Capacity investment and efficiency cost estimations in major East Asian ports

Abstract

This study applies an integrated suite of Data Envelopment Analysis models to investigate the various sources of efficiency contributing to the overall efficiency of major ports in Asia and estimates the amount of savings a port can potentially achieve through intelligent capital investments that promote a lean and fully efficient operation. Empirical results reveal that the Asia port industry is generally characterized by non-decreasing returns to scale. Hong Kong, Shanghai, Ningbo, Shenzhen, Incheon and Singapore found to be operating at their most productive scales and are fully technical, scale and mix efficient. Competitiveness benchmarking analysis further shows that Japanese ports will benefit the most by reducing excess capacity and the associated financial commitments through economizing on the deployment of physical resources. Similarly, Busan port in Korea possesses significant potential to regain traffic from its Chinese competitors via cost reduction. However, the competitiveness of the Singapore and Hong Kong ports may be eroded as the Malaysian and Taiwanese ports remove their productivity slacks and improve cost efficiency.