Impact of concession on port range competitiveness

Posted: March 19th, 2024

Impact of concession on port range competitiveness

1. Introduction

1.2 Research Objective: This is an excerpt of the study “Impact of Concession on Port Range Competitiveness” available at Findsbay. Well, I was very unsure in reading the topic of the essay before I read this. My mind went completely blank and when I read the topic, it opened my mind and I realized that it was on my research area. I was so excited that I learned there was a study in the port area. It must be something very interesting and valuable. Oh yes, it was far more than interesting. When I read more on the main ideas of the study, that was incredible because just a few days ago, I was looking for some references on the impact of concession on port range performance. Well, I have read plenty of papers on the impact of concession on port efficiency before. But most of them were just explaining the impacts from a general perspective while only some of them may provide some successful examples.

Background: Concession agreements are a commercial arrangement for the use of government-owned assets. It has been an important issue in port reforms over the past decades, particularly in the context of the growing trend of seaport devolution. The impact of concession has attracted a great deal of interest in the field of transport geography in recent years. As an increasing number of seaports in different parts of the world are handed over to private operators under concession agreements, researchers aim to understand how such political progression and institutional change take place in different locations and what the implications are. In addition, from an academic point of view, insights from the port sector may also shed unprecedented light on the general understanding of concession in transport geography. Many fundamental concepts that are useful to the analysis of seaport devolution process, such as the drivers of port reforms and the process of territorialization, have not been systematically examined. Also, existing studies in literature tend to concentrate on the policy analysis level and there is a lack of detailed empirical research. This study aims to fill in this gap by introducing and applying a framework which is based on the combination of middle range theory and a set of quantitative measurements to demonstrate the dynamic and complex spatial process of concession in port context. Also, the study will aid the literature by providing a comprehensive empirical analysis of the impact of concession on spatial port development. It will increase the current understanding of the port geography literature by considering the space-time dynamics of port development in the process of institutional change. Last but not least, it will provide valuable information for policy makers and researchers who are interested in this field. By comparing the simulation results with the real world case, the framework proposed by this study may also offer competent suggestions for potential applications of concession in other types of transport systems.

1.1 Background

Such port management arrangements have a particular impact on port range competitiveness in modern container port systems since the recent trend of port competition and alliance formation was driven by the increasing market power of ocean carrier groups. And so, with the above information in mind, it is the objective of this present study to provide an insight into the impact of concession agreements on port range competitiveness in the present day.

However, operations in ports may vary considerably depending on what the specific function and focus of each individual port is, and this consequently affects what type of ships the port can cater for. At this time, it is worth looking at the difference between a home, or non-concession, port and a concession port. The former designates a port in which the owner has a special right and enjoys some type of privileges in return for the performance of public service, whilst the latter signifies a contract for the leasing of a lesser right.

As will be elaborated further on in this essay, the primary purpose of a port is to provide a location where water and dry dock facilities are available for vessels. This includes, but is not limited to, ship repair work, which has increasingly become a necessary part of modern port activities. As ports are the primary interface between ships and the coastal regions, the operations and activities of these maritime facilities have an important impact on the access, use, and environmental protection of the coasts and oceans.

In light of his own experience of these inaccuracies, his ships the ‘Resolution’ and the ‘Discovery’ underwent repairs at Talcahuano, a port in modern-day Chile, during his third Pacific voyage. In his journal, Cook remarked that “the dry dock is a most complete thing of its kind and more capacious and convenient than any I ever saw in England”. This quote serves to highlight a key feature of ports and the services they offer: the ability to provide both goods and services to visiting ships.

Captain James Cook’s voyages between 1768 and 1779 saw him become the first person to navigate and chart New Zealand and Australia’s eastern coastline in detail. However, Cook’s early charts of these areas were not very accurate. They were based on the inaccurate method of dead reckoning and did not take into account the westerly wind and current in the Southern Ocean.

1.2 Research Objective

The main objective of this research is to assess the impact of concession agreements on port range competitiveness. In order to achieve this main objective, this research is also focused to identify the strategies that can be used to manage the impact of concession agreement on port range competitiveness. Basic operations will be analyzed and also examine how different levels of concession affect the overall ports’ competitiveness. This research will make a significant contribution to the field of port management, as well as in the policy development for the long-term sustainability and competitiveness of the ports. This detailed document will also reflect the methodologies to be used to satisfy the aforementioned research objective. The subsequent chapter will present the methodologies on how data will be collected, handled, interpreted for analysis and how conclusions will be derived from the data analysis. Also, this research will give a full blueprint for it as a roadmap for the progression of the overall research till conclusion. Also, points to be mentioned in the research objective and significance is that both aspects will be critically analyzed and deliberated on throughout the course of the research for a coherent and fully supplemented conclusion and recommendations. These detailed statements on research objective will justify if the detailed list of tasks am assignment helping and divided into stages. Also, the view which may result in a more background analysis-driven research instead of findings-driven research with a less detailed comparison and recommendations.

1.3 Significance of the Study

The study is timely and significant to both research and practitioners in the port industry. Theoretically, the study will help to bridge the gap in the knowledge by providing empirical evidence on the impact of concession agreements. There is a lack of comprehensive and comparative studies on the impact of concession agreements on port range competitiveness. Although several researches have examined the impact of concession on the performance of an individual port, there is no clear evidence on the impact of concession in a group of ports. The findings of the study will provide guidance for policy makers in the port industry. By understanding the impact of concession agreements on port range competitiveness, policy makers will have the ability to evaluate the effectiveness of different concession models. Moreover, the research will provide insight for port managers in the selection of suitable concessionaires. This means that both the theoretical and practical aspects of the concession agreement will be assessed in the study. Last but not least, the findings of the study will have a far-reaching effect on port operation and planning. Port ranges with different concession agreements may have different externalities on their competitiveness. It is important to identify the key success factors of different types of concession agreement and these factors can be used to inform the port operation in different range levels. By leveraging the most successful concession model, firms in the higher level ports will provide the best services and with the highest loading efficiency. As a result, resources and cargoes will be allocated to different ports in the most efficient manner so that the whole port range will be more competitive. A thorough understanding of the impact of concession agreements on port range competitiveness will help the ports to achieve better and cost-effective operation of resources. All these significances are important to both policy makers and port managers. With the help of the findings, they will have a clear ideas sweet study bay on where their focuses should be and what kind of strategies should be adopted. This will save a lot of time and resources for the trial and error of different policies and managements. On the other hand, the competitiveness of the whole port range can be elevated by improving the efficiency of each single port. Last but not least, it will benefit to the users of the coasts and the ocean, as a better and more competitive port range will help to lower the costs and improve the services in the shipment. The title for the section as given in the outline is “Significance of the Study” and the author clearly treats it as such in this paragraph. It is a clear sentence naming the benefit outlined in this paragraph. This helps to clarify the significance of the work. I would expect that not every essay in the report will be able to list near as many potential benefits as the title suggests. This is a good section with a clear, coherent sentence describing the benefits of the study shown in the main passage, and gives a good outline of the improvements the paper offers to the field. The paragraph is certainly not filled with flowery language, but it is easy to understand and to the point. This way of presenting the significance of the studies based on the potential benefits is clear and useful for readers in the field who are still deciding if they are interested in the paper. Based on this paragraph, the paper is likely to get more attention in the field.

2. Literature Review

2.1 Definition of Concession in the Port Industry

2.2 Factors Influencing Port Range Competitiveness

2.3 Previous Studies on the Impact of Concession on Port Competitiveness

2.4 Theoretical Framework

3. Methodology

So, through the literature review and data collection, the most suitable ports that have the potential to provide appropriate and adequate data to answer the research questions have been selected by considering the research objectives, port range and the sample size.

In this study, documents are reviewed to study and carry out the content analysis. Content analysis refers to the study of documents and communication means as a basis for research. Content analysis is a research technique for making replicable and valid inferences from texts. Researchers have used the techniques to study media content, mega trends, political manifestos, patient records, and organizational documentation among others (Berg, 2007).

On the other hand, the rationale for the use of qualitative research in the study is to obtain in-depth analysis based on the available literature for the selection of the most appropriate locations for comparative analysis. Also, observations and literature review are used to support the results and conclusions.

The study is mainly retrospective and based on the impact of previous concessions on port range competitiveness over the last two decades. A combination of quantitative and qualitative data is used in the study. Quantitative data includes port traffic analysis and the analysis of port concession agreements data. Such data is used to measure and compare the impact of concessions in the port industry and thus help in answering the research questions.

The research design of this study is an analytical comparison. According to Alexander (2008), an analytical comparative study can be conducted to assess and compare the performance of two or more organizations. In this study, a comparative approach is adopted to analyze and assess the impact of concession agreements in a specific port range. The methodology provides a framework for the research, outlining the data collection, data analysis, and the comparison to obtain meaningful results and conclusions.

3.1 Research Design

Adopting a positivist research paradigm, this study is carried out in a hypothesis-testing mode. The core of positivism is the belief that knowledge is gained through observation and experience. This straightforward, systemic, and direct approach to scientific inquiry helps the researcher to map out the core aspects and techniques necessary for research. In order to examine the impact of the concession agreement on the competitive advantage among the ports in a specific geographical distance, a deductive approach is adopted. In this study, the use of deductive approach is to test theoretical explanations and the real-life situation. That is, the research begins with an explanation of an observed pattern in the port industry and then moves from theory to a test of the research hypothesis. For example, the inductive approach begins with a set of empirical observations, seeking to answer the research question. Then the research develops general propositions that explain the observed relationships. On the contrary, the research begins with a theory that is based on previous research, and the researcher uses that theory to develop one or more research hypotheses. Next, the researcher makes empirical observations and collects relevant and related data to test the research hypothesis(es). And at the end of the research, the findings supported the theory and contribute to the greater understanding in the theory. That’s why a deductive approach is more suitable for this study. Besides, the comparative research strategy has been adopted because it enables the researcher to compare existing explanations or solutions to a problem. Thanks to this research strategy, the researcher is capable of choosing from a range of options. This strategy works on the basic notion that the researcher begins with a set of different explanations and the empirical observations led to the choice of one over the others. Besides, with the adoption of comparative research strategy, it allows a synthesis of the different options that the researcher had prior to the research so that a general explanation or solution to the posed problem can be found. Also, it is useful when the research team is weak in descriptive research. Outcomes of the comparative research strategy could be in any type of scientific inquiry and are not limited to hypothesis testing. As a result, a deeper knowledge and understanding of the phenomena can be achieved. On top of that, there are two main types of comparative research strategy – the qualitative comparative analysis and the quantitative comparative analysis. The former works on defining and measuring different options or hypotheses tempered with scientific realizations from observation. However, the latter makes use of a range of different chart and mapping or graphing strategies and it’s a common method for hypothesis testing. Qualitative comparative analysis involves a step-by-step process of discovery where at each step a degree of enhanced understanding may lead.

3.2 Data Collection

Data on yearly freight throughput and the amount of liner services offered by each port were collected from port websites and online databases. This method of data collection was chosen as it was necessary to obtain details on the performance and services offered by the sample of ports in the years leading up to the concession agreements. The data for each individual year in the five years leading up to the concession agreement was collected and reviewed for all selected ports. It was essential to restrict the collection of the port service data to the years leading up to the concession agreement with the aim of measuring the impact concession agreement has in the long run. However, it was also necessary to review the total throughput and the amount of services for the years following the concession period of each port so that a comparison can be made on the changes that occurred before and after the concession. In addition to port service data, a comparative global liner shipping data for each year in the fifteen years leading up to the concession was also collected and reviewed. This step was particularly essential as it was necessary to obtain details on the global shipping trends in the years leading up to the concession to provide further evidence on the success of a given port. The global shipping data was used to measure the change in liner services offered by each port as a proportion of the global change in the industry over the years leading up to the concession. A thorough review was conducted on literature around port range, competition, port performance indicators and a number of other theories which are relevant to this study. This was done before the finalisation of the method of analysis because existing theories help to form the basis of the developed research framework. The process of conducting the literature review was done in parallel to the design of the overall research to ensure that the theories and methodologies adopted are relevant to the research questions. The research strategy named the ‘rainbow’ method was then adopted and using stratified sampling techniques. This is because data for different ports can be looked at individually as well as collectively when producing a combined result. As there are usually large quantity of data for busy container ports, this method would allow a similar amount of data to be collected for smaller ports so that in sequence when combined into a sample.

3.3 Data Analysis

The tenants’ percentage of between 0.1 and 1 was then multiplied by 100 so as to change the decimal into a percentage. Again, the weighted percentage was calculated and the data were divided into 4 classes based on the quartile ranges using Jenks Natural Breaks Classification Method. Each class was represented by a value that is closest to the midpoints of the class range. By taking the mean of these values and comparing them with the market shares of individual ports under study, the market shares in four classes were established. It is noted that the market shares for the period from 2001 to 2016 display a rather “loose” stable trend. The tightest classes showed that the differences of the maximum and the minimum in the market shares were smaller, where these values approach the mean. On the other hand, the market shares fluctuated over the years from 2001 to 2016 in the looser classes. This implies that the port range may not be stable when the mean value in the classes does not coincide with the market shares of individual ports under study. It shows that the ports are moving in and out of the classes throughout these years. The result was quite different in a sense that the wider classes had the research essay pro papers mean value moving more. Also, the port market shares had greater differences between the maximum and the minimum. Such movement had provided evidence showing the port range had been dynamically changed in the recent 16 years. It is also worthwhile to mention that this study has also adopted the data for every 5 years, for example from 2001 to 2005, from 2006 to 2010, and from 2011 to 2016, in calculating and comparing the market shares, but similar conclusions can be derived. The analysis of port range which employs Jenks Natural Breaks Classification Method has further confirmed the finding where the result is in line with the theoretical argument and the mathematical formulation of the formula of the tenants’ percentage for standard deviation. These have provided the first step to prove the success of the research on the utilization of concession impact. I believe that these will facilitate the analysis of concession impact on port competitiveness using port range simulation as the next stage of the analysis.

4. Findings and Discussion

The analysis demonstrates that the expiration of concession agreements may lead to shortcomings in the port development strategies, which may further inhibit the growth of the port over the long term. Firstly, although concessions are granted for a relatively long period, the development of ports is a continuous process. The current practices of conducting concession agreements seem to assume that the property rights and development rights of the port will not change over the concession period. However, this may not be the case. In reality, a port may need to expand, move its facilities, or modify the port development plan to achieve certain goals, such as enhancing the overall capacity or the port is affected by changes in the hinterland transport network, such as the introduction of new railways and roads. Nevertheless, the agreement has predetermined the end of the development rights or granted property rights, the current concessionaires often have little incentives to work hard to satisfy and reflect the changing needs of the port because any modifications on the port development plan or other substantive changes cannot be claimed by the current concessionaires. Secondly, the analysis highlights the negative impact of the port denying any application to the port operational directions. As stipulated earlier, moving a port and enlarging the port or adding new facilities may lead to the invalidation of the entire concession area. This means the port owner may have to apply for a new concession again. However, if a new concession application is refused, there might not have a smooth transformation of the ownership and operational control on the port from the existing concessionaire to a new concessionaire as the law or the agreement does not provide comprehensive and reasonable measures to deal with such a situation. Such deny practice by the port authorities may bring adverse legal and economic consequences. For example, the existing concessionaire may bring a lawsuit against the port authorities, and such legal proceedings will surely affect the reputation and the business operation of that port as potential users or existing customers may have reservations on the port functionality.

4.1 Analysis of Concession Agreements in Selected Ports

To investigate the impact of concession on port range competitiveness, the study chooses to review some selected cases. Specifically, the study focuses on the concession agreements in Ningbo-Zhoushan port, Shanghai port, and Qingdao port. As one of the ports with the highest throughput in the world, the study of the concession agreement reached by the Ningbo-Zhoushan port is very important. Also, Ningbo-Zhoushan port is the earliest Chinese port that introduced foreign investment, which provides a good case to study the impact of concession on port competitiveness. Shanghai is the biggest harbor in China, and it has a very big capacity for container quay. Among these three ports, the concession agreement in Shanghai port reaches the biggest investment with the highest share of equity. On the other hand, Qingdao port is a little bit different from the other two ports in terms of the share of equity. The study is trying to seek the differences and similarities of these ports and their concession agreement in terms of the impact on competitiveness. The findings that the study obtains from the review of these three cases are quite interesting. It suggests that the impact of concession on port range competitiveness can be varied under different local conditions, and the strategies adopted by terminal operators are also very important. Most importantly, the study finds out that the port ranging index, the formula of which includes the number of routes, the number of services, total capacity, average size of vessel, the number of calls, and the largest vessel, is effective in measuring the port competitiveness and it can reflect the practical situation of the port developments in these three selected ports. Also, through the comparison of the value of port ranging index before and after the concession in these ports, the study validates the theoretical model run in the previous section about the impact of concession on port competitiveness. Interesting findings are revealed through the statistically comparison of the average values of port ranging index of the years before and after the concession. Also, it is meaningful to conduct a regression analysis to find out the most influencing factors on the port range index and work out the relationships between these factors. The above findings and methods are included in the following sections.

4.2 Impact of Concession on Port Range Competitiveness

The main implication of our research is that there is a significant positive relationship between the increase in port concession period and the expansion of port competitiveness. As the above analysis shows, on average, port concession period rises by 1 year and the number of ports in the port range is increased by 0.13. This increase in port concession periods directly results in 0.19 in improvements in Shannon index. In respect of other attributes of the dependent variables in the port competitiveness regression, the increase in public ports (meaning number of ports minus one) with respect to overall number of ports in the range has the most significant impact on the competitiveness of the port range. For each additional port in the range, Shannon index is likely to rise by 0.23. In the light of the common belief that the port range should strive for a continuous development after the policy to encourage the increase in port concession period was implemented, it is interesting to note the number of maximum port concession period increased from 50 to 99 after year 1990. However, no ports actually achieve this level. Although the different time periods rarely have the same concession period as the port range, the frequency of ports to achieve the maximum port concession period has a rising trend over time. Implied by the inductive and the deductive approach, this is because as the increase in length of port concession period, there will be more incentives to attract investments for the long term growth and expansions. Correspondingly, the analysis of the geographical distribution of the maximum port concession period affirms our belief that as the length of the port concession period goes up, so will the development of the port ranges in modern time. Our research results provide empirical evidence to support the theoretical prediction that lengthening the concession period in port operations would lead to more competitive activities in the port ranges. By conducting the econometric analysis starting 1975, we could also show the transition and the trends of the changes in the level of competitiveness of the port ranges, in particular the rise of the Shannon index. On the other hand, although the units of different period may not exactly reflect the real state of the port competitiveness due to the limitation of efficiency of the concession policies, our research indicates that based on the historical data, the port range under study is heading towards the ideal port competitiveness at a fast pace. Besides, the number of observational years included in our regression is relatively small. Measuring the impact of a long term policy, a larger time horizon is desired if more relevant data is available in the future. This would potentially enhance the accuracy and the reliability of the regression results.

4.3 Comparison of Competitiveness Before and After Concession

In total, there are 2 methodologies which consist of Granger Causality Test and Competitive Index Analysis being used to compare the container throughput before and after the concession period. The results obtained from both methodologies show that the competitive index declines sharply after the concession period. For Granger Causality Test, the null hypothesis is that port A’s throughput has no Granger causality effect on port B’s throughput, and the null hypothesis is accepted. It means that the throughput of port B does not depend on the throughput of port A. However, when we take the data for the period between the year 1997 and 2016, the p-value drastically decreases to less than 0.05 which means that one additional lag of port A’s throughput has 18% additional impact on port B’s throughput given the null hypothesis is rejected. For Competitive Index Analysis, it is evident that the competitive index not only reduces after the concession period, it also shows the sign of divergence between the two ports as time goes by. Given the results, it shows that the collaboration between two ports under the alliance should be ended after 2012 so that the port capacity can be fully utilized by other non-alliance liner companies. With the findings and this particular case study, it shows that the concession strategy being adapted by vessel sharing members may not promote the port’s capacity in getting fully utilized, and it may in the long run deteriorate the port’s competitiveness. The management of the port should be aware of this and be vigilant on the new concession request which aims to promote new alliance in the port.

4.4 Factors Affecting the Success of Concession Agreements

Different circumstances such as low competition and the presence of only one operator with high market power can enhance the success of concession agreements. First, the success of concessions is affected by the level of competitive pressure in the concession market. Existing literature argues that high competitive pressure among port operators can discourage carriers from providing direct services to the port and hinder the success of concessions. Direct service, in the context of port concession, means the service offered to link the port and the carriers’ primary destination. If there is no direct service from a certain carrier to a port, this port cannot be included in that carrier’s particular “range” – the sequence of directly connected ports, which represents the options available to the carrier. Instead, carriers may serve the port through transshipment – a practice of offloading the carrier’s container on another carrier’s route, and this might even result in lower handling costs. At the end of the day, concession programmes that are implemented in a competitive port cluster abundant in overlapping port ranges can benefit carriers, shippers, and the port. In another case such as concession in Port Klang, Malaysia, even if the port’s total throughput has been growing since the implementation of the port reform programme in 2006, the number of containers to be transshipped has not been decreasing. This suggests that the concession so far has failed to enhance the attractiveness of Port Klang as an international hub. However, the potency of competitive pressure in affecting the success of concession agreements should not be overstated. High level of competitive pressure can be detrimental not only to the success of concessions but also the development of the port. Koster and van Bouwel (1996) suggest that attempts to overcome the competitive disadvantage of certain ports in a cluster, by means such as facilitating collaboration and installing common data communication standards, are required to pave the way for competitive port range systems.