The number of successful companies in a maritime cluster can be considered as a measure of competitiveness of a regional maritime cluster. In order for these companies to settle and also stay in the area, the area must also be attractive, i.e. it must offer resources such as capital, labor, skills and subcontracting opportunities, and be attrractive as a residential area. The public sector plays a significant role in the area’s attractiveness.
Every two years, Menon Economics publishes the Leading Maritime Cities of the World report (Menon Economics and DNV, 2022), where it maps the world’s leading maritime cluster cities according to two criteria: Companies must be competitive and the city/region must be attractive as a host for these companies.
These two conditions are interdependent: firms derive their competitiveness from available resources—for example, the availability of capital, talent, and specialized equipment—and from the price they must pay for these resources.
Public policy plays a key role in developing attractiveness, including through taxes and subsidies, through which they determine the price of capital, labor and other inputs. The quality of resources is largely determined by investments in infrastructure, training and R&D activities.
Figure 1. Industrial competitiveness (Jakobsen et al. 2003).
In their study, Menon Economics measures the four main elements of the model, i.e. public policy factors, business competitiveness, city attractiveness and industry cluster dynamics for maritime cluster cities around the world. First, the city must be an attractive host for businesses. If this is not the case, domestic companies will leave, and foreign companies will not decide to locate their business in the city. Secondly, companies in the region must be internationally competitive. If they are not, businesses wither away.
Thirdly, the attractiveness of the city and the competitiveness of the industries located there are driven by many interrelated factors:
• Strategic location
• Favorable and stable political framework
• Transparent and effective legal framework
• Proximity to large, demanding customers
• Local competition – creates incentives for continuous improvement and innovation
• An abundance of suppliers and service providers
• Universities and research institutes
• Lots of skilled workforce
• A rich and open flow of information and ideas
• Relationships based on trust
• Rewarding education and career system
• Soft location factors – an attractive place to live for families and individuals
Together, these factors produce self-reinforcing growth cycles – or weaken if the factors are missing. Fourth, in a strong business cluster, competing companies spar with each other, and at the same time, industry expertise is developed, and expertise and labor are shared and exchanged.
In 2022, in Menon’s measurement of maritime cities, Singapore emerged as the winner. The report can be found here.
Figure 2. The world’s leading maritime cluster cities (Menon, 2022)
Estonian maritime cluster
The Estonian Ministry of Economy and Communications has commissioned a study on the competitiveness of the Estonian maritime cluster from the Norwegian Menon Economics. The report was published at the end of March 2023.
Based on the methodology described in the previous chapter, Menon Economics evaluated the entire Estonian maritime cluster. According to the report, Estonia has a fairly strong maritime community. Estonia has the largest shipping cluster in the Baltic countries. On the other hand, maritime finance and legal services are less developed and quite limited. The shipbuilding industry is smaller compared to the other two Baltic countries, mainly due to higher labor costs. In addition, there is a lack of maritime technological know-how among industry players. Estonia is also relatively undeveloped in terms of ports and logistics, which is mainly due to the relatively low TEU volume of the ports compared to larger ports in other countries. Despite this, Estonia is ranked relatively high in terms of attractiveness and competitiveness, which is mainly due to the ease of doing business and the tax system. On the other hand, the lack of key customers and suppliers is a hindrance. Regarding the education system, Estonia ranks quite well. However, there are concerns that curricula are out of date with technological advances and that more funding is needed to ensure that the education system is in line with the needs of the industry.
Critical success factors for the future are the recognition of the maritime cluster as a cornerstone of the national and regional economy, utilizing one’s own strengths and supplementing shortcomings. The study concluded that the development would be helped by a wider introduction of solutions based on new technologies and IT development. The IT sector is strong in Estonia, and according to the authors, it should be utilized in the development of the maritime technology sector, as the industry has a great need for digitization worldwide. Also the development of unmanned shipping and the wider use of green technology to reduce emissions would help.
In summary, it can be stated that in order for the Estonian maritime cluster to be even more functional, investments in maritime research and development projects and the maritime education system should be increased, as well as more cooperation with universities.
What would the same study look like for Finland? What if we measured Estonia and Finland together as the same cluster?
The article was previously published in Finnish in the online magazine for maritime professionals Navigator Magazine on March 13, 2023.
Jakobsen, E. W. (2003). Attracting the winners: the competitiveness of five European maritime industries. Kolofon
Menon (2023). Basic research of the competitiveness of Estonian shipping.
Menon Economics; DNV. (2022). The Leading Maritime Cities of the World 2022.