Port economic contribution to local economyPort economic contribution to local economyProf. dr. Michaël Dooms

IAPH Mid-term board meeting and conferenceWednesday May 23rd, 2012

Agenda

• Problems / issues• What (traditional – new measures) ?• Why ?• How ?• New tendencies / concepts• Conclusion

What?

• Socio-economic indicators (mainly gross value added and employment) to:

– Justify port investment in terms of contribution to local, regional, national welfare

– Serve as criteria for budget allocation of public infrastructure funds

Socio-economic indicators

– Convince stakeholders through communication• Port development as a component of local, regional, national and

supranational economic / industrial development policies• Socio-economic performance indicators for ports could serve to

measure the effectiveness of these policies (although causality could be questioned, e.g. exchange rate fluctuations can influence trade and hence, socio-economic indicators of ports)

Background (1)

• Historically, employment and value added have been important criteria/impacts to justify and show the economic contribution of port operations and development to stakeholders:– Local communities (societal acceptance);– Local communities (societal acceptance);– Central, regional and local government (criteria for budget allocation);– Preference to attract traffic segments with high value added.

• A number of issues arise:– (1) Exaggeration of impacts;– (2) ICT, comparisons and different methodologies;– (3) Local impacts are decreasing (see Gripaios and Gripaios, 1995);– (4) Stakeholder diversity / conflict of objectives.

Background (2)

• Figures are often exaggerated (in particular indirect impacts) and thus criticized by stakeholders opposing port development, who perform studies on proper means and/or mobilize eminent economists to show exaggerations

• Loss of credibility of port authority management (in most cases public authority) in the local community and with cases public authority) in the local community and with central government leading to loss of stakeholder commitment

• The rise of ICT and the internet has made studies and documents widely available:

• Comparisons between ports are possible but show great diversity in methodology and results leading to non-transparency

• Result: misleading comparisons and misconceptions coupled to the use of these sources as benchmark information to allocate budgets

| pag. 7

“We have to ask ourselves the question whether the Deurganckdok has not been THE mistake of the century.It has reduced the port to its pure logistical function. That is not so ambitious”

Causality of effects (1)Study Direct

effectIndirect effect

MI Induced effect

MA Strategic effect

Ms

Europe(1999)*

131 81,2 1,62 287 2,35 / /

United Kingdom(2003)

29,3 25,2 1,86 13,6 1,25 / /

France 22 30 2,36 13 1,25 465 9,94France(2003)

22 30 2,36 13 1,25 465 9,94

Germany(2004)

160 95 1,59 65 1,25 372 2,46

Italy(2004)

24 13,5 1,56 9,4 1,25 / /

Portugal(2004)

1,03 / / / / 75,5 46,8

Belgium(2003)

9,54 3,77 1,40 1,32 1,10 Partial calculation

/

Meta-analysis of economic impact of the courier industry (VUB, 2004)

Causality of effects (2)

Study Direct effect Indirecteffect

MI Inducedeffect

MA Strategiceffect

Ms

Europe(1999)

3.460 1.580 1,46 5.800 2,15 / /

UnitedKingdom(2003)

825 / / / / 1.800 /

France / / / / / 2.000 /France(2004)

/ / / / / 2.000 /

Germany(2004)

/ / / / / 18.000 /

Italy(2004)

634 / / / / 1.300 /

Portugal(2004)

18,8 38,3 3,04 24,9 1,44 1.120 20,6

Belgium(2003)

486 216 1,44 107 1,15 Partial /

Meta-analysis of economic impact of the courier industry (VUB, 2004)

Background (3)

• New (or old?) challenges:– Local economic impacts of port activity are in most European

cases decreasing (desindustralization, containerization and increased use of automated port handling technologies);

– Focus has shifted to negative externalities (which has led to the development of green management and stakeholder management literature for ports);literature for ports);

– Gripaios and Gripaios (MPM, 1995):• “(...) it is easy to exaggerate the existing and potential role of ports in

regional economic development.”;• “Ports are not big users of labour and are no longer the interrelated

industrial complexes that they once were.”;• “They are not efficient vehicles of economic development and (...) planners

would be unwise to rely too heavily on port development as a tool for economic regeneration.”.

Background (4)

• New insights:– Regional and hinterland impacts have gained in importance:

• Development of port networks / port regionalization / subharborization (Notteboom and Rodrigue, 2006).

• Development of methods to calculate economic impacts in the regional network (Dooms and Verbeke, 2007).network (Dooms and Verbeke, 2007).

• Development of Extended Gateways (Flemish Institute of Logistics, 2006).

Port regionalization (theory)

Notteboom and Rodrigue, 2005

Port regionalization (practice)

Port regional impact (1)

Port regional impact (2)

• 2008 study for the port of Antwerp• Opportunity of further port development

(e.g. one additional tidal dock):– Local (port area): ca. 3.600 direct FTE;– Local (port area): ca. 3.600 direct FTE;– Regional (Flanders): ca. 23.000 direct FTE.

• Use of additional indicators: e.g. trade volumes (e.g. % of trade transiting…)

Example from Belgium: share of the maritime cluster in total gross value added (GVA) inside the port areas, evolution 2002-2007 (Source: own calculations based on BNB data, report 2007 published July 2009)

The port of Zeebrugge has limited industrial activity in its area, so a high share of GVA

is realized in the maritime cluster

(Very) strong dynamics inside the port area

The port of Gent is an industrial port so the maritime cluster has a lower share in

total GVA

cluster

The port of Antwerp is a

diversified port

In only 5 years time, the share of the maritime cluster in GVA increased for the total Belgian port cluster from ca. 20% to ca. 27%: these

dynamics show the interest of measuring socio-economic indicators to analyze underlying trends affecting the port sector such as technological

innovation, market concentration, containerization, etc.

Need to review the existing indicators?

• Diversity of stakeholder objectives / policy objectives• In particular to ‘brand’ port areas / port companies as attractive

employers or for investment purposes– In particular given port regionalization

• Focus on “softer” issues, but with strong links to policy objectives:• Focus on “softer” issues, but with strong links to policy objectives:– Life-Long learning– Training and education– Gender equality

• Other: trade function, connectivity, financial health of the sector,…• Is this possible….?

http://www.nbb.be/doc/ts/publications/wp/wp215En.pdf

Suggestion• … yes, it is!• National Bank of Belgium annual report on socio-economic

impacts on ports contains:– Labour Cost indicator– Labour Turnover indicator– % of port companies which mention training in annual report– % of port companies which mention training in annual report

• 46,8% (in 2006) to 55,6% (in 2008)

– Training (‘investment in employees’) indicator• % of number of hours related to training/education• % share of personnel costs

– Gender equality indicator• 84% Male / 16% female

• Including benchmark with other sectors in the economy

Not there yet…

Source: NBB, 2010

Case study : IMPACTE project (2006-2008)

• Main limitations of literature (De Brucker et al., 1998, Bryan et al., 2006, Haezendonck, 2007):– Strong focus on local analysis of the impacts on the port territory (and maritime

industrial clusters), including supplier relations and spending impact of port workers;

– Limited attention for the regional and hinterland perspective in terms of socio-economic impact assessment.economic impact assessment.

• Research sources:– Numerous research and consulting studies performed for ports, for port projects,

on sectoral level, etc..• Research questions and challenges:

– (1) How to create an applicable and transparent method for economic impact assessment across ports/regions/countries?;

– (2) How to integrate new insights, e.g. importance of regional and hinterland impacts in economic impact assessment for ports?

Case study : IMPACTE project (2006-2008)

• Calculate economic contribution of 11 Channel Strait ports to local, regional, national economy:– Belgium: Ostend and Zeebrugge;– France: Dieppe and Calais;– UK: Dover, Ramsgate, Southampton, Portsmouth, Plymouth,

Falmouth, Thurrock.Falmouth, Thurrock.• Meta-Analysis of Economic Impact Assessment

reports (type of impacts considered, geographical scope, etc.);

• Development of an interregional best practice (toolkit);

• Application of the best practice to 11 ports.

Meta-Analysis

• A significant number (33) of recent studies from different countries and continents were analyzed;

• Several parameters were considered:– An evaluation of the usability of each study;– A summary of methodological aspects (which type/definition of impacts – A summary of methodological aspects (which type/definition of impacts

as well as calculation method);– Availability of results for value added, employment and investments;– Information on geographical and sectoral boundaries.

Results (1)

Code Title

Data MethodologyTexts and other information

BE-01 Working paper document n 86 Š June 2006. Economic importance of the Belgian ports: Flemish maritime ports and Li¸ge port complex

7 7 7

BE-02 Working paper document n 110. Economic impact of port activity: a disaggregate analysis - The case of Antwerp

4 4 4

UK-01 Bristol Port Š Economic assessment 5 4 4UK-02 Economic Impact of State Commercial Seaports on

the Irish Economy 5 5 5UK-03 Port of Dover Š Economic Impact assessment 3 3 4UK-04 Container Port Transhipment Study 4 4 4UK-05 The Northern Way: Evidence based review of the

growth prospects o the Northern ports 3 1 2UK-06 Economic and Employment Impact Assessment

Usefulness of

UK-06 Economic and Employment Impact AssessmentDibden terminal 3 3 3

UK-07 Proof of Evidence on the economic need for andemployment impact of Dibden Terminal 3 2 2

FR-01 La mesure de la valeur ajoutˇe liˇe aux activitˇs portuaires / Port de Nantes Š Saint Nazaire 2 3 2

FR-02 Les retombˇes rˇgionales des activitˇs commerciales des ports de Basse-Normandie 5 4 5

FR-03 Retombˇes socio-ˇconomiques du port de Calais 5 4 3FR-04 Impact ˇconomique et social du port de Nice

Villefranche Santˇ 4 5 5FR-05 Etude dÕˇvaluation socio-ˇconomique du projet de

terminal roulier du port de Boulogne/Mer 6 6 5FR-06 Etude du plan dÕadaptation du port de

Boulogne/Mer 6 6 5FR-07 La valeur ajoutˇe du port du Havre 1 1 1FR-08 Etude dÕˇvaluation socio-ˇconomique du projet

dÕadaptation des capacitˇs dÕaccueil du port de Lorient

6 6 5

FR-09 Etude dÕactualisation du plan de modernisation duport de S¸te 6 6 5

Results (2)

Code Title

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BE-01 Working paper document n 86 Š June 2006. Economic importance of the Belgian ports: Flemish maritime ports and Li¸ge port complex

X X X X X

BE-02 Working paper document n 110. Economic impact of port activity: a disaggregate analysis - The case of Antwerp

X X X

UK-01 Bristol Port Š Economic assessment X X X XUK-02 Economic Impact of State Commercial Seaports on

the Irish Economy X X X X XUK-03 Port of Dover Š Economic Impact assessment X X X XUK-04 Container Port Transhipment Study X X XUK-05 The Northern Way: Evidence based review of the

growth prospects of the Northern ports X XUK-06 Economic and Employment Impact Assessment

Methodological aspects

UK-06 Economic and Employment Impact AssessmentDibden terminal X X X

UK-07 Proof of Evidence on the economic need for andemployment impact of Dibden Terminal X X X

FR-01 La mesure de la valeur ajoutˇe liˇe aux activitˇs portuaires / Port de Nantes Š Saint Nazaire X X X X

FR-02 Les retombˇes rˇgionales des activitˇs commerciales des ports de Basse-Normandie X X X

FR-03 Retombˇes socio-ˇconomiques du port de Calais XFR-04 Impact ˇconomique et social du port de Nice

Villefranche Santˇ X XFR-05 Etude dÕˇvaluation socio-ˇconomique du projet de

terminal roulier du port de Boulogne/Mer X X XFR-06 Etude du plan dÕadaptation du port de Boulogne/Mer X X XFR-07 La valeur ajoutˇe du port du Havre XFR-08 Etude dÕˇvaluation socio-ˇconomique du projet

dÕadaptation des capacitˇs dÕaccueil du port de Lorient

X X X

FR-09 Etude dÕactualisation du plan de modernisation duport de S¸te X

Results (3)

Code Title

Add

ed V

alue

Em

ploy

men

t

Inve

stm

ents

Add

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alue

Em

ploy

men

t

Inve

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BE-01 Working paper document n 86 Š June 2006. Economic importance of the Belgian ports: Flemish maritime ports and Li¸ge port complex

X X X X X X

BE-02 Working paper document n 110. Economic impact of port activity: a disaggregate analysis - The case of Antwerp

X X X

UK-01 Bristol Port Š Economic assessment X XUK-02 Economic Impact of State Commercial Seaports on

the Irish Economy X X X XUK-03 Port of Dover Š Economic Impact assessment X XUK-04 Container Port Transhipment Study X XUK-05 The Northern Way: Evidence based review of the

growth prospects of the Northern ports X X X XUK-06 Economic and Employment Impact Assessment

Available results direct

Available results indirect

UK-06 Economic and Employment Impact AssessmentDibden terminal X X

UK-07 Proof of Evidence on the economic need for andemployment impact of Dibden Terminal X X

FR-01 La mesure de la valeur ajoutˇe liˇe aux activitˇs portuaires / Port de Nantes Š Saint Nazaire X X X X

FR-02 Les retombˇes rˇgionales des activitˇs commerciales des ports de Basse-Normandie X X X X

FR-03 Retombˇes socio-ˇconomiques du port de Calais X XFR-04 Impact ˇconomique et social du port de Nice

Villefranche Santˇ X X X X XFR-05 Etude dÕˇvaluation socio-ˇconomique du projet de

terminal roulier du port de Boulogne/Mer X X X XFR-06 Etude du plan dÕadaptation du port de Boulogne/Mer X X X XFR-07 La valeur ajoutˇe du port du Havre X X X XFR-08 Etude dÕˇvaluation socio-ˇconomique du projet

dÕadaptation des capacitˇs dÕaccueil du port de Lorient

X X X X

FR-09 Etude dÕactualisation du plan de modernisation duport de S¸te X X X X

Results (4)

Code Title

Several ports, aggregated results

Strictly one port (or several ports in separated analyses)

One project in the port

BE-01 Working paper document n 86 Š June 2006. Economic importance of the Belgian ports: Flemish maritime ports and Li¸ge port complex

X

BE-02 Working paper document n 110. Economic impact of port activity: a disaggregate analysis - The case of Antwerp

X

UK-01 Bristol Port Š Economic assessment XUK-02 Economic Impact of State Commercial Seaports on

the Irish Economy XUK-03 Port of Dover Š Economic Impact assessment XUK-04 Container Port Transhipment Study XUK-05 The Northern Way: Evidence based review of the

growth prospects of the Northern ports XUK-06 Economic and Employment Impact Assessment

Dibden terminal X

Geographical boundaries

Dibden terminal XUK-07 Proof of Evidence on the economic need for and

employment impact of Dibden Terminal XFR-01 La mesure de la valeur ajoutˇe liˇe aux activitˇs

portuaires / Port de Nantes Š Saint Nazaire XFR-02 Les retombˇes rˇgionales des activitˇs

commerciales des ports de Basse-Normandie XFR-03 Retombˇes socio-ˇconomiques du port de Calais XFR-04 Impact ˇconomique et social du port de Nice

Villefranche Santˇ XFR-05 Etude dÕˇvaluation socio-ˇconomique du projet de

terminal roulier du port de Boulogne/Mer XFR-06 Etude du plan dÕadaptation du port de

Boulogne/Mer XFR-07 La valeur ajoutˇe du port du Havre XFR-08 Etude dÕˇvaluation socio-ˇconomique du projet

dÕadaptation des capacitˇs dÕaccueil du port de Lorient

X

FR-09 Etude dÕactualisation du plan de modernisation duport de S¸te X

Results (5)

Code Title No information available

Few information

Comprehensive list of sectors

BE-01 Working paper document n 86 Š June 2006. Economic importance of the Belgian ports: Flemish maritime ports and Li¸ge port complex

X

BE-02 Working paper document n 110. Economic impact of port activity: a disaggregate analysis - The case of Antwerp

X

UK-01 Bristol Port Š Economic assessment XUK-02 Economic Impact of State Commercial Seaports on

the Irish Economy XUK-03 Port of Dover Š Economic Impact assessment XUK-04 Container Port Transhipment Study XUK-05 The Northern Way: Evidence based review of the

growth prospects of the Northern ports XUK-06 Economic and Employment Impact Assessment

Dibden terminal XUK-07 Proof of Evidence on the economic need for and

employment impact of Dibden Terminal X

Sectoral boundaries

employment impact of Dibden Terminal XFR-01 La mesure de la valeur ajoutˇe liˇe aux activitˇs

portuaires / Port de Nantes Š Saint Nazaire XFR-02 Les retombˇes rˇgionales des activitˇs

commerciales des ports de Basse-Normandie XFR-03 Retombˇes socio-ˇconomiques du port de Calais XFR-04 Impact ˇconomique et social du port de Nice

Villefranche Santˇ XFR-05 Etude dÕˇvaluation socio-ˇconomique du projet de

terminal roulier du port de Boulogne/Mer XFR-06 Etude du plan dÕadaptation du port de

Boulogne/Mer XFR-07 La valeur ajoutˇe du port du Havre XFR-08 Etude dÕˇvaluation socio-ˇconomique du projet

dÕadaptation des capacitˇs dÕaccueil du port de Lorient

X

FR-09 Etude dÕactualisation du plan de modernisation duport de S¸te X

Results (6)

• Great diversity in impacts calculated and methods:– Based on tonnes, calls, shifts...;– Use of surveys limited;– Value added not always calculated.

• Belgian National Bank as best practice, but:• Belgian National Bank as best practice, but:– Not readily applicable to UK/France (availability of resources and data,

in particular UK);– Focus only on local impacts (no wider regional/hinterland impact);– Some (minor) points of criticism by port authorities (underestimations).

Results (7)

• Development of guidelines and recommendations:– Regular assessments;– Inclusion of value added and employment;– Inclusion of investment volumes;– Treatment of macro-level data;– Treatment of macro-level data;– Geographical boundaries of the port area;– Sectoral boundaries of the port area;– Distinction of socio-economic impacts per broad traffic category;– Nature of regional effects;– Absence of core measures and information;– Transparency of assumptions.

Policy recommendations (1)

• Lack of availability of data represents important challenge (large influence on the quality of the results as well as relative comparability):– Still different calculation methods needed to apply a toolkit.

• Lack of common “language”:• Lack of common “language”:– E.g. Indirect impact: upstream, downstream, strategic, catalytic,

concerned, etc..– “Added Value” remains a very opaque concept to most stakeholders

(including policy makers).• Environmental impacts of ports and hinterland traffic

not treated (cfr. Benchmark with other sectors).

Policy recommendations (2)

• Need to “institutionalize” the calculation of economic impacts/contribution of ports, in terms of independence and development of common language:– E.g. Observatories financed by European Commission / port – E.g. Observatories financed by European Commission / port

authorities / regional authorities?

– Model of Belgian National Bank as guideline?

– The sequel: PPRISM project (http://pprism.espo.be)

Direct employment Indirect employment Direct gross added value Indirect gross added value Fiscal impact

Total (weighted, based on total European throughput)

46,41% 34,20% 39,46% 31,68% 11,41%

Ad-hoc (smaller ports) Ad-hoc (smaller ports)

European survey on measurement practices (1)

BasisAd-hoc (smaller ports)

Upstream supplier rela ons Ad-hoc (smaller ports)

Induced impacts Annual accountsAnnual (larger ports) Annual (larger ports)

Level Port level

Who calculates Port authority (own calcula ons or commi ssi oned to consul tant or independent body)

HowSurveys and annual

accountsInput-output models

Surveys and annual accounts

Input-output models Annual accounts

Delimita on Mix of both geographic boundaries and economic ac vi es

Period 2000 - 2009

European survey on measurement practices (2)

European survey on measurement practices (3)

European survey on measurement practices (4)

New insights: bringing in the regional perspective

• Data gathering during:– (1) Transnational research project co-funded by European

Commission (IMPACTE);– (2) Research study commissioned by the Antwerp Port Authority on

socio-economic impact of logistics activity in the hinterland.

• Data sources:– Quantitative data (maritime and trade statistics);– Qualitative data (in-depth interviews).

PHI Matrix

Applications

• Application to 11 Channel Strait Ports (UK, Belgium, France).

• Application to the port of Antwerp.

Results (1)

Results (2)

Limitations of the concept

• Time-consuming;• Limited number of respondents (although more than 50% of

traffic represented);• Static analysis;• Strongly diversified and larger ports need more detailed • Strongly diversified and larger ports need more detailed

data collection and different approach to implement the matrix;

• Dependency between the variables on the axes;• Strong dependence on qualitative expert information.

Lessons learned

• Introduction of a regional perspective on port socio-economic impact is possible

• Means of communication but also strategic exercise in the context of port competitive strategy

• Complement of value added and employment impact • Complement of value added and employment impact analyses

• Room for methodological and application oriented improvement

Conclusion (1)

• Growing paradox:– (1) Still no standardized, objective, accepted

approach to calculate local impacts, in particular for gross added value and particular for gross added value and employment

– (2) But growing and even urgent need to move beyond these basic indicators and show port contribution to welfare in the local and regional community in other ways to ensure license of operate

Conclusion (2)

• Need for independent, objective, yearly calculations – Step away from the ad-hoc approach

• Need for a common language and definitions to avoid exaggeration

• Create positive stories (avoid benchmarking with other sectors – “we create more than sector xyz…” - and even with sectors – “we create more than sector xyz…” - and even with other ports, cf. diversity)

• Need for a more holistic approach, integrating other socio-economic impacts showing contribution to local stakeholders economic objectives

• Need for an integrated local – regional – national story (cf. port regionalization)

• Link to broader policy objectives (innovation, R&D, trade policy, labor market etc.)

Conclusion (2)

• Remaining implementation issues on the port/country level:– Resources… €, $, £, ¥,…– Surprisingly, not a priority for a lot of port authority CEOs (opportunity

costs of executing the annual study versus other pressing issues)– Lack of lobby power of PA’s in some countries to advocate institutional

embedding of socio-economic impact calculationembedding of socio-economic impact calculation• Even in countries with large role of ports in the economy the usefulness of these

annual studies is questioned / under pressure cfr. Dutch Havenmonitor

• Increasing role of regional and global industry networks (pool resources, exchange best practices)?– Different challenges and different needs in different world port regions?– Emergence of cost-effective solutions / knowledge management

permitting more standardized / objective calculations

More info

Michael.Dooms@vub.ac.be