July 2015 Erasmus University Rotterdam
The role of port in the corridor
Bachelor thesis of Ayla Abbasova: Urban& Port and Transport Economics
Erasmus University Rotterdam
Under supervision of Dr. Erwin van Tuijl
Abstract-The aim of the paper is to analyze how important is the role of port in the corridor. The analysis is based on an example of Port of Baku, which was located on the international trade route since ancient times. But not only the good location of the port, but also a well-developed hinterland contributes and highlights the performance of the port. The role of Port of Baku in TRACECA was examined through the separate analysis of a port, its hinterland infrastructure and a corridor. The results have shown that ports in Azerbaijan are of a great importance for the development of the trade in the corridor.
Key Words: Port of Baku, TRACECA, hinterland, corridor
Table of Contents
Chapter 1 Introduction 4
1.1 Relevance 4
1.2 Aim 6
1.3 Research question 6
1.4 Method 7
1.5 Structure 7
Chapter 2 Theoretical Review 8
2.1 Port 8
2.1.1 What does it mean to be a port? 8
2.2 Hinterland Infrastructure 11
2.2.1 What is a hinterland infrastructure of the port? 11
2.3 Corridors 13
2.3.1 What does it mean to be a corridor? 13
2.3.2 What is the role of TRACECA in the corridor trade? 15
2.4 Conclusion 18
Chapter 3 Methods used for results part 18
Chapter 4 Results 19
4.1 Port of Baku 19
4.2 Hinterland Infrastructure of the port 23
4.2.1 Road Transport 23
4.2.2 Railway Transport 25
4.4 Ports of Baku in TRACECA 26
4.4.1 Alyat International Port 27
Chapter 5 Conclusion, Recommendations and Discussions 30
5.1 Conclusion 30
5.2 Recommendations 33
5.3 Discussions 33
Bibliography 33
Chapter 1 Introduction
1.1 Relevance
There are more than 2000 ports around the world, starting with small docks handling only several hundred tonnes per year to the biggest harbors such as Rotterdam, Shanghai and Singapore, each handling multiple of small ones. The history of ports and maritime transport goes back in ancient times. They have developed in the same path with the international trade evolvement, which was hereditary in formation of the present-day world. Therefore, ports and sea transport plays a critical role in global business world.
Though the role of ports is enormous, the first thing that comes to mind when thinking about port’s role, is a harbor as a part of supply chain. Ports provide with facilities to store and handle freights, they deal with postponed manufacturing, picking and packing, provide ships with required space and conditions (Mangan & Lalwani, 2008).
There are a number of papers focused on the role of ports today. For instance, a paper by Mangan and Lalwani (2008) states that an increased accentuate on the role of ports should be considered with the changes in world trade and sea transportation specifically. These authors also mention a number of changes that caused an increased demand and the role of ports. These include a drastically increase in vessels size, expansion of global shipping companies, specialization, unitization and transshipment (Mangan & Lalwani, 2008). The role of ports has been also highlighted, as operations became more capital intensive, labor saving and space consuming. The alterations have also occurred in the port market: as there is an increased competition between ports, lowers the transportation period (being pushed by liners), fear of overcapacity. The above-mentioned changes reiterating the role of ports can be observed as a generally tendency.
This paper will analyze the role of port in gateway logistics and apply it to one specific port: Port of Baku. It is notable, that there had been limited research conducted on the role of Port of Baku for Azerbaijan and its economy previously, making the following research challenging and more interesting. Therefore, the focus of the paper is Azerbaijan (Baku) and its Port.
Azerbaijan, with the capital city in Baku is located on the shore of the Caspian Sea. Though the country is landlocked, an access and connection to the Caspian Sea makes it crucial to evolve the sea transportation and land transportation modes. Being the biggest inland sea in the world, the Caspian Sea is ringed by five countries: Azerbaijan, Russian, Kazakhstan, Turkmenistan and Iran (Ziyadov, 2011). Therefore, these states are the predominant maritime merchants in Caspian region. Based on provided data, in 2010 11.7 mln tons of goods have been consigned through ports in Azerbaijan, out of which 9.5 mln tons were transit transshipments (Ziyadov, 2011). The sea transportation through Caspian Sea plays a critical role for Azerbaijan, as the country does not have a land connection with any Asian countries. The country and the sea play a bridging role between Europe and Asia. The connecting role of Port of Baku has been explicitly shown in Taleh Ziyadov’s paper (Ziyadov, 2011).
The sea transportation through the Caspian Sea has an influence on the whole Euro-Asian supply chain. The important role of Azerbaijan in Eurasian trade is reflected in Port of Baku’s position in “Transport Corridor Europe Caucasus Asia” (TRACECA), which was established in 1993. TRACECA project was created as a restoration of the historical Silk Road and is known as a new Silk Road of the 21st century. The main aims of TRACECA project are the following: evolvement of economical relationships between countries, improvement of transport ties of international transportation routes, creation of circumstances for transit trade, transportation policy evolvement and evolution of programs aimed to organize multi-modal transshipment (TRACECA, 2015). Notable to mention, that the headquarter office of TRACECA is located in Baku. An important role Port of Baku with its hinterland infrastructure in the project will be discussed in this thesis.
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1.2 Aim
A role of port varies from pail transshipment destination to crucial logistics point, which in turns relies upon the supply chain structure of dock users. The aim of the paper is to examine the current role of port from logistics and supply chain prospect. As the role of port depends on location, trade routes, this paper will mainly focus on the Port of Baku. The paper will also analyze why is the Port of Baku so important for Azerbaijan as a part of transport corridor. As a role of Port of Baku is tied to the role of Baku in TRACECA project, the hinterland infrastructure, which is tightly connected to the transportation system development, will also be highlighted in the paper. It will be reflected how the logistical aspect and developed hinterland infrastructure of Port of Baku influenced its role of the bridge.
1.3 Research question
Therefore, the main research question investigated in the paper is the following:
“How important is Port of Baku for Azerbaijan in a corridor between Europe and Asia?”
In order to answer to the question there are several sub-questions created to support and guide the main research question:
1. What does it mean to be the port?
2. What is a hinterland infrastructure of the port?
3. What does it mean to be a corridor?
4. What is the role of TRACECA in the corridor trade?
5. What is the role of Azerbaijan in TRACECA?
1.4 Method
The research in the paper is based on the literature review. The data will be analyzed using the qualitative research methods. The SWOT analysis is used as a tool for an overview of the current situation of the Port of Baku. The paper will draw its results and conclusions from the different papers review and examination of the current tendencies.
1.5 Structure
To get an answer to the research question, the paper will be structured as following. The theoretical part will set up a hypothesis constructed to reply to the main question. The hypothesis will be composed based on the literature review. Additionally, the theoretical part will give answers to the first four theoretical sub-questions. This part is necessary as it provides a general overview and puts a fundament for the subsequent part of the paper. The result part of the paper, applying the theory to the Port of Baku, will find an answer to the last sub-question related to the Port in Azerbaijan. This part is responsible for the hypothesis analysis and testing. Additionally, the end of the results part will clarify whether the hypothesis is accepted or rejected. The conclusion part providing an answer to the main research question will consist of the short summary, emphasizing the main findings and policy recommendations for the paper.
Chapter 2 Theoretical Review
The role of theories is to explain, predict and master various events, phenomena and relationships. Theoretical framework provides a context for analyzing hypotheses, creates a frame of references crucial for observations, definitions, interpretations and generalizations (PeopleLearn, 2008).
The following paragraph will provide the concepts necessary for the solid and reliable background, critical for the research. Therefore, the first four theoretical sub-questions are answered in this part. The theoretical part is divided into three parts: port, hinterland and corridor, which in combination create a sufficient upbringing for the analyses.
2.1 Port
2.1.1 What does it mean to be a port?
To better understand the role of ports, definitions are explained. The words like port, harbor and haven are usually tightly linked to each other. However, this paper will mainly concentrate on port. The Table1 provides an overview to common definitions of the port:
Table 1: definitions of port
“An entry place for global shipping transport and area of economic activities, connected to the advent of goods and vessels.” / (Nijdam, van der Lugt, & de Langen, 2012)“A geographical area where ships are brought alongside land to load and discharge cargo- usually a shelter deep water area such as bay of river mouth” is a port.” / (Stopford, 1997)
“Extents linked to sea, ocean or river, equipped with specific facilities allowing them to manage loads” / (Tarantola, 2005)
Source: Author
From the definitions provided above the unifying tendency is observed: the port is a place/area or extent, which deals with the discharge/load (loading management) of ships/shipping transport. From this point, the definition of the port that best suits this paper is therefore the following:
“Port is a place located on the shore of sea, river or ocean, used to receive vessels and transfer goods from and to it. Additionally, it applies certain machinery, facilitating loading and unloading processes.”
The above definition of the port highlights two major roles of port. First of all, a port is a bud in transportation group, standing in a line with other nodes of transportation like airports, railroad stations. Additionally, it is a place where economic activities connected with advent of ships and freight to the port take place.
It is usually the case that a port consists of several terminals, which are “specific parts of harbor consisting of one or more wharfs related to special type of cargo” (Stopford, 1997). There are various categories of freight in harbors: liquid bulk (crude and refined oil products), dry bulk (coal and iron), unitized freight (consisting of Ro-RO and Lo-Lo goods) and other consignment products. More than 6 billion tones of goods are transported every year by sea transportation. Out of them 45% are liquid bulks, 23% dry bulk and 32% general cargo (OECD, 2012).
To better understand what the port is, a deeper insight into functions and roles of the port from different perspectives is presented in addition to information provided in introduction part. Table 2 presents four main functions of the port:
Table 2: Different functions of Port
1) Administrative / Making sure that the legitimate, political and economical importance of the government is secured2) Development / Ports contribute, advocate and investigate local and international economy
3) Commercial / Ports are worldwide connection points for various types of the transport to interact: transition of goods, stowing and discharging
4) Industrial / Control goods and products export and import
Source: (Port Reform Tool Kit, 2015)
Different authors in their papers focus on only one function of the port, emphasizing its importance. For instance, a paper by Robinson (2002), argues that due to a fast and intensive reorganization of supply chain and logistics way, in which ports are entrenched, their role is now seen as an essential part in value-driven chain system. Robinson (2002) shows that port adds value to carriers and suppliers; therefore it should be considered not just a shipment place, but also more as a part of a complex value chain scheme (Robinson, 2002). Nijdam, van der Lugt and de Langen (2012) in their paper emphasize a role of port as a place of storage place where goods and passengers have to interim their journeys. Authors in the paper also mention fortification side of the port that is crucial for achievement economies of scale and efficiency improvement (Nijdam, van der Lugt, & de Langen, 2012). Another function of the port that was not mentioned in the table of ports function is a port in gateway logistics. A paper by Tongzon and Oum (2005) focused on this important role of the Port. A gateway in the paper is considered as a bud in international supply chain, which plays a bridging role between regions by providing different types of transportation systems. The importance of the port is highlighted by its role in gateway logistic accomplishment. The influence of the port on efficient transshipment and amalgamate between sea and land transportation is being analyzed (Tongzon & Oum, 2005).