Understanding Maritime Economics Regarding Port Financial Economics Essay

This literature reappraisal divided into six parts for understanding the economic sciences and nautical economic sciences sing port fiscal affair what featured in first portion. Furthermore, 2nd portion is discussed the logistics activities at port in relation to the planetary supply concatenation direction, direction of transit where substructure and intermodal systems helps port to increase the efficiency by altering the trade goods often to/from larboard country. In add-on, seaborne trade parts will calculate the present basic scenario of international concern and transportation trade. Finally reviewed the literature of port conveyance where port effectivity, fight, public presentation are highlighted for understanding the function of haven in international context and what schemes Bangladesh should take for developing her port installations sing the derived demand of trade.


Transporting plays a critical and important function in national economic system. The really beginning of modern economic sciences described about the literature of life criterions that is interested on trade and development. Clark et Al ( 2001 ) found the deficiency of initial consensus among research workers on the relationship between trade and growing has been mirrored by differences in the existent trade schemes of developing states. Globalization and liberalisation of trade besides brought the competition for prolonging on the international trade in all context developed or developing state. Basic demands of any topographic point is extenuating by importing from other topographic point in a inexpensive rate along with choice merchandise. This is go oning because of easy entree to the haven for transporting the lading at low cost. This economic sciences of trade good transit or minimising the sea conveyance cost or together created the environment for making international concern. Globalization ( King, 1997 ) is a interruption with the yesteryear, disputing accepted manners of idea and their interlingual rendition into concern pattern which reflect the range of procedures that are progressively act uponing our lives loosely intended to connote a displacement in the basic premises that have underpinned international concern and trade on the footing of comparative advantages. It is describes as a holistic attacks to international concern scheme for providing against the demand at a inexpensive rate in the competitory market.

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The Economist Anderton ( 1993: p7 ) inaugurated economic scarceness as “ there are merely a finite ( or limited ) figure of resources such as workers, machines, mills, estates of land and resources of oil in the planet Earth. Because these resources are finite, it is non possible to bring forth an infinite figure of goods and services ” . The basic economic job is originating twenty-four hours by twenty-four hours because human wants are non limited. Furthermore, the Numberss of human being are increasing irregularly and most of the states are unable to command it. In add-on, all resources are non equal for all. It is vary individual to individual, state to state. Globalization and wants of people changed the definition of import ( Shortage point to be brought from abroad ) and export ( Excess point to be transported to abroad commercially ) . To equilibrate the privation and resources in a specific state, import and export activates are non merely a trade but besides it is highly a commercial affair for a state. As a consequence, economical status of a state depends on its natural and unreal resources, population, activities of trade and others.

Economic ( JCRA,2006 ) efficiency plays a critical function in advancing economic growing and development at the rate of higher return in concern, for labor, overall, is higher existent rewards and increased employment. Hopefully, in regard of consumer public assistance, it leads to take down monetary value, higher quality goods and degree best service for full pledged satisfaction. Branch ( 1998: p-198 ) stated that “ Governments and merchandising axis such as ASEAN, NAFTA and the EU give a high precedence both to developing their regional economic sciences and to furthering international links with other states and trading axis through the vehicle of international links with other states and trading axis through the vehicle of international trade ” .

Macroeconomicss ( Monteil, 2009 ) concerned with growing theory or the development of an economic system ‘s productive capacity over the clip and how to the full the economic system usage its productiveness capacity. The most ( Quinet andVickerman, 2004 ) immediate macroeconomics effects of the development of substructure developed the conveyance sector which is denoted as a determiner of economic growing.

Transportation is an international concern where foreign exchange performed as the taking variables for importing and exporting trade good. In a survey, Lane ( 2001 ) expressed that place and foreign monetary value degrees are gluey, a motion in the nominal exchange rate displacements the existent exchange rate and delinks place and foreign ingestion growing where place and foreign end product rises since the domestic demand enlargement raises demand for imports at the fixed comparative monetary value of imports in footings of domestic currency. Foreign exchange rates which helps to do determinations in house servants development but before traveling for developing demand to analyze the supply and demand for measuring the strength of the state. Monteil ( 2009 ) addressed three inquiries to deduce the supply and demand for foreign exchange, which are as follows: –

What determines the comparative attraction of house servants versus foreign goods?

What determines the comparative attraction of house servants versus foreign assets?

What regulations govern cardinal bank minutess in the foreign exchange market?

As Bangladesh is import based state and depends on the foreign loan or fiscal aid, before taking any investing determination, need to measure the above inquiries.

McConville ( 1999: P 15 ) defined “ Maritime Economics is a subject or field of survey connected with the mode in which bing stuff and human resources are used in the industry and how they changed and develop over clip. Nautical Economics theory consists of a organic structure of constructs and rules which assists in the account of the industry ‘s advancement ” . Drewry ( 1996 ) transporting advisers featured that transporting finance is a high hazard but low return concern. Therefore, economic sciences of transportation is really difficult and complex by its nature.

McConville ( 1999 ) argued that there is no state in an international economic system who is self sufficient in the trade goods that its population demands and expects. He functioned that the maritime conveyance as a span between manufacturers and consumers for minimising the spread of demands and expects. Structural ( Gallegos nd ) alterations in international trade and the development of maritime conveyance have a direct impact on port growing and enlargement. Globalization, or the enlargement of markets and hence of the economic chances of societies, is taking topographic point non merely because of the supra-national nature of markets, but besides because of the flow of foreign investing and the schemes of transnational endeavors.


Logisticss is defined by Branch ( 1998 ) as the clip -related placement of resorts for guaranting the stuffs, people, operational capacity and information are in the right topographic point at the right clip in the right measure and quality and at the right cost. Fragmented in 1960, logistics is to the full integrated in 2000 where transit is the chief wings of physical distribution reviewed by Bardi et Al ( 2006 ) in their survey of transit. However, this portion is designed for having the function of port in supply concatenation on the context of logistics.

Transportation ( Bowersox et al. ,2007 ) is the operational country and primary duty of logistics across the supply concatenation that geographically moves and places stock list which traditionally received considerable managerial attending.Quinet & A ; Vickerman ( 2004 ) expressed that conveyance has a cardinal function in economic activity which contributes to a portion of national end product. Besides added that it is a derived demand and growing of the economic system as a whole ; it is necessary to understand the nature and the strength of this nexus and betterments themselves can find the rate of growing of the economic system. Furthermore, conveyance is like any factor of production which can be substituted for others, dependant on engineering and on comparative factor monetary values. In a survey of conveyance economic sciences, Hensher and Brewer ( 2001: P 3 ) expressed that “ Risks and chances, challenges and wagess pressure the economic universe of conveyance and logistics direction ” .

Pallis ( 2002: p-1 ) stated that “ In fact, the maritime conveyance system has been a extremely institutionalised and politicised economic sector. Precisely because of its strategic economic significance, national authoritiess are executing as market ( de ) regulators, every bit good as nautical substructure investors and proprietors ” . Ocean ( Jarzemskis and Vasiliauskas, 2007 ) freight conveyance industry has changed its construction as a consequence of the new tendencies and stipulations that came with the debut of the container and the rise of inter-modality. Pedersen ( 2001 ) explains that during the 1990 conveyance and communicating appear easy to be on their manner into the mainstream once more, but now transformed into a much broader construct of logistics, which has become an progressively of import component in the administration and restructuring of the globalising economic system. From being an external factor, conveyance has become an incorporate portion of the production and distribution system.

Kumar and Hoffmann ( 2002 ) stated that the trade in ware and unfinished goods increases faster than the universes GDP, and so does the demand for nautical conveyance services which portion of the planetary logistics concatenation that determine a good ‘s fight. At the same clip, the maritime concern is itself strongly affected by globalisation. Trade in maritime services is one of the most liberalized industries, and its “ constituent ” such as vass, flag enrollment, category reviews, insurance and the work of mariners, are purchased globally.

The ( Pettit and Boresford 2009 ) function of ports within the supply concatenation has taken several different signifiers and development waies for back uping the all logistics spouse of conveyance. The Supply Chain Management ( Martino and Morvillo, 2008 ) supports the development of partnership between the histrions of the concatenation and considers the integrating of activities and resources along concern procedure as beginning of competitory advantages. In a peculiar context of port fight, SCM attack is given the traditional hostile relationship between port histrions for get the better ofing the complexness on transporting trade. In order to pattern the distribution of goods between two topographic points, Tavasszy ( 1997 ) assumed that shippers combine locations of demand and supply in a rational manner for maximising the net income ensuing from the interaction and this net income is determined by the balance of costs and benefits coming from production, transit and ingestion or merchandising. Procuring the natural stuffs and bringing of finished goods or reassigning trade good, conveyance cost is the chief operating cost which determines the value of the merchandise. Internationally, puting a mill or investment in a foreign environment maritime entree and port efficiency are the of import determiners because of trade good transit economically and seasonably. Global supply concatenation direction is extremely depends on the public presentation of haven and intermodal system of the bring forthing state.

Transportation ( Bardi et al.,2006 ) is an built-in activity for a modern society which influenced in every facet of our lives for finding the value of goods by adding clip topographic point and measure public-service corporations to them. Overseas sourcing and selling by fabrication and selling houses are increasing the importance of planetary transit. Furthermore, the activities of them are turning by cantering the port for securing natural stuffs and cargo of finished goods.

The most crude industrial procedures are maintained through a good supply concatenation for puting the natural stuffs and shipped the finished merchandise in mill and vehicle severally. The relationship ( King, 1997 ) between the provider of natural stuffs and the consumer of finished merchandises involves a complex web of linkage, both within and between single companies by a system of supply concatenation which linked together by the feed-forward flow of stuffs and the feed-back of information. Stopford ( 2009 ) believes that transporting is concerned with international trade ; it necessarily operates within a complicated form of understandings between transporting companies, apprehensions with shippers and the policies of authorities. The demand ( Evans and Marlow, 1986 ) for sea conveyance is complex and variable because it is a step of the comparative advantages enjoyed by one state over the other. Most likely nautical industry is the lone industry where investing is really high but return is really low and clip factor investing comparing with any others.

For a complete analysis of a cargo transit job with all its alternate solutions and runing dimensions, Demilie et Al ( 1997 ) argued for separate operation of conveyances by different agencies on the same substructure, burden, droping, traveling, transporting and transiting of trade good, peculiarly, the goods transfer operation from one manner or means to another must be included to analyse the options offered by multimodal conveyances.

Political ( Gubbins,2003 ) thought and authorities action or enterprise can alter people ‘s perceptual experience of conveyance but as a service industry it is besides conditioned by events which although peripheral to itself, can still do big alterations on the conveyance web. In the context of conveyance webs, Capineri ( 1997 ) identified three chief possible scenarios which are as follows: –

A growing scenario that means traffic will still increase because of its demand, So that traffic control or separation strategy is the derived demand and basic portion of the direction of transit.

A permutation scenario like average alteration, public versus private. Creation of modal installations such as unreal canal for cut downing route traffic. Proper direction of conveyance by denationalization or handing over the responsibly for better direction or avoiding traditional attack.

Finally the multimodal scenario which will assist to carry through the demand of shipper and consignee for directing and having trade good on her premises in a bundle plan.


Recent ( Kwak et al 2005 ) environmental alterations over the universe and rapid promotion of ocean engineering are switching the perceptual experience of maritime industry. In add-on, economic depression what relocated the economic system from developed to developing besides diverted the class of marine trade towards developing state like China or other Asiatic state. The development of port and transportation sector is dawdling behind in Bangladesh. Due to fiscal crisis and inability to better the transportation policy, the state is s depends on the foreign transportation company. for due to its Legislative ( Drewry, 2000 ) control of transportation has efficaciously shifted from national degree to international degree besides traveling from regulations devised and implemented by single national disposals with a few international understandings, to a complex and turning set of planetary demands. In ( Francois and Wooton, 2000 ) the nautical universe, the oceans are populated with transportation conferences which meet on a regular basis to put rates, analyze market conditions, and assess other developments like fuel monetary values and port charges for building the market construction and concern environment.

On ( UNCTAD, 2009 ) the heels of the flowering planetary fiscal crisis and economic downswing started from 2008 decelerated the growing of universe economic system and planetary ware export and import. Reducing the planetary production every bit good as demand or take downing the degrees of trade has undermined the growing of seaborne trade. In add-on, clime alteration and nursery gas emanations from international transportation are adding a farther challenge to the maritime sector. The seaborne trade is extremely depends on the universe GDP growing which is bespeaking a tough clip of universe development.

In ( Bichou and Gray,2004 ) the recent argument on port fight, a turning figure of documents has focused on the issue of integrating of port activities sing supply ironss for bordering the unitarily of the port in the procedure of making value for the terminal client.The troubles ( Martino and Morvilo,2008 ) are encountered in the usage of a systematic attack in the port-aimed for finding the part of the whole port community in the supply chains-is chiefly linked to the deficiency of a ‘competitive community spirit ‘ among the histrions, both public and private. The construct of integrating in the port context has basically concerned intermodality and organisational integrating undertaken by planetary bearers aimed at reacting to the altering demands of industrial and commercial endeavors and, at the same clip, bettering their ain internal efficiency.

The field of analysis to the function and integrating manners of ports within planetary conveyance systems, on the other manus they underline the inactive function traditionally played by ports in relation to the strategic picks of other port community operators, with obvious effects on their bargaining power and, in general, on their development schemes. In this regard, it ( Slack,1993 ) has already been shown that ports are mere ‘pawns in the game ‘ within planetary conveyance systems and that the power of line drive transportation affects port development. In a survey Robinson ( 2002 ) identified the function of the port in the supply concatenation through the part of the ‘multi-port operator ‘ , i.e. big terminal operators, in the procedure of making value. Finally, Bichou and Gray ( 2004 ) attempt to gestate the port system from a logistics and supply concatenation direction position, taking to specify a new model to mensurate larboard public presentation. They start from the hypothesis that ‘by utilizing a logistics and supply concatenation attack, ports may accomplish a better usage of port capacity ‘ .

The port landscape ( Meersman & A ; Voorde, 2002 ) has, after all, besides altered in many respects because new engineering and strategic developments have led about automatically to greater port competition, both at port authorization degree and at the degree of companies runing within the assorted ports. In add-on, all port participants, from governments to terminal operator agents, are looking for ways to maximise net incomes, to keep or increase market portion or merely to last. They besides added that a strong and expeditiously run haven could be an of import plus for a state or part in seeking to better its economic place. When looking at the determiners of port efficiency, Clark et Al ( 2001 ) found that the degree of substructure and organized offense exert a important positive and negative influence severally. In add-on, policy variables reflecting ordinances at havens affect port efficiency in a non- additive manner. This consequence suggests that holding some degree of ordinance additions port efficiency, but an surplus of ordinance could get down to change by reversal these additions.

An of import issue is addressed by Tongzon ( 1995 ) in the survey of port public presentation and efficiency and that is quantified the part of terminal efficiency to the overall finding of port public presentation. He found that port provides empirical support for the impression that terminal efficiency is a critical constituent of any waterfront reform aimed at bettering port public presentation and efficiency.

Determinants OF EFFICIENCY

Container Mix

Crane efficiency

Work Practice

Vessel size and lading exchange

Determinants OF THROUGHPUT


Frequency of Ship call

Port Charges

Economic Activity

Figure 3.12 ( Diagram ) Port public presentation constituents ( Tongzon,1995 )

The function ( Reid & A ; Sanders, 2002 ) of operations scheme ( which is a portion of Business Strategy along with Marketing & A ; Finance scheme ) is to supply a program for the operations maps for doing the state of affairs to utilize its resources absolutely and efficaciously. For developing the operations scheme in maritime concern, it is really of import to follow the all phases of operations because it is non merely the concern but besides functioning the state and act as a accelerator of all trades of the state.

Figure 3.13 ( Diagram ) . Performance aims in operations ( Slack and Lewis, 2008: Reid & A ; Sanders, 2002 )

Cost. Cost is the chief elements of concern. Less cost or minimise the entree outgo will assist to increase the net income border every bit good as lessening the abuses of the company resources. Logistical ( Bowersox et al 1997 ) systems should be designed to use transit that minimizes the entire conveyance cost.

QUALITY. Quality as a competitory precedence ( Reid & A ; Sanders, 2002 ) chiefly focused on merchandise and service quality. There will be no forfeit in quality of the service.

TIME. Time is the best precedence for velocity and on clip replacing of the vas. The port public presentation is measured by the velocity of handling of lading and vass.

FLEXIBILTY. Due to the form and manner alteration of trade, environment alteration quickly, including client demands and outlook, the ability of the administration to suit these alterations can be a victorious scheme.

DEPENDABILITY. Organisation ( Slack and Lewis, 2008 ) needs to accomplish higher assurance in the operations for making to the concluding finish or consequence seasonably.

Stopford ( 2009 ) believed that port betterment plays a major portion in cut downing the sea conveyance cost which affected the value of the trade good. Globalization, trans-nationalism of production, or puting the natural stuffs or finished merchandise in right clip by traveling through sea, land or air need a perfect topographic point for co-occuring the supply and demand. Larger ship, containerisation or latest engineering or combination of sea and air or any procedures for dependable conveyance manners, Palmer ( 1999 ) identified one point at which a lading moves from sea to land or land to sea and that is port which attracted geographers, economic historiographers and sociologist. Recent proficient alterations in container and majority handling, port development is indispensable for remaining with the trade clock and cut downing the bend circular clip of the vas is the chief mark of authorization because transportation is the low return concern where investing is really high.

The basic purpose of economic planning is to convey about rapid economic development through the development of Agriculture, power, conveyance, communicating, bungalow industry and all other sectors of the state context Bangladesh. Through rapid growing that means economic growing, the state aims at increasing GDP. Directly or indirectly, port has been fuelling to the all sector of economic system for developing in national economic system where conveyance of a state serves as the life line.

Overall, port leads the economic development of a state. Port operates as establishments for advancing industrialisation, enlargement of trade and commercialism, prolonging stableness in monetary value degrees, colony of payments for imports and exports. Adam Smith, frequently regarded as the male parent of modern economic sciences, saw transportation as one of the immersing rocks to economic growing. A state ca n’t run without links to the outside universe, can ne’er, Adam Smith argued, accomplishing high degrees of efficiency by transporting that means the particular function of a port. The physical or choice public presentation of a port helps to lend on the national development.

However, from the above literature reappraisal sing port in connexion to the intermodal systems, backwoods, and substructure of conveyance systems along with port ain substructure of terminuss, equipments and quays Bangladesh will happen the ways to put up a schemes for developing the port services to play an of import function in GDP straight and societal services indirectly. On the other manus, treatment about economic sciences and others will assist to understand the fiscal results from the port conveyance by bettering the port installations. Last but non least, overall, development of the Bangladesh maritime industry as an of import sector of national economic system.


The development of Bangladeshi port or developing states are extremely depends on the finance of international giver or loan from international Bank. This literature reappraisal will assist how Bangladesh can put locally or international for their port development and substructure undertakings for doing easy entree to the sea port for utilizing inexpensive maritime installations in import and export concern.

The maritime ( Khanam and Misir,2008 ) dependence factor of Bangladesh is approximately 30 % where 89 % of international trade is handled by the premier port Chittagong as the chief gateway of international trade and commercialism. Unfortunately, this port is unable to supply prompt and efficient port operations comparing with private sector port operation in other states of the universe. Roy and Banerjee ( 200nd ) identified two great hindrances to the development of Bangladesh for trade facilitation and these are hapless conveyance installations and substructure. Inadequate development of multimodal systems, Congestion and inefficiency at major port Chittagong, limited function of private engagement in conveyance etc are the chief grounds to develop a good transit systems. Razzaque ( 1997 ) added that hapless port and related installations are major factors impeding the development of a logistics system in the state.

Prospectus of Bangladeshi haven is extremely described by the baronial award victor Professor Mohammad Yunus ( 2006 ) as “ Mega-port at Chittagong is the cardinal to doing Bangladesh the cross-road of the part. With the economic system of the part turning at a sustained high velocity, demand for the entree to a well equipped good managed port will maintain on rowing. A part, which includes two elephantine economic systems, will be urgently looking for direct transportation installations to make out to the universe. Chittagong will offer the part the most attractive option. Evan today despite the jobs of present Chittagong port, Kunming is bespeaking permission to use this installation. With planetary competition going more ferocious shorter and shorter lead clip for bringing will go charming expression to pull concern. An efficient mega port at Chittagong will be in high demand. This port can be built and owned by national or international company with authorities engagement in equity. It can contract out the direction of the port to a professional port direction company ” .

Figure 3.10 ( Diagram ) Maritime Profile of Bangladesh ( Hoffmann,2004 )

The above profile indicates the worst state of affairs of Bangladesh maritime industry. The figure of population and natural sea entree doing the demand of nautical concern. Furthermore, regional and international demand along with national derived demand forecasted the immense maritime concern.

Due to natural advantages of haven installations in Bangladesh, she can take competitory advantages and develop the conveyance concatenation for linking with the universe by trade or supplying logistics installations to neighbors.

WTO ( 2006 ) reported that “ Despite rapid growing of overall trade volume in recent old ages, and lading penchants available to Bangladesh flag vass, a deficit of vass in the national fleet has prevented them from run intoing their allocated portion in sea-borne trade ” Along with the national vas deficit Bhattacharya and Hossain ( 200 ) found the undermentioned challenge for the state ‘s fight in international trade as follows: –

Lack of equal substructure of ports ( Both Land and Sea ) which imposed heavy concern costs and long lead times of processing. However, the current substructure of the state is so far from contributing to an effectual concern environment.

Rules and ordinances are non appropriate for making international trade. Timely presentment of relevant and needed amendments to bing Torahs has barely been done to ease trade. In add-on, a small range of private sector engagement in the policy preparations by manner of supplying suggestions through common treatments.

Customss ratings and traffic categorization ambiguities in the private sector.

Commonness of corruptness among the imposts forces which raised the costs of making concern.

Inefficiency of the authorities bureaucratism has ever been a major constriction for the state ‘s international trade.

However, they praised the enterprise of authorities for easing the trade like imposts disposal modernisation, development of the premier havens, constitutions of new substructures and simplification of certification etc.

In 2001, the major two havens handled about 4.7 million metric tons of seaborne lading and it is likely to treble by 2015. Connectively, they argued “ There is no denying that such a growing of international trade demands more efficient port services, cargo-handling services and custom clearance for a cost effectual concern environment ” [ p-10 ] .

A ( Chodhury,2008 ) cardinal consequence of economic globalisation is the go oning addition in nautical trade and traffic. Private engagement in port sector is merely get downing and Bangladesh needs to supply believable confidences to investors that their attempts will non be thwarted by bureaucratic procedure, deficiency of equal resolutenesss in implementing declared policies or regulative chokehold. Quick, effectual execution of port reforms could assist to extenuate a major restraint for the export-led growing which Bangladesh wants to prosecute. Denoting Chittagong port as first coevals port of the universe, Begum ( 2006 ; p-5 ) believed that “ There is no uncertainty that Chittagong port Acts of the Apostless as the life line to sustenance & amp ; development of trade, commercialism, conveyance and industry of Bangladesh ” . She added that sustainable development of the state can be achieved by bettering the conveyance sector including haven installations where haven will be performed as per economic scheme of the state and will move as trade facilitator.

However, from ( Azad, 2008 ) the national point of position, the cost of end product at Chittagong port is higher than the existent cost incurred for operations. This is go oning due to the illegal utilizations of payoff to rush up the activities. So that is a great jobs for cut downing the cost of uncluttering the lading from the port and export trade or for both house servants ingestion and export purpose depends on the efficiency and public presentation of the service supply in the Chittagong port. Finally, Azad ( 2008 p-102 ) advised that “ The reorganization of the supply of port services in Bangladesh should be such that the Government should non be the exclusive provider of this service. Following, the Chitatgong port should be allowed to provide the demands of non merely the users from Bangladesh but besides users from the full part in the vicinity of Bangladesh ” .

Sing private sector engagement in Bangladeshi port, Khanam and Misir ( 2006 ) showed the manner to follow the theoretical accounts used by other Asiatic states like BOO-Build, Operate and Own, BOT-Build, Operate and Turnover, SOT-Supply, Operate and Transfer and etc for acquiring the new physical port or terminal construction.

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