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

Domestic Carrier

Domestic Carrier

Bank

Exporter International Carrier Customs Forwarder Broker Customs

Importer

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. ORourke 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. horticultureflowers, 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 countrys 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 MACROECONOMIC 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, Nigerias 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 Nigerias continued sustainable growth. Sustainable Growth The goal of promoting Nigerias 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. 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.
5.

 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 countrys 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 Sao Tome and Principe Tunisia Guinea Sudan Mauritania Kenya The Gambia Uganda Cameroon Angola Benin Malawi Nigeria Morocco Egypt Zambia Senegal Cote d Ivoire Ethiopia (24) (57) (60) (62) (64) (67) (76) (77) (83) (84) (86) (89) (91) (93) (94) (97) (100) (101) (102) (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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THANK YOU