Chasing shadows

Speak to any port operator in East Asia and the single biggest influence on how his or her port is faring is down to one giant factor: the People’s Republic of China. Whether it’s Japan, Korea or Taiwan, every port has had to deal with the huge change seen in trade flows since China acceded to the World Trade Organization in 2001.

As Chinese ports have risen stratospherically, other East Asian ports have had to adjust their marketing strategies to even be seen in the huge shadow that Chinese ports now cast across the region.

Price appears to be the main way that the Taiwanese and Koreans are hitting back. Both places have invested too much in port infrastructure to be wiped off the logistics map and so as a desperate move to maintain and indeed grow custom massive incentives have been offered to counter the obvious attractions in China.

Undercutting on price, though, hardly gives a good return to the billions of tax dollars spent to boost throughputs across the region. This type of business model can only be seen as a short term one to try and lock in clients. Generous offers on land and logistics parks to private investors have also been a common thread linking Japan, Korea and Taiwan burst out of the all enveloping Chinese shadow? A glance at historical box figures paints the picture perfectly for a region struggling to find traction amid the rapacious growth of Chinese ports.

In 1995,Chinese ports handled just 5m teu. In the first six months of this year alone Chinese ports handled 42m teu. There are now no Japanese ports in the top 20 container port list for the first time ever. Likewise, Taiwan’s crown has slipped – Keelung sliding well out of the top 20 and Kaohsiung down from third four years ago to sixth.

If the likes of Japan and Taiwan are to garner foreign interest in their ports moving ahead they could do well to learn from somewhere like Singapore. Both Japan and Taiwan are notoriously difficult to invest in port infrastructure, Japan only acquiescing in the past five years and Taiwan still refusing to allow anyone to have a majority stake in any port on the island.

When Singapore lost both Maersk Sealand and then Evergreen Marine back in 2001 and 2002 respectively to the port of Tanjung Pelepas across the causeway in Malaysia,it quickly realised it had to listen far more to its customers’ – the shipping lines – demands and give them what they wanted. Incentives included volumebased price cuts, the previously unheralded decision to allow key customers have dedicated berths and even buy into joint venture terminals.

Singapore roared back and now sits as the largest container port in the world thanks to it ridding itself of its stubbornness and listening to and then acceding to customers’demands. If the Japanese and Taiwanese are to see growth they will need to change their outlook on foreigners participating in their ports.

Not so the Koreans who have happily embraced the idea of foreigners investing in their huge swathe of container terminal developments. The Korean problem is more one of marketing to the outside world – a problem faced by most Korean firms not just its ports – and how best to attract foreigners whose wallets have been wide open to pricey Chinese container developments nearby where growth is in double digits, unlike in Korea.