The jobs and livelihoods of billions of
people in the developing world and the standards of living of people of the
industrialized and developed world depend on shipping. The shipping industry
has played an important role in the dramatic improvement in the global
standards that have aided in taking millions of people out of acute poverty in
recent years (www.un.org).In today’s economy, people all over the world rely on
ships to transport commodities e.g. fuel, coal, grain iron ore etc, (www.rmg.co.uk).
The purpose of this essay is to ascertain
how the effects of shipping benefit a country economically. This is a relevant
topic because without shipping a country’s economy cannot grow proportionally
and the living standard of the people in a country with shipping access is more
advanced than a country without shipping access. The main arguments that will
be presented will include the following, competitiveness of a country with
shipping access, prices of goods in a country with shipping access etc.,
1.2 The Effects
of shipping on landlocked Countries
High prices have hit many countries
around the world, but landlocked developing countries bear an extra burden.
Afghanistan, Central African Republic, Burundi, and other countries without a
port pay more and wait longer for imported oil, food, and other goods, and they
have an equally hard time exporting, as a result, they trade less and grow more
slowly than their coastal neighbour’s. Being landlocked is a major reason why
16 of the world’s 31 landlocked developing countries are among the poorest in
the world, (http://www.worldbank.org).
A report by the World Bank (www.worldbank.org), confirms that goods take
twice as long to exit a port, it can take twice as long for imports to exit
ports than to travel from port to destination. In all, it can take four to six
weeks for goods for goods to reach some landlocked countries from coastal
countries. Goods destined for landlocked countries sit longer in ports than
domestically bound goods, and they also are subject to multiple lengthy
clearance systems on most corridors.
1.3 The growth
of Maritime Freight traffic
According to Roderique et al. 2017, the
systematic growth of the maritime freight traffic has been fuelled by the
a) Absolute advantage: linked with the
geographical distribution of resources, implies that the places of production
are usually different from the places of consumption. Large quantities of
cargo, therefore, need to be carried over long distances. The growth in mineral
and energy trades, the dominant cargoes carried by maritime shipping, is the
outcome of both conventional demands from developed countries as well as new
demands from developing economies. For example, coal is mainly used for energy
generation and steel-making, activities that grew substantially in the
Comparative advantage: concerns cargoes that under ideal circumstances
would likely not be carried, but because of cost and capabilities
differentials, substantial shipping flows are generated. The international
division of production and trade liberalization, referred to as globalization, incited a
large number of parts and finished goods to be carried over long distances,
which has supported growth in container shipping. Therefore, such cargoes can
be temporary and subject to changes in their origins and destinations.
c) Technical improvements: Ships and
maritime terminals have become more efficient in terms of their throughput and
their 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 the
size of ships permitted maritime transportation to become increasingly
cost-effective, a trend
which has been strengthened by containerization, (https://people.hofstra.edu).
1.4 The factors
affecting the demand for seaborne trade
(Stopford, 2009). There are 5 factors effecting the demand for shipping namely,
world economy, seaborne commodity trades, average haul, random shocks and
transport costs, we will discuss these factors in detail below:
World Economy: the profile of the world trade has become more complex and is
dependent upon many elements such as technology logistic, politics, finance and
marketing. The demand for shipping is a derived demand and the world economy is
the greatest influencer of the demand for shipping, (www.uk.essays.com)
commodity trades: the effect of individual commodity trades on the demand for
seaborne transport falls into short term and long-term components. Short term
influences are seasonal effects and stock building, harvesting periods of
agricultural commodities, oil consumption is higher in autumn and winter than
in spring or summer. Both have a significant impact on the demand for shipping
services during a short period based on medium term growth of demand and the
employment of prospects for particular ships, (www.maritime.com ).
haul: Transport demand is determined by a precise matrix of distances which
determine the time it takes the ship to complete a voyage, e.g. a ton of oil
transported from the Middle East to Western Europe via the Cape travels five
times as far as a ton of oil shipped from Ceyhan in Turkey to Marseilles. This
distance effect is generally referred to as the average haul of the trade,
Shocks: upset the stability of the economic system and may contribute to the
cyclical process. Weather changes, wars, new resources, commodity price
changes, are all determinants. These differ from cycles because they are
unique, often precipitated by some particular event, and their impact on the
shipping market is often very severe, (Stopford,2009).
cost: many developments in sea trade depend on the economies of shipping
operations. Raw materials will only be transported from distant sources if the
cost of the shipping operation can be reduced to an acceptable level or some
major benefit is obtained in the quality of the product. This makes transport
cost a significant factor for the industry, (www.maritime.com).
2. The Economic impact of shipping on a country
plays a vital role in world trade and is the backbone of the world economy.
Without ships and the transportation services these ships provide, the world
would not be as prosperous as it is today and many countries would not be able
to participate in world trade,( www.ramiwaheed.wordpress.com).
According to a study done by, (Goodwin,2016) on the economic value of
shipping and maritime activity in Europe it was found that the direct economic
impact of the shipping industry amounts to 590 000 people employed within the
industry, contribution to the EU GDP amounted to EUR 56 Billion, EUR 6 Billion
in tax revenues. The total economic impact amounted to EUR 145 Billion to EU
GDP, 2.3 Million people employed by the industry and contributes EUR 41 Billion
in tax revenues, (www.oecd.org).
Shipping is present
in the development of our daily lives, even if we are sometimes unaware of this
reasons below why
shipping is the preferred
way of transport:
a) It´s cheaper: Shipping
industry has the most competitive freight costs, as is one of the most
cost-effective ways of goods transportation through long distances.
the ideal way to move big volumes of cargo: ships are built to carry huge amounts of
goods 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, and
c) It´s safe: The
percentages of losses caused by incidents during transport by sea have dropped
until it lowest since a decade ago.
eco-friendly: In comparison with the road
transport, the maritime industry is
less dangerous for the environment. The shipping industry is responsible for
only 12% of the total of pollution generated by human economic activities, (www.veconter.com).
Despite the particularly weak
import demand and limited exports in many economies, developing economies as a
group continued, to account for most of world seaborne cargo shipments in 2016.
As shown in figure 1, developing economies accounted for 59 per cent of
world goods loaded outbound and exports, and nearly two thirds of
goods unloaded inbound/imports,
Fig:1 World Seaborne