World’s Major Port Cities Are Growing Faster Than Inland Cities

Global trade is increasing. The value of exported goods as a share of global GDP rose from 15% in 1990 to 25% in 2013. As trade keeps growing, it directly boosts the economic development of the cities which handle cargo traffic. Indeed, a closer look at 126 of the world’s major metropolitan areas reveals that cities which serve as major seaports experienced faster growth than inland cities. Of these 126 major metropolises, 35 were also among the top 100 container ports and their aggregated real GDP increased by 13% over 2008-2013. In comparison, the GDP of the world’s major inland cities grew by only 8% over the same period, while overall global GDP growth was 11%.

Aggregated Real GDP Growth Of Cities By Type, 2008-2013

Source: Euromonitor International

Note:  The chart displays real GDP growth in 126 world’s major cities. 35 of these 126 cities are world’s major ports (19 in developed countries and 16 in emerging), 36 are coastal cities with no significant port (22 and 14), and the remaining 55 are purely inland cities (20 and 35).

Ports Boost Economic Growth

Ports play a substantial role in the economies of metropolitan areas. For example, in Rotterdam, port-related activities accounted for 74,000 direct jobs and 13% of total metropolitan GDP in 2007. In Shanghai, the number of jobs related to port activities reached 840,000 in 2012, up from 347,000 in 2002. Shanghai’s port accounted for 7.6% of the city’s GDP in 2012.

Research shows that there are some measurable impacts of handling increasing amounts of trade. For example, the OECD, from its research on European ports, estimates that an additional one million tonnes of cargo equates to 300 jobs in the short term. The impact varies depending on the particular type of cargo handled (for example, liquid types generate few jobs), but ports do generate substantial employment opportunities.

Cargo handling, warehousing and storage are not the only ways ports stimulate metropolitan GDP growth. Some ports are also home to closely interlinked manufacturing clusters which benefit from access to raw materials via nearby ports or from cheaper shipping costs. For example, petrochemical clusters account for between 25-39% of the value generated by port activities in Antwerp and Rotterdam. Such clusters of manufacturing attached to port activities are often even more important to city GDP growth than ports’ logistics activities.

Key to Further Growth

A port by itself is no guarantee of a city’s growth but improving port infrastructure should be a priority investment for many municipal authorities. Research shows that increasing port efficiency and in particular reducing the time needed to load/unload ships lowers transportation costs and boosts trade, which in turn leads to GDP growth. For example, Shanghai is today regarded as one of the most efficient Chinese ports, having lowered vessel turnaround time from 1.5 days in the 1990s to just 0.4 days in 2011. Improved efficiency has been one of the key drivers behind Shanghai’s importance rising ahead of other Chinese or world ports.

Brazil has recently emerged as the world’s seventh largest economy (ahead of UK and France), yet there have recently been concerns as to whether its growth is sustainable. Poor transport infrastructure and high import/export costs are some of the key obstacles to further growth in the country. For example, in 2013 Rotterdam handled five times more cargo (measured in tonnes per hour) than Santos, Brazil’s key port, with the same amount of employees. In the same year, Maersk, the world’s major shipping company, claimed it took an average of 21 days for a container vessel to be released after arrival to Santos port in comparison to merely two days in Rotterdam.

Without a doubt, such lack of efficiency in seaport operations is hindering Brazil’s economic and urban growth. However, the country does seem to recognise the need to improve its port infrastructure, with US$3 billion allocated to port investments under the government’s Growth Acceleration Programme over 2011-2014, and another US$14 billion earmarked for port upgrade works to be carried out by the private sector. Investment is being seen in 13 cities in Brazil (including Santos, Suape, Itaqui, Açu, and others) and is likely to serve as a catalyst for Brazilian cities’ economic growth.