If there were a Prayer for Competitiveness, it would go something like this: “May your imports arrive safely and your exports flow forth. May your ports turn vessels and cargo around with the speed and of summer lightning.”
This plea is now echoing across the developing world. As tariffs and quotas have dropped, the physical barriers to the movement of goods remain the greatest bottleneck to trade. Global trade now accounts for nearly 50 percent of global economic output, according to the World Bank’s Global Development Horizons (2001). Unclogging those barriers is crucial for countries to connect to the global economy.
In contrast to decades past, trade is no longer defined by cheap inputs for industrial production in Organisation for Economic Co-Operation and Development countries in one direction, and wealthy country exports to the developing world in the other direction. Bilateral trade flows between low income countries (LICs) and the major emerging economies have tripled since 1990 and are now greater than LIC trade with industrialized countries. In fact, the ability of most of the developing world to weather the last global financial crisis and to rebound quickly was greatly aided by that trade.
Seaports and airports: key to commerce
Since the vast majority of trade is physical, goods must pass through gateways on their way from farmgate and factory to markets and distributors. These gateways are primarily seaports and airports. In fact, over 70 percent of the world’s trade by value and 80 percent by volume travels by ship. Nearly every ton of the world’s commodities, and every container in global supply chains, must pass through at least two ports—and often three or four—before reaching its country of destination. Similarly, the highest value and most time-sensitive goods move by air—again, passing through at least two airports on the way.
Increasingly, these movements are defined by the growing share of developing country trade in global trade. According to International Monetary Fund data, 13 out of the top 25 bilateral maritime and aviation trading pairs involve at least one developing country. According to a Pricewaterhouse Coopers LLP forecast, that ratio will grow to 21 out of 25 by 2030. By then, the value of China’s maritime and airborne trade with Nigeria will be greater than trade between the United States and the United Kingdom.
With developing country trade growing at nearly 14 percent per year, the efficiency of port and airport activity becomes key to unlocking commerce. While these services were traditionally viewed as public infrastructure, concessionaires and private terminal operators are increasingly being called upon to induce change. The speed with which cargo is securely moved from a vessel or cleared from a plane, the ease and accuracy with which it is tracked, and the turnaround times of the ships and planes carrying that cargo together define the economics of the maritime and aviation industry. Private operators, spurred on by the profit motive, have changed the standards of acceptable performance for these crucial gateways to trade.
On a crane and a prayer
We have already seen what progress in this sector can mean to entire economies. For example, Latin America got its first container crane 20 years ago. That same year, an entrepreneur in Cartagena, Colombia bought a piece of waterfront property across from the public port, purchased a used gantry crane from the Port of New Orleans, shipped it to Colombia, reassembled it, turned the parcel of dirt into a small private container terminal, and sent a shockwave through the region’s maritime industry. Not long after, the public ports of Colombia were concessioned to private consortia so they could provide competitive services with faster turnaround times for both cargo and vessels. In three years, vcontainer movement productivity increased nearly 70 percent and the loading and unloading of bulk materials improved five-fold.
Success stories like this prove that innovative public-private partnerships can in fact improve seaport and airport efficiency, changing the
way commerce is conducted. Maybe this is the answer to the Prayer for Competitiveness.