As part of ALPHA programme activities, I signed up for the Economics Port Operations Learning Journey which took place on the 18th of November. You may ask “How is Economics linked to Port Operations of Singapore?” I shall explain about that but before I continue, I shall explain briefly about the background of Singapore’s port.
The port of Singapore was founded by Sir Stamford Raffles in the 19th Century. The 19th Century is well known to be the era of Industrial Revolution. Thus, during this era, there was an increase in consumer goods throughout the world. Goods were mostly produced at factories in large amounts and in its thousands. As a result, to meet the rising increase in demand for goods, more raw materials were needed which means people at that time often sail to other countries to obtain raw materials to continue producing their goods.
Initially, Raffles opened at Port at Penang and made it a free port. However, the location was unsuitable for traders to travel to. Thus, Raffles had to scout for a better location and that place was Singapore.
The reason why Singapore was better than Penang in the 19th century is because of it’s strategic location and accessibility. Singapore is located in between Indian Ocean and the Pacific Ocean. If there are ships that need to travel to Thailand, Bangladesh, India and Europe, they can sail past Singapore via the Western Anchorage and if there are ships that need to travel to Hong Kong, China, Japan and America, they can do so via Singapore’s Eastern Anchorage. Singapore’s position as a port made it easier and possible for immigration to occur in the 19th and 20th century.
Therefore, Today, since Singapore is situated in between the Indian and Pacific Ocean, this makes Singapore a strategic place for Ships to re-fuel, transforming Singapore’s port into a Giant Patrol Kiosk. In this way, Singapore gets to experience economic growth as many ships are anchoring at Singapore to obtain bunkering services from Singapore’s port.
Some important facts before I continue: Shipping and Port Operations contribute up to 7% of Singapore’s GDP. This means that Singapore’s Shipping and Port industry is one of Singapore Economy’s important assets. Anyway, what makes Singapore’s port so attractive? This is because, Singapore has natural deep water habours (below-darker blue areas) attracting many ships to Singapore for bunkering, dredging and waste disposals. Singapore generate a hefty revenue from these 3 activities. Singapore is also the world’s largest container transshipment hub (shipment of goods or container to an intermediate destination, and then from there to yet another destination), handling about one-fifth of the world’s total container transshipment throughput, and 6% of global container throughput.
To relate to the GCE A levels economic syllabus, The giant players of this industry are PSA and Jurong Port (Duopoly Market Structure).
PSA was formerly the The Port of Singapore Authority, and was part of the Statutory Board (Governed by Singapore Government). However, on August 25, 1997, a parliamentary bill was passed to corporatise the Port of Singapore Authority. PSA restructured into PSA International Pte Ltd. Currently, PSA is the largest Port operator in this region managing 4 container terminals - Tanjong Pagar (below-background), Keppel, Brani and Pasir Panjang. These 4 terminals once constituted the World’s Busiest Container Port moving 70,000 TEUs (Twenty footer containers) DAILY. In Singapore, PSA owns the largest market share as it operates 28 port projects in 16 countries across Asia, Europe and the Americas, with a global capacity of 111 million TEUs over 66 km of quay length. It has a network of 200 shipping lines serving 600 ports in 123 countries.These investments in other countries also help to increase Singapore’s actual growth. In addition, Singapore is also Dynamic Efficient having developed several in-house IT systems, including Computer Integrated Terminal Operating System (CITOS); Portnet; Flow-Through Gate; Remote-controlled Overhead Bridge Cranes; Collaborative Port Community Solution. These innovations are also forms of Technical Economies of Scale enjoyed by PSA. PSA is able to spread the fixed costs over as large output as possible using these technologies, so that Average Fixed Cost decreases. Furthermore, these technologies are also exported to other ports in the world, further increasing Singapore’s actual growth.
On the other hand, Jurong Port (below-background) was set-up to drive the industrial estate development in Singapore and Jurong Port became a business division under JTC. On January 1, 2001, Jurong Port was corporatized and became a fully-owned subsidiary of JTC Corporation. Unlike PSA which focuses only on containerization, Jurong Port is the only multi-purpose port in Singapore, handling bulk and breakbulk cargo besides container cargo as well. In addition, Jurong Port is also a key player in the manufacturing oil rigs which are then exported all over the world (product differentiation). These strategies also help increase Singapore’s actual growth.
Even though both PSA and Jurong Port handle containerized cargo (similar product), However, PSA has a larger market share because it welcomes over 130,000 vessel calls annually while Jurong Port only welcomes 35,000. Despite competing with each other, both PSA and Jurong Port are still closely monitored by Government body - MPA (Maritime and Port Authority of Singapore).
Summary on why Singapore’s Ports are one of the best in the world
1) Singapore has an active trading and assembling industry.
2) Singapore is a popular port because its waters have a depth of 40-50m deep - suitable for ocean-going vessels. This also means, Singapore ports provide enough capacity for Big Ships.
3) Singapore’s Shipping industry is a value-added industry. Even though Singapore does not have raw materials, we have the means to package and assemble small parts into bigger items and machinery.
4) Singapore’s ports are also one of the safest in the world and has a good safety record - no pilferage!
5) Singapore’s attractive because it has a large customer base and better and advanced technology operated in its ports as compared to other ports in the world.
6) Singapore’s ports has a good and strong reputation. Many foreign ships prefer to register under the name of Singapore and follow Singapore’s regulation. This is because Singapore’s ports are corruption-free.
7) PSA and Jurong ports employ workers that are highly skilled and efficient
I hope this knowledge benefit those reading [:
Shaik Nabil, 10A03