The Impact of Port Technical Efficiency on Mediterranean Container Port Competitiveness

Port efficiency is a significant element that stimulates port competitiveness and enhances regional development. With increasing international maritime traffic and changing technology in the maritime transport sector, containerisation and enhanced logistic activities, infrastructure might be one of the main determining factors of port competition (Merk & Dang, 2012). Due to the increasing container traffic and the high quality of service required by the shipping lines, Mediterranean container ports are being compelled to enhance port efficiency to improve comparative advantages that will increase cargo traffic and satisfy the customers’ requirements. The Mediterranean Sea is a link point between Europe, Africa and Asia. This research aims to examine the impact of ports' technical efficiency on the improvement of Mediterranean container ports’ competitiveness. The research analyses the competitiveness and the relative efficiency of the top 22 container ports in the Mediterranean basin using a cross-section, panel data and window analysis application of data envelopment analysis (DEA) for the period between 1998 and 2012. The selected 15 year period enables the analysis of Mediterranean container port market dynamics and the benchmarking of the technical efficiency of the selected ports for three consecutive market cycles. This research can be classified as quantitative analytical research. The research follows the concept of the Industrial Organization (IO) and the Structuralism (Harvard school) methodology that analyses the market Structures, Conduct and Performance (SCP) of market players.
The study conducts a simultaneous three-stage procedure: in the first stage, the competitiveness of the main container ports in the Mediterranean is analysed through the study of market structure and conduct. Market structure is assessed through measuring and analysing market concentration by using four different methods. These methods are: the K-Firm concentration ratio (K-CR), Hirshman-Herfindahl Index (HHI), the Gini coefficient (GC) and the generalized entropy index. Boston Consultant Group (BCG) matrix is also used to visualize the dynamics between ports in the defined market and assess the ports' competitive position. Market conduct is analysed using shift-share analysis (SSA) to get a thorough understanding of the issue of port traffic development.
In the second stage, market performance is analysed through the use of the non-parametric models of Data Envelopment Analysis (DEA) which estimates the relative efficiency scores and ranking seaports according to their efficiency. Five DEA models are adopted for comparative purpose, the DEA- CCR, DEA-BCC, the Super-Efficiency (A&P, 1993), the sensitivity analysis and slack variable analysis models. In the third stage, to examine the impact of port efficiency on port competitiveness, a number of hypotheses are examined through the use of parametric correlation coefficients (Spearman’s rank order) and Simar and Wilson (2007) procedure to bootstrap the DEA scores with a truncated regression. Using this approach enables more reliable evidence compared to previous studies analysing the efficiency of seaports.
The main findings demonstrate that the recent deconcentration tendency of the Mediterranean container port market is due to the increased number of market players which will in turn reshape the market structure, change the container port hierarchy and intensify the competition between ports as the market shifts from oligopoly to pure competition. The research findings also reveal the existence of inefficiency pertaining to the management of container ports in the region, since the total technical efficiency is found to be below 50% on average. This relatively limited technical efficiency of the Mediterranean container ports indicates the need for appropriate capital investments for ports’ infra/superstructure. In particular, those ports whose efficiency is not favoured by some factors such as size, geographical position and socio-economic conditions of the region in which they are located, must adopt suitable reform strategies to promptly
improve their efficiency and competitive position. What differentiates this work from previous studies on the subject is that both cross-sectional and panel data have been collected and analysed at the level of individual container ports in the Mediterranean. The study is based on a wide range of methodologies, both parametric and non-parametric, that have ensured the validity of the empirical examination that has been undertaken and the results obtained. The research
analysed the Mediterranean container ports competitiveness, benchmarked and ranked their efficiency by considering the Mediterranean in its totality, including South Europe, Middle East and North Africa. The study puts forward a way to assess container port efficiency based on simple, yet validated and meaningful physical efficiency measures.