• Andrew Irvin is the University of the South Pacific (USP) Project Officer for the Cerulean Project at the Micronesian Center for Sustainable Transport.

Pacific shipping cost Paradox

Our shipping cost, per tonne/nautical mile, is the highest in the world and serves as a primary barrier to progress across the United Nations (UN) Sustainable Development Goals.

Pacific populations are in flux, with accelerating internal migration from outer islands to urban centres. Internationally, shipping is embarking on a decarbonisation agenda.

Shipping in the Pacific needs to understand these future changes when planning today. Our transport needs in 2050 will likely be quite different from what they are in 2020.

For Pacific Islands, the phenomenon of urban drift is taken to an extreme, unmatched elsewhere around the globe, though the remote nations of the Pacific may not be what comes to mind when the term “urban” is used. With a current population of approximately 12 million people across 22 Pacific Island Countries and Territories (8.5 million of whom are in Papua New Guinea (PNG) the region has the most far-flung communities and cultures, with more exclusive economic zone area and languages per capita than any other region of the world.

These socio-geographic realities necessitate an entirely different scale and approach in development response to encourage improved connectivity in line with national, regional, and global Sustainable Development Goals (SDG) commitments.

Despite the limited resources available to address these needs, Pacific Islands represent the frontline fighting climate change and are proactively seeking to mitigate its effects and costs.

With existential threats mounting, including a vicious combination of ocean acidification, increasingly powerful and erratic cyclone seasons, sea-level rise and groundwater intrusion, climate-related emigration is an increasingly pertinent topic requiring greater recognition and response.

However, before the geographic and demographic stressors become an international issue, countries face the societal pressures of domestic demographic shifts.

The development divide that exists between rural and urban communities in the Pacific is largely a consequence of the limited financial resources and human capacity to provide distributed civil services. This has resulted in steady and increasing urban drift.

The Case for Connectivity

There are two assumptions which have driven the global shipping industry since moving away from sailing vessels in the latter half of the 19th century; a) economies of scale decrease the cost of goods per unit, and b) propulsion provided by fossil fuels is worth the cost of its use in reducing trip duration and increasing reliability of service.

Neither of these benefit the outer-island populations in the Pacific. Acknowledging the Pacific’s 95 per cent dependence on imported fossil fuels, with transport often using the majority of this fuel, combined with small and scattered populations, the supply chain is stretched thin, and the cost of logistics are some of the most expensive per unit/nautical mile, in the world.

A recent survey of shipping agencies operating in Fiji by University of the South Pacific (USP) and Internation Union for Conservation of Nature (IUCN) analysed shipping costs per cubic meter, 20’, and 40’ container, and found the cost 312 per cent higher between major ports in the Pacific when compared to the costs of shipping in Southeast Asia.

Even more alarming, once the distance between ports is included in the calculation, the Pacific pays an average of 560 per cent more per nautical mile than Southeast Asia. Shipping within the region can be 834 per cent more per nautical mile than for goods shipped from Singapore to Suva.

This disparity in cost of doing business is not generally captured as an economic barrier to regional development. Transporting goods beyond our international ports to outer islands incurs additional costs.

Cost Comparison – Rates per Nautical Mile in Southeast Asia & Oceania.

The barrier to sustainable shipping in the Pacific is the current cost structure, which is a consequence of reliance on global market supply of both goods and the vessels on which these goods are transported. In both instances, Pacific countries have to pay higher rates for lower quality purchases.

The nations of the Pacific are currently in a poverty trap.  Financial limitations prevent the transition to the existing and emerging generation of high-efficiency vessels, which may realise fuel savings sufficient enough to allow supply chains to extend to outer island communities without prohibitively high premiums required to offset operational costs.

Imported petroleum products are a primary driver of the Pacific’s debt burden, accounting for an average of 40 per cent of GDP across the region.

The challenges faced include the reliance of vessels (fishing, cargo, and passenger) on imported fossil fuels, and a generally poor quality supporting infrastructure (modern ports, bunkering, shipbuilding, and repair) for the maritime transport sector.  While regional shipping services use relatively modern and well-maintained vessels complaint with International Maritime Organisation (IMO) international standards, at domestic scale there is a prevalence of inefficient and under-maintained vessels.

Recognition of these challenges has led to the formation of the Pacific Blue Shipping Partnership, which seeks to catalyse the transition to new shipping technology in order to reduce the cost of improving connectivity across the Pacific and help turn the tide against the current poverty trap.

Demographic Decline

Initial research of urbanisation trends afflicting the Pacific illustrates the urgent need for outer-island connectivity to ensure distribution of services, economic activity, and associated benefits. A regional pattern is emerging of outer islands depopulating steadily.

Fiji’s 2017 Census reveals provincial-level shifts in population, with significant decline in remote areas such as Lau, Lomaiviti, and Macuata.

Both Lau and Rotuma experienced what would be considered population decimation, with losses of over 10 per cent in the 2007-2017 period.

Fiji’s Government Shipping Service (GSS) and Shipping Franchise Scheme are typical of the various regional initiatives where the state provides the transport or a subsidy is provided to the private sector to ensure the provision of shipping services from urban areas to outer island communities. $2.3 million is allocated in Fiji’s 2019-20 national budget for the Franchise Scheme.

The same pattern of urban drift is evident in Kiribati, with Tarawa Atoll now housing 57.2 per cent of the total population. Likewise, the Marshall Islands census data clearly depicts the trend towards urbanization over the last 30 years with Kwajalein and Majuro being home to 73.8 per cent alongside slow depopulation of the majority of the outer atolls.  Tuvalu provides an extreme example of urbanisation at the expense of outer island communities – all outer islands are rapidly depopulating, and only Funafuti is experiencing positive population growth.

Reliance on global supply chains, exacerbated by fossil fuel dependence and centralised through colonial and post-independence governance mechanisms around the region, reorganised what were previously broadly decentralised economies.

Now the Pacific is seeing populations gravitate towards the competitive advantage provided in cities to participate in cash economies. The extremely high geographic distribution of a relatively small population allows the social impacts of urbanisation to be seen in greater focus and relative scope.

Decarbonisation of Pacific shipping in line with the ambitious targets now being set by leaders in Fiji and Marshall Islands offers a unique opportunity to rethink maritime connectivity – the lifeline of our outer island communities.

Such an opportunity will only be fully realised if based on sound planning that is cognisant of our rapidly changing island population demographics.