The Journal of Maritime Business, No.81, pp.

89-114 Dec 2006

Comparative Analysis on Worlds Major Maritime Clusters

Chul-Hwan Han*
* Professor, Department of International Logistics, Division of International Relations,
Dongseo University, Busan, Korea

Contents
I. Introduction
II. Literature Review
III. Review of World Maritime Cluster
IV. Discussions and Conclusion

I.

Introduction

Recently, the concept of cluster is a buzzword. This is not only domestic respect but
also in global one. The trends of industrial location on global scale cause are increasing
industrial clustering. These trends can be characterized by: move manufacturing to low
cost/huge market locations, R&D center to high knowledge locations, and transnational
corporate headquarters to business or financial centers of the world. In domestic
perspective, most of countries are introducing cluster approach to strengthen their
industries competitiveness and regional development. Thus cluster concept has become
the focal point of many new industrial and regional development policy initiatives
around the globe.
This phenomenon is not exception in world maritime industry. Several developed
maritime countries, especially in European region, have already introduced the cluster
concept in their maritime industry to overcome high cost environment as well as
competitive pressure from overseas. In Norway, Holland and the UK within the past 10
years, the governments have realized and responded to the need for major initiatives
resulting in specific, clearly articulated policies to support their national, maritime
aspirations and assist the promotion of their maritime centers. Without these policies,
the decline of their countries as maritime nations would have continued, adversely
affecting the international appeal and quality of their maritime centers.
The main purpose of this paper is to examine the world major maritime clusters to

The Journal of Maritime Business, No.81, pp. 89-114 Dec 2006

understand their purpose, economic significance in national economy and characteristics

by focusing on Dutch Maritime Network, Norwegian Maritime Cluster, London
Maritime Service Cluster, and Hong Kong Maritime Cluster and suggest some
implication for Port of Gwangyang to establish Maritime Cluster.
The article is organized as follow: the next section as a literature review gives a basic
concept of cluster and the emergence backgrounds of maritime cluster approach. After
that the previous studies on maritime cluster are also surveyed. Review of world major
maritime clusters is conducted in section 3. In section 4, conclusions and some
discussion issues are mentioned.

II.

Literature Review

1.
Concept of Cluster
Clusters can be characterized as networks of strongly interdependent firms (including
specialized suppliers), knowledge-producing agents (universities, research institutes,
engineering companies), bridging institutions (brokers, consultants) and customers,
linked to each other in a value-adding production chain. There is no definitive
description of what constitutes a cluster. However, one of the leading academic
authorities in this area, Michael Porter (1990), describes the concept as representing a
new way of thinking about national, state, and city economies with the cluster as a
framework for thinking about how places acquire and maintain advantages or assets that
affect the competitive performance of the firms located there.
Porter (1990) also describes a cluster as a geographically proximate group of
interconnected companies and associated institutions in a particular field, linked by
commonalities and complementarities. Porter states that the geographic scale can range
from the urban scale to even a group of countries, and can take varying forms dependent
on depth and sophistication. Whilst Porter does not fix the boundaries of clusters, he
does argue that their fulcrum is geographical proximity. It is clear that clusters are
dependent upon informal contacts which are based upon trust and reciprocity. Equally
the transfer of ideas and a common labor pool enhances competition and reinforces the
competitive advantage of the cluster as a whole.
The presence of industrial clusters is increasingly seen as a key attribute of a region or
countrys competitive position. Where businesses cluster together, a critical mass can be
created, stimulating growth, collaboration, competition and opportunities for investment.
The idea that cluster-based policies can be beneficial to economic development has
arisen from practical observation of inter-firm networking and institutional support in

The Journal of Maritime Business, No.81, pp. 89-114 Dec 2006

regions such as Silicon Valley and Hollywood (USA), and the industrial districts of
Central and North Italy. A large body of international literature (see for example Porter,
1999 and Rosenfeld, 1997) now highlights the importance of clusters as an engine for
economic value, added over and above simple collections of firms.
The benefits of cluster development arise from the positive externalities which
companies gain from the presence and operations of a cluster. These externalities
include, for example, access to specialized human resources and suppliers, knowledge
spillover, pressure for higher performance in head-to-head competition, and learning
from the close interaction with specialized customers and suppliers(Ketels, 2003). The
discussion on cluster effect and relationships is summarized in the following model
(Figure 1).
Figure 1 Cluster and its Effect

Proximity to

-Reduced transaction

Innovation and

Business

-suppliers

costs and specialization

international

-profitability

-customers

-Utilization of

competitiveness

-Growth in size

-competitors

complementarities

-internationali

relationships

-Utilization of local rivalry

-zation

-Learning
-Skilled labor
-Leader firm
Public policy
-Coordinating institutions

Source: Wijnolst, Jenssen, and Sodal(2003)

Originally Porter (1984) focused on national industrial cluster, i.e. firms and industries
linked through vertical(buyer/supplier) or horizontal(customers, technology, etc)
relationships, and with the main players located on a single nation or state. In 1990,
however, Porter emphasized that geographic concentration of rivals, customers and
suppliers in a region will promote innovation and competitiveness in a cluster even
more. On the other hand, Porter (1998) employ a wider meaning in that he also includes
institutions as part of regional clusters. Thus the term regional cluster has emerged and
most of developed countries use regional clusters as the best environment for
stimulating innovation and competitiveness of firms in knowledge-based economy.

The Journal of Maritime Business, No.81, pp. 89-114 Dec 2006

2. Emergence of Maritime Cluster Approach

The main reasons of emergence of maritime cluster are as follows; First, in industrial
perspective, today European maritime industry seems to face the challenge from new
maritime powers, namely Asian countries. The prominence of European maritime
industry has been hurt especially in shipbuilding, shipping and port sectors.
Shipbuilding output has decreased and very survival of European shipbuilding industry
today is at stake. As shown in Figure 2, the market share of European shipbuilding
industrys orderbook has dwindled from 24% in 1980 to 10% in 2004 during the past 25
years.
Figure 2

World Shipbuilding Orderbook1 (GT)

1980

Other
15%

2004

CESA
10%

Korea
9%

Other
5%

China
14%
CESA
24%

Japan
52%

Korea
32%

Japan
39%

Source: Lloyds World Shipbuilding Statistics.

This is the same situation in shipbuilding completion. The share of European

shipbuilding completion in world shipbuilding industry has decreased from 23% in
1980 to 11% in 2004. The fall of European shipbuilding industry may bring down the
foundation of European maritime industry including marine equipment supply sector.

AWES, Association of European Shipbuliders and Shiprepairers, and CESA(Committee of EU Shipbuilders

Associations) decided on May 2004 to operate as one joint organization under the name of Community of European
Shipyards Association-CESA.

The Journal of Maritime Business, No.81, pp. 89-114 Dec 2006

Figure 3

World Shipbuilding Completions (GT)

1980

Other
27%

2004

Korea
4%
China
12%

CESA
11%

Other
3%

Korea
37%

Japan
46%
CESA
23%

Japan
37%

Source: Lloyds World Shipbuilding Statistics.

In shipping sector, when we see the distribution of world tonnage by group of countries
of registration, the share of developed market economy countries, consists of EU, Japan,
USA, Canada and Australia, New Zealand, has decreased steadily during the past 25
years due to the flagging out of ship in open registry countries which offered low cost
and flexibility. However, the tonnage of developed market economy countries grew
slightly in recent years. This could reflect the steps taken in some EU countries to apply
tonnage taxes instead of standard tax rules to vessels registered in the country, as well as
the guidelines for state aid approved by the European Union in October 2003.
Table 1

Distribution of world tonnage by group of countries of registration

Tonnage and Percentage shares in million of dwt

Flag of registration
1980

1990

2003

2004

2005

World total

682.8(100.0)

658.4(100.0)

844.2(100.0)

857.0(100.0)

895.8(100.0)

DMEC

350.1(51.3)

219.0(33.3)

217.1(25.7)

230.4(26.9)

241.7(27.0)

Open Registry

212.6(31.3)

224.6(34.1)

398.5(47.2)

399.5(46.6)

404.0(45.1)

CEE(incl. FSU)

37.8(5.5)

44.3(6.7)

15.9(1.9)

15.7(1.8)

14.5(1.6)

Socialist countries in Asia

10.9(1.6)

22.1(3.4)

28.3(3.4)

29.9(3.5)

33.4(3.7)

Developing Countries

68.4(10.0)

139.7(21.2)

171.3(20.3)

181.4(21.2)

202.3(22.6)

3.0(0.4)

8.7(1.3)

13.1(1.6)

0.0(0.0)

0.0(0.0)

Other

Source: UNCTAD, Review of Maritime Transport, 2005.

Although European port industry is a solid performer than other maritime sectors, the

The Journal of Maritime Business, No.81, pp. 89-114 Dec 2006

central axis of global port industry has already shifted to Asian region. For example,
world top 5 ports (Singapore, Hong Kong, Shanghai, Busan, Kaoshiung) are all located
in Asian region and their market share in global port industry is growing constantly.

Figure 4 World Container Port Throughput by Region

1990

Others
10%

2004

Eas t
As ia
38%

Europe/
Med
27%
America
s
25%

Others
11%
Europe/M
ed
23%

Eas t
As ia
47%

Americas
19%

Source: OSC, World Containerport Outlook to 2015, 2003.

The knock-on effect of a decline in one sector onto other sectors, and consequent loss of
value creation, is the main reasons for the introduction of European maritime cluster
policy. This has implications for business strategy and public policy. For the business
strategy, competition based on cost-leadership will be more and more difficult and the
necessity of an innovative differentiation strategy is growing. On the public policy level,
considering the importance of maritime industry in each country, a number of European
countries have adopted a cluster approach to organize parts of their maritime policy.
Second, in policy perspective, European policy makers in particular have turned to
cluster policy because of a shift in priorities from macro to microeconomic issues.
Monetary and fiscal policies are increasingly well understood, and many European
countries have made impressive progress in these areas. But their macroeconomic
progress turned out to be only necessary, not sufficient to higher prosperity. Very
targeted microeconomic efforts-often in a new partnership with the private sector,
universities, and other institutions-are required to translate into the macroeconomic
achievements into real productive improvements in companies. Cluster turned out to be
a very useful way to organize these efforts and launch effective action initiatives (Ketels,
2004).

The Journal of Maritime Business, No.81, pp. 89-114 Dec 2006

3. Previous Literatures on Maritime Clusters

With regard to the literature specifically dealing with maritime clusters there are three of
particular significance. First, Jakobsen et al (2002) examine the relative competitiveness
of five European maritime nations - Germany, The Netherlands, the UK, Denmark and
Norway whose 103 maritime industries between them account for annual value creation
of around $30bn. They examine relative national strengths in terms of country
attractiveness (price and quality of resources, satisfaction with domestic location, and
foreign attractiveness) and company competitiveness (internalization, R&D and
innovation, and competence and human resource strategy) using the parameters of
cluster dynamics (innovation pressure, knowledge diffusion, and complementarity), and
public policy. They consider each national cluster as a whole, even though each has
significant differences in the weights of the constituent sectors of each cluster. However,
while identifying some of the linkages between these, they frame their conclusions in
national terms rather than, say, sector terms and so cloud the larger picture of the
interrelatedness of the activities of these clusters. This analysis on the basis of regions
follows the initial Norwegian cluster analysis that focused on geographical rather than
functional clusters as the prime means of differentiation of activities. It is nonetheless an
important contribution to the analysis of the European maritime industries.
Second, Wijnolst et al (2003) develop a theoretical framework for maritime clusters
based on previous research for the Norwegian and Dutch clusters and an assessment of
their performance under cluster lead organizations. They provide a description of the
European Cluster Study (ECS) undertaken for the European Commission (2001)2, in
particular comparing its theoretical framework to that of the original Dutch study, which
divided the cluster into eleven functional sectors whereas the ECS used sixteen sectors.3
They evaluated that the ECS is a useful in using the most established clusters as
examples, as they were based on different approaches, the Dutch cluster using industry
sectors, the Norwegian cluster using regional centers. Wijnolst et al (2003) provide
useful research on maritime cluster indicators, identifying the relationship between
cluster strength and the type and number of constituent sectors, ranking the important
2

The purpose of European Cluster Study was to present basic economic data for a wide range of maritime industries
in all 15 countries of European Union and Norway. The data presented in the report were primarily based on existing
aggregated sources. Thus no data were available for a number of sectors in member countries.
3
EC distinguished between 16 sectors for maritime cluster; shipping, shipbuilding, repair & conversion, naval
shipbuilding, scrapping, offshore supply, inland shipping, dredging & maritime works, cable & submarine telecom,
ports & related services, fishing & aquaculture, recreational vessel, classification societies, R&D and education,
support services and equipment manufacturing. Dutch cluster study (1999) distinguished maritime cluster 11 sectors;
shipping, shipbuilding, marine equipment, offshore, inland shipping, dredging & marine works, ports & related
services, navy, maritime service, yachting, and fishing.

The Journal of Maritime Business, No.81, pp. 89-114 Dec 2006

economic indicators for cluster performance, and assessing critical mass and the role of
public policy to prevent distortions in competition. They also define seven enablers for
the development of an effective maritime cluster strategy and the action and support
required to maintain and develop the cluster.4 This study thus provides both an analysis
framework and concrete recommendations for a maritime cluster-based policy.
Third, De Langen (2003) analyses three seaport clusters. While his study has a narrower
field of study, it does have the advantage of going into greater depth in its analysis of
maritime cluster dynamics and their drivers. In addition to identifying further factors
which support the effective working of the clusters studied, it also quantifies them to
give relative weighs to their importance. It is considered that this work can be equally
applied to broader maritime clusters.
These three studies address maritime industries at country, cluster and sector levels
respectively, and each provides a more detailed analysis as their subject matter narrows.
Taken together they provide a comprehensive analysis of the current knowledge of
maritime clusters.
Individual maritime cluster studies have been conducted for the Dutch, Norwegian,
Swedish, German and Italian maritime industries. The latest country study is The
Finnish Maritime Cluster (Viitanen et al, 2003) which in addition to analyzing the
Finnish cluster also reviews all other European studies to date, paying particular
attention to the shortcomings of the Swedish studies. While it provides a comprehensive
description and quantification of the Finnish maritime industry and its financial and
employment contribution to that country, it falls short in making any recommendations
as to how cluster dynamics can be enhanced. Its major contribution is, therefore, as a
critique of other work done on national clusters.

III.

Review of World Maritime Cluster

1. The Dutch Maritime Cluster

In the middle of 1990s, Dutch maritime industry, like other European countries, suffered
from flagging out of national vessel to open registry countries, reduction of Dutch crews.
And this led to a steep reduction in newbuilding orders for Dutch shipyards. Under the
4

Seven maritime cluster enablers are as follows; i) define cluster, establish its significance and promote visibility, ii)
define an industrial policy, iii) strengthen demand pull sectors, iv) monitor and maintain a level playing field, v)
promote exports and internationalization, vi) strengthen innovation, R&D and leader firms, vii) strengthen education
and labor market.

The Journal of Maritime Business, No.81, pp. 89-114 Dec 2006

crisis of entire Dutch maritime industry, Dutch shipowners association convinced the
government to look into the fundamental problems of the industry and to device a
daring new shipping policy. For this purpose, several studies was conducted and led to a
change in policy focus from supporting the flag to creating a level playing field for
Dutch shipowners. The latter objective was realized through a number of policy
measures, such as the introduction of tonnage tax, the cancellation of detailed manning
regulations and a financial contribution to the shipowner as a compensation for a part of
the social charges. According to the success of policy introduction more than expected,
the government to initiate a second recommendation of the shipping study to reinforce
the network around shipping and to create more value added from the entire maritime
cluster. The private sector took initiative to found the Dutch Maritime Network in June
1997 with an independent board of maritime industry leaders and financial support from
the trade organizations and Dutch government. The objective of Dutch Maritime
Network is to promote and strengthen the Dutch Maritime Cluster. It is a generally
privately funded body that provides research information and a forum for discussion to
the Dutch maritime industry. Its activities focus on for themes: communication and
promotion, manpower and education, export, and innovation. The Dutch Maritime
Network also represents the industry to the Dutch Government on matters such as
competition policy in order to ensure that the Dutch maritime industries are not at a
competitive disadvantage either domestically or internationally. The Dutch Maritime
Network is considered to be the most successful of the initiatives supporting maritime
clusters, and its methodology and industry basis have been extensively used in other
maritime cluster analyses. The Dutch maritime cluster included 11 sectors and 11,850
companies (see Figure 5). It is probably one of the most complete maritime clusters in
the world.
Figure 5

Dutch Maritime Cluster

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The total value added in 2002 of the Dutch maritime cluster was EUR 12.6 billion and
its share of Dutch GNP amounted 2.9 %. And its turnover amounted to EUR 21.4 billion,
among them export reached to EUR 12.6 billion, The export of Dutch maritime cluster
accounted for 5.4% of total export in Netherlands. And the number of employment in
the Dutch maritime cluster reached about 190,000 persons.
Table 2 Economic Indicators of Dutch Maritime Cluster (EUR billion, current price)
1997

2002

17.8

21.4

9.9

12.6

Production Value

15.3

18.5

Total Added Value

10.9

12.6

Direct

8.0

9.5

Indirect

2.9

3.1

Turnover
Of which Export

Total Employment
Direct

190,000
-

Indirect

135,000
55,000

Source: Wijnolst. N, Jenssen. J, and Sodal. S., (2003)

The largest maritime sectors in terms of production are the port sector (20%), the
shipping sector (15%) and the offshore sector (14%). Together they account for about
half of the total output of the maritime cluster. Judging by the value added, the port
sector overtakes all other sectors with a result that is 30% of the value added generated
by all the sectors included in the maritime cluster. Part of the total value added flows
back to the government as taxes and social security payments. The backflow is worth
about EUR 3.9 billion. The largest employers are the port sector (19%), the shipping
sector (14%), the offshore sector (13%) and the inland navigation sector (10%).
However, the impact of the maritime sector extends further than the production, value
added and employment within the cluster itself. Complex relationships of the maritime
cluster with other clusters make it very important for the Dutch economy. The indirect
impacts of the cluster extend to other areas of society as well.
In addition to important economic relationships, other relationships also exist between
maritime cluster sectors. These are an object of political interest. Examples of such
relationships are strong technological interdependencies, the movement of labor from
one cluster sector to another and the physical flow of traffic between inland water routes

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and ports. Information collected from companies concerning cost structure, estimates on
the value of production, value added, and employment together with the results of the
cost analysis make it possible to predict the impact of different policy choices on the
maritime cluster. One of the main suggestions of the Dutch maritime cluster study is
that the cluster policy is more effective and productive than the current general policy of
the government. In policy perspective, Dutch Maritime Network suggested some policy
recommendations which would lead to a lasting and dynamic growth of the maritime
cluster. Not through direct interference with the market forces, but by creating the
conditions with which the private sector could function best. Also it reinforces its
innovative capacities and its capacity to create sustainable value added and employment
for the Dutch economy. The policy framework for the future of Dutch maritime cluster
was based on a paradigm in which entrepreneurial spirit and responsibility were the
central pillars. This spirit can be reinforced by having highly qualified human capital,
and innovation driven R&D and innovation diffusion network and sufficient capital.
The recommendations were focused on 10 topics; innovation, export, home market,
infrastructure and spatial planning, modal shift, level playing field, capital market,
network and image building, labor market and education, partnership between
government and private sector. Based on various literatures, SWOT analysis on Dutch
maritime cluster is shown in Table 3.
Table 3

SWOT Analysis on Dutch Maritime Cluster

Strengths

Weaknesses

Favorable location in Europe

Lack of large maritime service sectors

Most complete maritime cluster structure

Lack of large financial sector

Various education and training system

Relatively small tonnage controlled within the

Advanced shipping policy scheme

cluster

Opportunities

Threats

Growing world shipping market

Competition from oversea cluster

Increase in short sea shipping

Shift of maritime gravity to North

2. The Norwegian Maritime Cluster

During the years after the 1973 oil crisis the Norwegian shipping industry has gone
through a period of major transition. Like other European maritime countries,
aggressive competition from low-cost countries has put a lot of pressure on the
Norwegian fleet. Norwegian ships flagged out and crews were replaced by cheaper
foreign seamen. Under these circumstances, Norwegian government introduced two

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distinguished maritime policy; Norwegian International Ship Register (1987) and

tonnage tax reform (1996). However, increasing competition in global shipping industry
has forced advanced maritime countries to emphasize innovation even more.
Benito et al (2003) classified Norwegian maritime cluster into seven main categories;
shipping, ship brokers, ship consultants, ship building and repairs, ship equipment, other
shipping services, and others in ship industry.5 Almost 4,053 companies are included in
Norwegian maritime cluster and shipping companies formed 62% of the total number of
companies. And about 80,000 persons are employed in the maritime cluster.
Furthermore, Norwegian maritime cluster has several world class actors: (1) shipping
company like Oslo-based Bergesen d.y. ASA and Leif Hegh & Co ASA, (2)
classification society like Det Norske Veritas (DNV), with more than 5500 employees in
100 countries, classifying 15% of world fleet (and 80% of the Norwegian fleet), (3) ship
finance institutions such as Det Norske Bank and Nordea, (4) marine insurance
companies such as Gard and Skuld (P&I Club), Vesta and Storebrand (hull insurance).
Figure 6

Norwegian Maritime Cluster

Source: The Norwegian maritime cluster-synergy breeds excellence (www.nortrade.com)

The Maritime Forum of Norway, founded in 1990 is the only network organization and
its three main tasks are as follows; to positively influence the conditions of Norways
industrial policies, to strengthen cooperation between the different sectors within the
maritime industry, to forward, the best interests of Norways maritime industry on an
international basis. The Maritime Forum has several hundred members, comprising both
5

Benito et al (2003) divided the Norwegian maritime industry into two main parts. On the one hand, shipping which
basically consists of service suppliers, and on the other hand, the ship industry that includes the suppliers of goods.

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The Journal of Maritime Business, No.81, pp. 89-114 Dec 2006

employers and employees of maritime organizations. While Dutch Maritime Network

has divided the network based on sectors of industry, the Maritime Forum has
established relatively independent departments within the most important regional
maritime clusters in Norway. Although Norwegian researchers often states that
Norwegian maritime cluster is complete (Reve & Jakobsen, 2001, Benito et al, 2003),
several maritime sectors are small. Compared to the Netherlands, sectors such as
dredging and inland shipping are minor sectors. And yachting, ports and navy are not
included in most analyses of the maritime sector in Norway.
Norwegian maritime industry is dominated by shipping sector. Around 50 percent of
value creation in maritime industry is within shipping companies. The rest of the cluster
is almost equally split between services, equipment and ship building (Jakobsen et al
2003). Another important characteristic of Norwegian maritime cluster is that it is not
based on one region of the country. It consists of seven regional clusters along the whole
coastline, but the largest actors are all located on the West Coast and along the South
Coast up to the capital city Oslo. The three main geographic locations are: (1) the
county of M re and Romsdal in the north-west part of the country, where shipyards and
equipment dominate, (2) the western city of Bergen, which is important for both
shipping and ship industry, and (3) the city of Oslo, which is mainly shipping oriented.
This implies that Norwegian maritime cluster has regional specialization.
Reve et al (2001) have shown that the Norwegian maritime industries have a high status
in international competition that is based on solid know-how in the domestic market and
on the strength of the companies that actively seek profit. Technical know-how gives the
Norwegian shipping companies the advantage of being able to use and develop the
Norwegian vessel classification system. However, one of the most important success
factors is the cooperation and synergy that Norwegian shipping companies have with
one another across the cluster. This efficient co-operation between Norwegian shipping
companies and the rest of the maritime sector helps to create innovations and
commercial competitiveness. As the Norwegian shipping companies mostly compete on
the international market, it is important for them to be able to offer services to the
shipping companies at a competitive price. This would not be possible without
cooperation between shipyards and research institutes that have in turn developed and
offered new solutions for the market. And cooperation helps in developing high level
technical know-how, which benefits all the parties involved. Furthermore cooperation
between shipping companies and experts of marketing, finance, insurance and law is
another prerequisite to success. This is the basis for the Norwegian maritime cluster.
Concerning the economic performance of Norwegian maritime cluster, the total value

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creation of Norwegian maritime cluster is estimated at EUR 4 billion in 2001 and its
share of the GDP is estimated at almost 3% (Jakobsen et al, 2003). In policy perspective,
the Norwegian government has not intervened heavily in the development of the
maritime cluster. The overall policy seems to be that the governmental policies should
be sector neutral. Norwegian maritime clusters strengths, weaknesses, opportunities
and threats are shown in Table 4.
Table 4

SWOT Analysis on Norwegian Maritime Cluster

Strengths

Weaknesses

High cooperation and synergy within the cluster

Relatively small cluster size against competitors

Solid know-how in maritime industry

Divergence on clusters in 7 region

World class maritime services(shipping finance,

Remoteness from main European market

insurance, and stock exchange)

Less investment in education compared to other

Specialization in oil transportation

European maritime nations

Opportunities

Threats

Development of Information and communication

Competition from European maritime cluster

technology

Challenge form low cost countries

Development of multimodal transport

3. London Maritime Service Cluster

Like other European developed maritime countries, UK confronted with same situation
during the 1980-1990s. In an increasingly competitive environment, Maritime London
was set up in 2000 to address this very problem as an industry led initiative. Maritime
Londons key objectives are: (1) to maintain and enhance Londons position as the
worlds premier maritime center, (2) to promote the maritime service sector, and (3) to
attract new maritime related business to London and the UK. These include shipbrokers,
shipowners, lawyers, insurers, bankers and class societies (IFSL, 2003).
Recently, Corporation of London, the body which provides local government service for
the City of London, published a new report, The Future of Londons Maritime Service
Cluster: A Call for Action (2004), to maintain the competitiveness of the London
maritime service industry. According to the report, maritime service cluster consists of
five sectors: shipping, intermediate services, maritime governance and regulation,
support services, and industry associations (see Figure 7).

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Figure 7

Londons Maritime Service Cluster

Source: Corporation of London, The Future of Londons Maritime Service Cluster, Aug 2004.

The importance of maritime service cluster in London and the UK can be explained by
the IFSL report Maritime Services (2003). According to the report, net overseas
earnings of maritime services in London and the UK rose by 16% to 1,092m between
1999 and 2002, and maritime services form a key segment within Londons status as an
international financial centre. The major contributors in 2002 were the Baltic Exchange
(322m), legal services (190m), insurance brokers (170m), banks (150m), and
Lloyds Register of Shipping (100m), with P & I Clubs and publishing also making an
important contribution. Adding 1.1bn overseas earnings from UK shipping, the
combined net overseas earnings of maritime services and UK shipping totalled 2.2bn
in 2002. IFSL estimates that 14,200 people are employed in maritime services. Of this
total, 4,200 work in ship-broking; 3,150 in insurance-related business; 2,500 in legal
services; 1,850 in ship classification; and around 500 each in banking, accounting,
publishing and international organizations.
Corporation of London (2004) undertook a cluster mapping exercise to identify the size
of the maritime service cluster in London by bottom up approach. It identified some
1,382 companies have a registered office in London, and another 375 have a trading
office in London, thus over 1,750 companies or organizations is located in London.
Corporation of London (2004) also conducted interviews to find out the main
advantages and disadvantages of London maritime service cluster. The main advantages
are close to market leading customers, availability of market information, strong skilled

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labor supply, close to firms supplying specialist services, near to professional bodies (eg
International Maritime Organization), knowledge transfer in the wider cluster mix, and
proximity to an exchange or market place. On the other side, the disadvantages of
London are cost pressure (high wage and housing cost), poor transport infrastructure,
unfavorable UK tax system, and insufficiency of government support. Based on various
literatures, SWOT analysis on Dutch maritime cluster is shown in Table 5.
Table 5

SWOT Analysis on London Maritime Service Cluster

Strengths

Weaknesses

Brand power

Lack of collective work among cluster members

World-class maritime-related service

Lack of public and private relationship

Highly skills and expertise

Insufficiency of government support

Presence of International Institutions

Limited tonnage controlled within the cluster

English law, Courts and Admiralty Solicitor

High labor and housing cost

Opportunities

Threats

Synergy with London financial service cluster

Competition from oversea cluster

Development of e-commerce

Inferior transport infrastructure

Engagement with maritime cities in UK

Shift of global maritime balance to Asia

Difficulty in recruitment for young people

4. Hong Kongs Maritime Cluster

Hong Kong is regarded by many in the maritime industries both in and, more so, outside
Hong Kong as the premier maritime centre in the Asia-Pacific area. Yet, oversea
competitors such as Singapore and Shanghai are trying to catch up Hong Kongs
position aggressively. Thus there is much to be done both to preserve Hong Kongs
present status and to develop it further. And Hong Kong government is regarded by
members of the cluster as having limited awareness of either its international status as a
maritime centre or of the significant benefit Hong Kong derives from this situation. This
view is based for the most part on the perception that the government lacks awareness
of the importance of the cluster to Hong Kong economy. Consequently, the government
does not see the need to accord high profile policy status to the cluster leading to and
caused by the lack of a comprehensive set of consistently applied policy initiatives. The
situation is compounded both by the significant attention given variously to the port and
logistics and by the extensive, varied nature of the industries comprising the cluster.
Members of the cluster feel that their industries are viewed by the Government as a poor

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relation of less importance than the port, evidenced by there being only a Shipping
Committee of the Hong Kong Port and Maritime Board and that not formed until 1998.
Although the port plays an important but single role in the logistics chain while the
maritime industries, as a cluster, form one of the main bridges between the port and the
logistics chain. Yet Hong Kongs reputation as an international maritime centre has
developed principally from the activities of the cluster rather than the port. The port is
significantly dependent on activities within the cluster for its success yet much of the
cluster could continue to function effectively if there were no port. Thus Hong Kong
maritime industries feel it is time for the Government to give their activities recognition
and attention at least equal to that enjoyed by the port and the logistics industries. In
2003 the Government established the Hong Kong Maritime Industry Council (MIC) to
develop the maritime industry and conducted maritime cluster study to take appropriate
measures to ensure Hong Kong continues to develop as the preeminent International
Maritime Center in Asia. According to the study (2003), Hong Kong Maritime Cluster
covering both as traditional and intellectual maritime activities and all supporting
services including, but not limited to, services such as communications, supply of
professional manpower, maritime training facilities, the taxation and legal framework
(see Figure 8).
Figure 8

Hong Kong Maritime Cluster

Source: Hong Kong Port and Maritime Board, Study to Strengthen Hong Kong Role as an International
Maritime Center, 2003.

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The cluster comprises the following 11 sectors: Ship ownership, operation and
management, ship agents, classification societies and surveyors, marine equipment and
supplies including shipyards and ship repairs, marine insurance, ship finance, ship
brokers, maritime law and arbitration, technical and miscellaneous services (including
R&D), and ship register. Among them, the most important sector in terms of revenue
generation and economic value in Hong Kong are ship ownership and ship management.
They are the core which sustain and develop the other industries in the cluster. But
Hong Kong maritime cluster does not include dredging equipment, yachts and fishing
unlike Dutch maritime network.
As an economic benefit of the international maritime centre of Hong Kong, business
receipts and other income of maritime cluster total HK$ 103 billion in 2000. The value
added was estimated HK$ 31 billion and its share in Hong Kongs GDP was 2.44%. The
contribution to export of service in Balance of Payment (BOP) account reached HK$ 70
billion, and 21.8% share in Hong Kongs export of service in BOP in 2000. The number
of employee engaged in maritime cluster reached 54,928 persons, 1.7% share in total
employment.
Unlike European maritime cluster, Hong Kong maritime cluster has no one overall body
representing all members. Instead, each element of the cluster has its own body and
organizational arrangements. One body in the private sector, the Hong Kong Ship
Owners Association (HKSOA), is the largest and perhaps the most influential of the
industry representative bodies in Hong Kong. It would be relatively straightforward for
the HKSOA to become the overall private sector representative body but its members do
not wish to take on this role as they fear that in doing so they would lose their original
purpose. The absence of this overall body makes it more difficult for the private sector
to: develop and articulate a comprehensive strategy for the cluster to preserve and
develop Hong Kongs standing; make the Government aware of the support the
industries need it to provide for them; raise public awareness of both Hong Kongs
reputation and the contribution to GDP made by the cluster; attract the appropriate
ability of people into the industries to ensure their further development; ensure its
members adopt and contribute to the development of international best practice in their
structures, management and operations. Thus Hong Kong maritime community ask to
create a compact, high level body (the Maritime Industries Board) dedicated solely to
the maritime industries and composed of private sector and government representatives.
Because existing Hong Kong Port and Maritime Board has principally focus on the port
and logistics. Hong Kong maritime clusters strengths, weaknesses, opportunities and
threats are shown in Table 6.

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Table 6

SWOT Analysis on Hong Kong Maritime Cluster

Strengths

Weaknesses

Premier shipping industry

Lack of clear strategy for maritime cluster

World-class transportation and communication

Absence of effective institutional structure to lead

infrastructure

and safeguard the cluster

Excellent business environment

Growing shortage of competent manpower

Strategic location in Southern China

Diminishing cost competitiveness

Opportunities

Threats

Positive outlook for the maritime cluster

Competition from oversea Singapore, especially

worldwide

in arbitration center

Focus of international shipping shift to Asia

Competition from Mainland China (Shanghai and

Rapid growth of China economy

Shenzhen)

IV.

Conclusion

Industrial competitiveness is more and more a function of attractive industrial locations.

Nation and regions compete aggressively to attract international companies and
industries. Firms benefit from being located in cluster where competition is keen and
opportunity of innovation are plentiful.
The industrial clustering is particularly pronounced in the maritime industry where
markets are global and resources are mobile. The common characteristics of European
maritime cluster approach are as follows: private sector takes initiative to develop the
maritime cluster, macro approach for the prosperity of whole sectors in maritime cluster,
and cluster mapping by various quantitative studies such as input-out analysis and
survey method.
Table 7

Summary of World Major Maritime Clusters

Data
Maritime operating revenue

Netherlands

Norway

UK

Hong Kong

15.4

38

4.8

10.3

4.04

2.9

0.7

2.44

66,000

70,000

18,6000

54,928

(year 2000, US$ bn)

Value of Maritime Value Added
(year 2001, US$ bn)
Maritime Value Added as % of GDP
Total employment
% of total value creation in maritime industry

The findings of this study suggest that the success of maritime cluster depends on

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The Journal of Maritime Business, No.81, pp. 89-114 Dec 2006

following aspects: first of all, as a prerequisite, study for getting basic statistics of
maritime cluster in each country should be conducted. Policies can best be developed
when the cluster and the Government know the size, nature and contribution of the
cluster to the country. The lack of availability of discrete and comprehensive statistics
for the maritime cluster hinders the development of reliable profiles of each industry
comprising the cluster and their individual as well as collective needs. Second, strong
and developed maritime ancillary services sectors strengthen the maritime value chain
and potential to service the maritime community in more cost efficient manner. For this
aim, it is important to build up local expertise and knowledge base by strengthening
education and R&D capacity. Identification the area of specialization for global and
regional leadership is also important task. Because each maritime cluster has its unique
characteristics, based on its own set of strengths, which is difficult to replicate by
overseas competitors. Third, enhancement of operating environment to attract foreign
advanced maritime companies is needed. To reduce business cost and enhancing
efficiency coordination between diverse government agencies, streamlining bureaucracy
and regulatory requirement, and more flexible regulations including tax schemes are
required. Fourth, strengthening intra-cluster linkages is essential for successful cluster.
Because strengthening ties between various private associations can be helpful for the
network and partnership between cluster numbers and this enhance the knowledge
spillover within the cluster. Fifth, international competition and cooperation is another
critical factor for successful cluster. It is important to monitor competitors and identify
potential partners for collaboration internationally in order to focus management
attention on achieving global competitive benchmark, sharpen alertness to actions of
competitors, and prioritize strategic partnership with selected target partners to
maximize synergies based on factor such as historical ties, strategic complementarities.
Last but not least, especially in developing countries, the role of public sector as a
cluster facilitator and regulator is indispensable to start-up the cluster and ensure fair
level playing field within the cluster. Thus, following policy initiatives are
recommended: proactive public sector involvement, close collaboration between the
public and the private sectors, and recognition of the importance of involving the entire
maritime community, rather than compartmentalization along traditional individual
industry lines.

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