BUS613: Advanced International Business

This study examined associations of quality of port infrastructure, logistics performance, and seaborne trade, and their effects on the national economy. Overall, the results show that improvement in quality of port infrastructure and logistics performance would bring the greatest benefits to the economy of a country. The study revealed that the quality of port infrastructure has a significant positive effect on the national economy, which is similar to Ferrari et al., Bottasso et al., Park and Seo, and others, who observed positive effects of seaports on the economy. Our findings are also similar to those of Deng et al. as we found no association between seaborne trade (i.e. port demand) and the national economy.

However, port infrastructure quality significantly affects the logistics performance of a country. Similar to Hausman et al., we also found that logistics performance affects the seaborne trade of a country. Most of the studies that foresaw diminishing impact of seaports on the economy emphasised employment generation within ports. However, Helling and Poister mentioned that ports that retain direct port-related employment lose their ability to compete for cargo, which leads to a lower number of jobs in the long-run. Economic development is associated much more with the long-term capability of a port to attract more customers while creating and retaining employment and income. A dollar's worth of maritime transportation requires inputs from at least 10 interrelated transport and logistics industries. Therefore, if the quality of port infrastructure is not improved continuously, it may have a substantial adverse impact on the economy of a country.

Further, the extension to multi-group analysis reveals important findings, especially for developing economies. Seaborne trade partially mediates the impact of port infrastructure quality and logistics performance on economic growth in developing countries. Portugal-Perez and Wilson found that the impact of transport efficiency (a component of logistics performance) on export performance decreases as the economy becomes richer. Similarly, the present study found that logistics performance has a higher impact on seaborne trade in developing economies than developed ones. For developing economies, we also found that quality of port infrastructure positively affects logistics performance; better logistics performance yields higher seaborne trade, and higher seaborne trade yields economic growth. Therefore, policy makers in developing countries should consider investing in quality improvement of port infrastructure and logistics performance, compared to larger investments in the building of new physical infrastructures. Policy makers in developed countries should also consider maintaining high-quality port infrastructure, as this has a positive effect on logistics performance and the national economy. Korinek and Sourdin stated that "as developed nations shift from traditional manufacturing and agriculture and are increasingly engaging in international vertical specialisation, the need for efficient logistics services becomes ever more important". As of 1990, although smaller countries of the OECD database had a higher share of vertical specialisation than the overall OECD share; the overall share increased by about 30% between 1970 and 1990.

However, the reasons for the lack of any significant association between seaborne trade and the national economy for developed economies could be: (1) the growth rates of GDP per capita compared to seaborne trade of the developed countries is lower than that of developing countries in general, and (2) developed countries are service-based economies and the role of seaborne trade is often one-way (imports), while developing countries tend to be more industry-based and trade plays a two-way role (both imports and exports). Meanwhile, attempts to stimulate economic growth by major developed economies – such as Brexit by the United Kingdom, and the United States President Donald Trump's approach towards bringing back major industrial production facilities to the USA – could, if followed by other developed nations, change the current association between seaborne trade and economy in the future.

Overall, the findings of the study are consistent with the existing transport economics literature, which underlines the fundamental contributions of port infrastructure quality and logistics performance to the economic growth of a country. However, associations among the quality of port infrastructure, logistics performance, and seaborne trade, and their effects on yearly growth of a country's economy, should be further examined using latent growth models. It would be interesting for future studies to investigate the interaction effect between port size and economy classification. Investigation of the comparative economic impact of hub and gateway ports could also be considered. Studies should also examine the impact that quality of port infrastructure and logistics performance has on the growth of neighbouring landlocked countries' economy. Finally, economic contribution of value added activities at ports (e.g. through development of logistics parks) may also be investigated in future research.