In modern times, first the British Empire and later the United States dominated world trade. By the start of the 21st century, however, influence over trade had shifted from West to East. Today, the center of consumer and electronics manufacturing—critical to the North American and European economies—is in Asia. Intra-Asia shipping volumes, too, are soaring; in fact, in terms of volume, intra-Asia shipping represents both the largest and the fastest-growing ocean trade lane in the world.

The availability of relatively cheap ocean transportation and labor means that Asia is likely to dominate manufacturing, and therefore global trade, for many decades to come. But manufacturing growth is outstripping the region's transportation capacity. That is becoming particularly troublesome for Asia's ports, where congestion threatens to create dangerous bottlenecks. According to a report by London-based Ocean Shipping Consultants, annual container handling volumes at Asian ports will increase from approximately 107 million TEUs (twenty-foot equivalent units) to somewhere between 254 million and 306 million TEUs by 2015. Despite the global economic slowdown that is expected to reduce demand for Asian products, the report says, Asian ports could see an average 50-percent jump in container volumes in the next five years alone.

Asian businesses and governments are taking that threat very seriously. As a result, most have made port development and modernization a top priority as they seek to keep ahead of rising trade volumes now and in the future.

As export and intra-Asia cargo volumes have continued to climb, building new container terminals has become a priority throughout the region. Many have been constructed over the last decade, and more are under way or are on the drawing board.

Asian nations can quickly respond to rising demand because port construction there faces few of the restrictions that hamper development in the United States. For one thing, there is a greater recognition of the critical role international trade plays in local and regional economies not only among Asian governments but also by the average citizen. Thus, there is wide support for port expansion as a necessary step in promoting economic growth. There also are fewer environmental restrictions on development, so the process of planning and building port facilities is less cumbersome than it is here. Finally, forecasts like the Ocean Shipping Consultants report cited earlier make it clear that building new ports and container terminals is not a luxury in this part of the world, but rather a matter of survival.

New ports have sprung up across the continent. Ten years ago, bustling container ports like Laem Chabang in Thailand, Tanjung Pelepas in Malaysia, Tanjung Priok in Indonesia, and Yantian, Chiwan, and Shekou in China didn't exist. Today, these and other new ports have plenty to keep them busy. The Shekou container terminal, for example, recently reported a 31-percent increase in containers, to nearly 250,000 TEUs, for the first four months of this year compared with the same period last year. Tanjung Priok handled nearly 3.3 million TEUs in 2000, up from 2.1 million TEUs the previous year. And Tanjung Pelepas moved more than 734,000 containers in the first five months of this year.

Even the newest ports are quickly adding capacity. Tanjung Pelepas—less than two years old—will add eight container cranes by the end of this year, bringing its total to 24. Port management plans to build 50 berths eventually, and by the end of 2002, Tanjung Pelepas will have the physical capability to handle nearly five million TEUs. At Laem Chabang in neighboring Thailand, construction continues on five new terminals, scheduled to open in stages between 2002 and 2008. And at least two ports in southern China, Yantian and Shekou, expect to boost container handling capability from about four million TEUs today to 10 million by 2010.

Older ports, too, are adding terminals and berths as quickly as they can. In fact, there's hardly a container port in Asia that isn't under construction right now. Significant additions, for example, are currently under way in Busan, Korea; Subic Bay, Philippines; Kaohsiung, Taiwan; Hong Kong; Singapore; and Shanghai. And China's Ministry of Communications has announced that it will spend enormous sums on port development and upgrades over the next five years.

Port management expert James Brennan, principal with transportation consultants Norbridge Inc. in Reston, Va., predicts that the focus of port investment will now shift to smaller but still significant projects. "I don't think we'll see a lot of new ports on the scale of a Shanghai, Kaohsiung, or Busan, with possible exceptions in India or China," he says. Instead, much of the development will be focused on regional ports that will serve intra-Asia trade, he believes. With its smaller vessels and more frequent service, he says, it would be more economical and logistically efficient for the intra-Asia trade to focus on developing regional ports rather than concentrating on building more huge East-West hub ports.

Asian governments also have come to recognize that purely government-managed port development would be too slow and inefficient to keep up with cargo growth. Private investment, therefore, has become the norm in almost every new port development there today. Often, that takes the form of a partnership or joint venture between private developers or terminal operators and local governments. In Asia as in any other region, Brennan says, the degree of privatization depends on politics, whether the national government is centralized or decentralized, and to what extent the economy is capitalistic and free-market oriented as opposed to structured and regulated.

At one end of the spectrum is Hong Kong, which handled 18.1 million TEUs in 2000, making it the largest container port in the world in terms of container throughput. Alex Fong, secretary of the Hong Kong Port and Maritime Board, believes privatization is a big reason for the port's success. "The container terminal of Hong Kong is unique in the world in that it is fully funded ..., owned, and managed by the private sector with no direct or indirect government involvement in investment and management," he says. "So far, this arrangement is working well for Hong Kong as the private sector is more flexible and can respond to changes and competition speedily."

Most other countries rely on a public-private approach that retains some ownership by local governments. More and more of these construction contracts and operating concessions are being awarded to a handful of experienced, efficient international container terminal operators. These four operators, Hong Kong-based Hutchison Port Holdings, Singapore's PSA Corp., CSX World Terminals of Jacksonville, Fla., and Australia-based P&O Ports Ltd., have had a hand in most of the major port developments in Asia over the last decade.

Bringing in foreign port-management expertise has facilitated China's growth as a manufacturing center. Early on, Brennan reports, port development was controlled by the national government, and investments were predominantly by "homegrown" developers. "But growth in the marketplace was outstripping their capacity, not just in terms of space but also in terms of expertise, dollars, and their ability to work within the limited time frame when capacity needed to be brought online," he says. Today, the "Big Four" of port operators hold significant stakes in container terminals at Tianjin, Xiamen, Shanghai, Yantian, Shekou, Guangzhou, Dalian, Fuzhou, and Qingdao.

There's more to managing container volumes than simply building more and bigger terminals. Asian ports boast legendary productivity and asset utilization rates. Hong Kong and Singapore both are top-ranked in the world when it comes to productivity as measured by TEUs handled per acre per year. There are some unique aspects of their operations that make clear comparisons with other ports difficult, Brennan says, but "even without the rail and transshipment [traffic], the numbers are still very compelling."

Other major Asian ports also can claim impressive container throughput rates per acre that are several times those of even the busiest North American ports. How do they do it? "Asian ports have always been land poor and labor rich," Brennan observes. "When you don't have land, you learn how to use what you do have very, very efficiently." Most employ high-density stacking, storing loaded containers five or six deep and four or five wide. To make that work, Brennan points out, efficient information systems are required. "You have to have absolute accuracy in the way you track the location of containers. You have to know exactly where each container is because you could end up having to pull out four or five containers to get at the one you want."

Automation helps Asia's busiest ports make very efficient use of labor. A report last month in the Wall Street Journal highlighted how automation and flexible work rules allow a small number of highly trained workers to control the movements of enormous numbers of containers. Automation is expensive—according to WSJ, Singapore's Pasir Panjang terminal cost about $1 billion to build. But there's no other option: Relying on manual systems would quickly lead to gridlock.

Ports are also looking to improve intermodal connections and customs operations to help speed throughput. According to Fong, the Hong Kong government is actively pursuing improvements in customs-clearance procedures for transshipment cargo and has expanded an important customs facility at the border with mainland China. The planned Shenzhen-Hong Kong Western Corridor project will double the handling capacity for vehicles moving between the two important regions, he reports. A current study is also looking at an expansion of intermodal rail service between Hong Kong and China.

One of the greatest challenges facing Asian ports is responding to changes that are driven by global economic conditions. When Asia experienced a deep economic crisis in the late 1990s, ports were victims of the downturn as much as shippers were. Now that the regional economy has revived, they are investing enormous sums in new construction and additional cranes and yard equipment.

Asian ports need to respond to shifting trade patterns. M.K. Wong, director of marketing for Hong Kong-based ocean carrier OOCL (USA), believes the most important business issue for those ports today is the change in where companies source commodities, which affects both exports of finished products and imports of raw materials. The migration of manufacturing to China and Southeast Asia is driving demand for transportation infrastructure now, and the tremendous growth in intra-Asia trade will keep ports in the region very busy. But trade flows can and do change quickly. The slowdown in the U.S. economy and the resulting reduction in orders for manufactured goods will certainly have some impact on Asian ports. Wong says the most recent trend he sees is an increase in exports from the United States to China and a simultaneous cutback in exports to Southeast Asia.

The development of China as a world power in manufacturing may well have an enormous impact on ports throughout the region. That country's expected entry into the World Trade Organization later this year will likely result in a rapid increase in trade. Already, Chinese ports are sucking business away from ports further north as shippers seek to move goods onto vessels as close to the manufacturing source as possible. Thus, container handling activity, once concentrated in Hong Kong, is spreading outward toward the mainland.

For shippers, having multiple options is beneficial, because it reduces congestion and delays as well as inland transportation costs. But the development of new container ports in China has left Hong Kong at a cost disadvantage, says Fong of the Port and Maritime Board. The port has fought hard to keep its pricing in line but must also depend on non-monetary advantages like its efficient customs service and international banking expertise to gain a competitive advantage against neighboring Chinese ports. With close to 70 percent of the cargo that passes through Hong Kong coming from the mainland's Pearl River Delta, Fong says, it's imperative that Hong Kong reposition itself as the most efficient, cost-effective gateway for cargo moving in and out of southern China.

In short, wherever manufacturing goes, ships will follow, and Asia's ports will be deeply affected in turn. The willingness of Asian governments and private operators to invest heavily in both port infrastructure and management expertise will pay off as China and other Asian nations come to play an even greater role in the world economy.