Economics Impact of Ports on the Regional Economy

  • Post last modified:12 July 2025
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What is a Port?

A port is a location on the coast or shore where ships dock to load and unload cargo or passengers. It serves as a crucial link between sea transport and land transport systems like railways, roads, and inland waterways.

The term port comes from the Latin word portus, which means gate or gateway. Port acts as a region’s gateway to the sea through which goods are brought in to the region (inbound cargo – import incase of international trade) or sent out of the region (outbound cargo – export incase of international trade).

If a country has only one port, it is used as the country’s only international gateway. If a country is having a long coastline with many ports, each port serves as the gateway for its region. A country without a coastline is known as “landlocked” country. (Example: Nepal, Ethiopia, Switzerland). Landlocked countries will have to depend on gateways situated in other countries for international seaborne trade. Goods from one region in a country could be transported to another region in the country through sea (or) through inland waterway (or) a combination of both. This traffic is known as coastal traffic of a country.

The region to which a port acts as the doorway is known as Hinterland. Distributory hinterland refers to a region which receives its import cargo through the gateway port. Contributory hinterland refers to the region which produces goods for export through the gateway port.

In case of a well developed country, you will find that parts of a region can be served by more than 1 port giving the businesses in the region a choice of using any of the ports. (Example: Bangalore based importer / exporter has a choice of using either Chennai port or Cochin port or Tuticorin port as the gateway).


Port as an Economic Multiplier

Besides being “gateways”, ports are also the sites for locating industries (port based as well as port related), banks, ship agencies, commercial agencies, storage depots and distribution centres. All these “economic activities” are employers of large numbers of labour. The employees of these economic entities and their families constitute a large “market” for various consumer goods and services. The socio-economic prosperity brought by the port can be measured statistically. This type of measurement is known as Economic Impact Study of a port.

Economic Impact Study (EIS) will measure the “value addition” done by the port based, port related industries by adding their “gross profits” and the “wages” of the employees working in these industries. The EIS will also take into account, the contribution made by port based & port related industries and services viz. transportation, banking, ship agencies, etc. to the Gross Domestic Product (GDP) of the region.


Factors Affecting the Development of a Port

Operationally, a “port” can be defined as a town with a “harbour” and “facilities” for a ship to shore transfer of goods. A region with a long coastline may have only a few places that are designated as “Ports”.

“Harbour” can be defined as a natural or artificial shelter for ships. The shelter is created by maintaining a constant depth of water (known as “draught” – pronounced as “draft”). The “facilities” mentioned in the above definition refers to “availability of cargo handling equipments and the stevedoring (loading and unloading) labour to carry out the ship to shore transfer of goods.

While the “natural harbour” near a “town” stands a good chance of getting developed as a “port”, the following factors contribute to the development of a coastal location as a “port”.

These factors will also cause changes to the existing well-established ports.

Availability of inland road/rail network

Having a well-developed “inland transport” network is a prerequisite for a successful port. Any changes in the existing inland transport infrastructure will have its effect on the port site. If a port is being developed to cater to a particular hinterland (for using it as a gateway for export of natural minerals or for bringing raw materials for industries), the port developers will also include road / rail connectivity in the port development plan.

Changes in the trade pattern

Trade creates the need for “port services”. Ports in China have added considerable capacity addition to the country’s ports after its entry into WTO to cope for the increase in the traffic volume. If a landlocked country changes its gateway, due to political reasons, the new gateway port will get developed to handle the increased traffic. (Ethiopia shifted from using Eritrean gateway port of Assab to Djibouti after relationship between Ethiopia and Eritrea was strained.)

Competition from nearby ports

Ports also compete for cargo originating in / destined for nearby countries. This type of traffic is known as Transhipment traffic (prevalent mostly in the case of containerized cargo). If a port in the region increases its infrastructure (in terms of increased draught for larger ships to call, sophisticated cargo handling systems, etc.), ship owners will prefer to call only 1 port in the region, thereby making the other port as a feeder port.

Ports with small docks in existence for a long period will find dwindling cargo traffic, if the port facilities are not developed over a period of time to cater to the changing requirements. (Rotterdam port’s development as a mega hub port has reduced many ports in the region viz. Gdansk in Poland, Rostock in Germany as feeder ports.)

Changes in Ship size/ technology

In order to achieve economies of scale, ship owners increased the ship size over a period. Ship builders and engine manufacturers kept up with the challenges and have built new generation of ships with larger capacity to carry. This factor has made ports to also change over time to be eligible to receive the new generation of ships.

The draught required by the first generation container ship with a capacity to carry 1000 TEUs (Twenty Foot Equivalent Units) built during 1960 – 70 was only 9 m. Whereas a 5th generation container ship built in 1990s with a capacity to carry 6,000 to 8,000 TEUs required a draught of 14.5 m. Ports have to keep track of the draught requirements and ensure that they are ready to receive the new generation of ships. If they are unable to meet the meet the requirements, ship owners will switch the port of call to the nearby “hub port” in the region.

Environmental pressures

Ports are subject to natural phenomena viz. silting, sedimentation, etc. Port draught will change if adequate steps viz. dredging are not taken by the port. Ports will be required to carry out Environmental Impact Assessment (EIA) to determine whether the dredging activity will affect the port’s environment and underwater marine life.

Some of the natural harbours may be prevented from increasing their capacity due to the likely adverse impact on the environment created by the port development activities. New coastal sites planning to construct a deep water port have to carry out EIA and obtain clearance before commencement of construction.

Logistics developments

Port is one of the elements of the logistics chain. The traditional role of using the port as a mere warehouse is getting changed. Ports are performing value added services and are being used as distribution centres for their hinterland. Developing specialized ports for handling cargoes viz. chemicals is also getting increasingly popular.


Location Characteristics

There are 2 physical characteristics paramount to a port location. They are,

  • Maritime Access
  • Land Access

Both these characteristics must be available in a location as they are very important for port operations. Port is basically an interface between sea and land. Incase of a coastal seaport, the interface takes shape as a linear space along the coastline.

A port should have adequate maritime access in terms of approach channel with a good draught, turning basin with sufficient width, etc. The land access for construction of wharves, transit sheds, warehouses, grain silos, cold storages, container terminals, container parking yards, inland transport terminals, roads, railway lines and administrative buildings. Ports, depending on the location in which they are situated, can be grouped into following categories.


Coastal Natural Seaport

These ports have direct access to the sea. According to the World Port Index (developed by US based National Geospatial Intelligence Agency), 46 % of the ports are in this category. This indicates the importance of the quality of the harbour in the selection of a port site.

Coastal natural seaports are located in bays (as in the case of Tokyo port in Japan, San Francisco port in USA). The sheltered port site is the outcome of a natural profile of the coast, creating a natural barrier such as a cape (as in the case of Cape Town port in South Africa), a reef (as in the case of Honolulu port), a sand dune (as in the case of Gdansk port in Poland) or an island (as in the case of Cochin port in India and Dakar port in West Africa).

Layout of Cochin port is given below to enable you get an idea of the approach channel, turning circle, alongside berths and jetties. The draughts (in meters) available for ship movements at various positions is also given. (Source: Cochin port website – Link in www.ipa.nic.in)

Cochin Port

Coastal Breakwater Port

This type of port is also known as “Artificial port” if there is no natural shelter available in the location. An artificial breakwater will be constructed to provide the shelter (as in the case of Chennai port in India). Breakwaters can also be built to an existing natural shelter if the location is exposed to dominant winds, waves or the sea currents.

According to the World Port Index, 17.6 % of the world ports are in this category. In some locations, there can be more than 1 breakwaters (as in the case of Chennai port and Tuticorin port in India)

Layout of Chennai port and Tuticorin port is given below (Source: Links in www.ipa.nic.in) to enable you get an idea of the outer and inner breakwaters, 3 enclosed docks with cargo specific handling infrastructure (more of it explained in later sections), approach channel, turning circle, alongside berths and quays (pronounced as “keys”).

Layout of Tuticorin port (a natural harbour) is given below which has breakwaters on 3 sides.

It may be noted that construction of breakwater and dredging the channel (to increase the draught available for navigation) are methods to improve the “maritime access”.


Open Roadstead Port

In a location (off the coastline) where sufficient depth of water is available with limited tides, the need for sheltering infrastructure viz. breakwater is very less. The harbours with no natural or artificial protection are known as open roadstead. Presence of a shallow sand bank known as shoal off the coast reduces the tide formation and results in tranquil water.

According to the World Port Index, 12.5 % of the world ports are in this category. Mangalore, Kozhikode, Thallasery and Pondicherry are open roadstead anchorage ports. New Mangalore port has been developed into good enclosed port by providing appropriate protection. Port Elizabeth (South Africa), Callao (Peru) and Valparaiso (Chile) are also open roadsteads developed into good enclosed ports.

Pondicherry port is presently being used for lighterage operations (transferring cargo from the carrying ship to smaller boats at roadstead anchorage (place where the ship will drop its anchors to remain stable) and bringing the boats to the wharf with shallow draught for discharge) during fair weather months (February to September). Pondicherry Port Limited has been established by Government of Pondicherry to develop the port into a good enclosed port for round the year operations.

Open roadstead ports are suitable for handling very large ships (such as oil tankers) and structures viz. Single Buoy Moorings (SBMs) or Jetties (concrete standalone structures) will be used to tie the ship to increase its stability. Network of pipelines for carrying oil from the oil tanker ship to shore based storage tanks will also be connected SBMs / Oil Jetties. This type of infrastructure can be seen in major oil ports in the Middle east Gulf region viz. Ras Tanurah in Saudi Arabia and also in Vadinar port in India.


Coastal Tide Gate Port

Some locations (off the coastline) will have tidal variations making changes to the harbour draught at various times of the day. In such locations (mostly major cities), where having a port is a necessity, mechanical devices (known as “locks”) will be built to let the water in and maintain sufficient draft in the inner harbour. Mumbai port shown below (Source: – Link in www.ipa.nic.in ) is a good example for a coastal tide gate port.

In Mumbai port, there are three enclosed wet docks namely Indira, Princess and Victoria dock having total water area of 46.30 hectares. The Indira Dock has an Entrance Lock 228.6 metres long and 30.5 metres wide through which vessels can enter or leave at any state of tide. There are 21 berths inside the basin in Indira Dock and 5 berths along the harbour wall, with a designed draught of 9.14 metres and 7.5 metres respectively.

The depth of berths inside the basin can be increased by 1.20 metres by impounding water by electric pumps. There are 14 berths with a designed draught of 6.4 metres at Princess Dock and 15 berths at Victoria Dock with a designed draught of 6.7 metres. According to the World Port Index, only 0.80 % of the world ports are in this category, indicating that only if it is absolutely essential (due to commercial reasons), this type of locations will be selected as ports.


Natural Riverine Port

According to the World Port Index, 18.5 % of ports in the world are along the banks of navigable rivers. In these locations (as in Jacksonville port in Florida, USA, Montreal port, Canada, Antwerp port, Belgium), water is not retained in any artificial means. The harbour often consists of quays or wharves parallel to the riverbanks. Piers (concrete structures to tie the ship) may also extend into the river.


Port on River Estuaries

River Estuary refers to the mouth of a large river. These locations are natural harbours, provided the approach from the sea has enough draught. An estuary enables a port being established well inland, away from the vagaries of the sea. (Examples: London (United Kingdom) port, Hamburg and Bremen (Germany) ports). In these locations, basins have been excavated to accommodate ships, often parallel to the flow of the river. This also gives the advantage of additional berth space without impeding fluvial navigation. According to the World Port Index, only 1.6 % of ports in the world are in this category.


Port on River Estuaries With Tide Gates

The tidal action in river estuaries closer to the ocean will affect the loading / unloading operations. To overcome this problem, a set of locks or other mechanical devices have been built to insure sufficient water levels in the harbour for all tide levels. (Examples: Bremenhaven port, Germany, Calcutta port, Rotterdam port, Holland). According to the World Port Index, only 1.0 % of ports in the world are in this category.


Canal or Lake Port

A location along an artificial canal or by a river accessible through a navigable waterway. (Examples: Zeebrugge port, Belgium). According to the World Port Index, 1.4 % of ports in the world are in this category.

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