World Economic Development and Maritime Activity - Coursework Example

INSTITUTE OF MARITIME BUSINESS MANAGEMENT Singapore 18h Intake Maritime Transport (MM2311) Assignment Student: Student ID: Lecturer: Word Count: Abstract Maritime business can always be considered as one of the dominant ‘pillars’ for the global trade from time immemorial. The colonial powers of Europe, especially Spain, England, Portugal, Netherlands and France can be considered the pioneers in establishing the maritime business across the World. When viewed in the simplest terms, maritime transport is the shipment of primarily cargoes and also people by sea as well as other waterways. Thus, the maritime business entails various aspects of businesses such as designing, manufacturing, constructing, supplying, operating, etc. Like any other trade, the maritime trade activity also encompasses the vital elements such as shipping, delivery of goods, freight forwarding, etc. The paper will mainly focus on the importance of maritime business, maritime freight markets and the role of maritime activity in the global economic development Table of contents Abstract i Table of contents ii Introduction ________________________________________________ 1 The importance of maritime business _________________________________________ 2 Maritime Freight Market ___________________________________________________ 2 World economic development and maritime activity______________________________3 Conclusion ____________________________________________________________5 References ____________________________________________________________6 Introduction Transport is one of the most important activities in trade. Trade includes various steps such as manufacturing of the goods, shipping and delivering it to the intended customers, thereby providing a link between the producers and the customers, different regions and different countries. Among the various modes of transport, transport through sea and water are utilized effectively in delivering the goods across continents, thus constituting maritime business. Maritime business activities can be explained as follows. Trade that is done through shipping from a port in country or city to another constitutes Maritime business, and often ships transport crude oil, iron ore, grain and containers. (Sitorus 2012). Thus, the transports done through sea are mainly used to carry materials in larger quantities. Maritime activity is of crucial importance to the developing and the developed countries, as it complements their economies. “In certain situations, it can become a means of improving and offsetting the balance of payments of one country, helping the external debt reduction of the developing countries, through: establishing prices and delivery quantities which correspond to both the interests of the producers and the importers.” (Ispas 2011). From the above it is obvious that the transportation of goods through sea and the maritime business can be jotted as the major determinant component in constructing the economic infrastructure of a country. Hence, it is considered to be a key aspect in enhancing the social and economic status of a country. “Shipping has long been the major form of transport, as well as essential communication link connecting coastal cities, countries and continents.” (Wind Rose Network). The importance of maritime business With the increase in the world population and subsequent increase in the needs, nations across the globe need have heightened transportation needs for trade and this where the role of maritime assumes importance. Storage and economic feasibility can be considered as one of the most highlighted feature of maritime business. Since, the large ships and containers are used in shipping; sizable amounts of goods can be transported at much less cost. The total cost that is involved in manufacturing the goods along with the transport cost can be considerably reduced through the maritime activity. (Kristiansen 2004). Since, the goods can be transported in bulk, without the need to do ‘repetitive movements’; the operating costs can be maximally reduced. The other significance of the maritime trading is it allows the movement of cargo and people to almost any part of the globe. “Marine transportation, similar to land and air modes, operates on its own space, which is at the same time geographical by its physical attributes, strategic by its control and commercial by its usage.” (Rodrigue, Notteboom and Slack 2009). Thus, the maritime business can be explained in terms of the sea route which connects the major industrial countries across the globe, thus proving to be the vital element to carry out all forms of trade. Maritime Freight Market “Global goods movement is a critical element in the global freight transportation system that includes ocean and costal routes, inland waterways.” (Corbett and Winebrake 2008). In the current competitive global market, factors such as the cost, time, reliability of delivery of goods, etc., decide upon the survival and the success of the business firms. To fulfil those factors, maritime freight segment is playing a major role. With the other factors such as globalization expanding the geographical boundaries, the exact market of the Maritime freight has also ‘blurred’. “Maritime services have benefited in recent years by considerable expansion fostered by globalization.” (World Trade Organization). Today most of the companies are spread world wide, hence the production and the distribution of the goods are greatly integrated with the global economy, and this where the market of the Maritime freight keeps on evolving. However, when the market is viewed from a closer perspective, it is clear that the maritime freight markets also rely on the demand and supply of the goods. The manufacturing trends in the national and the regional economy also have a direct impact on the markets. Importantly, with the international trade impacting not only the economic but also social status of the countries, the associated maritime activities indirectly makes key socio-economic impacts. “Developing countries play a vital role in maritime transport in terms of poverty alleviation and economic growth.” (Bocanete and Nistor 2009). In addition, the maritime freight markets are influenced by other practices such as Just-In time inventory practices, effective packaging of the goods, efficient handling of the warehousing, etc. From the above, it is obvious that the maritime freight market are based on the nature of services rendered, nature of the goods carried, the place of delivery, etc, etc. World economic development and maritime activity In the current globalized world, the economic status of a country has symbiotic relationship with maritime activity, and that is applicable to all the countries of the world. “Maritime transportation is as old as global trade and historically the scope and extent of long distance trade came on par with the developments in maritime transportation technology.” (Rodrigue). That is, with the advancement in technology and increase in the demand due to the increase in the world population, sea transportation of goods has become a key part of the supply chain. In the supply chain, the maritime industry fulfils the role of international logistics. “Together with telecommunications, trade liberalizations and international standardization, the increased of port and shipping services has made it ever easier to buy and sell merchandise goods, raw materials any where in the world.” (Aksel and Akca 2006). When the raw materials needed for the manufacturing process are provided to the industries in large quantities through maritime options, the industries can optimize their production. Then, with the finished products also reached to the intended customers by the maritime players, it is clear that it aids in the generation of high economic activities. “As the markets of the world become increasingly interconnected, the maritime industry plays a larger role in the transport of goods.” (Business.com). Thus, with the increased imports and exports, a country’s economic growth can be considerably enhanced. Due to globalization and other positive business related developments, this heightened economic activity is visible in many countries of the world, thus leading to worldwide economic development. This is validated by Gallegos (2011) who stated that global movements like globalization, liberalization, etc, as well as structural change in the international trade and importantly the evolution of the maritime transport have a direct impact on the economic growth worldwide. As discussed earlier, the ability of the maritime players to deliver the product to the customers or suppliers or distribution in apt times at affordable costs also makes the various industries to depend on the maritime sector for transportation and other logistics. “Several specific aspects of maritime markets such as shipping cycle and its consequences for supply/demand ratios and freight rates have world wide impacts.” (Sanchez and Salas 2009). The main reason why maritime activity is leading to optimum economic growth on the global scale is because of the reach of the maritime transport, when compared to other forms of transportation. “Maritime transport handles over eighty percent of the volume of global trade and accounts for over seventy percent of its value.” (United Nations 2012). This dependency on the maritime transport and the resultant benefits clearly show how maritime sector is generating high volume of business activities, leading to development of the economy. Summary and Conclusion The socio-economic environment has been changing sharply throughout the world in the last few decades. Globalization, industrialization, modernization, etc., and resultant opening of trade and advancements in technology are leading to optimum trade. (McNicholas 2007). This trade on international scale is mainly driven by maritime sector, with various maritime companies with their ‘stable’ of ships and other containers transporting everything from raw materials to the finished goods. As discussed above, this widespread use of maritime players for international trade is leading to optimization of the economic and the financial status of a country. With the maritime sector having the ability to transport large quantities of cargoes and that too at feasible costs, it is maximally being used for international trade. To conclude, it can be strongly stated that maritime sector is an essential component that can provide an able support for international trade and importantly enhance the socio-economic status of many countries worldwide. Word Count: 1558 References Aksel, I and Akca, Cihan., 2006. 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Trends in Maritime Transport and Port development in the context of World Trade, [Online] Available at www.oas.org/.../12_trends_maritime_transport_doc30_00.doc.doc (Accessed on June 12, 2012) Ispas, C., 2011. International Maritime Freight Transportation, [Online] Available at http://www.scribd.com/doc/50975578/International-Maritime-Freight-Transportation- Copy (Accessed on June 12, 2012) Kristiansen, S., 2004. Maritime Transportation: Safety Management and Risk Analysis, Butterworth-Heinemann, New York. McNicholas, M., 2007. Maritime Security: An Introduction, Butterworth-Heinemann, New York. Rodrigue, J. P., Notteboom, T and Slack, Brian., 2009. The Geography of Transportation Systems. Routledge, New York. Rodrigue, J. P. Ports and Maritime Trade, [Online] Available at http://people.hofstra.edu/jean-paul_rodrigue/downloads/Ports%20and%20Maritime %20Trade.pdf. (Accessed on June 12, 2012) Sanchez, R. J. and Salas, G. P., 2009. The Economic Crisis and the Maritime and Port Sector, [Online] Available at http://www.eclac.org/cgi-bin/getProd.asp?xml=/Transporte/noticias/bolfall/5/38155/ P38155.xml&xsl=/Transporte/tpl-i/p11f.xsl&base=/transporte/tpl-i/top-bottom.xslt (Accessed on June 12, 2012) Sitorus, B., 2012. Maritime Transport and Port Operations, [Online] Available at http://www.gfptt.org/entities/topicprofile.aspx?tid=45124a21-5f6c-40a0-bf24- 21d118c674b8 (Accessed on June 12, 2012) United Nations., 2012. International Trade, World Economic Situation and Prospects 2012, [Online] Available at http://www.un.org/en/development/desa/policy/wesp/wesp_current/2012chap2.pdf (Accessed on June 12, 2012) Wind Rose Network. Maritime Sector, [Online] Available at http://www.windrosenetwork.com/Maritime-Sector.html (Accessed on June 12, 2012) World Trade organization. Maritime Transport, [Online] Available at http://www.wto.org/english/tratop_e/serv_e/transport_e/transport_maritime_e.htm (Accessed on June 12, 2012) Read More