Assessment criteria for global logistics hub ports in Northeast Asia

a Department of Shipping and Transportation Management, National Kaohsiung Marine University, Kaohsiung City, Taiwan Assessment criteria for global logistics hub ports in Northeast Asia YI-CHIH YANG a, SHU-LING CHEN b b Department of Maritime and Logistics Management, Australian Maritime 2014/00/00 College, University of Tasmania, Launceston, Tasmania, Australia

Introduction Mega ships serve as moving container terminals. call at a small number of mega-hub ports and gateway-hub ports Cargo is transferred from mother ships onto small feeder ships destined for small and medium-sized ports in the region, called feeder ports (Hsu and Hsieh 2005).

Introduction As economic growth, development of water ports in China, coupled with the increasing size of ships Major trunk liners have shifted from calling on international commercial ports throughout Northeast Asia countries to ports exclusively in China. The emergence of Chinese ports and transhipment centers has placed more emphasis on gateway ports (Notteboom 2006). This trend has possibly resulted in other ports in the region facing challenges of decreasing number of ship calls, ship size and transhipment containers. Tokyo port in Japan Busan port in Korea Kaohsiung port in Taiwan

Introduction Adopted some measures Countries Taiwan Japan Implement free trade zones (FTZs) at the international container ports. Simplify business transaction factors procedures, of a global promote logistics free flow of hub commodities port. within a FTZ. Exempt customs administration Customs clearance procedures Grant 72-hour landing visas for foreign persons engaging in business activities within a FTZ Offer other preferential measures (Taiwan international ports corporation 2012). Super hub port establishment program International strategic port plan Endeavored in reducing costs and Improving service for users by providing users with incentives for receiving fee reductions Improving operational efficiency The establishment of integrated special port zones in keihin ports (port of Tokyo, Yokohama and Kawasaki) to enhance operational flexibility and competitiveness for logistics service provided (MLIT harbor bureau 2011). It is important Measures for port managers and port policy makers to know key successful

Introduction This paper aims to Explore the assessment criteria of a global logistics hub port Using the criteria, to undertake a comparative study between Busan, Tokyo and Kaohsiung ports in Northeast Asia. Examines the characteristic of a global logistics hub port through reviewing the literature Step 1 Analytic hierarchy process (AHP) method to calculate the relative weights of global logistics hub port assessment criteria Step 2

Literature review Author UNCTAD (2004); Nam and Song (2011) Lee et al. (2008) UNESCAP (2000) Description Port logistic functions include cargo handling, transhipment, storage, warehousing, consolidation, distribution center service, value-added, information management and other related activities Ports have been seen as a critical player in the supply chain as a result of the development of transport systems, integrated logistics, and maritime industries in port hinterland areas. 1. A port to be a logistics center often requires spaces either within the port or adjacent to the port for logistics businesses. 2. Developing FTZs in the port hinterland has been seen as used by many international container ports to enhance their capability in providing value-added logistics services.

Literature review Author Port choice from a general and logistics hub perspectives Description Tongzon (1995) Tongzon 2009 Malchow and kanafani (2001) Notteboom 2004; wong et al. 2008) Wiegmans et al. (2008) Wong et al. (2008) Chang et al. (2008) Tavaszy et al. (2011) Musso et al. (2013) Efficiency, sailing frequency, infrastructure, location, port charges, ability to respond rapidly to port users demands, and cargo damage credibility are considered by carriers when selecting ports Except location and cargo damage credibility were also important for forwarders. Oceanic and inland distance between the origin and destination is of the most importance to port selection. Shipping port conditions and economies of scale should also be considered when selecting a route from the port of loading to the destination port The main criteria of port choice from the deep-see container carriers view included availability of hinterland connection, reasonable tariffs and immediacy of consumers The shippers preference, cargo location, cargo handling capacity, the shipper's skills, overall global services, and customer service were important for selecting ports in china's pearl river basin. Major port selection factors including local cargo, container yard handling charges, berth use, and port location. The location of port cargo handling facilities, inland and overseas transportation costs, freight forwarding preferences, characteristics of logistics, port and inland infrastructure facilities and services, and the characteristics and strategies of freight forwarders, shippers or shipping companies, and shipping agencies were important. System integration and innovation are important for port competitiveness

Literature review Author Tongzon (2007) Wiegmans et al. (2008) Yeo et al. (2008) Song and panayides (2008) From a logistics hub perspective, port s strategic location is crucial. Description A strategic location is critical for a logistics hub, which implies that a logistics hub port should be located in the main international shipping route. Cargo handling speed, costs, reliability and hinterland connectivity related to logistics functions were main criteria for selecting container terminals. The ports s competitive depend on an efficient hinterland system, and five main criteria, port service, hinterland condition, convenience, logistics costs, regional centers and connectivity, for assessing container port competitiveness. Used six variables to assess logistics port competitiveness, including information and communication technology, relationships with shipping companies, value added services, inland transport links, relationships with the inland carriers, and channel integration practices and performance.

Literature review Author Korea's maritime institute (2003) Yeo et al. (2008) Yurimoto and masui (1995) Kmi (2000) Paik (2001) Yang (2003) Yang (2009) Description Relevant business and logistics activities in port hinterland can enhance the capability of ports in providing high value-added services, reduce logistics costs, and directly foster portrelated industries. The development of FTZs has been considered as a port selection factor related to hinterland condition. Identified factors affecting the development of FTZs (1) political factors (2) financial factors (3) legal system (4) social systems (5) geographical factors; and (6) industry. Adequate infrastructure facilities, simplified customs clearance procedures, preferential tax measures, an excellent labor force, and an advanced, integrated information system were the chief factors to the success of a FTZ. Economic growth potential in the port hinterland, a favorable geographical location, low cost of production factors, adequate infrastructure, and support facilities in the hinterland essential. Several factors classified as four dimensions including political-economic environment dimension, production dimension, cost dimension, and infrastructure dimension. Key successful assessment criteria for the development of FTZs such as integration of customs clearance and port logistics information systems, operational efficiency, tax exemption on custom duties and VAT, market economies of scale, incentives for business investment, labor costs, transportation and distribution costs, efficiency of the intermodal transportation network, land cost and port logistics facilities.

Methodology Use a hybrid decision-making method, incorporating the analytical hierarchy process (AHP) and gray relational analysis (GRA). Assessment variables Table 1- Main assessment criteria for global logistics hub ports Dimension Assessment criteria Source in literature Political- Economic Environment Operational Environment Stability of political climate Economic scale of market Volume of transshipment cargo Deregulation of international trade and foreign currency exchange systems Efficiency of local government administration Convenience of customs clearance procedures Efficiency of port and logistics operations Integration of customs and port logistics information Yurimoto and Masui (1995), KMI (2000), Yang(2003) Notteboom(2004), Yu et al. (2006), Chang et al. (2008), Chou (2010), Onut et al. (2011) Yu et al. (2006), Chang et al. (2008), Wong et al.(2008) KMI (2000), KMI (2003), Yang(2003) Yurimoto and Masui (1995), Yang (2003) KMI (2003), KMI (2000),Tongzon (2007) Tongzon (1995), Yeo et al. (2008), Wong et al. (2008), Tongzon (2009), Chou (2010), Onut et al. (2011) Tongzon (2007), Mussoet al.(2013), Song and Panayides (2008)

Methodology Dimension Assessment criteria Source in literature Infrastructur e Facilities Environment Preferential Incentive Environment Table 1- Main assessment criteria for global logistics hub ports Effectiveness of port logistics facilities Notteboom (2004), Wong et al.(2008), Chou (2010), Onut et al. (2011), Tongzon (1995) Adequacy of the port hinterland for logistics functions Tongzon(2007), Yeo et al. (2008), Wiegmanset al. (2008) Efficiency of intermodal transport network UNCTAD (1992), Yurimoto and Masui (1995), Tongzon(2007), Tongzon(2009),Tavaszy et al. (2011), Sailing frequency and diversification of shipping routes Tongzon (1995), Malchow and Kanafani (2001), Paik (2001),Yang (2003),Tongzon (2009) Soundness of investment system and Yurimoto and Masui (1995), Ulgado (1997), KMI (2000), incentive measures KMI (2003) Exemption from or deduction of corporate and local taxes Ulgado (1997), KMI (2003), Yang(2009) Exemption from and deduction of customs duties and value-added tax for cargo Ulgado (1997), KMI (2003), Yang(2009) Financial assistance for investing companies Yurimoto and Masui (1995), Ulgado (1997), KMI (2000)

Methodology Data collection To gage the extent of importance of global logistics hub port assessment criteria perceived by Shipping companies Logistics companies (port users) Port companies (port managers) To determine the extent to which the three international hub ports in Northeast Asia meet the foregoing assessment criteria. Receiving the returned questionnaires in July 2013

Empirical analysis Analysis of respondents' backgrounds Shipping companies Port company Logistics companies Total response Number of distribute 10 10 10 30 Number of response 8 9 8 25 Response rate(%) 32 36 32 83.33 Position Working experience Category Rate(%) general manager 44 manager or vice manager 32 26 years' experience or more 44 11-15 years 24 21-25 years 16

Empirical analysis AHP Political-Economic analysis Table 2- Overall weights of assessment criteria from all respondents perspective Dimension (A) Assessment criteria Weight (B) Environment As the (0.142) overall consistency ratio (C.R.) was 0.01 < 0.1 The survey results were considered valid and consistent Overall weight Rank (C=AxB) Stability of political climate 0.214 0.030 17 Economic scale of market 0.333 0.047 10 Volume of transshipment cargo 0.264 0.037 14 Deregulation of international trade and foreign currency exchange systems 0.189 0.027 20 Efficiency of local government administration 0.149 0.029 19 Operational Environment (0.194) Convenience of customs clearance procedures Efficiency of port and logistics operations 0.388 0.227 0.075 0.044 2 12 Integration of customs and port logistics information 0.236 0.046 11 Cost of labor 0.185 0.053 9 Cost of land 0.237 0.067 4 Cost Environment (0.284) Harbor and stevedoring costs 0.251 0.071 3 Transport and distribution costs 0.327 0.093 1 Effectiveness of port logistics facilities 0.246 0.042 13 Infrastructure Facilities Adequacy of the port hinterland for logistics functions 0.177 0.030 18 Environment Efficiency of intermodal transport network 0.209 0.035 15 (0.169) Sailing frequency and diversification of shipping routes 0.368 0.062 6 Soundness of investment system and incentive measures 0.298 0.063 5 Preferential Incentive Exemption from or deduction of corporate and local taxes 0.271 0.057 8 Environment Exemption from and deduction of custom duties and (0.210) value-added tax for cargo 0.277 0.058 7 Financial assistance for investing companies 0.153 0.032 16

Empirical analysis Rank No. 1 2 3 4 Table 3- Summary of overall weights of assessment criteria Assessment Criteria (Weight value) Shipping Company Logistics Company Port Management co. All Respondents Exemption from or deduction of corporate and local taxes Exemption from and deduction of custom duties and valueadded tax for cargo Soundness of investment system and incentive measures Convenience of customs clearance procedures (0.093) (0.086) (0.086) (0.067) (0.062) 5 Transport and distribution costs Transport and distribution Transport and distribution costs (0.090) costs (0.119) Cost of labor Convenience of customs clearance procedures Harbor and stevedoring costs Exemption from and deduction of custom duties and value-added tax for cargo (0.084) (0.077) (0.067) (0.066) Cost of land Sailing frequency and diversification of shipping routes Convenience of customs clearance procedures (0.105) (0.078) (0.075) (0.074) Harbor and stevedoring costs Transport and distribution costs Convenience of customs clearance procedures Harbor and stevedoring costs Cost of land Soundness of (0.093) (0.075) (0.071) (0.067) (0.063) investment system and incentive measures

Table 4- GRA grades of satisfaction from the viewpoints of all respondents Assessment Criteria Kaohsiung Busan Tokyo Weight Stability of political climate 0.510 0.527 1.000 0.030 Economic scale of market 0.477 0.927 1.000 0.047 Volume of transshipment cargo 0.363 1.000 0.333 0.037 Deregulation of international trade and foreign currency exchange systems 0.407 0.716 1.000 0.027 Efficiency of local government administration 0.402 0.679 1.000 0.029 Convenience of customs clearance procedures 0.435 1.000 1.000 0.075 Efficiency of port and logistics operations 0.620 1.000 0.746 0.044 Integration of customs and port logistics information 0.516 1.000 0.046 0.046 Cost of labor 1.000 0.636 0.370 0.053 Cost of land 1.000 0.776 0.483 0.067 Harbor and stevedoring costs 1.000 0.730 0.558 0.071 Transport and distribution costs 1.000 1.000 0.624 0.093 Effectiveness of port logistics facilities 0.463 1.000 0.830 0.042 Adequacy of the port hinterland for logistics functions 0.350 1.000 0.700 0.030 Efficiency of intermodal transport network 0.433 0.935 1.000 0.035 Sailing frequency and diversification of shipping routes 0.512 1.000 0.816 0.062 Soundness of investment system and incentive measures 0.411 0. 930 1.000 0.063 Exemption from or deduction of corporate and local taxes 0.444 1.000 0.810 0.057 Exemption from and deduction of custom duties and value-added tax for cargo 0.587 1.000 0.927 0.058 Financial assistance for investing companies 0.384 1.000 0.686 0.032 MAX value 0.289 0.140 0.312 MIN value 0 0 0 GRA grade 0.616 0.904 0.770 Ranking order 3 1 2 與 Fuzzy AHP Empirical analysis GRA analysis

Empirical analysis Table 5- Ranking order of satisfaction toward global logistics hub ports in Northeast Asia Shipping company Logistics company Port Management company Overall Respondents No. Name GRA Name GRA Name GRA Name GRA 1 Busan 0.869 Busan 0.926 Busan 0.958 Busan 0.904 2 Tokyo 0.837 Tokyo 0.874 Kaohsiung 0.746 Tokyo 0.770 3 Kaohsiung 0.567 Kaohsiung 0.586 Tokyo 0.654 Kaohsiung 0.616

Conclusions and Implications A global logistics hub port is formed when an international container port in a country becomes a hub providing the region s transhipment and valued added logistics services. Ports have continuously enhanced their competitiveness by increasing logistics functions in their hinterland. This paper explored the assessment 20 criteria under five dimensions of a global logistics hub port Political-economic environment Operational environment Cost environment Infrastructure facilities environment Preferential incentive environment

Conclusions and Implications The empirical results revealed that costs environment was the most concerned dimension by respondents. RANK Assessment Criteria Weight value 1 Transport and distribution costs 0.093 2 Convenience of customs clearance procedures 0.075 3 Harbor and stevedoring costs 0.071 4 Cost of land 0.067 5 Soundness of investment system and incentive measures 0.063 that preferential incentive measures were important to a logistic hub port

Conclusions and Implications The GRA grades showed that Busan had the highest level of satisfaction to be a global logistics hub port in the region, followed by Tokyo and Kaohsiung. Kaohsiung port faced serious challenge when competing with Tokyo and Busan ports The research findings have several implications for the industry to promote a global logistics hub port. Provide more incentives to attract investments in ports and FTZs The procedure of customs clearance should be more efficient by having a single window service for port customers and simplifying the administrative procedure. Incentives can be granted to shipping companies who add the port into as their new shipping routes, increase sailing frequency.

Conclusions and Implications This paper suggests that further research on Investigate the relationship between the incentive measures of FTZs and the competition between FTZs across countries within a region Evaluate the impact of a FTZ s performance on a port s competitiveness. Further data collection international shipping companies, logistic service providers and port corporations in Korea and Japan Assessment criteria of global hub ports and explore the ranking order of three international commercial ports.

a Department of Shipping and Transportation Management, National Kaohsiung Marine University, Kaohsiung City, Taiwan Thank you for listening YI-CHIH YANG a, SHU-LING CHEN b b Department of Maritime and Logistics Management, Australian Maritime College, University of Tasmania, Launceston, Tasmania, Australia 2014/00/00