OPENING STATEMENTS

•“whosoever commands the sea

commands the trade: whosoever
commands the trade of the world
commands the riches of the world and
consequently the world itself”.- Sir Walter
Raleigh, a pioneer shipping magnate,
• "No matter how information technology
advances, the world trade cannot be
materialized without ports. This is
exactly why every country needs to
develop much more advanced and
efficient ports for its prosperity
Dr. Mahathir, Prime Minister of Malaysia
•Above assertions bring to
the fore the important
position shipping occupies
in global trade.
INTRODUCTION

• Truly speaking, the challenges facing

shipping and the world's ports today are
not only related to the quantity but also
the quality of services. The continuous
progress of globalization of shipping
and trade business is resulting in
increasing pressures on ports cost and
improve operational efficiency.
WHY SHIPPING IS CRITICAL

• The movement of freight from one location to

another could be defined as shipping.
• Why does the need for shipping
worldwide arise?
• Shipping meets the need to move cargo
cheaply from one place to another.
Movement of cargo by sea transport is
yet the cheapest means of transport in
comparison to most modes of
transportation.
Some Statistics
• The shipping industry is transporting 90% of the world's
trade. Most ships move from country to country as part
of their normal trading pattern. 
• The safety record of shipping is the envy of shore-based
transport sectors, and shipping is the most
environmentally friendly form of transport. 
• The 50,000 ships that make up the international trading
fleet are technically sophisticated, high value assets. The
cost of a new ship can easily exceed US $100 million.
Merchant ships generate an estimated annual income of
over US $200 billion in freight rates within the global
economy.
• The shipping industry is a truly global community. It is
intrinsically international; indeed it was the very first
global industry.
 Why Shipping is necessary
• (a) The United Kingdom has a lot of coal over and above
her national requirements but short of timber, which are
abundant in Africa and Asia.
• (b) Arab states have vast reserve of crude oil over and above
their domestic needs but very deficient in other natural
resources.
• (c) Some geographical area due to its favorable climate could
produce abundant citrus fruit or others but deficient also in
other finished goods.
• (d) Some nations are unable to produce enough of a
particular commodity to satisfy home demand e.g. Britain
and Wheat.
• (e) Most Western Countries had abundant of Chemicals and
other finished goods and there are economic considerations
to move these goods to areas deficient in both the production
and the know-how. They also lack availability of agricultural
produce.
Government Involvement

• In the past, governments have intervened,

often massively, in the maritime sector to
fulfill different goals such as economic
development, national defense, prestige,
balance of payments, and the protection of
the national industry. To reach those goals,
governments relied on methods such as
regulations, subsidies, national fleets,
preference of cargo and ports of entry.
Cabotage regulations have been one of
the privileged measures to protect the
national maritime transportation industry.
Logistics Industry Fragmentation

Domestic

Seller Domestic Carrier Buyer

Global

Bank Bank
Domestic Carrier Domestic Carrier

Exporter Importer
International
Carrier

Customs Forwarder Broker Customs

STAKE HOLDERS

• Shippers
• Freight Forwarders
• Commercial Banks
• Terminal Operators
• Ocean Carriers
• Customs Inspectors
• Customs Brokers
• Conference Cargo Inspectors
• Port Authorities   
• Insurance Surveyors   
INFRASTRUCTURE AND EXPORT COMPETITIVENESS

• Infrastructure development is a key element of

a countries’ ability to produce and move goods.
O’Rourke and Williamson (1999) argue “all of
the commodity market integration in the
Atlantic economy after the 1860s was due to the
fall in transport costs between markets....”.
Weak infrastructure is a major impediment to
trade, competitiveness and sustainable
development in most African countries. Recent
literature has emphasized the dependence of
trade costs on infrastructure.
Trade costs

• Trade costs can be defined as the cost of

transaction and transport associated with the
exchange of goods over and above the marginal
cost of production. Broadly defined, trade costs
include all costs incurred in getting a good to a
final user other than the marginal cost of
producing the good itself.
• Such costs include transportation costs (both
freight costs and time costs), policy barriers
(tariffs and non-tariff barriers),
• communication costs, utility costs, and local
distribution costs (wholesale and retail).
Export Competitiveness

• •Improved trade logistics and facilitation can

improve competitiveness by:
• I. Increasing profitability of existing exports
and encouraging expansion in production
• II. Reducing delivery time and cost of imports,
benefiting both domestic & export sectors
• III. Allowing manufacturers to enter high value
market segments e.g. premium garments
requiring shorter delivery cycles
• IV. Opening up new markets e.g. horticulture-
flowers, fruits, etc.
Export Competitiveness contd.

• In addition to the macro incentive regime,

what is also important is that firms have
access to efficiently-produced critical
backbone services and inputs. Countries
where firms have to pay more than their
competitors for energy,
telecommunications, customs services,
transport, logistics, and business
registration and operations, will find it
hard to compete in the global markets.
Global Trade Issues
• The ability to compete in a global economy is dependent
on the transport system as well as a vast array of
supporting service activities. These activities include:
• Distribution-based. A multimodal and intermodal
freight transport system composed of modes,
infrastructures and terminals that spans across the
globe. It insures a physical capacity to support trade.
• Regulation-based. Customs procedures, tariffs,
regulations and handling of documentation. They insure
that trade flows abide to the rules and regulations of the
jurisdictions they cross.
• Transaction-based. Banking, finance, legal and
insurance activities where accounts can be settled. They
insure that the sellers of goods and services are receiving
an agreed upon compensation and that the purchasers
are protected and have a legal recourse if the outcome of
the transaction is judged unsatisfactory.
Three components of international transportation that
facilitate trade:

• Transportation infrastructure. Concerns physical

infrastructures such as terminals, vehicles and
networks. Efficiencies or deficiencies in transport
infrastructures will either promote or inhibit
international trade.
• Transportation services. Concerns the complex set
of services involved in the international circulation of
passengers and freight. It includes activities such as
warehousing, logistics, finance, insurance and
marketing.
• Transactional environment. Concerns the complex
legal, political, financial and cultural setting in which
international transport systems operate. It includes
aspects such as exchange rates, regulations, quotas and
tariffs, but also consumer preferences.
TRADE FACILITATION

• Trade facilitation, i.e. the simplification,

harmonization, automation and speeding up
of the international flows of goods and trade
information, has the potential of bolstering
economic growth. In an increasingly
globalized economy, it contributes directly to
promoting supply chain linkages and
reducing non-tariff barriers to trade. Above
all, by saving precious resources, it has a
strong potential for development.
National Competitiveness

• Competitiveness is the ability of a nation to

create sustainable value through its enterprises
and to maintain a high standard of living for its
citizens.  Competitiveness is primarily driven by
productivity – the level of output per input used,
including labour and capital goods.
• Nations compete with each other by offering the
most productive labour force and the most
conducive environment for business. This
environment in turn attracts investment, allows
existing companies to grow, and leads to job
creation.
 Why measure
• The case for understanding the cost and impact of global logistics
is regarded as a non-issue with prominent researchers and
authors of the discipline. It simply must be measured.
• “The distribution of products and services from the point of origin
to point of consumption is a very important part of any country’s
gross national product, and indicates how much ‘money’ the
country has produced or made. Logistics activities thus mean
money to a country.” (Voortman, 2004, p.13).
• “As the logistics functions become more integrated, they are able
to achieve many efficiencies. But, a barrier to fully implementing
an integrated logistics function is the lack of accurate information
about costs.” (Fredendall and Hill, 2001, p. 213)
• We believe that the CONTINUOUS understanding, modelling,
measuring and reporting of logistics costs on a MACRO-
ECONOMIC level is a key indicator of the competitive advantage
of nations, and is therefore important for nations.
About Competitiveness

• For the National Competitiveness Council, the goal

of national competitiveness is to provide Nigerian
people with the opportunity to improve their living
standards and quality of life. Improving livings
standards depends on, among other things, raising
incomes (and providing employment). To raise
incomes, productivity gains are necessary but in an
monolithic economy, this requires a healthy non oil
exporting sector to achieve economies of scale
necessary for productivity gains. For a vibrant
exporting sector, Nigeria must maintain its national
competitiveness.
What do exporting firms need?

• What constitutes a competitive

economy? National competitiveness is a
broad concept that encompasses a
diverse range of factors and policy
inputs, including education and
training, entrepreneurship and
innovation, Nigeria’s economic and
technological infrastructure and the
taxation and regulatory frameworks are
also at work here.
The Competitiveness Pyramid
The Competitiveness Pyramid contd.

• The 'inputs' (in the bottom row of the competitiveness pyramid)

represent the foundation stones of the economy and are the
primary drivers of competitiveness.
Essential Conditions
• The second stage of the competitiveness pyramid is the 'essential
conditions' stage. If the inputs are in line with best practice, this
should be reflected in measurements of the essential inputs for
Nigeria’s continued sustainable growth.
Sustainable Growth
• The goal of promoting Nigeria’s national competitiveness is to
further improve the quality of life for people. To assess quality of
life, a range of national performance indicators are examined
which are not directly within the control of policymakers
Competitive gains at the lower levels of the pyramid allow growth
potential to be maximized at the apex, whilst providing suitable
conditions for sustainable development
Policy Issues

• In order to effect change, the following imperatives, that are

a combination of those economical, social and governmental
elements, needs to be implemented;
1. Defining and making explicit our moral goal: a sustainable,
high and rising standard of living.
2. Understanding that the world has changed dramatically:
political boundaries have disappeared, costs of
communications, transportation and learning are declining
rapidly.
3. Acknowledging that we are over-dependent on oil and the
wealth of natural resources.
4. Understanding that wealth in the future is based on insight,
sophisticated human capital, optimistic cultural attitudes
advocating competition, learning, trust, cooperation and
investment in intricate edges.
Policy Issues contd.

5. Understanding that economic growth and social equity is

one and the same thing. Indeed, there must be no trade-off
between generating growth and income redistribution.
6. Understanding that competitiveness is productivity; and
productivity is where we choose to compete and how we
choose to compete.
7. Acknowledging that the government must do everything it
can to assist the private sector, without impeding
competition, understanding that the private sector needs to
invest more in identifying the most sophisticated and
demanding customer preferences, its position relative to its
competitors, possibilities of changing the distribution
channels, and upgrading products.
• The World Bank Ranking

Countries that have high rankings and/or have shown

significant gains have done so by showing consistently superior
performance in key macro and microeconomic areas:
• Macroeconomic environment: high budget surpluses, low
government waste, strong country credit rating, low inflation
• Strong public and private institutions: absence of corruption,
business and governmental transparency, judicial
independence, enforcement of property rights
• Technology and innovation: high spend on research and
development (R&D), aggressive adoption of new technologies,
university and industry research collaborations, active use of
technology
• Education and training: high educational enrolment rates,
excellent educational establishments, skilled labour force
 LOGISTICS INDEX CRITERIA

The LPI is a composite of a country’s rating

across the following seven different
attributes:
•Customs Clearance
•Logistics Infrastructure
•Ease of International Shipments
•Logistics Competence/Internal Skills Sets
•and Service Providers
•Tracking and Tracing Capabilities
•Domestic Logistics Costs
•Timeliness/Consistency
Global Ranking(AFRICA)

• South Africa (24)

• Sao Tome and Principe ‘’      (57)
• Tunisia ‘’   (60)
• Guinea (62)
• Sudan (64)
• Mauritania (67)
• Kenya (76)
• The Gambia (77)
• Uganda (83)
• Cameroon (84)
• Angola (86)
• Benin (89)
• Malawi (91)
• Nigeria (93)
• Morocco (94)
• Egypt (97)
• Zambia (100)
• Senegal (101)
• Cote d’ Ivoire (102)
• Ethiopia (104) (Source: World Bank report)
PROMOTING NATIONAL COMPETITIVENESS IN A
GLOBALIZING ECONOMY

• Globalization has, for more than two decades, been

changing the “rules of the game” for nations
competing in international trade and investment.
The roles of the state as a central planner and
controller of the national economy, as the primary
provider of goods and services, and as the engine of
economic growth, have largely been discredited.
Indeed, even the ability of states to exercise
sovereign control over internal economic activities
and transactions across their borders has weakened
in the face of relentless globalization.
THE IMPLICATIONS OF NIGERIA’S RANKING

• The placement of Nigeria speaks

volumes about the state of our logistics
readiness for the year 2020. It is not
very encouraging that a country that
aspires to be in the top 20 economies in
the world by the year 2020 is currently
standing at no 93 in the world twelve
years to the target date. This means that
it will take nothing short of a miracle to
realize this vision.
A CALL TO ACTION

• The World Bank report notes that there are vast

differences between countries in their attitudes
towards logistics improvement. The governments of
countries are either “logistics friendly,” while others
are “logistics unfriendly” .Logistics unfriendly leaders
have their countries caught in a vicious circle that
presents huge barriers to reform. Many other
countries fall in the middle of these two extremes, but
must make major commitments to reach better levels
of performance.” We hope the new administration in
Nigeria will be logistics friendly since this is one of the
major driving factors for the fulfillment of its vision
2020.
The Lesson
• The World Bank report, the Logistics performance index
rankings and indicators provide robust benchmarks that
may help policymakers - and particularly the private sector -
to build the case for reform. “By showing countries how they
compare with their competitors and shining a light on the
costs of poor logistics performance, it is hoped that the LPI
and its indicators may help countries break out of the
vicious circle of logistics unfriendliness.”
• We cannot agree any less with this final conclusions As one
writer put it recently, “when it comes to global supply chains
performance, you better be good” This is a warning not only
for globally aspiring companies but also for any nation that
aspires towards achieving global competitiveness in this 21st
century.
The South African State of Logistics Survey

• This State of Logistics Survey is the first of a planned annual initiative to

evolve a comprehensive picture of the state of logistics in South Africa,
incorporating a macroeconomic viewpoint (top-down), an industry-level
perspective (bottom-up), and a small business development perspective,
dealing with logistics as a developmental constraint for small, medium
and micro enterprises (SMMEs) in urban and isolated rural
environments. Specific problems that were highlighted during these
studies are the following:
• · Old priorities were still reflected in operational planning,
• · The overall system has been systematically under-investing,
• · Broad prioritisation avoided focussing resources on specific customers,
• · Highly concentrated corridors have to carry freight from and to dense
industrial locations, and
• · High prices, poor service levels and low reliability indicated a lack of
support for export competitiveness and system sustainability on these
corridors.
Conclusion

“The future ahead of us seems to be

full of changes and challenges.
Unthinkably, drastic changes and
trends, which are yet under the
water, may be emerging to even
quickly replace present ones. Let us
sail out together to the ocean of the
21st century with the spirit of
challenges”. 2005 Shipping conference
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