|
|
|
|
Korea banks on Busan
By William Armbruster
Faced with growing competition from China, the South Korean government is
seeking to strengthen its economy by developing Busan port as a mega-hub for
Northeast Asia comparable to the role of Singapore in Southeast Asia. Port
officials say Busan's location between Japan and China makes it an ideal
transshipment point for cargo moving to and from North America and Europe.
The centerpiece of Korea's plan for Busan, which handles 80% of the country's
container traffic, is the construction of a new port that will increase its
container capacity 150% by 2011. Other elements include the creation of a free
economic zone designed as a focal point for high-tech manufacturing and
research and development, and the opening of a distribution park aimed at
developing Busan into an international logistics center serving all of
Northeast Asia, encompassing China, Japan, North and South Korea, and the
Russian Far East.
Korean authorities are hoping to attract logistics companies to the
distribution park by practically giving away the space. Foreign companies as
well as joint ventures with as little as 10% foreign investment may receive
leases for up to 50 years with annual rates of just 48 US cents per square
meter. That's one-fifteenth the going rate for logistics ventures in Shanghai,
according to Boo-Won Kang, director of marketing for the Busan Port Authority.
"Without this revolutionary idea, we cannot compete with China," he told an
investment forum in New York recently.
Busan handled 11.5 million TEUs (twenty-foot equivalent units) last year, a 10%
increase over 10.4 million TEUs in 2003 and an 80% increase over the 6.4
million TEUs crossing its docks in 1999. Despite that growth, Busan last year
fell from third place to fifth in the rankings of container ports as Shanghai
and Shenzhen roared past it. Hong Kong remained in first place, followed by
Singapore. Busan is, however, still the world's third-largest transshipment
center, with feeder services representing 40% of Busan's total trade. Of that,
China accounts for 55% and Japan another 35%.
Feeder services
Busan is such a large transshipment hub because it allows ship lines to limit
the number of ports where they have to make direct calls on trunkline routes to
North America and Europe. Feeder services link Busan, located on the
southeastern tip of the Korean peninsula, with 60 Japanese ports and 45 in
China, as well as five in Russia, according to Kang.
Those figures, along with its naturally deep water, reflect Busan's strategic
location on the main trunkline routes linking Asia with Europe and North
America. But Busan's share of Chinese cargo is likely to fall as ocean carriers
introduce direct services to more and more ports in China, and as the Chinese
ports themselves ramp up their capacity.
The new Yangshan port outside Shanghai, for example, will have an initial
capacity of 2.2 million TEUs when it opens later this year. That total is
expected to reach 25 million TEUs when the project is completed in 15 years.
Nonetheless, June-Suk Choo, president of the Busan Port Authority, is
optimistic that Busan will remain a major gateway for Chinese cargo as long as
the port becomes more efficient and productive. Choo said Busan does not
compete directly with Shanghai, but that it is a natural transshipment gateway
for ports in northern China, such as Qingdao, Dalian and Tianjin. According to
Choo, logistics companies from Japan, China and the US have all expressed
interest in the distribution park, known as Distripark. "If we develop the
Distripark as planned, we expect a lot of Japanese companies will come."
The first phase of the $7.6 billion new port is slated for completion by the
end of this year, when the first three berths become operational. By the time
it is finished in 2011, it will have 30 berths and an annual capacity of 15
million TEUs. With depths of 16-17 meters, the new port will be able to
accommodate 10,000-TEU ships. The existing port can accommodate vessels with
capacities of up to 8,500 TEUs.
Private terminal operators are building the berths in the first phase of the
port's development, while the Busan Port Authority is constructing the berths
in the next several stages. It will then lease the berths to shipping lines and
terminal operators. No decision has been reached on how the berths in the final
stage will be developed. Private investors include Dubai Ports International,
which is putting up US$300 million toward the construction of the new terminals
through a joint venture with Samsung. The Dubai group took over the 25% share
previously held by CSX World Terminals.
The Iron Silk Road
Aside from its role as a center for containers transferred from one ship to
another, Busan officials also tout the port as the starting point for what they
call the Iron Silk Road, a landbridge for cargo that could move to Europe via
the Trans-Siberian Railroad. These services would all require an agreement with
North Korea to create what the South Koreans call the Trans-Korea Railway. "I
see big potential for it," said Scott MacDonald, a Korea specialist with
Aladdin Capital Management. "At some point they expect those rail links to be
open." MacDonald added that South Korea already has excellent roads and rails.
The Iron Silk Road would be a natural link between Busan and cities in
northeast China, such as Shenyang and Harbin. In addition, it could provide a
connection to Mongolia, according to port officials. In the meantime, Busan
acts a feeder for cargo shipped to and from Russian ports such as Vostochny,
Nakhodka and Vladivostok. The new port itself is part of the Busan-Jinhae Free
Economic Zone, designed to maintain Korea's role as an economic powerhouse by
offering generous incentives to manufacturers. Renault Samsung, which invested
$300 million in an auto factory there four years ago, plans to invest another
$600 million in an engine-production plant, according to Yun-Il Kim, the free
zone authority's director general for investment planning and support.
The plan also includes the creation of a new city between Busan and the new
port. It would attract foreign investment by creating international schools for
children of expatriates, as well as tourist attractions such as an indoor ski
dome. Up until last year, the central government in Seoul controlled all port
activities. It created the Busan Port Authority in January last year as a 50-50
venture between the central government and the local government in Busan.
Busan Port Authority's Kang said it is modeled after the Port Authority of New
York and New Jersey, which is governed by an equal number of commissioners
appointed by the governors of the two states. Current plans for Busan do not
include the construction of a major international airport, but Choo said he
believes the government is considering that possibility. Inchon International
Airport, outside Seoul, is one of the world's largest cargo airports, mainly
because of its role as a transshipment center for Chinese cargo. The creation
of a major international airport in Busan, located about 250 miles from Seoul,
would boost Busan's prospects of becoming a logistics center.
This article was originally published in the June 27 issue of
Shipping Digest magazine. |
|
|
|
|
|
|
|
 |
|
|
|
|
|
All material on this
website is copyright and may not be republished in any form without written
permission.
© Copyright 1999 - 2005 Asia Times
Online Ltd.
|
|
Head
Office: Rm 202, Hau Fook Mansion, No. 8 Hau Fook St., Kowloon, Hong
Kong
Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
|
|
|
|
