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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 (a_ij) gives the input required from sector i to produce a unit increase of sector j's output.

(1) a_ij = z_ij/X_j

where

z_ij = total output from sector i used as an input in sector j

X_j = 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 z_ij, production in sector i as X_i, the price of output in sector i as P_i and final demand for output from sector i as F_i, then the value of output produced by sector i is

(2) P_iX_i = S_jP_iz_ij + P_iF_i

Substituting equation 1 into equation 2 gives

(3) X_i = S_ja_ijX_i + F_i

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 i^th row of the matrix equation

(4) X = AX + F

A represents the matrix of technical coefficients a_ij, 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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