The Jade-Weser Port. An Economic Impact Assessment

Transcription

1 The Jade-Weser Port An Economic Impact Assessment By: Susanne Kleinsteuber European Business School Tutor: Prof. Gerald Vinten Date: 7 th of March,

2 TABLE OF CONTENT EXECUTIVE SUMMARY... 6 CHAPTER I: INTRODUCTION Introduction General Background of the Study General Purpose of the Study Professional Significance of Study Organisation of the following Chapters...10 CHAPTER II: METHODOLOGY & LITERATURE REVIEW Research Approach Research Strategy Objectives of this Paper Research Questions Research Design Reasons for the Research Strategy: Data Collection Phase 1 of the Research Process: Macroeconomic Principles Phase 2 of the Research Process: Maritime Economics Phase 3 of the Research Process: The Jade-Weser Port Phase 4 of the Research Process: Economic Impact Assessment Limitations Suggestions CHAPTER III: ECONOMIC IMPACT ANALYSIS Objective of an Economic Impact Analysis

3 2. The Frameworks Statistical Forecasting Input/Output Model Cost/Benefit Analysis Procedure of Presentation of Results...31 CHAPTER IV: DESCRIPTION OF THE JADE-WESER PORT Time Plan Project Investment and Finance Planned Capacity of the Container Terminal Construction Measures...35 CHAPTER V: REGIONAL ANALYSIS Geographic Location Infrastructure Population & Labour Force Economic Structure Future Development of the Industries CHAPTER VI: ARGUMENTS IN FAVOUR OF THE PORT Economic Significance of the Shipping Industry The Demand Side: Growth in overseas Container Traffic Overall Competitive Advantage Economics of Container Vessel Sizes Projected Benefits Employment Benefits

4 5.2. State and Local Government Tax Revenues Snowball Effect in the Chemical Industry CHAPTER VII: ARGUMENTS AGAINST THE PORT Economics of Vessel Size Demand Side and Forecasting Employment Benefits Environmental Impact The Construction Phase Voslapper Groden National Nature Park Nationalpark Wattenmeer Environmental Feasibility...64 CHAPTER VIII: CONCLUSION Importance of Sea-Borne Trade The Demand-side The Ship Size The Employment Benefits The Cost of Economic Growth Cost of the Port The Port s Competitive Strategy The Jade-Weser Port strives to become a Multi-Port...69 CHAPTER IX: RECOMMENDATIONS Infrastructure Attraction of new Businesses Employment

5 4. Tourism BIBLIOGRAPHY APPENDICES Appendix 1: The Time-plan of the Jade-Weser Port Appendix 2: The Investment Proposal for the Jade-Weser Port Appendix 3: The Global Demand Scenarios Appendix 4: The Intermodal Split of Cargo Volume Appendix 5: The international Transport Zones and available Transport Modes Appendix 6: The Regional Analysis: Population and Labour Force Appendix 7: The Regional Analysis: Industries Share in GDP and Employment Appendix 8 The Regional Analysis: Employment by Industry Structure Appendix 9: The Seaborne Trade by Economic Activity Appendix 10: The Producing Industry: Development of Output/ Export Ratio Appendix 11: The World Merchant Fleet Order Book Development Appendix 12: The Container Ship Dimensions, Explanations, Load Factor/Depth Requirements Appendix 13: The Technology Systems at Terminal EXHIBITS Exhibit 1: The Geographical Location of the Jade-Weser Port Exhibit 2: The Structure of the Presentation of Results Exhibit 3: The Planned Capacity of the Jade-Weser Port Exhibit 4: The Dimensions of the Jade-Weser Port Exhibit 5: The Infrastructure Connectivity of the Jade-Weser Port Exhibit 6: The E.U. Development of GDP and Container Shipping since 1985 Exhibit 7: The Forecasted Growth of Demand for Container Shipping in Northern Europe Exhibit 8: The Forecasted Capacity of North-Range Ports until 2015 Exhibit 9: The Planned Capacity and Market Share of North-Range Ports Exhibit 10: The Cost-Differences according to Ship Size Exhibit 11: The Total Projected Employment Benefits Exhibit 12: The General Cost Classifications 5

6 EXECUTIVE SUMMARY The following report investigates the regional economic impact of the Jade-Weser Port in Wilhelmshaven by evaluating the costs and benefits involved. The new container terminal is projected to bring important economic and social benefits, namely the creation of employment, multiplier effects, local and state tax revenues. The construction of the terminal and its operation at a later stage, however, also imply costs, which are sacrifices on environmental grounds in form of pollution, noise emission and additional infrastructure congestion in the hinterland. Next to evaluating the projected benefits and costs, this report will also examine the underlying rationale for the Jade-Weser Port, which include the forecasted growth in container shipping, the increase in ship size and capacity constraints at neighbouring harbours, henceforth analysing the viability of the project. The Jade-Weser Port will bring direct benefits in form of employment and fiscal revenues. Whether these are satisfactory in regard to the scope of investment or to the expectations of the population remains to be seen. As the investigation will demonstrate, the significance of the project lies within the long-term indirect prospects of the region. The port will initiate a chain reaction of beneficiary effects hopefully resulting from the creation of an industrial chemical compound and the arrival of new enterprise surrounding the port. In this aspect, the Jade-Weser Port is assumed to serve as a catalyst for economic growth, thereby significantly re-shaping the wealth of the whole region. 6

7 CHAPTER I: INTRODUCTION CHAPTER I: INTRODUCTION 1. Introduction The Jade-Weser Port will be located at the deep fairway of the outer Jade in Wilhelmshaven and shall become Germany s sole and Europe s most modern deep-water harbour. The idea of a universal port at Wilhelmshaven was born about thirty years ago when a local engineer named Tappe envisaged a solution to overcome the poor regional economic structure. Not taken seriously, his plan was conceived as wishful thinking and had been long forgotten. Today, representatives of the local economy and politics have resurrected the Tappe vision with slight modifications and are pushing it into reality. Thirty years later Wilhelmshaven is trying to deal with the same old problem: the creation of a solid base of income for economic growth and prosperity for the whole Jade-Weser region. Therefore this paper will be a study on the Jade-Weser Port and its socio-economic impact on the Jade-Weser region. 7

8 Exhibit 1: Location of the Jade-Weser Port Source: Ineos, General Background of the Study The Jade-Weser Port is a project of such an immense scope that it is bound to turn the course of history of a region for the better or worse. Its social and economic implications make extensive investigation and discussion worthwhile. As the port could act as an initiator for economic growth and development it could provide the opportunity to substantially increase regional prosperity. 8

9 3. General Purpose of the Study Within the course of current debates it has been argued that the efforts for the creation of such a harbour are not justified by the low projections for workplaces which evolve from the operations of the harbour itself. Furthermore the opposing forces (mainly environmentalists) regard the container terminal as environmentally incompatible, useless, too expensive. They described it as an effort coming far too late in order for Wilhelmshaven to successfully path its way into the transportation industry, as other successful harbour operators have established themselves since long (HANSA, 1999). The evaluation of these arguments will necessitate the examination of the projected local economical impact of the Jade-Weser Port. Therefore, the purpose of this paper is to investigate the trade-off between economic benefits and costs (mainly environmental) and henceforth define the economic viability of this project. It is furthermore intended to give the reader an insight into the impact the harbour can be expected to have in promoting economic growth and development, thereby significantly and positively effecting the wealth of the region. 4. Professional Significance of Study Regarding the contribution to professional knowledge it is hoped that this study will contribute in informing not only the affected population in the Jade-Weser region, but the 9

10 general wider audience. This will increase awareness and an understanding of the significance of this project, regardless of the overall outcome. This subject is of great importance, as it will affect numerous organisations and whole communities one-way or the other and can therefore be regarded as a historical opportunity. 5. Organisation of the following Chapters The Methodology and Literature Review in Chapter II familiarises the reader with the author s approach to the subject. Next to introducing the main literature it furthermore provides the relevant models for economic impact analysis. Building on the findings, Chapter III evaluates the most suitable frameworks to be used in order to assess the port s regional impacts and illustrates how the results are going to be presented. Chapter IV delivers a brief description of the Jade-Weser Port project, the time frame, planned investments and the technical aspects. Following the description, a regional analysis in Chapter V provides the necessary background information. Chapter VI presents the arguments in favour while Chapter VII discusses the arguments against the port that lead to a conclusion in Chapter VIII. The final Chapter IX intends to give recommendations directed towards a successful realisation of the project. 10

11 CHAPTER II: METHODOLOGY & LITERATURE REVIEW 1. Research Approach The research approach for this paper is mainly of an inductive nature, involving a long and constant data collection and analysis. Within this permanent process of up dating ideas and arguments emerge gradually. Taking into consideration that Jade-Weser Port Project is in the process of realisation, the future impacts and consequences can only be estimated. Thus, the inductive approach will allow for the flexibility and multiple viewpoints required. 2. Research Strategy The research strategy involves a multi-method, using a combination of methods and thus qualitative and quantitative data in order to obtain the closest estimates of the impacts. Such an approach should make it possible to cover the topic in the most thorough way. 3. Research Objectives The underlying task of this study is to assess the viability of the Jade-Weser Port project. This involves evaluating the importance of sea borne trade on the national economy in general, and also the importance of a single port, acting as a facilitator of economic 11

12 growth. The examination of the possible economic and environmental impacts of the Jade-Weser Port container terminal on the Jade-Weser Region will allow for an investigation of a trade-off between the environment and the economic benefits. The objectives of this study therefore intend to tackle the following specific research questions. 4. Research Questions 1. What is the economic significance of sea-borne trade? 2. What are the direct and indirect benefits of the Jade-Weser Port? 3. What are the direct and indirect costs of the Jade-Weser Port? 4. What arguments are the driving factors? 5. What are the arguments against the Jade-Weser Port? 6. Which industry sectors are most likely to benefit from the new terminal and therefore contribute to the region? 7. Who will ultimately benefit? 8. Does the region need a container terminal and if, will it succeed in promoting economic growth and prosperity? 5. Research Design From the beginning it was planned to carry out the research in several progressing phases: Beginning broadly and narrowing down to the essence. In order to provide a line of guidance to the reader, the different steps are briefly introduced in advance: 12

13 1. Research on macroeconomic principles 2. Research on maritime economics and sea-borne trade 3. Research on the Jade-Weser Port 4. Research on economic impact assessment 6. Reasons for the Research Strategy: Taking into account the novelty of the subject matter, it was perceived that this logical and structural sequence of research would be the most effective, as the process of narrowing down would allow for increased specification and formulation of the problematic issues, hence the achievement of the research objectives. 7. Data Collection As explained during the research design the collection of data occurred in four different stages. The structure of the headings intends to guide the reader through the different steps. Fehler! Keine Indexeinträge gefunden.7.1. Phase 1 of the Research Process: Macroeconomic Principles Objective of Research Process The first stage of the research intended to put the harbour into a macroeconomic context, hence to find suitable literature on regional development and to obtain economic 13

14 definitions, most importantly on economic growth, development and its variables leading to growth (such as capital, labour, land and raw materials, economies of scale and technical knowledge) Literature on Regional Development After searching for literature on regional development (e.g. by Paul Krugman s Development, Geography, and Economic Theory ) it turned out, that these were directed towards a totally different scope: regions defined by continents, explaining the differences in economic development on a national level. The literature proved to concentrate on developing countries and to be too broad. Therefore it did not help to identify any practical models that could have been applied onto the regional and local level of the Jade-Weser region Literature on Economic Growth Turning towards economic growth and development, Kasliwal (Kasliwal, 1995) delivered a good overview of the different factors of growth. Several models on economic growth were accessible (i.e. by N. Gregory Mankin, professor at the Harvard University), however, none have been adopted specifically within this report. This can be explained by the fact that presumptions made in order for the frameworks to be accurate are not applied in practice with the Jade-Weser Port (i.e. no governmental interference within the book by Stanely Fischer and Rudiger Dornbusch or an increase of supply of land which in the case of the port is going to be re-claimed as a subsidy by the State of Lower Saxony). 14

15 Result of First Research Phase Encountering macroeconomic models proved to be very difficult and complicated. Defining economic growth, development and its variables did not lead to an understanding of how it can be applied to a practical case like the Jade-Weser Port. At this stage it appeared to be essential to find other ways of approaching this challenging task, starting by gaining a specific insight into maritime economics Phase 2 of the Research Process: Maritime Economics Objectives: The objective of this research phase was to generate an understanding on maritime trade and the shipping industry Theoretical Literature on Maritime Economics Martin Stopford s book on maritime economics enhanced the academic and an economic understanding of maritime trade on an academic level. It included the economic organisation of the shipping market, supply, demand, costs and revenues, economic principles of maritime trade, global patterns and many other economic models and technical aspects. His book delivered qualitative information that has been used extensively within the analysis section. Nevertheless, it did not provide recent market data on the shipping trade itself, which brings us to the next main source. 15

16 Industry Statistics The Institute of Shipping Economics and Logistics (ISL) in Bremen releases annual reports in form of a Shipping Statistics Yearbook, containing the most recent statistics on the international shipping industry. The ISL deliveres the projections made on the development of world container shipping, shipbuilding and size that will be used as arguments favouring the port project within this study Industry Up-date First of all journals specialised on maritime trade, available at the British Library, have publicised articles written by different industry participants, identifying and discussing recent issues and trends within the industry. The journal World Port Development and HANSA included issues relevant to the Jade-Weser Port, especially regarding environmental factors aggravating port expansion, targeted in reaction to international growth in container shipment. These journals conveyed practical knowledge from the point of view of industry participants. A large amount of newspaper articles have been collected in order to enable a constant up-date on developments. Due to the high amount of articles collected, the bibliography will only include articles, which have been used within this report Result of the Research Phase Overall, this research phase delivered the essential understanding of the shipping industry and general problematic issues currently discussed especially in regard to port economics. 16

17 Without this research and knowledge; it would not have been possible to evaluate the different arguments and assess their viability Phase 3 of the Research Process: The Jade-Weser Port Objective of the Research Phase After gathering information on the industry, the task was to find sufficient reliable and suitable information on the Jade-Weser Port project itself Primary Literature - Interviews Getting as close to the topic as possible, interviews were scheduled with different key stakeholders. As they hold a personal interest in the project (or aversion in case of the anti group) we have to assume that they might lack a certain degree of objectivity. Objective of the Interviews The aim of these interviews was to obtain a holistic view and a general impression of the project by speaking to all different actors directly involved and responsible for the planning and realisation of the project. Administrative Issues The interviews were processed in an informal manner, face-to-face and semi-structured, with the intention to allow enough room for change and interaction. The data was noted 17

18 down by hand to the extent that it was allowed to be recorded. These interviews were all scheduled for January 2002 and took place either in Wilhelmshaven or in Jever (within the Rural District of Friesland) at the beginning of the research process. The average duration was 1-2 hours. Interview Partners Subjects to these interviews were representatives from the Economic Development Corporation, Chamber of Industry and Commerce, Jade-Weser Airport GmbH, Employers Association, the Wilhelmshaven City Authority and representatives of the chemical industry. To complete the picture, special attention was also given to the primary opposition group. Difficulties Emerging There were several difficulties emerging. As the interviews had to take place in Germany, the time-scale for the conduction was not only limited, but also restricted to a certain period of time during the year. They had to be carried out all at once in January, namely in the middle of the research process. Therefore, at the time of the interviews, there was an absence of a clear understanding of what was concretely involved in an economic impact assessment (so to say the variables of measurement). This lack of knowledge inhibited the formation of specific questions that would have clearly targeted the research questions on the port s direct and indirect impacts. These variables in its form only became apparent after the last step of the research process. 18

19 Another problem was the restricted access to the most recent numbers and estimations regarding the project (disclosed information), in other words, the variables of the economic impact analysis, especially regarding an estimation of the government and local tax revenues that the port and related businesses are expected to generate. There is a certain and important background to this: Competing Federal States in Germany still try to block the implementation of the Jade-Weser Port, using all and any facts and information obtainable for political purposes. Information policy is still rather tight. Therefore, even if the knowledge had been at hand prior to the interviews, the chances of receiving the financial data would still have been very slim. Result of the Interviews Resulting from the difficulties and restrictions described above, the information obtained could not fully serve to answer the research objectives. Nevertheless, they delivered an excellent insight into the problematic of the port, complexity and interdependency of the numerous factors involved ensuring success (port development, infrastructure development and politics) Secondary Literature The only secondary literature existing was Accomplishing the Future with the Jade- Weser Port (Simonsen, 2001). It proved as useful for gaining familiarity with the project, delivering valuable background information of the birth of the Jade-Weser Port idea and project, the political implications on a regional and local scale. Furthermore it provided an essential impression on the complexity and social acceptability of a project 19

20 of such immense scope. It contains mainly newspaper information, letters and critical comments and seems to have served as a promotional tool to the Jade-Weser Port project, which again reduces objectivity Studies and Reports on the Jade-Weser Port Project Feasibility Study In regard to reports written explicitly on the Jade-Weser Port, the first main source was a technical, economic and environmental feasibility study that had been carried out in cooperation between IBP (Engineering Company in Oldenburg), the Institute of Shipping Economics and Logistics and the Port and Transport Consulting Bremen GmbH. Completed in 1999, it was introduced to the public only in February 2000 withholding the financial and economic part of the study, which would have delivered the needed variables for the economic impact assessment. This study confirmed the technical, economic and environmental feasibility of the port. Study on the Necessity of a Deep-Water Port This study was conducted by Planco Consulting GmbH in October 2000, investigating the demand for a deepwater harbour in Germany on the basis of projected growth rates in container shipment, the future development of ship size and capacity constraints of the relevant North Range harbours (Hamburg, Bremerhaven, Rotterdam, Amsterdam, Antwerp, Zeebruegge), British and Asian ports. It delivered a detailed analysis of container growth expectation, strategic implications and the theory of economies of scale 20

21 in maritime economics. The use of published studies and projections together with statistical analysis and forecasting have ensured objectivity and delivered a reliable and important background study for this report. Evaluation of Options for Ports: Wilhelmshaven or Cuxhaven Roland Berger Consulting compared and evaluated the two possible locations for a container terminal at Wilhelmshaven and Cuxhaven, with the result that Wilhelmshaven is the most suitable option. Economic Development Prospects of the Region The main piece of literature used extensively throughout this report is a study made in 2001 in collaboration by two well-respected organisations: the Lower Saxon Institute for Economic Development Research (NIW) and the Institute for Economic Development Research (BAW). Their task was to assess the economic development prospects of the Jade-Weser Region in regard to the Jade-Weser Port. The report includes a detailed situational analysis on the region and an estimation of the socio-economic impacts. This study has built on the Jade Weser port Feasibility Study, the Berger and PLANCO Reports, and hence made use of extensive databases and statistics in order to reach the most plausible results. The report has used comparisons with other German harbours as a method for estimation. In comparison to all literature referred to in this report, this particular study has been the most valuable one, as it deliveres quotable data, clearly relates to the objectives stated and also demonstrates the 21

22 complexity and difficulty in undergoing such an assessment. Unfortunately, this study did not include any useful financial data Results of Research Phase As can be observed, there is little existing secondary literature on the Jade-Weser Port. This increased the dependency on the interviews for information, which can be regarded as disadvantageous. Therefore, quotable data had to be extracted from the different reports made. As these have all been conducted by external organisations the objectivity of these studies is maintained Phase 4 of the Research Process: Economic Impact Assessment Objective of the Research Phase The last phase represents the heart of this report. The objective was to obtain relevant frameworks or models explaining how an economic impact assessment is carried out, therefore defining essential data and variables The Models Comparable Studies After thorough research in the British library, it appeared to be somewhat impossible to find a comparative study, which evaluated the economic impact of another deep-sea harbour. The Internet however provided a few sources. 22

23 The first study obtained by the State of Nevada (Horten, 1999) explicitly described the application of economic analysis, forecasting and statistical modelling techniques, providing statistical methods of forecasting, non-statistical input/out-put models and economic impact analysis. This work has been adopted as a theoretical guideline during this report. Nevertheless, the actual structure of the impact analysis has been derived from another exemplary work carried out for the South Carolina State Ports Authority (Link, 1996), evaluating the contribution of its waterborne commerce to South Carolina s economy. The report confirmed the significance of deep-sea ports to the local economy and described it as a catalyst for economic growth and development, a result that relates to the hypothesis given within this paper. Even though it is a report about a geographically very distant location, it leaves enough room for appropriate application to the case of the Jade- Weser Port. Most importantly the report demonstrated a detailed economic impact analysis delivering the essential variables of measurement using an Input/Output model: Employment Benefit Sales Revenue Benefit Personal Income Benefit State and local Tax Benefit 23

24 The significant difference however lies within the fact that the Jade-Weser Port project is still distant from realisation. Therefore, it is impossible to obtain equivalent data that had been used originally in the report of South Carolina s Ports Authorities. Another example for economic impact assessment of a port has been released by the authorities of the Ports of Auckland, New Zealand (Ports of Auckland, 2000), emphasising on the significance of its ports in bringing prosperity to the national economy. This study also accounts for the direct and indirect benefits and confirmes the variables used by the South Carolina s State Ports Authority. All these comparable studies have given a direction towards what variables can be used for impact measurement. The institution A.Strauss-Wieder Inc again confirms the variables and this structure. They have developed a MARAD Port Kid (Maritime Administration Port Kid) for sale, which provides a step-by step handbook of how to undertake an economic impact assessment. However, to meet the research objectives, it was necessary to encounter an additional approach that would increase the scope and allow to include variables measuring the disadvantages or costs of a port. This was given by an economic impact assessment on the investment for a National Stadium of Ireland in form of a Cost/Benefit analysis. Even though the nature of the project is not even close to a deepwater port, the technical framework appears usable, as it offers more simplicity and flexibility than the previous models proposed and especially since it includes additional variables such as environmental implications. This exemplary 24

25 study represented an important addition, significantly shaping the structure of the presentation of the results Cost of Economic Growth There remains one essential part to be covered specifically within the literature review: The costs of economic growth; the costs of the Jade-Weser Project. The necessary information has been collected through following main sources: The Opposing Organisations The primary source was the material and studies obtained by the Anti-port organisation, established in reaction to the Jade-Weser Port project in form of published reports, articles and newsletters. The information addresses various aspects of the costs involved of the Jade-Weser Port, especially the environmental implications. Despite the fact that personal motives again reduce objectivity, the chain of argumentation nevertheless is logically based on scientific studies and have to be taken into consideration. Compatibility of Growth in Container Shipping and the Environment The second piece of literature is Container, Seaport and Ecology (Deecke 1998) written on behalf of Lower Saxony and World Wide Fund-Germany. This report is relevant as it investigates the compatibility of growth in container shipment, capacity expansion at ports and environmental sustainability. This report demonstrates objectivity and credibility and provides excellent information with regard to risks and environmental implications. 25

26 Feasibility Study The study has evaluated the environmental feasibility of the Jade-Weser Port, explaining in detail the effects that the port is expected to bring Results of Research Phase The findings of this research phase delivered several models. Due to the nature of the study, it is not possible to rely on a specific one. A combination of all three models might have to be used to analyse the port s impacts. However, this will be illustrated in detail in the next chapter. 8. Limitations There have been several considerable obstacles during the research. First of all there has been a serious lack of knowledge on maritime economics and trade, which represents a completely new addition to the prior academic studies of the author. Next to maritime economics, the economic impact assessment procedure is a whole subject and science in itself, usually carried out by professionals specialised on providing these kinds of services. Henceforth there has been a disadvantage. The access to data especially regarding economic impact estimations of the Jade-Weser Port is very limited, very restricted and difficult to obtain. Even though the responsible 26

27 Jade-Port Development Corporation maintains their own Internet site, there was almost no qualitative financial information obtainable (the reasons are explained in section ). 9. Suggestions When looking at the research design and results obtained during the process, it is evident that it had not been the ideal approach to completely fulfil the objectives set out in this paper. Knowing the determinants of an economic impact assessment from the beginning would have been advantageous even though the crucial data is not yet accessible by the public. Secondly, the interviews should have been carried out at the very last phase of the research process, after the acquisition of sufficient knowledge, in order to focus to the specific and most relevant aspects. 27

28 CHAPTER III: ECONOMIC IMPACT ANALYSIS The approach, derived to tackle the objectives within this paper has been shaped and defined primarily by the literature introduced within the phase 3 and 4 of the research process. According to the findings the initial intention of conducting a pure economic impact assessment had to be slightly re-directed and re-defined as will be illustrated within this chapter. Impact Assessment, simply defined, is the process of identifying the future consequences of a current or proposed action (International Association for Impact Assessment, 2002) Before going into detail of how such an economic impact study is conducted, the author will briefly explain the objective and the data searched for in an assessment study. 1. Objective of an Economic Impact Analysis An economic impact assessment of the Jade-Weser Port is devised by measuring the direct and indirect impacts that it is projected to result in. The direct impact represent the expenditure of the port industry, generated as industries sell exported or imported goods or through further processing. These direct impacts are created as revenues and are earned from handling and transportation of cargo through existing ports facilities. These 28

29 revenues support direct employment, personal income, and in turn state and local taxes, acting as catalysts for the creation of indirect impacts. A further impact can occur on the resources and environment (Link, 1996). Indirect impacts are created as expenditures made by port users and their supplying industry firms. These can be in form of further spending in supplies, services, labour and other resources required for the operation of the port industry. When direct and indirect effects are re-injected into the economy (i.e. through industry and households respending) reference is made to the multiplier effect. These are so-called induced impacts (describing change in consumer spending, generated by changes in labour income, accruing to the workers in the port industry, as well as increased labour in the supplying business), (Link, 1996). 2. The Frameworks Three techniques, Statistical Methods of Forecasting, Non-Statistical Input/Input Model and Cost-Benefit Analysis have come into consideration Statistical Forecasting The use of statistics for forecasting is based on the analysis of historical data, statistically proven interactions and dependencies over a period of time. Such historically proven relationships however do not prove anything, but merely indicate a statistical probability 29

30 and thus a 95% of confidence, as it is based on the assumption that history repeats itself (Horton, 1999) Input/Output Model The Input/Output Model focuses on the interrelationships among industry sectors. Through mathematical procedures, it calculates the total economic impacts or multiplier effect of port industries and potential investments (A. Strauss-Wieder Inc, 2000). This model distinguishes between the direct, the indirect and the induced impacts. To measure the economic impact of a port, following main variables are traditionally used in an Input/Output Model (A. Strauss-Wieder Inc, 2000). Employment benefit (direct and total) Total output (business sales revenue) Personal income (wages and salaries) Tax revenue for state and local governments 2.3. Cost/Benefit Analysis A Cost/Benefit Analysis is a procedure for making long-run decisions, whether they may involve the building of a new factory or in this case a container terminal. As actions 30

31 have implications far into the future, the correct way to make a decision is to compare the present value of the costs with the present value of the benefits (Dornbusch, 1995). 3. Procedure of Presentation of Results Due to the restricted data accessibility mentioned in the research methodology and literature review, it was decided to combine the traditional economic impact assessment methods and Statistical Forecasting and the Cost/Benefit Analysis. Exhibit 2: Form of Presentation of the Results Statistical Statistical Forecasting Forecasting Input Input / / Output Output Model Model Cost Cost / / Benefit Benefit Analysis Analysis Arguments Arguments in in favour favour and and against against the the port port Conclusion Conclusion Recommendations Recommendations 31

32 The Input/Output Model should counteract against the above-mentioned weakness of statistical forecasting. By combining these two models with a Cost/Benefit Analysis it will be possible to focus on the variables available for an impact assessment. To partially compensate for disclosed data, we will use comparisons with other container terminals and derive own broad estimations. However, it is necessary to consider the impossibility of assessing the impact of the port by the use of actual data. As the port is still in project phase, the impact analysis will be of a predictive nature. Nevertheless, this mixture should increase the level of predictability and thus allow for the most accurate meeting of the research objectives. Despite the risk given by the lack of relevant data, this procedure should enable the reader to draw own conclusions regarding the rationality of this port. The results will be presented in a section for arguments in favour the port, and arguments against the port. 32

33 CHAPTER IV: DESCRIPTION OF THE JADE-WESER PORT The Jade-Weser Port project involves the construction of a deepwater terminal in Wilhelmshaven, specifically targeted at cargo handling. 1. Time Plan According to the timetable the actual construction will begin in the year 2003 and the terminal should be operational in The operator of the terminal will be Eurogate, which is also prepared to pay part of the cost of the infrastructure investment, as we will cover in the following section (Please see Appendix 1 for the detailed time Plan). 2. Project Investment and Finance The total investment so far has been estimated at around Euro m (Please see appendix 2 for detailed investment purposes). The terminal infrastructure and suprastructure (cranes, vehicles etc.) is intended to be financed privately, whereas the remainder will have to be covered by the state, hence the taxpayers. 33

34 3. Planned Capacity of the Container Terminal Using the moderate demand scenario, the maximum capacity for container handling is estimated at TEU 1.8m (Transport Equivalent Unit; 1 TEU equals a 20 feet long standard container) by the realisation of the first phase in 2013/2015 (please see Appendix 3 for the scenarios). Exhibit 3: The Planned Capacity of the Jade-Weser Port in TEU Scenario I (7 %) Scenario II (5 %) Scenario III (4 %) 1.8 Mio. TEU TEU 4.1m TEU 3.6m TEU 2.9m Year Source: Feasibility Study, 1999 Of this volume TEU 738,000 will account for feeder traffic and TEU 1,062,000 for the mega carriers (Please see appendix 4 for the intermodal split of volume traffic). By the final stage in 2020, the capacity for container handling is estimated at TEU 4.1m. 34

35 4. Construction Measures The first phase of the project involves the land reclamation of around 460 acres at Voslapper Groden designated for the terminal, leaving enough space for commercial purposes and logistical services and a completely new 1725-meter long quay (designed for three mega carrier docking stations). This quay wall can potentially be extended by 12 km. The depth of currently 16.5m (for docking approaches) can be extended to 18.5m. In addition, there is sufficient room for the expansion of port facilities by 4.1 km. 35

36 CHAPTER V: REGIONAL ANALYSIS In order to evaluate the significance of the Jade-Weser port project, it is vital to create an awareness for the current economic structure and interactions within the region. This chapter however will only briefly present the key points, as additional information is given in the appropriate appendices. Whenever reference is made to the Jade-Weser Region, the geographical area consisting of the Rural Districts of Friesland, the Wesermarsch, Wittmund and the City of Wilhelmshaven is meant. Altogether there are 24 towns and communities, reaching a total regional population of around 340, Geographic Location Wilhelmshaven has a clear geographical attractiveness, specifically for the shipping industry, harbours or industrial compounds resulting from the excellent direct access to the sea and its unparalleled depth of around 17m. 36

37 Exhibit 4: The Dimensions of the Port Fairway widening JadeWeserPort 1,700 m Reclaimed Land: 460 ha 4,100 m 1,400 m Pre-planned industrial area: 400 ha Motorway Potential Land Reclamation Source: INEOS, 2001 Interestingly and a decisive criteria for the building of the container terminal is its hinterlands capacity, leaving virtually unlimited room for expansion. Wilhelmshaven is able to designate vast areas of land for industrial purposes and the settling of enterprises of 760 acres (the Ruestensieler and Voslapper Groden ) located close to the Jade canal and well connected to the hinterland infrastructure. 2. Infrastructure The intermodal infrastructure of the region represents primary criteria in choice of harbour, as it will determine the ability to move between different modes of transport (ship/truck/train) with minimal disruption to the speed of through-transit 37

38 (Stopford,1997). Hence it is essential to examine the port s infrastructure connectivity as it will have to accommodate around 30 % of the handling volume (Jung and Pohl, 2001). (Please see appendix 5 for transport zones and modes) Exhibit 5: Infrastructure Connectivity Source: INEOS, 2001 Wilhelmshaven and Friesland are well connected to the hinterland s motorway infrastructure from North to South via the A 29, leaving little room for possible congestion. The motorway leads to the area of the harbour, and after few future extensions directly into the container terminal. But as the exhibit demonstrates, the 38

39 connection from east to west is not satisfactory. Even though the realisation of the Weser Tunnel in 2005 might improve the situation, further actions need to be taken. The existing rail infrastructure on the other hand poses a risk of congestion due to its low speed and capacity. Furthermore, air transportation is a primary precondition not only for transportation of cargo, but also staff, visitors and business people. Currently, the closest international airport is situated in Bremen, about a two-hour drive from Wilhelmshaven, making it more difficult to be in instant reach of Wilhelmshaven and the port. Another crucial aspect is the lack of adequate infrastructure for the inland water navigation. Although in existence, it does not comply with present technical standards. This significantly shapes the strategy adapted for the Jade-Weser Port which will emphasise on mega carriers and feeder services. Nevertheless, overall the prerequisites in terms of infrastructure of region are relatively well fulfilled. 3. Population & Labour Force The structural weaknesses of the region can be observed by its extreme low density and uneven distribution of the population, with little growth and a low GDP income per capita. In regard to the labour force, a very high level of unemployment (10.9 %) persists, which is even higher Wilhelmshaven. (Please see appendix 6 for details). 39

40 4. Economic Structure An interesting observation in relation to the port is that, despite producing industry being the greatest contributor to the regional GDP with 27 % (Please see Appendix 7 & 8) the largest employment is generated within the processing industry, in which the chemical and energy (petroleum) industries are strongly represented. Hence the development and future growth prospects of these industries appear to be significant. Putting the commodities trade into a global context, we can conclude another interesting fact: of the tonnage of sea borne trade almost 50 % is associated with the energy industry, confirming the above stated observation (Please see Appendix 9). Investigating the service industry, industry sectors such as transportation, trade, financial services and business-related services are represented weakly and have not been developing much in the resent years. This will be of importance when identifying the impacts of the port. 5. Future Development of the Industries Concluding this chapter, we will briefly examine the estimated development in the production and exportation of the different industry sectors. This will be of significance when looking at the statistical forecasting for future development in context to the port in 40

41 which especially the chemical industry is regarded with high growth prospects and as export-intensive (Please see table 10 for industry growth prospects and export-intensity). The role and importance of the chemical industry come into weighting within the next chapter. However the most important issue is, that the regional economy cannot provide a substantial goods for exportation this far (HANSA, 1999). This will significantly shape not only the argumentation but also the intended strategic direction of the port. 41

42 CHAPTER VI: ARGUMENTS IN FAVOUR OF THE PORT This chapter will illustrate all data collected supporting the construction of the container terminal, the projected direct and indirect benefits as well as the underlying rationale. In order to comprehend the significance of the Jade-Weser Port Project, it is essential to not only comprehend the economic importance of the shipping industry, but also the underlying rationale, the driving factors and hence arguments in favour of the project. 1. Economic Significance of the Shipping Industry According to Stopford, shipping is one of the world s most international industries. He describes sea borne trade as being the apex of world economic activity, as global events have a direct impact on the shipping industry (as for example a price change in oil, the nuclear disaster in Russia, political conflicts regarding the Suez Canal in the 1950 ies and 1960 ies). Furthermore, its strategic value should not be underestimated, i.e. regarding the maritime industry acting as a vehicle for growth of trade in the OECD countries. Therefore a twoway link exists and interaction between developments in the shipping industry and developments in the world economy. The transport industry is one of the prime forces shaping the global economy of today (a shift away from the exclusively national system), (Stopford, 1997). Looking at the role of sea borne trade in economic development, Adam Smith regarded shipping as one of the key factors of economic growth, in which shipping represents a 42

43 cheap and volume-efficient way of transportation for the opening up of wider markets. (Smith, 1986). Even though technology long after Adam Smith has provided efficient inland transportation networks, shipping technology has also improved considerably and helped to create a global market for both manufactures and raw materials (Stopford, 1997). Exhibit 6: The Development of GDP and Container Shipping in the EU since 1985 TEU Container volume GDP GDP Index 1985 = Source: Feasibility Study, 1999 The figure below confirms a clear linkage between world GDP and container shipping, in which world economy generated most of the demand for sea transport. Accordingly this, the medium to long-term estimations of growth have been calculated, projecting the stable and positive development that can be further transferred to a global level (Feasibility study, 1999). The following section will continue the argument of the growth in container shipping. 43

44 2. The Demand Side: Growth in overseas Container Traffic According to the Institute of Shipping Economic and Logistics the world-wide container traffic has been statistically forecasted to grow at 7 % p.a. until 2005, and thereafter by 6.5 % p.a. This means that only within the next ten years the overall handling volume will accordingly increase by a 100 % until the year The PLANCO report has used a more cautious approach for the estimation of container traffic within the North Range itself: Exhibit 7: Forecasted Growth of Demand for Container Shipping in Northern Europe until Growth rate 4.7 % Until 2006; 3.8 % thereafter 29,778 39,227 45,538 54,873 Growth rate 5 % 29,778 39,906 48,506 61,907 Source: PLANCO, 2000 It is argued that this growth trend will persist regardless of local economic recessions (Ports of Niedersachsen, 2002). This statement however is questionable if we take Stopford s view of the interaction between the maritime industry and the world economy into account. 44

45 Nevertheless, relating the demand with the planned capacity provision for the North Range, PLANCO suggests that independently from the extent of excess demand, significant market share can be gained. The following table includes a 25% increased buffer zone, in order to ensure the provision of the needed capacity at least three years in advance. Exhibit 8: Forecasted Capacity of selected North-range ports until 2015 in 1,000 TEU p.a. Present Capacity Hamburg 4,500 Planned Capacity Planned Capacity ,600 8,500 Bremerhaven 3, ,000 Rotterdam 7,500 1,800 12,700 Antwerp 3,550 2,000 8,500 Zeebruegge ,600 Amsterdam ,200 Vlissingen 0 1,000 1,000 Le Havre 1,400 1,100 2,900 UK ports 5,300 8,500 Total 26,300 10,850 50,900 Source: PLANCO, 2000 This table demonstrates that the German seaports should be able to benefit from the growth projections if the necessary capacity and intermodal infrastructure is being provided, fulfilling the technological demands. Taking into account that Hamburg and Bremerhaven, despite further planned extension measures, will not be able to cope with this volume, the establishment of the Jade-Weser- Port appears to be essential in order for the German seaport to meet these growth 45