How a digital imbalance puts trade on a two-tier track
One of the key lessons learned early in the pandemic was the need to ensure business continuity of the critical supply lines, notably maritime gateways and their associated logistical chains.
The response of the maritime supply chain is one of the few success stories to come out of the experience, though it is not without human cost too. But the shipping, ports and logistics industries have lessons to learn from the experience and perhaps an opportunity too, according to the World Bank.
In a new report, it points out that while the initial challenge was met and overcome in some countries, the risk of subsequent infection waves underlines the urgent need to improve the resilience of the maritime sector through accelerating the digitalization of maritime trade and logistics.
Businesses currently experiencing problems associated with freshly minted ‘third country’ status may roll their eyes at the suggestion that trade can be facilitated by automating cross-border trading, reducing human interaction and use of paper, but this applies to both developed and developing world.
While the digital revolution has emerged in the past decade as one of the main drivers of change in the port and maritime sector, it requires a high level of integration between devices, agents and activities. This, together with the increased connectivity between ports, has created a new ecosystem in the industry – one where being on the outside is a significant disadvantage for ports and countries.
This makes it vital that ports improve their position in respect of innovation and integration, both to ensure or improve their competitiveness and also to reduce the cost of international trade for their respective hosts and hinterland.
As the UK is currently discovering, impediments will have tangible repercussions; in the short term, shortages of essential goods and higher prices; in the medium to longer term, slower economic growth, lower employment and higher trade costs.
A number of global organisations including UNCTAD and IMO have been advocating the accelerated digitalization of cross-border processes and documentation. The objectives have been to not only keep trade flowing in current and future events, but also protect frontline workers at sea and on land while enabling remote working, with contactless electronic solutions replacing paper documents.
The recommended first steps are outlined as mandatory requirements in the IMO’s Facilitation (FAL) Convention on the transmission, receipt and response of information required between ships and ports via electronic data exchange. This has been mandatory for all ports since April 2019, though implementation remains partial at best.
Secondly, to develop an efficient digital ecosystem for a port, a fully functioning Port Community System – a platform to optimise, manage, and automate port and logistics processes through a single submission of data in the transport and logistics chain – is required. Sadly, as of November 2020, only 49 of the 174 IMO member states possessed a functioning PCS.
This delay, the bank suggests, poses a risk to business continuity during subsequent waves of the pandemic, along with a further risk over a slightly longer period, which would result from the development of a two-tier system, with laggards facing increased costs for the import and export of merchandise trade.
Equally, those ports with a Port Management System – the next stage in the evolution of the digital ecosystem – is even smaller. A PMS enables the port authority to control all port traffic through a single digital interface, and manage port infrastructure such as port calls, dues, journal, incidents, waste, dangerous goods, planner, cargo, inspections, permits, services, security, and assets.
A PMS paves the way towards a truly automated ‘smart port.’ Namely, one that that uses emerging and disruptive technologies such as artificial intelligence, advanced analytics, internet of things, 5G communications, remote control and autonomous systems, digital twins, and distributed ledger solutions as well as other smart technology-based methods to improve performance, economic competitiveness, and environmental sustainability.
Fail to adopt this strategy, it warns, and countries could be left behind in terms of resilience and competitiveness and face greater inefficiencies, higher transaction costs, higher trade costs, lower competitiveness, lower economic growth and lower employment.
This would increase the economic distance between the developed and developing world and could also exacerbate the challenges that many low-income countries, or small island states already face.
It might also serve as a timely reminder to governments, bureaucracies, IGOs, NGOs et al, that while it might look robust and healthy from a distance, viewed close up, there are many moving parts to keeping trade moving. This will be even more true in the future than it was in the past.