Special Interest Group on Maritime Transport and Ports
a member of the WCTR Society
INTERNATIONAL WORKSHOP
Genoa - June 8-10, 2000
The Economic Value of the Port of Cork to Ireland in
1999:
An Input-Output Study*
Richard Moloney
Department of Economics
National University of Ireland, Cork
Cork, Ireland
+353-21-902659
+353-21-4273920 (fax)
rjpmoloney@eircom.net
William Sjostrom
Department of Economics
National University of Ireland, Cork
Cork, Ireland
+353-21-902091
+353-21-4273920 (fax)
w.sjostrom@ucc.ie
Version: June 2000
*
This study is based on a report carried out by the authors for the Port of Cork Company (Moloney and Sjostrom 2000). The views expressed in this paper do not necessarily represent the views of the Port of Cork Company, its directors, or its staff. We would like to thank Raymond Burke, KPMG, and Sean Geary, Pat Keenan, and Tony O'Leary of the Port of Cork Company.
All tons are metric tons.
The calculation of all impacts was done using the software package GRIMP (West, 1993)
All values were re-priced to 1993 values in order to use the input-output tables to calculate the required multipliers.
Crew on ferries are not included due to lack of data.
Abstract
This paper is developed from a report commissioned by the Port
of Cork Company (Moloney and Sjostrom, 2000). The paper provides
an assessment of the contributions made by the Port of Cork to
the Irish economy in 1999. The study provides an estimate of
the total contribution to Ireland of the Port of Cork,
both in expenditure and employment, and the directcontribution
of the various activities at the Port of Cork.
After giving a background to the Port of Cork's business, we describe
the methods used in the study. In particular, we explain the
direct contribution, the indirect contribution and the overall
contribution of cruise liner traffic. We then give a detailed
breakdown of the estimated amount of expenditure generated by
various activities at the Port of Cork.
Nearly 100% of Irish trade by volume and 90% by value is transported
through the country's ports. Because Ireland has no direct land
links, these figures are significantly higher than other European
Union countries. The study quantifies the direct as well as indirect
and induced economic contributions of this traffic.
The findings are based on the input-output Table of Ireland, as
well as interviews and data supplied by the Port of Cork Company
and other companies using the port.
We show that the total contributions of all activities
at the Port of Cork for 1999 are expenditures of €334.61
million and 4225 full-time equivalent jobs. This is broken down
as €24.61 million in current expenditure by the Port of Cork
and 330 full-time equivalent jobs, €21.98 million in capital
expenditure and 293 full-time equivalent jobs, €117.77 million
by other companies operating through the Port of Cork and 1436
full-time equivalent jobs, and €170.22 million in expenditure
by tourists arriving on ferries and cruise liners and crew of
the ships visiting Cork and 2166 full-time equivalent jobs.
The direct contributions of all activities at the Port
of Cork for 1999 are expenditure on locally produced goods and
services totaled €176.01 million and 886 full-time equivalent
jobs. This is broken down as €13.28 million in current expenditure
and 124 full-time equivalent jobs, €13.46 million in capital
expenditure, €56.96 million by other companies operating
through the Port of Cork and 762 full-time equivalent jobs, and
€92.31 million by tourists arriving on ferries and cruise
liners and crew of the ships visiting Cork.
1. INTRODUCTION
This paper examines the contribution of activities at the Port
of Cork to Ireland. It is based on a survey of expenditure and
employment by the various providers of services in the Port of
Cork area during the year 1999. This spending is analyzed in
an input-output framework, using the input-output tables for Ireland
in 1993 (CSO, 1999a). The input-output model enabled the authors
to measure the direct, indirect and induced effects of this spending
on the Irish economy.
This paper is related to Donnellan and Moloney (2000), which established
the economic value of the Port of Cork's cruise liner traffic.
More generally, Garhart and Moloney (1994) survey the use of
input-output techniques in Ireland, and Miller and Blair (1985)
review the use of input-output techniques more generally.
Because Ireland is an island, ports play an important role in
its economy. Nearly 100% of trade by volume and 90% by value
is transported through Irish ports. Because Ireland has no direct
land links, these figures are significantly higher than other
European Union countries. Ports provide the interface between
two modes of transport - waterborne and land-carried freight and
passengers.
The Port of Cork is Ireland's second largest port. Its trade
comes from a wide area of the country, as far north as County
Mayo, from the East Coast and from Northern Ireland. Internal
Port estimates indicate that port traffic grew by 8.9% in 1998
and decreased by 3.8% in 1999. In 1998 the Port handled 8,895,000
tons of cargo, consisting of 5,431,000 tons of imports, 2,611,000
tons of exports, and 853,000 tons of coastal trade (CSO, 1999b).
In 1999, the port handled 5,496,000 tons of imports, 2,313, tons
of exports and 781,000 tons of coastal trade.
Other than Dublin, Cork is the only Irish port with the capability
to handle all five shipping modes: lift-on lift-off, roll-on roll-off,
dry bulk, liquid bulk and break bulk. Services are available
throughout the harbor area with public docking facilities provided
at the City Quays, Ringaskiddy, Tivoli, and Cobh.
In recent times, subventions from the European Union Structural
and Cohesion Funds, as well as substantial private investment,
have contributed to a wide range of upgrades and extensions to
the facilities offered by the Port of Cork. In 1999 the Port
of Cork spent €13.46 million on capital investment. Of this
expenditure €3.0 million (22.6%) was contributed in the form
of European support.
The remainder of the report is divided into 6 sections. Section
2 gives a background to the Port of Cork's business. The major
areas in which the Port of Cork has impacts are highlighted.
Section 3provides a description of the techniques used
in this study. Section 4details the breakdown of the
estimated amount of expenditure generated by various activities
at the Port of Cork. The various estimates of the contributions
of the Port of Cork are provided. Type I and Type II multipliers
are also reported. Section 5presents the conclusion to
the report.
2. BACKGROUND TO THE PORT OF CORK
This section provides a brief description of the Port of Cork's
activities and influences on the Irish economy. The Port of Cork
itself employs more than 124 workers directly. As well as these
employees, many other companies are involved in operating ships
and handling cargoes. These companies include truck drivers,
crane drivers, railroad employees, dock and warehouse workers,
and tugboat crews. For example, the Port of Cork Yearbook 1998/99
lists 47 companies acting as shipping agents, forwarding agents
and stevedores.
There are four main facilities operated by the Port of Cork.
- City Quays, which for centuries handled the bulk of the Port's
traffic. In recent years, large volumes of this work have been
transferred to other port facilities but these quays still continue
to handle 780,000 tons per year.
- Tivoli Industrial and Dock Estate, which handles the Port's
container traffic, as well as shortsea car carriers, bulk liquids,
livestock and ore concentrates.
- Ringaskiddy offers a range of deepwater and specialist port
facilities, including roll-on roll-off, dry bulk and bulk liquid
facilities. This area offers an infrastructure base to attract
foreign direct investment into the area.
- Lower Harbor Quays contain many privately owned quays, including
the Whitegate oil refinery. In addition to the private facilities,
Cobh Deepwater Quay is also situated in the lower harbor.
Other operators at the Port include ship owners, companies and
their agents that use the Port of Cork to export their products
and import raw materials. Among the more prominent within the
Port's immediate region are:
- Scheduled Lift-on lift-off Services including HKCIL, EUCON,
BG Freightline and Rheintainer Linie/Seawheel Ireland. These
companies generate business not only for the Port but also in
the road and rail transport areas.
- Scheduled Roll-on Roll-off and Car Ferry Services include
Swansea Cork Ferries, Brittany Ferries and Grimaldi Euro-Med.
These generate indirect impacts through use of transport facilities
and the spending of tourists arriving by ferry.
- Cruise Liner Traffic: In recent years there has been increasing
cruise liner traffic to the Port of Cork, arriving mainly at the
dedicated facilities in Cobh. These operations generate impacts
through passenger and tourist spending.
- Stevedoring Companies.
Other port users include those businesses that make significant
use of the waterborne commerce for shipping or receiving goods.
The Port of Cork is now Ireland's premier deepwater port. The
availability of this resource has attracted a wide range of industry
to the greater Cork region. These include power generation, fertilizer
manufacture, chemical plants, oil refining, offshore gas and oil
servicing, and steel manufacturing. Many of these users of port
facilities are based in the port area.
3. TECHNIQUES
This section provides a brief description of the
input-output modelling techniques used in this study. Miller
and Blair (1985) offer a more thorough treatment. The conventional
interpretation of input-output is of models characterised by unemployment
and excess capacity, that is a passive supply framework, imperfect
competition and a short-run focus. Input-output assumes fixed
relative prices, or zero response to changes in relative prices.
There is no simultaneous calculation of prices and quantities.
An input-output model is one in which inter-industry linkages
are explicitly specified, described by the United Nations Statistical
Office (1968: 7) as:
|
a theoretical scheme, a set of simultaneous linear equations in
which the unknowns are the levels of output of various branches,
and in which the parameters are empirically estimated from the
information contained in the input-output table.
|
Central to the use of input-output models is the assumption that
input demand is a fixed proportion of total output. Any increase
in total output will lead to a specific increase in each input
category used in the production of that output. The technical
coefficient for any sector (aij) gives the input required
from sector i to produce a unit increase of sector j's output.
(1) aij = zij/Xj
where
zij = total output from sector i used as an input
in sector j
Xj = total output of sector j.
An input-output model is based on the use of data organised in
the form of an input-output table. This table provides a picture
of the structure of an economy at a given time. The table itself
is useful as a data source, independent of the technological assumptions
used to motivate a Leontief model.
An input-output table describes the various flows of inputs into
the productive process and matches these with outputs which are
consumed in final demand. It represents the productive structure
of an economy at a given point in time. The table shows the inter-industry
transactions, the final demand, and the primary input sections.
Taking a flow of intermediate goods from sector i to sector j
as zij, production in sector i as Xi, the
price of output in sector i as Pi and final demand
for output from sector i as Fi, then the value of output
produced by sector i is
(2) PiXi = SjPizij
+ PiFi
Substituting equation 1 into equation 2 gives
(3) Xi = SjaijXi
+ Fi
Equation 3 indicates that total output is the sum of products
for intermediate use and output which is consumed in final demand.
It is the ith row of the matrix equation
(4) X = AX + F
A represents the matrix of technical coefficients aij,
X represents the matrix of gross output and F represents
the matrix of final demands from domestic and foreign institutions.
Equation 4 can be solved for X giving
(5)X = (I - A)-1F
The input-output model and solution shown above assume
that the final demand sector is exogenous to the system and there
is no feedback into final demand after the initial stimulus.
This type of structure, which we use, is called an open input-output
model.
Expenditures at the Port of Cork are treated as augmenting the
final demand matrix. The X matrix is a 39x1 matrix, with each
row representing an industry in the NACE classification. Expenditures
at the port were assigned to an industry on the basis of confidential
interviews with Port officials and firms at the port.
Three impacts were calculated.
(i) The Direct Contribution
The direct contribution to a region or country represents the
impact of the spending by the operators at the Port of Cork on
goods and services produced in the Ireland.
(ii) The Indirect Contribution
Indirect Contributions are those which occur when local suppliers
to businesses in receipt of expenditure in turn purchase goods
and services to meet demand.
(iii) The Induced Contribution
Induced Contributions refer to the additional consumer expenditure
that takes place when the income generated from the direct and
indirect contributions is in turn spent.
For both indirect and induced contributions, these effects will
be higher when leakages from the economy are lower - in other
words, when the expenditure on imports from outside the country
or region under analysis are lower.
The sum of the direct, indirect and induced contributions,
described above, represents the overall contribution of cruise
liner traffic. These contributions may be expressed both in absolute
terms and in terms of multipliers for output (i.e. purchases
of inputs), income and employment. The total contribution of
cruise liner passengers can thus be expressed in terms of money
and jobs.
Once the absolute contributions are estimated the direct, indirect
and induced multipliers are obtained. From these multipliers
two other multipliers are calculated Type 1 multipliers reflecting
the direct and indirect impact and Type 2 multipliers which represent
the induced impact in addition to the direct and indirect impacts.
The type 2 multiplier indicates that the overall impact expenditure
on the region or country.
4. ECONOMIC CONTRIBUTIONS OF THE PORT
OF CORK
This section details the contributions of the Port of Cork in
1999. The contributions are given under various headings:
- Port of Cork Company operations;
- Industries operating at the Port;
- Shipping companies using the port; and
- The shipping agents.
- Tourist and related spending
4.1 Contribution of Port
of Cork Company Operations
In order to assess the direct impact of the Port of Cork operations
the authors obtained from the Port of Cork a detailed break down
of its expenditure for 1999. These expenditures were applied
to the input-output Model. The data requested included total
expenditure on goods and services, employment, wages and salaries
and expenditure on capital.
Table 1 presents the direct expenditure by Port of Cork on Irish
goods and services and on wages and salaries in 1999. Total expenditure
was €26.74 million, of which €13.28 million (49.7%)
was spent on current expenditure and €13.46 million (50.3%)
was spent on capital investment. Of the current expenditure,
€5.47 million (41.2% of total current expenditure) was spent
on goods and services, and the remaining €7.81 million (58.8%)
was spent on wages and salaries.
Table 1: Summary of Port of Cork Direct Expenditures and
Employment -1999
| Expenditure (€ millions)
|
| Current Expenditure | 13.28
|
| Capital Expenditure | 13.46
|
| Total Expenditure | 26.74
|
| Employment
|
| Total | 124
|
The overall contribution is reported in Table 2. Using details
of the magnitude of the initial injection in conjunction with
the input-output model, it is possible to estimate the magnitude
of the direct, indirect and induced contributions.
Table
2: Economic Impacts of Port of Cork Company Current Expenditure
| Type of Contribution
| Expenditure in Ireland
(€ millions)
| Multipliers
| Employment (FTEs)
|
|
Direct
| 13.28 | 1.00
| 124 |
| Indirect | 7.57
| 0.57 | 133
|
| Induced | 3.76
| 0.28 | 73
|
| Overall Contribution | 24.61
| ---- | 330
|
| Type I | ----
| 1.57 | ----
|
| Type II | -----
| 1.85 | ----
|
Collectively the direct, indirect and induced contributions represent
the overall contribution to Ireland. The overall contribution
is in terms of money and jobs.
The total current expenditure of €13.28 results in an injection
of €9.36 million into the country when account is taken of
leakages to the rest of the world. When the multiplier effects
are traced through the model, the overall contribution is €20.68
million. In terms of employment, the direct effect of the Port
of Company expenditure supports 124 jobs with the overall contribution
representing 330 jobs.
Based on the absolute values shown in Tables 1 and 2, the corresponding
multipliers are calculated and reported in Table 2. As well as
the indirect and induced multipliers, Type 1 multipliers reflecting
the direct and the indirect impact are shown along with Type 2
multipliers which represent the induced impact in addition to
the direct and indirect impacts. The Type 2 multiplier indicates
that the overall impact of the expenditure on the country is 1.85
times the initial injection.
Table 2 reports the GNP multipliers for the direct current expenditure in Ireland.
The type I multiplier which includes the direct and the indirect impact is 1.57 and
the Type II multiplier which includes the direct, indirect and induced impacts is 1.85.
Over the years the Port of Cork Company has consistently invested
in the updating its facilities. Table 3 gives the total value
of this spending for Ireland.
Table 3: Economic Contribution of the Port
of Cork Company's Capital Expenditure (1999)
| Type of Contribution | Expenditure (£m)
| Multiplier | Employment
|
| Direct | 13.46
| 1.00 | ------.
|
|
Indirect
|
6.13 | 0.46
| 201 |
| Induced | 2.39
| 0.18 | 82
|
| Overall Contribution | 21.98
| ---- | 293
|
| Type I | ----
| 1.46 | -----
|
| Type II | -----
| 1.64 | -----
|
In 1999 the Port of Cork Company spent €13.46 million on
capital expenditures. Of this total 54% (€7.26 million)
was spent in Ireland. The total impact of this expenditure was
€15.78 million and 293 full time equivalent jobs. As these
expenditures are once of impacts their overall contribution are
less long lasting in terms of measurements in this study. Also
capital expenditure tends to vary greatly from year to year.
For example in 1998, the Port of Cork Company spent €3.53
million. This expenditure was only 26% of the 1999 level.
As with current expenditure, the GNP multipliers for the direct spend in the country are also provided in Table 3. The type I multiplier is 1.84 and the Type II multiplier is 2.16.
The overall impact of the Port of Cork company on the Irish Economy
is €46.59 million and 629 FTE jobs. The aggregate Type I
multiplier is 1.51 and the Type II multiplier is 1.74.
4.2 Contribution of Industrial
Users of the Port of Cork
The overall contribution of the Port of Cork Company to the Irish
economy is only one of the contributions related to port activities.
As discussed earlier, a large number of related companies operate
at the port and incur expenditures independently of the Port of
Cork Company.
The various port users who have direct expenditures operating
at the port were surveyed. Only that portion of a company's expenditure
and employment used in their operations at the Port is included.
These estimates were obtained by interviewing various companies
operating at the Port. The types of users reported in this section
are the industries operating at and through the Port and private
piers in the harbor region, and the shipping agents. These estimates
include stevedoring and dock workers.
The Port users employ 762 full-time equivalent employees, and
spend €56.96 million on their Port operations on Irish goods
services and wages and salaries. Of this €18.98 (33.3%)
is spent on wages and salaries. We estimate from our surveys
that 65% of this expenditure is on Irish goods and services.
These direct expenditures are used to calculate total impacts.
Using these estimates of expenditure, the total contribution of
these companies to the Irish economy was calculated. These contributions
are provided in Table 4. The total impact of these operations
is €117.77 million. Of this total contribution €56.96
million is directly related to the various companies' operations.
The balance of €60.81 million is the total of the indirect
and induced activities. Overall employment related to the activities
of port users is 1436 full time equivalent jobs, 762 directly
and the balance due to indirect and induced activity. The indirect,
induced, Type II and Type II multipliers are also reported.
Table 4: Summary of Total Contribution Port
Users' Expenditures and Employment - 1999
| Type of Contribution | Expenditure (€m)
| Multipliers | Employment
|
| Direct | 56.96
| 1.00 | 762
|
| Indirect | 40.44
| 0.71 | 435
|
| Induced | 20.37
| 0.36 | 227
|
| Overall Contribution | 117.77
| ---- | 1436
|
| Type I | ----
| 1.71 | ----
|
| Type II | ----
| 2.07 | ----
|
4.3 Contribution of Tourist
Expenditures - 1999
An estimated 226,000 foreign tourists used the Port of Cork as
an entry or exit point in 1999. Of this total 16,000 (7.1% of
the total) arrived on cruise liners. Of the remainder 140,000
(61.9%) were foreign tourists arriving on the various ferries
operating out of the Port of Cork. In 1997 the Port of Cork company
published a report by Donnellan and Moloney (1997) estimating
the value of cruise liner business. This study, updated with
the 1993 input-output Tables (CSO, 1999a), is used to estimate
the value of this type of tourist expenditure in 1999. Figures
supplied by Bórd Fáilte are used to estimate the
direct spending of the remainder of the tourist traffic.
Table 5: Aggregate Expenditure by Cruise
Passenger, Ferry Passenger and Crew - 1999
| Passengers | € Million
|
|
Cruise
| 4.53 |
| Ferry | 59.55
|
| Crew | 1.10
|
| Total | 65.19
|
Table 5 provides estimates of direct value of expenditure in 1999.
The total expenditure by each category of tourist is provided.
Donnellan and Moloney (1997, 2000) showed that cruise liner tourists
had higher and distinct spending patterns compared to the spending
patterns of other tourists. This is illustrated by the fact that
although tourists from cruise liners only spent on average 1 day
in Cork, their per capita spending was approximately €283.
Other tourists arriving by ferry transport are estimated to spent
€425 per capita on their holidays. Spending by crew members
from cruise liners is estimated as €47 per capita. Total
spending by tourists on goods and services was €65.19 million.
Tourists arriving on the various ferries using the Port of Cork
accounted for approximately 91.4% of this spending. This illustrates
the importance of maintaining these services to the region and
country.
Table 6 provides estimates of the total contribution made to the
country through expenditures incurred by ferry and cruise liner
visitors and by crew members using the Port of Cork as their access
point in 1999.
The overall contribution is €120.13 million and 1521 full-time
equivalent jobs. This level of contribution to the tourist industry
indicates the importance of maintaining and maximizing this type
of traffic for the port region. The Type I multiplier is 1.58
and the Type II multiplier is 1.84.
Table 6: Economic Contribution Ferry and Cruise Liner
Tourist Expenditure - 1999
| Type of Contribution | Purchases (€ millions)
| Multipliers | Employment
|
| Direct | 65.19
| 1.00 | -----
|
| Indirect | 37.81
| 0.58 | 1065
|
| Induced | 17.13
| 0.26 | 456
|
| Overall Contribution | 120.13
| ---- | 1521
|
| Type I | ----
| 1.58 | ----
|
| Type II | ----
| 1.84 | ----
|
5. CONCLUSION
Although the various categories are not strictly aggregatable
they are approximately so. The results indicate the actual and
potential substantial benefits both financial and in employment
to the Irish economy. The total contribution of the Port of Cork
is approximately €284.48 million in 1999 and the total employment
linked to these operations is 3580 full time equivalent jobs.
Quite apart from the importance of the Port of Cork to the economy
as outlined above, the Port can act as a catalyst for development.
The port of Cork should be seen as a generator of economic activity
in its own right. The Port can be used to maximise the exploitation
of infrastructure investment, reduce transportation costs between
linked industrial processes, develop and make economical use of
a pool of skilled workers, and provide marketing concentration.
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