Trade, Transport and Economic Development - With a focus on the case of China -

1. Trade, Transport and Economic Development - With a focus on the case of China -

2. Table of Content 1. Transport and Trade Logistics Branch 2 2. Trade, Transport and Economic Development 5 3. Maritime Business in Developing Countries (RMT Preview) 37

3. TLB comprises three sections: facilitation, transport and policy & legislation.

4. TLB comprises three sections: facilitation, transport and policy & legislation. UNCTAD Research Intergovernmental Technical assistance and capacity building The work of the TLB within UNCTAD’s three pillars

5. Table of Content 1. Transport and Trade Logistics Branch 2. Trade, Transport and Economic Development a. Trade and Globalization b. Factors influencing Trade c. Links between trade and economic development 3. Maritime Business in Developing Countries (RMT Preview)

6. The structure of international trade has been under constant change within the last decades. 1 2 Traditional Recent trend (Traditional) international trade: • Trade in raw materials and finished products (Trend towards...) globalized Economy: • More trade in intermediate products • More trade within companies • Logistics part of production process

7. Intermediate goods contribute an high share to international trade. Share of intermediate goods in non-fuel merchandise trade, 2008 Source: WTO

8. An increasing participation of developing countries in seaborne trade can be observed. Developing countries’ share in seaborne trade (% of tons) Why is there a more or less stable amount of loaded goods? Source: UNCTAD, Review of Maritime Transport, 2011

9. Asia emerging economies contribute the biggest share to seaborne trade (tonnage) in 2010. 60 50 40 30 20 10 0 Asia Americas Europe Oceania Africa Loaded Unloaded Source: UNCTAD, Review of Maritime Transport, 2011

10. Africa’s share in world trade is dominated by crude materials . World seaborne trade by type of cargo (2006-2009) Source: UNCTAD, Review of Maritime Transport, 2010

11. Transport costs are also influenced on the transport direction. Source: UNCTAD, Review of Maritime Transport, 2010

12. Trade is an engine for economic growth, growing three times faster than the world’s GDP. Source: Based on data from UNCTAD and from WTO

13. Exports react more sensitive to changes in the economic environment than GDP. Source: UNCTAD

14. Containerized trade grows even faster then general trade. Source: Ocean shipping consultants

15. 2010 compensated the trade losses from 2009 with a overall growth rate of 15.2 %. Source: RMT 2011

16. What are China’s most important export goods? What are China’s most important exported goods? Source: ITC trade map

17. Who is China’s most important trading partner? Who is China’s most important trading partner?  Purchasing goods from China Source: ITC trade map

18. Table of Content 1. Transport and Trade Logistics Branch 2. Trade, Transport and Economic Development a. Trade and Globalization b. Factors influencing Trade c. Links between trade and economic development 3. Maritime Business in Developing Countries (RMT Preview)

19. Most developed countries are active in international trade and connected to global supply chains. What are the factors fostering international trade? 1. Technology 3. Standardization 2. Transport and logistics 4. Trade facilitation

20. Technological progress fostered the division of labor and regional specialization. • Communications • technology 2. Production technology 3. Transportation technologies • Telecommunication • ERP Systems • Internet • Assembling technologies • QM technologies • Product technologies • Larger ships • More efficient trucks • Cheaper plane transport Technology

21. The increase in vessel size lead to a reduction of the transportation costs. Transport and logistics

22. Economies of scale have reached a limit due to port infrastructure and canal size. Transport and logistics

23. The freight price gap between developing and developed countries decreases since 1990. Transport and logistics

24. Standardization reduces costs for process and product adaption, which allows economies of scale. Standardization organizations Standardized products and services Standardization

25. The development of common markets and trade agreements have often facilitated export/import between nations. Trade facilitation

26. Technological advancement can also help at developing customs procedures. Trade facilitation

27. Customs processes can influence costs for importers and exporters alike. Trade facilitation

28. Operations efficiency Customs automatic data processing system ASYCUDA reduces costs for customs processing and creates transparency on revenue and the trade structure. Transparency Statistics on collection of duties and taxes, and accurate traded goods Harmonization Software installed in more than 90 countries  However, the systems efficiency highly depends on the country’s customs procedures and documentary requirements Trade facilitation

29. Do you pay more transport costs if you buy a car from Japan in Tanzania today then 30 years ago? 1 2 Buying a car 30 years ago Buying a car today

30. Table of Content 1. Transport and Trade Logistics Branch 2. Trade, Transport and Economic Development a. Trade and Globalization b. Factors influencing Trade c. Links between trade and economic development 3. Maritime Business in Developing Countries (RMT Preview)

31. What are the linkages between trade and economic development? Does trade foster economic development? OR Is economic development the trigger for more trade? ANSWER: It is both

32. Seaborne trade, world GDP and industrial production correlate and have developed in tandem.

33. Interdependencies between Economic growth and trade exist and one can be a trigger for the development of the other. Economic growth Larger markets Economies of scale More state revenue … More competitive products Better infrastructure … More and better products Economies of scale Better resource allocation More state revenue … More competitive products Better infrastructure … More trade

34. The existence of linkages between economic growth and trade have been supported by a variety of studies and country data.

35. Trade as a trigger for economic growth includes both: Exports and imports of goods and services. Source: Shuo Zhang, Syracuse University

36. Table of Content 1. Transport and Trade Logistics Branch 2. Trade, Transport and Economic Development 3. Maritime Business in Developing Countries (RMT Preview) a. Value chain of maritime businesses b. Sector analysis c. Tanzania’s portfolio of maritime business

37. 2. Ship owning 3. Ship operation (container ships) The value chain of maritime businesses covers a variety of industries and services. Industry overview of maritime shipping 1. Ship building 4. Ship scrapping Core ship lifecycle industries 5. Ship financing 6. Ship classification 7. Ship registration Supporting industries 8. Ship insurances (protection and indemnity) 9. Seafarer supply 10. Port operation (container terminal operators) Source: UNCTAD, Review of Maritime Transport, 2011

38. What would the maritime business development portfolio of Tanzania look like? • 1. Ship building • 2. Ship owning • 3. Ship operation (container ships) • Ship scrapping • Ship financing • 6. Ship classification • 7. Ship registration • Ship insurances (protection and indemnity) • Officers • Ratings • Port operation (container terminal operators) Long term strategy Currently not to be addressed High ? Risks Industry establishment Low Quick wins High potentials Low High Benefits Industry establishment

39. Table of Content 1. Transport and Trade Logistics Branch 2. Trade, Transport and Economic Development 3. Maritime Business in Developing Countries (RMT Preview) a. Value chain of maritime businesses b. Sector analysis c. Tanzania’s portfolio of maritime business

40. Ship building. Is dominated by China, South Korea and Japan generating 94 % of the ship capacity. Industry overview Shipbuilding in China • Biggest ship builder in terms of dwt • Tankers, bulk carriers and container ships produced in the countries • Technologically some high-tech niches remain where China does not participate much (e. G. cruise ships, diesel engines, offshore business) Strategic questions for the future: • How will China increase its technological competitiveness? • How will it increase the added value? • Should the state participation be reduced? • Should subventions be reduced? (e. G. cheap loans) • … Source: UNCTAD, Review of Maritime Transport, 2011

41. Ship owning. Is more or less equally shared between developing and developed countries. Industry overview Ship owning in China Strategic questions for the future: • Will Chinese ship owners continue to internationalize their business? • Will the ties between ship owning and building such as operation loosened or strengthened. Source: UNCTAD, Review of Maritime Transport, 2011

42. Ship operation. Volatility of transport demand effects freight prices and increases business risks for ship operators. Source: UNCTAD, Review of Maritime Transport, 2011

43. Ship operation. Is spread among a large number of countries. Industry overview Ship operation in China • Large operators often state owned such as COSCO (sixth largest in the world) • Close links to Chinese ship owning and ship construction Strategic questions for the future: • Will big ship operators privatize • How do Chinese ship operators further internationalize their business Source: UNCTAD, Review of Maritime Transport, 2011

44. Ship scrapping. Is concentrated in three developing countries and supplies national heavy industries. Industry overview Ship scrapping in China • India bought a large share of the ships to be scrapped at high steel prices • Ships were transported also from China to India for scrapping Ship scrapping future in China: • Will China remain competitive in comparison to countries with lower wages such as Bangladesh? • When environmental standards rise how will that effect the competitiveness of the sector? • Which route should China take? Source: UNCTAD, Review of Maritime Transport, 2011

45. Ship financing. The sector has been severely effected by the economic crisis, which lead to a restricted access to loans. Source: UNCTAD, Review of Maritime Transport, 2011

46. Ship financing. The sector is until today dominated by ship financing banks from developed countries. Industry overview Ship financing in China • Chinese ship financing to a large extent state controlled • Promotes also national ship building. (e. G. Financing Greece ship owners to buy Chinese ships) • Business apart from this almost entirely national • Few share of loans given on a competitive basis to clients on the international market. Strategic questions for the future: • Should the business be privatized and/or internationalized? • Should the sector be developed? Source: UNCTAD, Review of Maritime Transport, 2011

47. Ship classification. A few players that are members of IACS, mostly from developed countries, dominate the market Industry overview Ship classification in China • China’s share in the classification business is comparably low • Market dominated by members of the CIAS • Chinese classifications societies often act nationally • China Class if member of IACS Strategic questions for the future: • Should China try to grow this business internationally Source: UNCTAD, Review of Maritime Transport, 2011

48. Ship registration. Developing countries take an increasing share since the establishment of “open registries”. Industry overview Ship registration in China • Strong national focus • In comparison to market leaders, market share is low • Strategic questions: • Can China internationalize the business • Can it compete with the largest international market players Source: UNCTAD, Review of Maritime Transport, 2011

49. Ship registration. What are the biggest clients of China’s ship registry? Total 1000 dwt registered with China: 51784 dwt Registered tonnage with China registry 1000 dwt Source: UNCTAD, Review of Maritime Transport, 2011

50. Ship registration. Registering ships with foreign flags has experienced continuous growth within the last 20 years. Source: UNCTAD Review of Maritime Transport, various issues, based on data provided by IHS Fairplay