Analysis on Development Interplay between Port and Maritime Cluster

Jasmine Siu Lee Lam Division of Infrastructure Systems and Maritime Studies School of Civil and Environmental Engineering Nanyang Technological University, N1, 50 Nanyang Avenue Singapore 639798 Email: sllam@ntu.edu.sg Tel: +65 6790 5276 Fax: +65 6791 0676 Wei Zhang Division of Infrastructure Systems and Maritime Studies School of Civil and Environmental Engineering Nanyang Technological University, N1, 50 Nanyang Avenue Singapore 639798 Email: WZHANG2@e.ntu.edu.sg

Abstract Recent research shows that maritime clusters can maximize competitive advantages in maritime and regional development. Thus the creation and promotion of maritime cluster has been taken as an important policy tool when considering an array of linked sectors in the maritime industry from the network perspective. Of all the sectors in a maritime cluster, port plays an important role in cluster development. This paper aims to study the interrelationship between port development and maritime cluster development. The analysis starts with an overview of maritime cluster, which is not a static concept, but an evolutionary one based on the dynamics of its functions. The development of a maritime cluster can be divided into four categories by the changing of port and maritime services. They are cargo loading and discharging, value-added processing and logistics, regional/global supply chain hub, and international maritime services. The paper then identifies some world famous maritime clusters, which are already or capable of being the international maritime centre (IMC), commonly regarded as the most matured stage of maritime cluster. Two case examples, namely London and Hong Kong, are drawn from these clusters, showing ports contribution to maritime
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cluster development, and reflecting the relationship between port development and maritime cluster development. In order to study the coordinated development quantitatively among different ports and maritime clusters, Data Envelopment Analysis (DEA) is proposed, aiming to evaluate the validity of support and utilization between the two systems. The paper presents a useful reference for research and policy suggestions on the interplay between maritime cluster and its port development for maritime cities and regions en route to higher value generating IMCs.

1. Introduction Cluster theory was developed over the last two decades as a tool for better understanding the economic activities in service or knowledge-based regional economies. The essence of a cluster is that the value of the whole exceeds the sum of its parts, and that there is a critical mass - in one geographical place - of remarkable competitive success in a particular field. Cluster is viewed to gain the advantage of competitiveness. It reflects firstly the productivity, including accessing efficiently to information, specialized inputs and employees, institutions, and public goods; achieving complementarities across businesses; better incentives and performance measurement. Secondly is innovation, including ability to perceive and respond to innovation opportunities; and rapid diffusion of improvements. Thirdly is the formation, including perceiving opportunities for new businesses and lowering barriers to entry, including the perceived risk of market entry. These are the very reasons that industries tend to carry on organizing mode in the form of cluster (Porter, 1990). The notion of industry clusters has been revived in economics and has become central to business strategists and industrial policy makers (Arthur, 1989; Krugman, 1991; Doeringer and Terkla, 1995; Appold, 1997; Malmberg and Maskell, 1997; Bathelt et al., 2002; Martin and Sunley, 2003; Sternberg and Litzenberg, 2004). This study devotes to the analysis of maritime cluster. When taking reference from business cluster, also known as industry cluster or competitive cluster, there is no standard definition for the maritime sector. Often the definition starts with general industry cluster then focuses on maritime section. For example, Chang (2011) based on industry cluster and maritime industry, proposed the definition of maritime cluster as a network of firm, research, development and innovation units and training organizations, sometimes supported by national or local authorities, which cooperates with the aim of technology innovation and of increasing maritime industrys performance. In this case, some traditional areas of the maritime sector are identified, such as inland navigation, marine aggregates, marine equipment, maritime services, maritime works, navy and coastguard and offshore supply, recreational boating, seaports, ship building and shipping. It also includes the coastal and sea-related (marine) recreation and tourism
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and fisheries (Ianca and Batrinca, 2010) in a broader way. What is more, it includes other marine sectors, including emerging knowledge-intensive businesses and services in marine science and technology (Kwak et al., 2005). Of all the maritime sectors, port is regarded as an important one, for it is identified as playing a core role in the whole maritime world and is taking up a more active role in supply chains (Rodrigue and Notteboom, 2009). Today, growing international trade is transforming the world economy into a single system and integrating world transport activities. Ports are naturally being incorporated into this huge, changing and competitive system. This is the very reason of resulting in port functions changing to adapt this dynamic system. At the same time, the functions of maritime cluster are changing to provide better and more efficient maritime services. However, maritime cluster is not a once-for-all concept, it is a dynamic one with different connotations in different development stages. Different historical period means different cluster functions, vice versa, clusters in different situations reflect quite different stages of economic and social development. It is such a changing formation and development concept that any static and definitive claims of what a maritime cluster should be, seems to be imprecise. However, few address the evolution of this definition and connotation according to the existing literatures, not to mention this evolution depends on the changing and development of port functions and maritime services. Though the development of maritime cluster has close relationship with port, there is yet any literature on the study of relationship between port and maritime cluster, either qualitatively or quantitatively. The paper aims to study maritime cluster evolution from the changing of port and maritime services perspective. Besides, in order to analyze the contribution of port to maritime cluster, with contributions from other maritime sectors as comparison, the paper studies the cases of London and Hong Kong. The two typical examples are selected from the two identified categories of maritime clusters, In addition, so as to study the coordination development between port and maritime cluster, Data Envelopment Analysis (DEA) model is proposed, which provides the quantitative method for future research.

2. Maritime cluster connotation 2.1 Evolution and classification of maritime cluster Maritime cluster comprises an array of linked sections in maritime industries. Taking an overall review throughout famous maritime clusters, such as London, New York, Rotterdam, Singapore, Hong Kong, etc, it can be observed that most maritime clusters developed from port production in the early stage. It is interesting to find that maritime cluster functions are evolved by the changing of port functions in some degree. Port functions can be as limited as simple berthing facilities, ship/shore or intermodal interfaces, or extended to trade, logistics and production centres (Bichou and Gray, 2005). Port function is also a changing concept, for they have different categories or generations evolving with time, based on UNCTAD (1992). The following part discusses the functions of maritime clusters based on the changing functions of port, see Table 1. Port roles and functions, but also institutional structuring, as well as operational and management practices vary signicantly from generation to generation (UNCTAD, 1992). First and second generation ports, respectively relating to ship/shore and industrial interfaces, operate bulk and break bulk cargo in a traditional manner, with the second generation-type being reliant more on capital than labour. Third generation ports are the product of the unitisation of sea-trade and multimodal cargo packaging (mainly in the form of containers) which has led to the development of ports as logistics and intermodal centres offering value-added services, with technology and know-how being the major determining factors (Bichou and Gray, 2005). At the same time, the dynamic definition and function of maritime cluster can be derived from the change in port functions.

Table 1 Maritime Cluster Classification

Type 1 Cargo loading and discharging, Cargo storage and distribution, transportation Scope of activities facilities, navigational service-Quay, waterfront area and distribution channel -Cargo flow Operation characteristics -Simple individual service -Low value-added Labour/capital/Nat ural conditions Cargo handling and distribution -Conservative -Changing point of transport mode Value-added processing -Expansionist -Transport, industrial and commercial centre Antwerp (Belgium), Kaohsiung (Taiwan), Osaka (Japan) Key node in global/regional supply chains -Efficiency oriented -Integrated transport centre and logistic platform for international trade Hamburg (Germany), Hong Kong (China), New York/New Jersey (USA), Piraeus (Greece), Rotterdam (Netherlands), Singapore, Shanghai (China), Tokyo (Japan) International maritime service centre -Maritime service oriented -Varied positions in different maritime clusters London (UK), Oslo (Norway) Type 2 Logistics in valueadded processing for cargo: initially consolidating and distributing products, nearby industrial processing, combination, grouping, packing and commercial marketing -Cargo transformation -Combined services -Improved valueadded Decisive factors Main Functions Capital Technology/knowhow -Cargo/information distribution -Multiple service package -Feature in maritime services -Operated by highly advanced human capital Knowhow Type 3 Concentration and distribution of factors and production and information, relating to economic, financial, technological, communicational and international trade aspects Type 4 Variety of maritime services provided: shipping services, regulators, industry associations, intermediate services, support services

Position of port in maritime cluster

Dublin(Ireland), Selangor (Malaysia)

Current Examples

Source: authors

In the first stage, maritime activities within maritime cluster focus on shipping and port cargo loading and discharging mainly. At the commercial level the different maritime activities do not act together in unison, but make their decisions independently of how other organizations in the same cluster will react. This was nevertheless quite natural at the time of pre-containerization, since the commercial relationship between different activities or the port was casual. Users were more familiar with individual sectors or different port services, rather than with the maritime cluster in its entirety. As a result, the main functions in the early maritime cluster are cargo handling and distribution. London and Rotterdam were the pioneers of the first generation maritime cluster. Around the Second World War, for example, New York and Hamburg played a big part of it. Dublin in Ireland and Selangor in Malaysia at their current status (Brett and Roe, 2010; Othman et al., 2011) are considered in this category. In the second stage, maritime cluster is the centre of cargo allocation and value-added processing. It consolidates and distributes cargoes initially, including on the spot of industrial processing, combination, grouping, packing and commercial marketing. It is the typical centre of logistics and cargo allocation. Maritime activities in this stage are also carried out in and around port of the second generation. In this category of ports, governments, port authorities and those who provide port services have a broader understanding of ports functions. The port is regarded as a transport, industrial and commercial service centre. Thus ports are allowed to undertake and offer industrial or commercial services to their users, which are not directly connected to the traditional loading/discharging activity. Based on a broader conception and management attitude, port policies, legislation and development strategies are made. As a result, the scope of port activities is extended to commercial or any other relevant service such as cargo packing, marking and industrial services such as cargo transformation. Industrial facilities are built up within the port area. Therefore, maritime cluster develops and expands towards its hinterland with industries such as iron and steel, heavy metallurgy, refineries and basic petrochemicals, aluminium, paper pulp making, fertilizers, sugar and starch, flour milling and various agro-food activities. The second generation
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maritime cluster is not only a transport centre but also industrial and commercial centre. Second generation maritime clusters enjoy a closer relationship with transport and trade partners who have built their cargo transformation facilities in the port area. The second generation maritime clusters also have a closer relationship with the municipality since they are more dependent on the surrounding city as regards land, energy, water and manpower supply as well as the land transport connection systems. Therefore, the second type maritime cluster is regarded as a cargo allocation, logistics and valueadded processing centre. For example, in this period Hong Kong and Singapore were the creators of this type, followed up with New York, Rotterdam and London (De Langen, 2002; Fisher Associates, 2004; Maunsell Consultants, 2003), which completed the function transition to this new era, whilst Antwerp and Kaohsiung are current examples. World trade changes its pattern and develops in depth and in dimension. The multiplicity of world trade centres calls for an extensive transport network. A greater variety of transport services should be provided to link the whole world trade complex consisting of big, medium and small centres. The third generation maritime clusters emerged in the 1980s, principally due to world-wide large scale containerization and intermodalism combined with the growing requirement of supply chain management. A network expansion is the first requirement of this new trade pattern. The important characteristic in the third stage is integrated resources allocation. It integrates not only products but capital, information and technology as well. When international trade is involved not only before and after production but during the whole production process, maritime cluster assumes a very special role, especially, being an important part of global supply chain, it has the capacity for information processing and distribution. With various kinds of resources, it engages actively in the international flow of factors of production. Maritime cluster is regarded as the supply chain hub in global/regional economic and trade market, enjoying largely the economies of density and scope by the effect of hub-andspoke system. Rotterdam, Hong Kong and Singapore are the leaders of this generation (Janssen, 2006; Maunsell Consultants, 2003). In the 1990s, the fourth-generation port concept was proposed which was physically separated but linked through common operators or through a common administration. It
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is mainly the result of the recent vertical and horizontal integration strategies undertaken by transport operators. However, this time maritime cluster has its new function as a maritime service centre, so-called the international maritime centre. The details are discussed below. 2.2 Formation of international maritime centre The wide range of maritime cluster is as such that it can be viewed as making up of several subsets. Taking London the worlds biggest maritime services centre as an example, the maritime services cluster is shown in figure 1. Thus we define maritime services to include an interconnected supply chain that covers several distinct activities: Shipping, Intermediate Services, Maritime Governance and Regulation, Support Services, and Industry Associations.

Fig. 1 Overview of the Maritime Services Cluster in London

Source: Fisher Associates (2004), p.14.

Some of the intermediate services (specifically those related to marine insurance, maritime law, and shipping finance) each form a niche market for a subset of the financial services cluster in London. The port and physical cargo handling do not play a major role in maritime services cluster. The focus is rather on knowhow which is highvalue and the most difficult to be imitated by competitors.

2.3 World famous maritime clusters Maritime clusters come in a wide variety of forms depending on the mix of maritime activities that make up the cluster and their relative weights within the cluster. According to the analysis on the changing functions of maritime cluster, we can find different maritime clusters show their generation characteristics differently. London falls into the fourth-generation category, retaining the leading position. This section studies on London and other maritime clusters identified as (potential) competitors to the London maritime cluster. The (potential) competitors to the London cluster are primarily those that have maritime services as a principal feature of the cluster, or that wish to expand maritime services as a strategic objective. It is noted that not all maritime clusters as yet identify themselves as maritime services centre. Several have yet to establish cluster level institutions to provide support across the maritime activities that constitute the cluster (Fisher Associates, 2004). Based on the definition in Section 2.2, the competitive advantages of sixteen maritime sectors on which to base this exercise are compared in Table 2 - Port, Marine insurance, Ship Finance & Related Services, Ship registry, Shipowners, Operators & Managers, Classification Society, Ship Agency and Forwarding, Shipbrokers, Maritime Legal Services, Ship building and repair, Marine Personnel, Maritime Research, Education and Training, Information and Communication Technology (ICT) Services, Maritime Organisations /Associations, Maritime Culture and Heritage and government supporting. Disadvantages comparison is shown in Table 3. Both tables are derived on the basis of thorough review of literature and secondary sources, such as Fisher Associates (2004)

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and Hamburg: Wijnolst and Janssens (2006); Hong Kong: Maunsell Consultants (2003); London: Brownrigg (2006), Dong (2010); New York/New Jersey: ; Oslo: Benito et al. (2003), Wijnolst (2003), Jakobsen (2006), Reve (2009), Isaksen (2009); Piraeus: Grammenos and Choi (1999); Rotterdam: De Langen (2002), Nijdam (2003), Wijnolst (2003), Janssens (2006); Shanghai: Lam and Cullinane (2003); Singapore: Wonga (2006) ; Tokyo: Shinohara (2006), Shinohara (2010), etc.

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Table 2 Comparison of world famous maritime clusters

Hamburg Hong Kong London NewYork/ NewJersey Oslo Piraeus Rotterdam Shanghai Singapore Tokyo

Maritimeadvantages Port Marineinsurance Financialservice Shipregistry Shipowners,Operators&Managers Shipclassificationsociety Shipagencyandforwarding Shipbrokers Legalservices Shipbuilding&repair Marinepersonnel Research,education&training Informationandcommunication technology(ICT)Services Regulators:MaritimeOrganisations/ Associations/exchangemarket,etc. Governmentalsupport Maritimecultureandheritage

Note: denotes maritime clusters have the competitive advantages in the particular aspects. Source: Authors.

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Table 3 Maritime cluster threats and disadvantages Famous maritime cluster Hamburg Threats and disadvantages
Relative remoteness in geographical location Poor access (eg. No. of intermodal connections) Restriction beyond a regional presence Concern of being inhibited by government Port competition from mainland China The balance of shipping business now exists in Far East High property and salary costs Overall transport infrastructure Unfavourable UK tax measures Insufficient support from government Insufficient capacity in port infrastructure Slowing growth of US economy Relatively small scale Insufficient internal competition to drive quality and efficiency in services Not being supported by cluster policies or initiatives Lack of international base of shipping companies, though a large Greek shipping centre Not having a reputation of major shipping operators Absence of a large financial services sector Not much value in short term to as a cluster analysis Hampered by protectionist policies in legal services sector Corporatist does little to engender a risk-taking commercial culture Insufficient platform of maritime information and intelligence Weak influencing of maritime trading marketing

Hong Kong

London

New York/ New Jersey Oslo

Piraeus

Rotterdam Shanghai Singapore

Tokyo Source: Authors

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Based on tables 1 to 3 and port status in the various maritime clusters, the classification of maritime clusters can be carried out by the influences of their ports. The categorisation is shown in Table 4. Table 4 Maritime clusters with/without strong port support Typical world famous maritime clusters Hong Kong, Rotterdam, Hamburg, Singapore, Shanghai London, Oslo, Piraeus

With/Without strong port support With strong port support Without strong port support Source: Authors.

3. Case studies of port in maritime cluster Based on the above discussion, port plays an important part in the whole development process of maritime cluster, though there are some famous maritime clusters without port as a prior advantage in its development, such as Oslo. As such, port contribution to maritime cluster development is an interesting research question which needs to be compared and further studied. 3.1 Contribution of port in maritime cluster At the early stage of maritime cluster, maritime activities focus on port production. Therefore, the port has almost absolute contribution to maritime cluster earnings. With the change in maritime cluster functions, maritime service activities are increasing. Port production is not the only or majority of earning resources. The following section takes maritime clusters of London and Hong Kong as case study to research on the development relationship between port and maritime cluster. 3.1.1 Case of London The UK is the leading centre worldwide in the supply of a broad range of professional and business services to the international maritime community, that are largely concentrated in London. According to the IFSL (2011) report, London and the UK is a leading source of capital and expertise for marine insurance, ship-chartering, shipping finance, ship classification, legal and accounting services and dispute resolution. In

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addition there are a wide range of other skills and facilities based there. Table 5 shows the increasing international market share of Londons maritime services. Table 6 indicates the rising trend in employment number of maritime service cluster in London, followed by Table 7 and Fig. 2 which show the overseas earnings of maritime service in London. Table 5 International market share of London maritime services (%) Maritime service category Ship finance Insurance - underwriting Insurance P&I Clubs Lloyds Register Tanker charting(estimates) Dry bulk chartering (estimates) Second hand tonnage(estimates) Year 1999 18 19 71 20 50 30-40 50 Year 2004 17 15 67 19 50 30-40 50 Year 2006 18 23 65 19 50 30-40 50 Year 2008 13 17 62 18 50 30-40 50 Year 2010 15 20 62 16 50 30-40 50

Source: IFSL (2000, 2005, 2007, 2009)

Table 6 Employment of London maritime service cluster (Person) Maritime service category Shipbrokering Ship classification Insurance service Law firms Banking Other service Total Year 1999 4000 1300 3700 2600 400 1800 13800 Year 2004 4498 1734 3030 2350 400 2050 14062 Year 2007 5000 1700 2950 2050 200 2400 14300 Year 2009 5000 3000 2950 2050 200 2400 15600

Sources: IFSL (2000, 2005, 2007, 2009)

Table 7 Overseas earnings of maritime service in London (m) Maritime service category Ship brokering

Year 1999 293

Year 2002 322

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Year 2004 551

Year 2008 948

Year 2010 744

Ship classification Insurance service Legal service Ship finance Other services Total

47 160 190 100 140 930

54 170 190 150 160 1046

75 170 180 170 155 1301

72 195 205 500 180 2100

70 472 208 662 60 2216

Sources: IFSL (2000, 2003, 2005, 2009, 2011)

Fig. 2 Overseas earnings of maritime service in London (m)

2500

2000

Shipbrokering 1500 Shipclassification Insuranceservice Legalservice 1000 Shipfinance Otherservices Total 500

0 1999 2002 2004 2008 2010

Sources: IFSL (2000, 2003, 2005, 2009, 2011)

As shown in Table 7 and Fig. 2, the growth of total overseas earnings from maritime service sectors in London is tremendous in the past decade, more than two times of earnings in year 1999 comparing with 2010. Ship finance enjoyed a more than six-fold growth, while there is approximately three times increase in earnings from insurance
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and about two times from brokering in the same period. However, when maritime services cluster is developing rapidly in London, Port of London does not behave as prosperous as many maritime service sectors. We see the stagnation or even tiny downswing of freight handled by Port of London in Fig. 3, contrasting with the background of enhancement in the international trade and port throughput worldwide.

Fig. 3 Freight handled by Port of London (mt)

70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

AllfreighttrafficthroughPortofLondon:1965 2010(thousandtonnes)

Source: DfT Port Statistics, UK(9 June 2011). The key finding of the above analysis is that, from the experience of London case, the port does not lead the development of maritime cluster any more. Port is not the main factor contributing to the maritime cluster in the advanced stage of cluster development, comparing with the former stages. 3.1.2 Case of Hong Kong Hong Kong is one of the worlds major container ports and its maritime industry is estimated to contribute to 2.5% of its GDP. The analysis of maritime business development in Hong Kong, based on data availability, is about the number and gross
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tonnage of ships registered in Hong Kong and authorized insurers - underwriting results of ship business (see tables 8 and 9 and figure 4).

Table 8 Number and Gross Tonnage of Ships Registered in Hong Kong No. of vessels Gross tonnage Year-on-year change (%) 2.4% -0.8% -1.7% -6.5% -11.0% -1.0% 8.8% 10.7% 13.2% 16.1% 16.1% 14.7% 7.5% 6.0% 6.7% 10.9% 9.9% 16.0% Year-on-year change (%) 5.9% 3.3% 11.1% -11.4% -28.2% 9.8% 34.2% 24.7% 32.0% 18.2% 26.9% 24.1% 16.6% 9.2% 10.6% 10.2% 13.3% 25.8%

At the end of year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

No. of vessels 597 592 582 544 484 479 521 577 653 758 880 1009 1085 1150 1227 1361 1496 1735

Gross tonnage ('000 tons) 7751 8003 8890 7877 5658 6213 8338 10397 13726 16230 20604 25565 29798 32529 35697 39643 44904 56510

Source: Summary Statistics on Shipping Industry of Hong Kong, 2011(3)

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Fig. 4 Gross tonnage from year 1993 to year 2010 (000 tons)
60000 50000 40000 30000 20000 10000 0 Grosstonnage ('000tons)

Source: Summary Statistics on Shipping Industry of Hong Kong, 2011(3)

Table 9 Authorized Insurers in Hong Kong - Underwriting Results of Ship Business Year-on-year change (%) Gross premiums Net premiums Gross claims paid Net claims paid Net claims incurred 2002 15.2 45.7 -42.7 -57.6 124.1 2003 1.6 1.3 21.8 92.4 6.2 2004 19.3 15.1 26.9 -2.2 -33.5 2005 4.8 3.6 2.3 38.7 81.7 2006 16.8 21.2 -12.4 -13.7 -13 2007 2.2 -0.1 159.5 65.4 35.9 2008 32.4 40.3 -45.3 -33.9 -2.4 2009 -11.6 -18.1 11.5 11.8 -0.2 2010 23.7 30 -19.2 -9.5 22

Source: Summary Statistics on Shipping Industry of Hong Kong, 2011(3)

Table 10 shows the ports cargo throughput ranging from year 1993 to year 2010. Based on the figures of port and typical maritime services in Hong Kong, such as number and gross tonnage of ships registered in Hong Kong and the authorized insurers in Hong Kong - underwriting results of ship business, figure 5 summerises the year-on-year percentage change of these indexes.

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Table 10 Seaborne Cargo Throughput Discharged Year ('000 Year-on-year tonnes) % change Loaded ('000 Year-on-year tonnes) % change +13.7 +23.0 +17.1 -2.4 +5.6 -9.6 +5.9 +8.4 -1.8 +6.4 +9.8 +9.6 +1.4 +8.9 +13.9 +2.7 -19.7 +20.7 Total seaborne cargo throughput ('000 Year-on-year tonnes) % change 96 100 110 947 127 175 125 838 133 301 127 482 128 222 130 937 130 676 138 301 148 618 158 617 161 467 166 208 177 347 179 974 161 591 182 004 +15.2 +15.4 +14.6 -1.1 +5.9 -4.4 +0.6 +2.1 -0.2 +5.8 +7.5 +6.7 +1.8 +2.9 +6.7 +1.5 -10.2 +12.6

68 226 +15.8 27 873 1993 76 672 +12.4 34 274 1994 87 048 +13.5 40 127 1995 86 694 -0.4 39 145 1996 91 950 +6.1 41 351 1997 90 104 -2.0 37 378 1998 88 621 -1.6 39 601 1999 88 003 -0.7 42 934 2000 88 506 +0.6 42 170 2001 93 444 +5.6 44 857 2002 99 363 +6.3 49 255 2003 104 612 +5.3 54 006 2004 106 695 +2.0 54 772 2005 106 579 -0.1 59 629 2006 109 435 +2.7 67 912 2007 110 220 +0.7 69 755 2008 105 612 -4.2 55 979 2009 114 447 +8.4 67 557 2010 Source: Census and statistics department (2011)

It can be seen that total seaborne cargo throughput in Hong Kong is not increased as much as ship gross registered tonnage and ship insurance business, but more steady than the other businesses. From the case of London maritime cluster, it can be found that port throughput is encountering a downturn in the past few years, which contrasts sharply with the tremendous increase of earnings in many maritime service sectors. It also sees the changing positions of Port of London and maritime service sectors. Port of London used to be the world main and leading port. However, the leading position of the port has disappeared, and is replaced by maritime service business instead, which is approximately 50% of oversea earnings in the world. The port no longer plays the key role in maritime cluster development in London.
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Fig. 5 Year-on-year % change of port throughput (tonnes), gross registered tonnage and ship insurance business
200

150

100

50

0 2002 2003 2004 2005 2006 2007 2008 2009 2010

50

100 Grosspremiums Grossclaimspaid Netclaimsincurred Totalseabornecargothroughput Netpremiums Netclaimspaid Grosstonnage

Source: Drawn by authors based on Census and statistics department and Summary
Statistics on Shipping Industry of Hong Kong, 2011(3)

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In the case of Hong Kong, according to the past tendency, it can be deduced that dynamics of Hong Kong maritime cluster are driven by both maritime service sectors and the port. Port of Hong Kong is still one of the leading sea ports in the world, but with relatively stagnant throughput movement, comparing with the vibrant maritime service sectors. It seems that the ports significance to the clusters development is relatively lower than earlier years. By comparison of maritime clusters in both London and Hong Kong, it can be found that port is not necessarily the leading influencing factor to maritime cluster development nowadays. Based on the analysis of the maritime cluster evolution in section 2.1, some world-famous maritime clusters such as Hong Kong are entering the new generation. The new era of maritime cluster features maritime service provider and intelligence capability, It takes over ports leading position of being the unique or main determinant of maritime cluster development.

3.2 Coordinated development between port and maritime cluster The above statement is based on conceptual development and qualitative analysis on port and maritime cluster. As the result shows, ports significance is diminishing as a maritime cluster advances to become more service oriented. It would be interesting to know what a proper development degree between these two systems is. The following part carries on the discussion on the measurement of the coordinated development between port and maritime cluster in a quantitative way. 3.2.1 Evaluation model selection From above analysis, we can see that the prompting effect of port on maritime cluster is changing. Questions concerned here are whether the impact of input and output of the two systems are coordinated and whether the impact of the input is evident (Liu et al., 2010). Aiming at the problems, based on some famous maritime clusters as the research scope, the study selects port and maritime cluster as Decision Making Units. By analysing input and output data from these two systems, we are able to evaluate the
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coordination development and efficiency validity of support and utilization between these two systems. Data analysis techniques used in port research are mainly descriptive statistics (35.5%), regression (16.9%), DEA (10.2%), Logit model (5.1%) and SFA (4.8%) (Woo, et al. 2011). These techniques, such as DEA, SFA, Logit model, Multi-Criteria Decision Making (MCDM), Error Correction Model (ECM) and Structural Equation Modelling (SEM), have more specic purposes and usages than descriptive statistics. The comparison of these methods is listed in Table 11. Table 11. Comparison of data analysis techniques used in port research Data analysis technique
Assess the relative efciency of port operations Evaluate the consequence of port reform Evaluate the impact of regulation on port efciency Traditionally determine or predict demand for freight and passengers in transport economics, using a discrete choice approach Demand analysis for port services Frequently in port selection studies Cullinane and Wang, 2007 Cullinane et al., 2002; Cullinane et al., 2005 Barros, 2003; Ferrari and Basta, 2009 Winston, 1985 Anderson et al., 2009; Veldman et al., 2005 Garcia-Alonso and SanchezSoriano, 2009; Magala and Sammons, 2008; Malchow and Kanafani, 2001, 2004; Tongzon and Sawant, 2007 Evaluate competitiveness of particular ports and to develop strategies for competitiveness: Analytical Hierarchical Process (AHP) PROMETHEE Lirn et al., 2003, 2004; Ugboma et al., 2006 Castillo-Manzano et al., 2009; Guy and Urli, 2006

Functions

Examples

DEA & SFA

Logit model

MCDM

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Technique for Order Performance by Similarity to Ideal Solution (TOPSIS) Gray Relation Analysis (GRA) Hierarchical Fuzzy Process (HFP) Estimate both short term and long run effects of explanatory time series variables Forecast by predicting short-run adjustments of the dependent variable Determine relationships between the variables, such as inter-port dynamics

Celik et al., 2009 Teng et al., 2004; Huang et al., 2003 Yeo and Song, 2006 DeBoef, 2001 Fung, 2001; Hui et al., 2004 Yap and Lam, 2006

ECM

Take a conrmatory approach to the analysis of a structural theory Examine the channel relationship Examine the impact of peoples perception on performance Examine and the Technology Acceptance Model (TAM)

Byrne, 2001 Bichou and Bell, 2007; Lai et al., 2008 Shang and Lu, 2009 Norzaidi et al., 2009

SEM

Source: Compiled by authors, according to references of Lin and Tseng (2005) and Woo et al. (2011). As shown in the table above, there are two techniques - SFA and DEA, to measure port efficiency. The measurement of efficiency can be applied in the study of coordination development and efficiency validity. However, there are some differences to be considered when adopting the proper method. By comparing the advantages and disadvantages of the two methods, DEA is adopted. It is mainly because SFA needs to assume functional form and distribution type in advance, which is difficult to be applied in the research of maritime cluster.

3.2.2 Application of DEA model

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The paper proposes to use the DEA method to evaluate the coordination between port and maritime cluster development, which is to evaluate the validity of support and utilization between the two systems. The development of the port might promote maritime cluster, and vice versa. Therefore, the two systems as input and output respectively can be counted as a big input-output system. When taking port as the input system, DEA validity evaluation is to evaluate whether port accommodates to the demand of maritime cluster development, as well as whether port strongly supports the clusters progress. When maritime cluster is the input system, it is to measure whether the cluster has powerfully supported and utilized maritime cluster system. The suitability of the chosen inputs and outputs is a key concern. In terms of the approaches towards the selection of input and output variables for port, they can be classified into two categories according to whether a monetary parameter should be used or not (Panayides et al., 2009) and such reference can be drawn from the literature. Though there is no research on maritime cluster inputs or outputs in DEA method, it can be derived from the relationship between port and city when considering and choosing the variables of inputs and outputs for maritime cluster, since maritime cluster is one of the industry clusters within a region economy. According to Li and Lu (2009), fixed assets investment amount and number of employees are selected as maritime cluster inputs, with GDP and total sales of retail trade as port city output, Besides, Liu et al (2010) takes GDP, investment in fixed assets and social retail goods as variables of economy society. Based on the prior research and maritime cluster characteristics, such as internationalism, we propose the variables for port and maritime cluster, as shown in Table 12. Here CCR input-oriented model in DEA approach is proposed in the port and maritime cluster development evaluation model, with the objective of focusing on how many inputs can be reduced by maintaining the same level of output by providing information purely on technical and scale efficiency. In this way, relationships such as whether the development of port is coordinated with maritime cluster can it be identified.

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Table 12 The variables in DEA model Variables

Number of employees(

References
Roll and Hayuth (1993); Martinez-Budria et al. (1999) labour expenditure; Tongzon (2001); Barros (2003); Barros and Athanassiou (2004); Liu et al. (2010) Barros (2003); Park and De (2004); Barros and Athanassiou (2004)

x1 )

Port

Number of Productive Berths (

x2 )

Cargo Throughput(x3)

Martinez-Budria et al. (1999); Tongzon (2001); Valentine and Gray (2001, 2002); Barros (2003); Park and De (2004); Barros and Athanassiou (2004); Min and Park (2005)

Total Investment Amount(

y1 )

Barros (2003, 2006); Liu et al. (2010) Roll and Hayuth (1993); Martinez-Budria et al. (1999) labour expenditure; Tongzon (2001); Barros (2003); Barros and Athanassiou (2004); Liu et al. (2010) Park and De (2004); Barros (2006); Liu et al. (2010)

Maritime cluster

Total Number of Employees ( y2 )

GDP from maritime cluster ( y3 ) Overseas earnings ( y4 )

Source: Authors.

CCR model assumes there are n Decision Making Units (DMU) and each of them has m types of input (the consumption of resources) and s types of output (the effect of the input). When taking port as the input, the relative efficiency is represented by P , which stands for the degree of closeness between actual effective rates of port development scale and technology and the requirements of the maritime cluster development. The size of value refers to the adaptability of the port to maritime cluster development. On the other hand, when taking maritime cluster as input system, the relative efficiency is represented by M , which stands for the degree of closeness between actual effective rates of maritime cluster supporting and utilizing port and the requirements of to
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maritime cluster. Using weighted method on P and M , = p p + m m ( p + m = 1 ), stands for the linear combinations coefficient of the DMUs. The index represents the coordination of the whole system. It can combine the two indexes of relative efficiency, and preferably evaluates the coordination degree of port and maritime cluster.

4. Conclusions The paper studies the influence and contribution of port on maritime cluster development. It thoroughly develops an original maritime cluster connotation, especially in the aspects of its formation and relationship with the port within it. Then, it summarizes maritime cluster development evolution from the perspective of dynamic port functions. Based on this relationship with port, it categorizes world-famous maritime clusters into two parts - with/without strong port throughput support. One typical case of maritime cluster from each of these two groups - London and Hong Kong, is selected and analysed. In each case, the paper studies the development trends and positions of maritime sectors within a cluster. It is found that port is not the only main influencing factor in the advanced generation of maritime cluster, which is recognized as international maritime cluster with the main function of maritime services centre. In order to take further analysis as to what extent this coordination development relationship between port and maritime cluster should be maintained, the study proposes DEA model to evaluate the two systems. With this method, it provides the reference for maritime clusters, which are on their way to be international maritime centres, to handle the development relationship with ports. This research findings presented are based primarily on evidences from the changing functions of maritime clusters and case analysis of London and Hong Kong. For the maritime cluster evolution based on changing port functions, future research can apply the DEA model for detailed analysis. Future studies could also take into account other maritime sectors that might be identified as important influencing factors to maritime cluster development. Besides, maritime service sectors analysed in London and Hong
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Kong cases are part of maritime service provided in their clusters. Hence, future researchers could also choose more comprehensive sectors into maritime cluster analysis, to compare and evaluate the relationship between port and maritime cluster. What is more, the unique characteristic of each maritime cluster might have its own dynamic development path with port, which is different from London or Hong Kong. Future researchers could take steps on different classification of maritime clusters to make the relationship with port more precisely. As a whole, the paper presents a useful reference for research and policy suggestions on the interplay between maritime cluster and its port development for maritime cities and regions en route to higher value generating IMCs.

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