Splash247: World Bank: The underinvestment risk

Published by Splash247

Jan Hoffmann on how uncertainty, congestion and concentrated liner networks are reshaping global trade.

Ports face a growing danger that investment will fail to keep pace with demand as geopolitical and trade uncertainty pushes up the returns investors require before committing capital, warns Jan Hoffmann, global lead for maritime transport and ports at the World Bank.

Hoffmann, one of the best-known figures in port economics after a long career at UNCTAD, argues in an exclusive interview with Splash Ports today that current congestion levels underline the need for additional capacity.

“Given the long time it takes to plan and build new port capacity, I actually see a bigger danger that port investments will lag behind,” he tells Splash Ports.

The problem is uncertainty. Investors trying to forecast where future cargo growth will emerge are being asked to commit billions to assets that may take years to deliver.

“Given growing uncertainty about where trade demand will be generated, investors will require a higher rate of return before investing compared to a linear straightforward projection of continued growth,” Hoffmann says.

That, all else being equal, means less investment. He acknowledges that some port projects remain driven more by ambition than realistic demand forecasts. For that reason, the World Bank often recommends public-private partnerships.

“The private sector tends to be more hard-nosed and less influenced by political motivations,” he explains.

The investment challenge comes as liner networks themselves become more concentrated.

Comparing 2006 with 2026, Hoffmann notes the number of direct bilateral liner shipping connections globally has fallen from 2,444 to 2,243, while the median country’s number of direct partners has dropped from 22 to 17.

Carrier consolidation and the growing disparity in vessel sizes are major drivers, encouraging lines and alliances to concentrate cargo through preferred hubs.

The Red Sea crisis temporarily interrupted that trend as carriers introduced shorter rotations and additional direct calls to protect schedule reliability.

“But the very latest evidence seems to suggest that this was a short-term correction rather than a long-term reversal,” Hoffmann points out.

Hub-and-spoke networks deliver economies of scale and make otherwise uneconomic country pairings possible, but there is a cost.

“Dependence on a few hubs and chokepoints does increase exposure to congestion, missed connections and disruptions, Hoffmann observes.

Measuring that performance has become one of Hoffmann’s central responsibilities at the World Bank.

He stresses that the Container Port Performance Index, which the bank oversees in association with S&P Global, should not simply be treated as a league table. Ports should instead compare their own performance over time.

“The CPPI really only measures one dimension of port performance, which is the time ships spend in port,” he says.

External events also matter. Disruption at Suez, Hormuz and Panama can make ship arrivals less predictable, generating burst congestion and worsening a port’s score regardless of what its management has done.

Improving performance requires a combination of infrastructure, management, regulation, digitalisation and labour flexibility.

“Different labour regimes and flexible starting times for shifts can help reduce the time ships spend waiting at berth,” Hoffmann notes.

The gap between the world’s richest and poorer ports will nevertheless remain difficult to eliminate.

Public-private partnerships can theoretically bring investment to any market, but capital costs rise sharply where political and market risks are higher.

Hoffmann is also wary of governments restricting competition as ports become more strategically important. He points to UN research indicating that greater inter-port competition is associated with maritime transport costs that are 24% lower.

“I would recommend that shippers and carriers as ports’ clients should be given as much choice as possible,” he advises.

The bigger principle, he suggests, is cooperation.

“Trade is not a zero-sum game,” he says. “Each trade transaction needs at least two ports.” That makes strong international institutions and common rules essential.

“IMO, WTO, ILO et al remain, in my view, important cornerstones of global trade,” the supply chain veteran concludes.