EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf

Economies of Scale
Port operations such as cargo handling services have been shown to have increasing returns
to scale 80 . Figure A.34 which plots data for a selection of (anonymous) Latin American ports
demonstrates that economies of scale do exist.
The chart shows the number of TEUs processed per hour increases in direct proportion to the
total number of TEUs processed per year. More specifically: larger vessels have lower costs per
container than smaller vessels. Large vessels also require bigger ports and equipment. Larger
ports also employ bigger cranes and other equipment which have greater throughput. They are
able to make more intensive use of the port assets and can also achieve economies of scale in
the management of port operations.
The main commercial ports in the Pacific are significantly smaller than most of the
comparators and have had limited access to funding for upgrades equipment and
maintenance. Most port infrastructure in the region has been funded by donor grants 81 . The
low volume of traffic at some of the smaller Pacific ports means that any investment in port
infrastructure produces a relatively low rate of return. The low rate of return is a deterrent to
investment. Kiribati provides one example of this where economic analysis of a development
plan to construct a new wharf allowing alongside berthing of 90% of the ships calling, was
shown to provide a low rate of return because of the small cargo volumes compared with the
large capital investment required to bring the facilities up to an international standard 82 .
Figure A.34: Central American Ports, Throughput and Movements 1999
Source: Hoffman (2001) Grafico 4 in Caribbean Infrastructure Review, Castalia 2004
80 “Caribbean Infrastructure Review”, Ports and Maritime Services Section, Castalia, June 2004
81 Pacific Regional Transport Study, AusAid, 2004
82 “Review of Maritime Transport 2000”, Chapter V Port Development, United Nations, 2000
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