1.1Introduction:The jobs and livelihoods of billions ofpeople in the developing world and the standards of living of people of theindustrialized and developed world depend on shipping. The shipping industryhas played an important role in the dramatic improvement in the globalstandards that have aided in taking millions of people out of acute poverty inrecent years (www.
un.org).In today’s economy, people all over the world rely onships to transport commodities e.g. fuel, coal, grain iron ore etc, (www.
rmg.co.uk).The purpose of this essay is to ascertainhow the effects of shipping benefit a country economically. This is a relevanttopic because without shipping a country’s economy cannot grow proportionallyand the living standard of the people in a country with shipping access is moreadvanced than a country without shipping access. The main arguments that willbe presented will include the following, competitiveness of a country withshipping access, prices of goods in a country with shipping access etc.,1.
2 The Effectsof shipping on landlocked Countries High prices have hit many countriesaround the world, but landlocked developing countries bear an extra burden.Afghanistan, Central African Republic, Burundi, and other countries without aport pay more and wait longer for imported oil, food, and other goods, and theyhave an equally hard time exporting, as a result, they trade less and grow moreslowly than their coastal neighbour’s. Being landlocked is a major reason why16 of the world’s 31 landlocked developing countries are among the poorest inthe world, (http://www.worldbank.org). A report by the World Bank (www.
worldbank.org), confirms that goods taketwice as long to exit a port, it can take twice as long for imports to exitports than to travel from port to destination. In all, it can take four to sixweeks for goods for goods to reach some landlocked countries from coastalcountries.
Goods destined for landlocked countries sit longer in ports thandomestically bound goods, and they also are subject to multiple lengthyclearance systems on most corridors. 1.3 The growthof Maritime Freight trafficAccording to Roderique et al. 2017, thesystematic growth of the maritime freight traffic has been fuelled by thefollowing factors:a) Absolute advantage: linked with thegeographical distribution of resources, implies that the places of productionare usually different from the places of consumption. Large quantities ofcargo, therefore, need to be carried over long distances.
The growth in mineraland energy trades, the dominant cargoes carried by maritime shipping, is theoutcome of both conventional demands from developed countries as well as newdemands from developing economies. For example, coal is mainly used for energygeneration and steel-making, activities that grew substantially in thedeveloping world. b) Comparative advantage: concerns cargoes that under ideal circumstanceswould likely not be carried, but because of cost and capabilitiesdifferentials, substantial shipping flows are generated. The internationaldivision of production and trade liberalization, referred to as globalization, incited alarge number of parts and finished goods to be carried over long distances,which has supported growth in container shipping. Therefore, such cargoes canbe temporary and subject to changes in their origins and destinations.c) Technical improvements: Ships andmaritime terminals have become more efficient in terms of their throughput andtheir ability to handle several types of cargoes e.g. containers, natural gas,refrigerated goods, enabling it to support long-distance trade.
d) Economies of scale: the growth in thesize of ships permitted maritime transportation to become increasinglycost-effective, a trendwhich has been strengthened by containerization, (https://people.hofstra.edu).1.4 The factorsaffecting the demand for seaborne tradeAccording to(Stopford, 2009). There are 5 factors effecting the demand for shipping namely,world economy, seaborne commodity trades, average haul, random shocks andtransport costs, we will discuss these factors in detail below:a) TheWorld Economy: the profile of the world trade has become more complex and isdependent upon many elements such as technology logistic, politics, finance andmarketing.
The demand for shipping is a derived demand and the world economy isthe greatest influencer of the demand for shipping, (www.uk.essays.com)b) Seabornecommodity trades: the effect of individual commodity trades on the demand forseaborne transport falls into short term and long-term components.
Short terminfluences are seasonal effects and stock building, harvesting periods ofagricultural commodities, oil consumption is higher in autumn and winter thanin spring or summer. Both have a significant impact on the demand for shippingservices during a short period based on medium term growth of demand and theemployment of prospects for particular ships, (www.maritime.com ).c) Averagehaul: Transport demand is determined by a precise matrix of distances whichdetermine the time it takes the ship to complete a voyage, e.g. a ton of oiltransported from the Middle East to Western Europe via the Cape travels fivetimes as far as a ton of oil shipped from Ceyhan in Turkey to Marseilles. Thisdistance effect is generally referred to as the average haul of the trade,(Stopford, 2009).
d) RandomShocks: upset the stability of the economic system and may contribute to thecyclical process. Weather changes, wars, new resources, commodity pricechanges, are all determinants. These differ from cycles because they areunique, often precipitated by some particular event, and their impact on theshipping market is often very severe, (Stopford,2009).e) Transportcost: many developments in sea trade depend on the economies of shippingoperations. Raw materials will only be transported from distant sources if thecost of the shipping operation can be reduced to an acceptable level or somemajor benefit is obtained in the quality of the product.
This makes transportcost a significant factor for the industry, (www.maritime.com). 2. The Economic impact of shipping on a countryShippingplays a vital role in world trade and is the backbone of the world economy.Without ships and the transportation services these ships provide, the worldwould not be as prosperous as it is today and many countries would not be ableto participate in world trade,( www.
ramiwaheed.wordpress.com).According to a study done by, (Goodwin,2016) on the economic value ofshipping and maritime activity in Europe it was found that the direct economicimpact of the shipping industry amounts to 590 000 people employed within theindustry, contribution to the EU GDP amounted to EUR 56 Billion, EUR 6 Billionin tax revenues. The total economic impact amounted to EUR 145 Billion to EUGDP, 2.
3 Million people employed by the industry and contributes EUR 41 Billionin tax revenues, (www.oecd.org).Shipping is presentin the development of our daily lives, even if we are sometimes unaware of thisfact,please seereasons below whyshipping is the preferredway of transport:a) It´s cheaper: Shippingindustry has the most competitive freight costs, as is one of the mostcost-effective ways of goods transportation through long distances. b) It´sthe ideal way to move big volumes of cargo: ships are built to carry huge amounts ofgoods and raw materials in comparison with the capacity of airplanes or trucks.In addition, shipping allows the movement of liquids, gas and dangerous cargo.For this matter, there are certain regulations to keep the safety of the vessel, the crew, andthe cargo.
c) It´s safe: Thepercentages of losses caused by incidents during transport by sea have droppeduntil it lowest since a decade ago.d) It’seco-friendly: In comparison with the roadtransport, the maritime industry isless dangerous for the environment. The shipping industry is responsible foronly 12% of the total of pollution generated by human economic activities, (www.veconter.
com).Despite the particularly weakimport demand and limited exports in many economies, developing economies as agroup continued, to account for most of world seaborne cargo shipments in 2016.As shown in figure 1, developing economies accounted for 59 per cent ofworld goods loaded outbound and exports, and nearly two thirds ofgoods unloaded inbound/imports,respectively, (www.unctad.
org). Fig:1 World SeaborneTrad