Economies of developing countries on maritime routes
By Marek Grzybowski
The dynamic development of developing countries’ economies has led to the rapid development of ports and maritime trade, and the structure of maritime transport has changed – UNCTAD emphasizes in its latest report. Far Eastern countries have become key players in global value chains. Along with the dynamic development of production, negative phenomena have also appeared. Emissions of CO2 and harmful substances have increased rapidly, the environment has been polluted by plastics and chemical waste. The public debt of most developing countries has increased significantly.
On the occasion of the 60th anniversary of UN Trade and Development (UNCTAD), the organization’s experts have highlighted the key trends that have shaped global trade and the development of developing countries’ economies in recent decades. The market analysis shows “the growing share of developing economies in world trade”. A clear evolution of maritime trade has been noted, both in the transport of general cargo and dry and liquid bulk cargo. A clear increase in e-commerce and dynamic development of trade in plastics has been noted. Changes in production technologies and demand for electronics have led to an increase in demand for minerals. The economic growth of developing countries and growth in consumption have caused an “alarming increase in global public debt.”
It is emphasized that “since the establishment of UN Trade and Development in 1964, international trade has expanded significantly.” Measured in current prices, which also take into account inflation, trade in goods is now about 134 times larger than it was six decades ago. This dynamic development was caused by the allocation of production from developed countries to Asian countries and the integration of national economies into the global economic system. The globalization of the economy has led to a complete reconstruction of logistics chains and transport networks, including seaports.
Maritime trade on the rise
As a result, maritime transport has had to face such challenges as the imbalance in supply and demand for cargo space and the extension of supply routes. In 2022, the seaborne transport of containers, measured in metric tons, fell by 3.7%, according to UNCTAD analysts, before growing by 1.2% in 2023 and increasing by more than 3% in the period 2024-2028.
This is still a much slower pace of growth in the supply of containers in seaborne trade than in the previous three decades, when the average growth was estimated at around 7%. The extension of liner routes saved operators from bearing the consequences of the oversupply of cargo space on container ships. Nevertheless, operators made decisions to optimize connections between container terminals.
In the case of dry bulk cargo and the transport of oil, chemicals and products, since the beginning of 2022, seaborne trade has been operating under pressure from changes caused by the war in Ukraine. The war and the imposed sanctions led to changes in the logistics of grain, fertilizers, oil and gas, and products. The distances traveled for many commodities have increased, especially oil and grain, as well as coal and refined products. Growth in tonne-miles is expected to exceed growth in tonnes in 2022, 2023 and 2024, according to UNCTAD.
This phenomenon was clearly visible in the bulk and fuel terminals of Polish ports. Secretary of State in the Ministry of Infrastructure, Deputy Minister Arkadiusz Marchewka drew attention to this in information on transshipments in Polish ports in the first half of 2024. A total of 1,557,603 TEU were transshipped in container terminals, which means an increase of almost 8.3%.
The transshipment of grain also increased by over 2.5%, general cargo by almost 3% and liquid fuels by about 5% compared to the same period in 2023, as reported here.
Developing countries in the global economy
Over the past 60 years, developing countries have significantly increased their share in world trade. From 1964 to 2023, their share of global trade in goods increased from 22% to 44%, UNCTAD experts calculated, emphasizing that regional disparities persist and not all countries have benefited equally, with the share of the least developed countries being less than 1%.
The growth of developing countries’ share in global trade has been driven by the liberalization of tariffs since 1995, thanks to World Trade Organization agreements, bilateral and regional trade agreements, and unilateral policies, experts explain. However, while tariffs have fallen, countries have begun to protect their markets with non-tariff tools (NTMs). And this is causing new challenges in international trade and access to local markets.
Among the most commonly used non-tariff regulations, countries have restricted access to their markets by introducing quotas and safety and sanitary standards for food and medical products. In the EU, the lack of tariff and non-tariff restrictions has resulted, among other things, in the complete loss of the photovoltaic panel market to Chinese producers. The market for manufacturing cars, household appliances, industrial electronics, and many other areas has become dependent on supplies from China and other Asian countries. In developed countries, this dependence is even greater.
While global tariffs have fallen from 13% to 7% over the past decade, the use of non-tariff measures has increased from 53% to 72%. The complexity of these measures and higher compliance costs can be particularly difficult for companies in developing countries, hampering their global competitiveness, UNCTAD analysts note.
Maritime transport – rising ton-miles
From 1970 to 2021, cargo transported by ships increased from 2.6 billion tons to almost 11 billion tons. Globalization was possible because ships carry about 80% of goods. In general, it carries a whole range of products, from electronics to furniture, toys, clothing and food. Since the creation of UN Trade and Development, the volume of maritime trade has increased significantly. The widespread use of container shipping has led to an unprecedented increase in the exchange of industrial and consumer goods. Door-to-door deliveries have become the norm.
This is reflected in the Liner Shipping Connectivity Index (LSCI). China’s economy stands out in terms of its integration with other regions via liner services. South Korea, Singapore, Malaysia and the United States also have high levels of integration.
In Europe, Spain, the Netherlands and Belgium have all seen their LSCI increase in recent years, while the United Kingdom has seen its LSCI decline slightly. Global container port throughput has increased by 56% between 2010 and 2022. As a result, seven of the world’s ten busiest ports are in China, illustrating their critical role in producing for the global economy on virtually every continent, notes Hossein N. Fashkhami of Anzali Free Zone, citing Ship Technology’s findings. China’s economy has been the world’s largest exporter of industrial and consumer goods since 2009.
Since 2022, the distances and ton-miles of oil and gas cargo have been steadily increasing. The Russian Federation, bypassing sanctions, sought new markets for its cargoes, while Europe sought alternative suppliers of energy resources. Grain shipments had to cover longer distances on land and at sea, which could be seen, for example, in Polish ports in 2023. This was despite the fact that grain deliveries from Ukraine were resumed in 2022 thanks to the initiative to launch a corridor through safe waters of the Black Sea. Many grain-importing countries had to focus on alternative grain suppliers.
Attention had to be directed to deliveries from the United States of America or Brazil, which in many cases required longer delivery routes. In the first half of the year, the situation improved slightly, because despite Russian attacks on ports on the Black Sea coast and on the Danube, Ukraine exported 4.2 million tons of food in July, twice as much as a year earlier, Reuters reported.
Ports of Asia – the main players
The allocation of production to Asian countries and globalization have made ports in developing countries the main loading points for goods delivered by sea to other markets for over two decades. Their share of unloaded goods has increased significantly, already exceeding 50% in 2011, and in 2020 it increased to 61%.
This trend reflects their growing role as consumers in the global market. It also highlights their increased participation in global value chains, as imports of goods include semi-finished products, UNCTAD analysts explain, noting that this share varies, with the main participants being Asia, in particular China and neighboring Asian economies.
Unfortunately, developing countries face twice the costs of transporting goods. One key indicator that can be extracted from the data set is the transport work performed by means of transport on behalf of developing economies for imports and exports – whether by land, air or sea.
“Basically, transport work is a measure of effort,” explains Onno Hoffmeister, a UN statistician on trade and development. It is calculated by multiplying the weight of goods by the distance they have to be shipped. UNCTAD finds that, strikingly, developing economies have to put in twice as much transport work as developed countries to transport their imports and exports by sea per dollar of seaborne trade. The dataset aggregated by UNCTAD essentially reveals the costs of transporting goods between countries, such as transporting iron ore from Brazil to China, electronics from China to Germany, or cars from Germany to Brazil. Jan Hoffmann, head of UN Trade and Development’s trade logistics division, emphasizes the importance of the data for understanding the dynamics of global trade. He says it is crucial for policymakers and businesses because it highlights the costs of trade logistics and helps researchers identify areas for improving efficiency.
“The data highlights the unique challenges faced by small island developing states,” Hoffmann says, noting that “their geographic isolation, trade imbalances and lack of economies of scale result in higher transportation costs. This was also reflected in a statement by SIDS (Small Island Developing States) ministers at the Global Supply Chain Forum in June.”
Technological revolution
A significant factor that has caused enormous changes in maritime transport is the technological revolution. The widespread availability of the Internet and the widespread use of smartphones have led to a rapid increase in e-commerce and the penetration of transactions across borders. The latest UNCTAD estimates show that by 2022, e-commerce sales in 43 developed and developing economies, accounting for about three-quarters of global GDP, will have reached almost $27 trillion, up 60% from 2016.
“The value of the global e-commerce market in 2023 was to reach $16 trillion. Forecasts say that in 2032 it will be over $57 trillion. In Europe alone, revenues from online trade are to grow by about 9-10% annually in the coming years,” says Krzysztof Mirończuk from Money.pl.
– European B2C e-commerce grew from €849 billion in 2021 to €899 billion in 2022, although the growth rate slowed from 12% in 2021 to 6% in 2022. Nevertheless, the growth rate is expected to increase slightly to 8% in 2023, and European B2C e-commerce turnover will also continue to show a positive growth trend, says Luca Cassetti, Secretary General, Ecommerce Europe. UNCTAD emphasizes that progress has also been noticed in developing countries. Trade in digitally delivered services, including telecommunications and financial services, has increased by 114% since 2010. Developing countries have increased their share of e-commerce from 19% in 2010 to 24% in 2022. For developing countries, digital transformation offers huge potential for economic growth, job creation and poverty reduction.
But there are limitations. These countries face significant challenges in realizing these opportunities, including high market concentration, inadequate laws and infrastructure, limited financial resources and a lack of digital skills, experts say.
Negative developments
The positive trends associated with the growth of Asian economies have been accompanied by negative developments. While global GDP per capita has almost tripled since 1960, CO2 emissions have quadrupled. The production and distribution of goods account for about a quarter of all emissions of environmentally harmful substances, which poses a challenge for both developed and developing countries, UNCTAD emphasizes.
Over the past two decades, per capita emissions have increased in lower middle-income and upper middle-income countries, while falling in high-income countries. This underscores the urgent need to find more sustainable production and distribution methods, while ensuring a fair global energy transition that addresses both environmental and development goals. One threat is the “rapidly growing trade in plastics.” UNCTAD estimates that “global trade in plastics more than doubled from $535 billion in 2005 to $1.2 trillion in 2022. The world sold more than 382 million tons of plastic in 2021, enough to fill more than 19 million trucks.” With less than 10% of plastics recycled, most of these products end up polluting our environment. The solution is to introduce materials that are recyclable.
Eco-friendly materials include bamboo, hemp, sand and algae. The use of these materials by developing countries to produce goods is an opportunity for developing economies. In 2022, global trade in plastic substitutes was worth about $557 billion. About two-thirds of global exports of plastic substitutes come mainly from developing countries.
Dependence on unprocessed goods
Many developing economies rely on a few commodities for their export revenue. These are mainly oil, copper, cocoa and wheat, according to UNCTAD, which defines a country as “dependent” when these products account for more than 60% of its total merchandise exports. From 1998 to 2021, the number of countries dependent on such exports increased from 92 to 101.
In 2021, about 85% of the world’s least developed countries were dependent on exports of unprocessed goods, compared with just 12% of developed economies. Over-reliance on exports of unprocessed goods makes countries vulnerable to price volatility and global shocks, such as oil price declines or the effects of climate change.
This is also a field that is undergoing significant changes, as the development of electronics has recently led to a boom in key minerals used in the production of products used in the energy transition. UNCTAD notes that this brings both opportunities and threats to many developing countries. UNCTAD forecasts based on data from the International Energy Agency indicate that demand for lithium could increase by more than 1,500% by 2050. Significant increases are also expected for nickel, cobalt and copper.
The above trends and geopolitical turmoil are generating demand for maritime transport. The capacity of the container fleet increased by 3.9% in 2022, and that of tankers by 3.4% and is growing steadily. The capacity of bulk carriers increased by 2.8% and is growing at the same rate in subsequent years. Gas tankers recorded the highest increase in capacity at 5% and this trend is continuing. The main player here is QatarEnergy, which is conducting negotiations with three shipyards: HD Korea Shipbuilding & Offshore Engineering, Samsung Heavy Industries and Hanwha Ocean. According to industry information, talks began in June this year. The contract, worth around 9 trillion won ($6.6 billion), is expected to include the construction of 20 Q-Max LNG tankers. From 2022, QatarEnergy has been carrying out long-term charters for the operation of 104 LNG carriers. The main beneficiaries of the high demand for ships are mainly the shipyards of the People’s Republic of China and the Republic of Korea, and marginally of Japan.