Maritime Ports Management: Bringing prosperity to Nation
Author: Capt Gajanan Karanjikar, Port management professional; Visiting Faculty IIM; and Multi-modal transport expert
Nothing contributes so much to the prosperity and happiness of a country as High Profits. – David Ricardo (1772–1823)
Ports being the export and import gateways are a nation’s links to prosperity. Any chain is only as strong as its weakest link, a port’s constitutional weakness within a supply chain will eventually affect a country’s economic growth. Quite-essentially the ports are direct contributors to countries national grid and hence their efficiency will count in terms of operation and excellence in connections for trade across borders
After all, ports of all sizes and types are important tools to build a country’s competitive advantages, as long as they aim toward a niche market. The modernisation of operations as well as processes are the important aspect in this regard. Revamping of ports is on the cards for long time and it is time the measures taken should yield some results now. Despite this compelling theoretic approach, in reality, the performance of a country’s ports is not always synchronized; neither is it focused on comparative advantages that are based on opportunity cost. Perhaps this is the reason why today’s trade has experienced an increasing disparity among harbours that have adjusted to the new technological and supply chain needs and harbours that have not reconciled with this new reality.
Where the more focus is needed on the trade across borders and ease of doing /facilitating kind of business. The recent world bank report stated ‘China made exporting and importing easier by implementing advance cargo declaration, upgrading port infrastructure, optimizing customs administration, and publishing fee schedules.' Thus the processes have a bigger role to play In ports functioning. Every country will have to draw those key parameters where the index has to be brought up with respect to efficiency in operational processes.
In the twenty-first century’s rapidly growing and ever-evolving global trade and transport, it seems difficult to clearly define the difference between a port’s absolute advantage, as opposed to a comparative advantage or a niche.
Adam Smith (1776) developed the absolute advantage theory in his publication An Inquiry into the Nature and Causes of the Wealth of Nations. During the ages of the powerful British Empire and the concept of mercantilism, Adam Smith contended that, in practice, mercantilism could not bring profit and growth to all countries, as during an export/import transaction, one country’s profit was based on another country’s low cost and limited gains.
A Comparative Advantage focuses on lower opportunity cost. It establishes the capabilities of growth and profitability from industrial and commercial specialization. The principles of comparative advantage were conceptualized by the British economist David Ricardo in 1821, that is, 45 years after Smith’s absolute advantage theory (1772–1823). Applying his principles in the maritime industry, a port’s value and profitability for the services rendered are analogous to the degree of obstacles encountered during the input process.
A Market Niche, finally, is a specialized market segment; a unique service or commodity that is offered to a market that has an unmet demand. Ports of any size, type, or geographical location can offer a niche when they have studied their supply chain’s market segments and have identified the different supply and demand trends. Niches are not readily available but are strategically designed by identifying this specific market demand and supplying the commodities or services required. Although a niche strategy is a widely recognized way of maximizing profits, there is no long-term guarantee of market share retention or sustainable success.
A nation’s economic and business objectives can be reshaped when it learns to develop, identify, and evaluate the comparative and absolute advantages or niche markets connected to its ports and supply chains. Once a port’s advantages are recognized, it may prompt other regional ports to diversify and therefore grow in size and influence, as opposed to consuming their resources in regional competition.
IMS