Urgent investment needed in maritime transport to bolster resilience to future crises—UNCTAD

Countries need to increase their investment in maritime supply chains, including in ports, shipping fleets, and connections to remote areas, to be better prepared for future global crises, climate change, and the transition to low-carbon energy, according to a new United Nations report.

The UN Conference on Trade and Development (UNCTAD) in its flagship “Review of Maritime Transport 2022” stressed the urgent need to make bigger investments in maritime transport systems to strengthen supply chains and cut the carbon footprint of the sector.

It noted how the supply chain crisis of the last two years has shown that a mismatch between demand and supply of maritime logistics capacity leads to surges in freight rates, congestion, and critical interruptions to global value chains.

“We need to learn from the current supply chain crisis and prepare better for future challenges and transitions. This includes enhancing intermodal infrastructure, fleet renewal and improving port performance and trade facilitation,” UNCTAD Secretary-General Rebeca Grynspan said. “And we must not delay the decarbonization of shipping.”

UNCTAD called on countries to carefully assess potential changes in shipping demand and develop and upgrade port infrastructure and hinterland connections while involving the private sector. Nations should also bolster port connectivity, expand storage and warehousing space and capabilities, and minimize labor and equipment shortages.

Many supply chain disruptions can also be eased through trade facilitation, notably through digitalization, which cuts waiting and clearance times in ports and speeds up documentary processes through e-documents and electronic payments, said the report released late last month.

Additionally, UNCTAD called for more investment in technical and operational improvements to cut the carbon footprint of maritime transport. These include switching to alternative, low- or zero-carbon fuels, optimizing operations, using onshore electricity when in ports, and equipping vessels with energy-efficient technology.

Last month, the World Bank also urged the Philippines to intensify policy actions and increase investments supportive of climate change adaptation. The Philippines Country Climate and Development Report painted a chilling picture for the economic future of the country, the world’s most vulnerable to climate change risks, unless policy action is taken now to avert huge economic losses and human suffering due to severe environmental disruptions.

The UNCTAD report likewise pressed policymakers to keep in sight the longer-term goals of promoting maritime trade while enabling sustainable and resilient transport systems. Among its recommendations is for governments to control the COVID-19 pandemic by widening access to vaccines, testing, and therapies.

Countries must at the same time strengthen macroeconomic frameworks by promoting economic growth and accommodative fiscal stances. They must work to alleviate the impact of shocks on the most vulnerable segments of the population, tame inflation, reduce financial vulnerabilities, and help the most vulnerable by avoiding food insecurity and setbacks to poverty reduction.

The report also recommends keeping trade flowing by avoiding export and import restrictions. States should facilitate trade and streamline procedures and maintain access to finance and enforce contracts. They should also enable trade through the implementation of multilateral and regional frameworks such as the Regional Comprehensive Economic Partnership (RCEP).

Governments are encouraged as well to help the maritime industry’s green transition by helping companies embrace digitalization and by advancing the decarbonization and energy transition agendas, while ensuring preparedness and resilience.

Building resilience is a must and can be achieved by taking an integrated and proactive approach to “resilience by design,” which requires strategic thinking to find new opportunities and business models, the paper explained.

“Supply chains and their underlying transport and logistics networks should integrate long-term resilience criteria in their plans and structures. For ports, for example, resilience-building should be seen as a strategy and an ongoing process that can gradually be implemented and fine-tuned to each port’s governance, managerial, commercial, and infrastructural context,” it said.

Meanwhile, the report forecasts a slowdown in global maritime trade after bouncing back significantly in 2021. For 2022, UNCTAD projects global maritime trade growth to moderate to 1.4%. And for the period 2023-2027, it is expected to expand at an annual average of 2.1%, a slower rate than the previous three-decade average of 3.3%.

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