3.1 Lesson 1: Port development should not stop at the port gate

BOX 3.1

Lesson 1: Port development should not stop at the port gate

Taking a holistic approach to port development involves aligning logistics, trade, and transport policies with broader economic development strategies. In China, port development was well integrated with broader economic development planning. Port planning supported broader strategies in various ways, including integrating port development with special economic zones, inland logistics, customs administration, hinterland transport networks, and trade facilitation. Port development was conceived of as an element of the larger economy. In most emerging economies the relationship between the port and economic development goals is not as clear. However, in China the frontiers of traditional port planning were expanded to consider national economic and social objectives, opportunities for developing the hinterland, the interests of the various supply chains that pass through the port, and the community within which each port is embedded. China’s experience shows the importance of this holistic approach.

Because most ports are now part of national and global supply chains, successful planning must extend far beyond the port gate and must involve a wide range of stakeholder interests. Notably, it must extend beyond the profitability of individual investments or the desire to capture as much traffic as possible. China was able to address this requirement through its national planning framework—its five-year plans—which pull together the actions of its various ministries and other public bodies and provide an indication to private businesses of general policy directions.

Few countries have the planning procedures or centralized coordination and decision mechanisms that permitted China to achieve agreement among large networks of public and commercial actors, often having conflicting interests and the ability to act autonomously. However, there are other ways in which a more holistic approach to port planning can be developed in different contexts.

• The first is to expand the frontiers of traditional port planning to consider national economic and social objectives, the needs of the hinterland, the interests of the various supply chains that pass through the port, and the community within which each port is embedded. • Consideration should also be given to the use of multistakeholder steering committees or a requirement for the plan to be jointly approved by relevant stakeholders or a higher-level organization that is able to take a wider overview, for example, the government’s central planning unit. • Finally, more opportunities can be created for public and private organizations to interact, encouraging each to look outside its silo when making decisions that will affect other groups.

The opportunity to influence decisions should be a two-way street. For example, ports should have a say in the development of national rail infrastructure, and rail operators should be involved in the planning of rail yards within the ports.

networks, and the Belt and Road Initiative, which improved the connectivity of inland areas to seaports and established overland rail links to Europe.

The Port of Shanghai is a good example of this strategy. It played a vital role in the development of a comprehensive inland water transport network along the Yangtze River, the busiest river in the world in cargo volumes. The Port of Ningbo-Zhoushan, in contrast, has focused on developing sea-rail connections for its hinterland. Inland provinces, in their desire to export their manufactured products, also promoted the development of infrastructure that opened access to the coast.

The merger of separate ministries into a single Ministry of Transport (MoT) has improved coordination among freight transport modes, but China still lacks fully integrated multimodal freight transport policies, even though the 12th and 13th Five-Year Plans (spanning the years 2011 through 2020) advocated a comprehensive multimodal transport system, and the National Development and Reform Commission has also championed this idea.

A holistic approach is also apparent in the spatial planning of port cities, with logistics zones located well away from city centers, at points in the urban road networks where they cause minimum interference with other traffic. In some cases, administrative borders were modified to permit integrated development of ports and new manufacturing areas and to provide incentives for the relocation of established industries to suitable sites near the ports.

Holistic planning remains evident in current policies. The 14th Five-Year Plan (2021–25) focuses on achieving decarbonization and sustainable development (with comparatively less emphasis on international trade), meeting domestic demand, attracting higher value added industries, and stimulating innovation. These overall policy goals are translated to ports in several ways. China is promoting the merger of ports into regional groups to reduce the risk of overcapacity that stems partly from the shift of focus away from exports as drivers of economic growth. China’s ambitious sustainability goals and emphasis on innovation and technological development steer port policies toward the digitalization of freight transport and the spread of terminal automation. Overseas investment by Chinese port companies is also well aligned with strategic policy goals set by the central government.

China began port decentralization in 1984 with pilot projects in Dalian and Tianjin designed to test the concept of joint port management. Lessons from the pilots led to a dual management system in which responsibilities were shared between the central and local governments. The MoT controlled strategic planning, port development, financing, and high-level regulation, while the local government was responsible for day-to-day management.

In the next step, the centrally funded port bureaus, which had hitherto held the dual roles of administrator and business operator, were split. Their administrative and regulatory functions were transferred to new port administrative authorities answering to provincial or municipal authorities. The bureaus’ commercial functions were transferred to newly established state-owned port enterprises, which operated very much like private companies but under local government leadership, coordinated by central planning.

China’s experience shows the risks of excessive decentralization, especially in preventing overcapacity. Equipped with financial resources to invest under the one-city, one-port strategy, many coastal cities invested in ports. This approach served the country well during the rapid expansion of exports but led to excess capacity when the economy shifted to consumption-led growth. Development of port clusters reflected recognition of the importance of combining decentralization with a mechanism for regional coordination.