to the port development.
4
In addition, the introduction of dedicated container vessels in the 1960s in turn demanded deep
water container ports. In the pursuit of economies of scale, the capacity of container vessels has
increased significantly over time. In the late 1960s the largest container vessel had a capacity of
1,000 TEUs (Twenty-foot Equivalent Units, the size of a standard 20-foot container). By the
early 2000s, vessels with the capacity of 7,000-9,000 TEUs were the norm. It is estimated that
the per container operating costs of a 6,000 TEUs vessel are some 20 percent less than those of
a 4,000 TEUs vessel. These developments facilitate the deployment of information and
communications technologies (ICT) to improve the efficiency of logistic management,
maximising the throughput of ports and minimising the time that containers are sitting idle in
vessels or on quaysides.
The second wave of innovation involved the application of ICT in the operation of ports.1 As
well as places for transshipment and storage, established global ports are cities with ICT-based
logistics management hubs, the city-hub, with Singapore being a typical example (see Airriess,
2001). As a result of ICT advances, customs declarations and transactions are conducted
electronically, speeding up transactions and shortening container storage time. It is estimated
that more than 30,000 container trucks travel each day between Kwai Chung container terminal
in Hong Kong and various locations in China (as in contrast to most global hubs, there is no
direct rail-link between Kwai Chung and major Chinese cities) (Wang, 1998). The temporary
storage and trucking cost savings can be substantial.
Gioia Tauro: from planning disaster to container gateway
In March 1970 Gioa Tauro in Southern Italy (an area of rich citrus groves) was selected as a
future MIDA and more specifically as the site for state-owned Italsider's fifth integrated shorebased steel plant. By the late 1970s 7,500 jobs were to be created in an area of high un- and
under-employment and very limited industrialisation. State regional development funds were
devoted to port construction and site preparation which started in 1975-6. Although the
construction of a port capable of receiving giant ore and coal carriers was completed, after
several revised plans the steel project was quietly dropped. The reason why lay in the steel
overproduction crises of the 1970s and their devastating financial consequences for Italsider
(Dunford, 1988). A subsequent electrical power station project designed to make use of Gioa
Tauro's notorious white elephant was dropped for environmental reasons. In the mid 1990s,
however, this large and still modern port finally found a use as a container port and as a pole for
the transhipment of containers from ocean-going to Mediterranean vessels (a classic hub and
spoke network), not least due to its situation along the route connecting Suez to Gibraltar.
Starting from 16,034 TEUs and docking facilities for 50 ships in 1995 its operations expanded
1
From the perspective of technological innovation and diffusion, Hayuth developed a fivestage load-centre model of container port systems: (1) the pre-conditions for containerisation,
(2) container adoption, (3) diffusion, consolidation and port concentration, (4) load-centre,
and (5) the rise of hinterland (see Wang, 1998).
5
at breathtaking speed to more than 3 million TEUs in 2004 and 3,060 ships, making it the
largest container transhipment terminal in the Mediterranean.
Figure 2 Gioia Tauro port
Industrial agglomeration and port hinterlands:
After containerization, the size of the hinterland over which agglomeration effects were
exercised increased, in part as the port itself occupied more space, and in part due to reductions
in transport costs, creating an extended and discontinuous port-industrial complex
Agglomeration economies derived from the clustering of manufacturing sectors, which were in
turn attracted by accessibility to overseas markets. Dunning (1998) and UNCTAD (1998) both
recently argued that spatial clusters of (foreign-financed) firms in complementary sectors
profited from agglomeration/positive external economies, including improved access to shared
infrastructures, factor inputs (especially skilled labour), established distribution networks and
regional markets. One of the most successful examples of port development (from a
transshipment port to the city-hub of Pacific Asia) with agglomeration economies in its
hinterland is Hong Kong.
Because of its strategic location and its ice-free 12.5 metre deep harbour, Hong Kong has long
been the leading gateway in East Asia, especially to the southern China. Hong Kong developed
from an entrepôt in the early to mid-1900s to become the largest container port by throughput in
the world by 1987. In addition to being a significant node in regional distribution networks in
6
East Asia (in particular for cargo originating from and destined for southern China), Hong Kong
was made into a vital logistic centre for trans-national corporations (TNCs) in Pacific Asia.
Hong Kong was a relative late comer to containerization compared with two of its major, Asian
competitors, Japan and Singapore (which started to handle containers in the late 1960s). In
contrast to Singapore, where the Port of Singapore Authority (PSA), which directed port
operations and development, is an autonomous government agency, incorporated as a
commercial port operator in 1997 directed the development and operation of port, the Hong
Kong government only provided the land and certain infrastructures (mainly motorway) for the
development of a dedicated container port in Kwai Chung, allowing private operators to run it,
of which the most important are Modern Terminals Ltd (MTL) and Hong Kong International
Terminals (HIT).
After China implemented economic reforms and opened up to foreign investors in 1979, there
was a massive relocation of manufacturing industry from Hong Kong and other Southeast Asian
countries into four special economic zones and 14 coastal open cities in southern and eastern
China. As the only developed container port that shared land physically with mainland China,
and the transshipment port for China-Taiwan trade (there was no direct links between China and
Taiwan until 1997), Hong Kong enjoyed annual double-digit growth in throughput and
developed as a regional hub for the (foreign-financed and) export-oriented manufacturing firms
inthe Pearl River Delta. In the mid-1990s, the government estimated that 'port-related' activities
(broadly defined) accounted for about 21 percent of employment in Hong Kong (Wang, 1998).
Hong Kong, along with Singapore, Busan in South Korea and Kaohsiung in Taiwan accordingly
came to dominate container handling in East Asia. More recently, Hong Kong's dominance as a
regional hub is challenged by the operation of dedicated containerised terminals in mainland
China. One of the mainline operators, Global Alliance, started to call at Yantian in Shenzhen
directly in 1995. With a draft at 14 meters at the quayside and a direct connection to the
Beijing-Kowloon railway, Yantian in the Pearl River Delta is well equipped to handle container
vessels with capacities of more than 7,000 TEUs. It is estimated that it costs US$300 less to
ship a TEU from Yantian to West Europe or North America than via Hong Kong (Wang, 1998;
Loo and Hook, 2002; Cullinane, Wang and Cullinane, 2004). As mainline operators are
increasingly calling at ports in mainland China to handle China's booming exports, especially
Yantian and Shanghai, it is expected that the annual, double-digit growth rates egistered in
Chinese ports since the late 1990s will lead them to overtake ports in other East Asian countries
in the near future. In 2005, the throughput of container terminals in Shenzhen reached 16.1
million TEUs (up from 5.1 million in 2001), ranking it fourth in the world, just after Singapore,
Hong Kong and Shanghai.
The extraordinary growth of investment and output of China's export-oriented manufacturing
sectors contributed to the double-digit growth in ports’ throughput. The investment in port
development in China has exceeded that of all other countries in the world combined since 1985
7
(Wang and Cullinane, 2004). By 2010, it is estimated that the combined throughput of Chinese
ports will double to about 140 million TEUs. One of the instances of significant investment in
port capacity is Shanghai.. To overcome the maximum draught restriction of 11 meters in the
exiting container terminals and to facilitate the economic growth in the Yangtze Delta, the
Shanghai city government is investing US$17 billion in a 20-year project to build one of the
largest deep-water container ports (with a maximum draught restriction of 15 meters and a total
of 50 berths with a capacity of 25 million TEUs) in the Yangshan islands. Interestingly, both of
the Hong Kong hub's major operators, HIT and MTL, have been investing heavily in port
development in the mainland China. An example is Hutchison Whampoa, which owns
Hutchison Port Holdings (HPH). HPH operates 18 container terminals worldwide and
accounted for 10 percent of global container throughput. In addition HPH holds either
significant or dominant shares in the major ports in (HIT) Hong Kong, Yantian, Zhuhai,
Nanhai, Shantou and Jiangmen in southern China, and Shanghai and Xiamen in eastern China.
Equally interesting is the fact that Chinese TNCs and European port operators are investing
heavily in European ports to facilitate the rapid growth of cargo throughput originating from
China. For instance, COSCO Pacific holds a 25% of the equity in Antwerp Gateway, the
operator of a Deurganckdock container terminal in Antwerp. Meanwhile the Antwerp Port
Authority has trained more than 2,000 Chinese workers to work in the shipping industry and set
up a Chinese language school for the children of Chinese expatriates. A Chinese website
dedicated to companies in China is also planned.
Some of the most aggressive investors in port-development are located in the Middle-East. For
instance, United Arab Emirates-owned port operator, DP World, bought Peninsular & Oriental
Steam Navigation (P&O) for US$6.8 billion in February 2006. DP World was subsequently
forced to agree to sell the British company’s interests in six US ports after US lawmakers
threatened to block the takeover on the grounds of US national security. In 2005, DP World
ports handled 17 million TEUs, 19 per cent more than in 2004. Combined with P&O its
throughput reached some 37 million TEUs. By comparison, Singapore-owned PSA
International, the world’s second-largest port operator, handled 41.2 million TEUs in 2005.
Competition and port development
The development of leading port and industrial complexes should not divert attention away
from the other side of the coin: the rationalisation and run down of smaller and less favoured
ports with all of its consequences of port and industrial decline, job losses, dereliction and
attempted regeneration. A striking example relates to the recent development of Franco-British
ports not least for the differences it reveals in the scope for public action.
In 1994, on the French side of what was until the arrival of the Channel Tunnel the main ParisLondon rail route the Dieppe Chamber of Commerce and Industry put a large amount of
investment into a new cross-channel passenger and freight port capable of handling new
generations of larger and faster ferries and larger cargo ships. The success of this investment
8
depended however on complementary investments in Newhaven on the other side of the
channel in comparable facilities. On the cargo side, for example, James Fisher's modern cold
store facilities in Newhaven was constantly losing contracts due to insurance problems
associated with the restricted depth of the Newhaven port. On the United Kingdom side,
however, the former British Rail ports (Folkestone, Harwich Parkeston Quay, Newhaven,
Heysham, Fishguard, Holyhead and Stranraer) and fleet had been privatised in 1984. A
Conservative government sold all of British Rail's ports and ferries to Bermuda-based Sea
Containers for £66 million. Six years later, most of the ferry operations acquired from British
Rail were sold to Stena Line for £259 million. (Stena Line had been ia party to a hostile
takeover bid for Sea Containers). Sea Containers was left with the port facilities, its Hoverspeed
operation and a massive privatisation windfall as well as its separate containers activities and its
property development, hotel and publishing interests.
As the owner of the Newhaven port, Sea Containers did secure planning permission for port
modernization and the construction of a new outer harbour (complicated by the inclusion of a
controversial housing development in the submitted plans). To support these plans East Sussex
County Council secured approval for £6.8 million of capital challenge credit and £1million of
European Union INTERREG funding for a new road connecting the planned outport with the
national trunk road network. The situation was however that the local authorities would not
construct the road (or the modified road agreed to when Sea Containers suggested a revised
interim plan of deepning the existing harbour) until Sea Containers made a firm commitment to
port development, while Stena Line (soon to be involved in a long-drawn out merger with P &
O) would not make a long-term commitment to the route, and Sea Containers itself showed no
inclination to proceed with the port development.
In the late 1980s and early 1990s there was relatively rapid investment and growth in North Sea
and cross-Channel ferry operations after the negative impact of the herald of Free Enterprise
disaster of 1987 as the ferry operators prepared to confront the opening (finally in 1994) of the
Channel Tunnel. One reason why was the positive impact on traffic and passenger movements
of the Internal European Market. Another was that the ferry operators anticipated a cost
advantage due to the partial amortisation of their fleets and the high debts of the Channel
Tunnel operators.
Early in 1999, however, the new P&O Stena Line joint venture withdrew from the loss-making
(in part due to its diversion of traffic onto its Dover-Calais route) Newhaven-Dieppe route. For
several years Hoverspeed ran a summer passenger service. Traffic on the route collapsed with
negative consequences for the port of Dieppe itself and threats of relocation by local transport
operators in the Dieppe area. Two years later in 2001 the Conseil Général de Seine-Maritime (a
French departmental council) responded by purchasing the port of Newhaven port. The aim was
to reduce their dependence on private companies, and to re-instate passenger and freight ferry
services between Newhaven and Dieppe. Additional money was spent to improve Newhaven's
9
dilapidated facilities, a co-operation agreement was made with United Kingdom local
authorities and, together with three French Chambers of Commerce, the Conseil Général
established Transmanche Ferries and restarted the cross-Channel service. In spite of many
difficulties on the Newhaven side, it carries some 450,000 passengers per year, and in 2006 is
introducing two new ferries specifically designed to operate on the route.
References
Airriess, C. A. (2001) `Regional production, information-communication technology, and the
developmental state: The rise of Singapore as a global container hub’, Geoforum, 32(2): 235254.
Beynon, Huw, Raymond Hudson, and David Sadler (1994) A place called Teesside:
A locality in a global economy, Edinburgh: Edinburgh University Press
Bleitrach, Danielle and Chenu, Alain (1975) L'aménagement: régulation ou approfondissemnt
des contradictions sociales? Un exemple: fos-sur-Mer et l'aire métropolitaine marseillaise',
Environment and Planning A, 7:367-91
Castells, Manuel and Godard, Francis (1974) Monopolville. Analyse des rapports entre
l'entreprise, l'Etat et l'urbain. The Hague and Paris: Mouton.
Cullinane, Kevin, Wang, Teng Fei and Cullinane, Sharon (2004) `Container terminal
development in mainland China and its impact on the competitiveness of the port of Hong
Kong’, Transport Reviews, 24(1):33-56.
Dunford, Michael (1988) Capital, the state and regional development. London: Pion.
Dunford, Michael and Greco, Lidia (2006) After the three Italies. Oxford: Blackwells
Dunning, John (1998) 'Location and the multinational enterprise: A neglected factor?', Journal
of International Business Studies, 19: 45-66.
Loo, Becky P. Y. and Hook, Brian (2002) `Interplay of international, national and local factors
in shaping container port development: A case study of Hong Kong’, Transport Reviews,
22(2):219-245.
Robinson, R. (1976) 'Modelling the port as an operational system', Economic Geography, 52:
71-86.
UNCTAD. (1998) World investment report 1998: Trends and determinants. New York: United
Nations.
Wang, J. J. (1998) 'A container load center with a developing hinterland: A case study of Hong
Kong', Journal of Transport Geography, 6(3): 187-201.
10