Ports constitute a major part of the global transportation sector and have been integral to the success story of economies the world over for many centuries, evolving with the rise of ‘container hubs’ acting as a crucial connection between sea and land.
International maritime operations of ports are now responsible for 80% of global trade by volume and more than 70% of its value carried on board ships and handled by seaports worldwide, according to the United Nation’s UNCTAD. Ports have enabled many companies to expand into new markets for their products, acting as ‘funnels’ for economic development, channelling money and resources into specific sectors and corridors.
International competition can also drive more productive employment, but such long-term benefits are sometimes achieved at the expense of short-term negative shocks to the job market. The need for greater infrastructure expands beyond the physical limits of the port itself and can extend well into the hinterland.
In 2014, The OECD’s The Competitiveness of Global Port-Cities report found that one tonne of port throughput is on average associated with $100 of economic value added, while one million tonnes is associated with an increase in employment of 300 jobs. The report also found that companies in a port’s hinterland also benefit, with less than 5% of economic linkages with suppliers taking place inside the port area. In the six years since that report, consumer habits have changed so much that throughout has only gone in one direction, up. Meaning that these benefits will continue to be reaped.
Ports have clear positive economic benefits as they support industries and increase national competitiveness. Taken together, shipping and port activities tend to have a multiplier effect on an economy that is much larger than the port itself.
In a report for the European Community Shipowners’ Associations, consultancy Oxford Economics found that for every €1m the shipping industry contributes to GDP in the EU, it creates another €1.6m elsewhere in the economy. Meanwhile, for every job created another 2.8 are created elsewhere.
This effect is something that we at DP World recognise and have been keen to promote with our partnerships around the world.
Our world, our future
DP World has used its expertise in logistics and ports around the world to design solutions with local authorities and governments to bring about positive change.
It’s the reason that we have embraced the UN’s Sustainable Development Goals, which DP World’s Our World, Our Future initiative aims to promote through sustainability and by considering our impact on society. But do not just take our word for it.
We’ve been able to see real benefits at the Dakar Container Terminal in Senegal, which we have been managing and operating since 2008 after being granted a 25-year concession. In 2015 alone, the Dakar Container Terminal supported 4,900 direct, indirect and induced jobs. Meanwhile local expenses - comprising taxes, wages and payments to local suppliers - totalled $64m, bringing additional wealth to the local economy.
Elsewhere, in the Republic of Somaliland, we developed and are now managing the Port of Berbera - a multi-purpose port project on the Horn of Africa - which saw up to $442m invested to expand and upgrade its capacity. With a 30-year concession, we have a 98% local employment rate and 85% of our managers are locally employed. Furthermore, we have made a $600,000 contribution to 13 local schools to invest in the next generation of port workers.
Nevertheless, there are future challenges that international maritime trading needs to overcome, like the Covid-19 pandemic and growing international trade frictions.
While these events will undoubtedly have knock-on effects for ports and the economies they support, ports must step up, remembering the important role they play to make sure supply chains remain open and are able to support the global economic recovery.
Indeed, UNCTAD secretary-general Mukhisa Kituyi said that further digitalisation of international maritime trade will help ships to keep moving, ports to remain open and cross-border trade to continue even during a pandemic.
Last year’s Review of Maritime Transport noted how increased digitalisation and automation of processes are transforming the shipping sector, which should lead to an increase in shore-based jobs and encourage greater economic diversity.
It’s a trend that we at DP World have seen close up, and that’s why we have invested heavily in these technologies in recent years.
We will continue to invest in our ports, because we know that they benefit our partners and clients and the world. After all, when they thrive, we all thrive.