Greater levels of investment in port infrastructure are required in advanced economies over the coming years. According to a report by GlobalData, this is due to rising long-term demand and in response to the inefficiencies experienced at ports in recent years, which have led to bottlenecks and severe disruptions.

GlobalData is tracking port construction projects globally, from the early pre-planning stages of announcement and study, through to execution, with a combined value of $497bn – a marginal decline from the value of $501.5bn in its Q4 2023 update. Southeast Asia has the highest share of the pipeline value, standing at $84.5bn, followed by the Middle East and North Africa region at $73.2bn and South Asia at $73.1bn.

There have been several key port developments in the Middle East this year. Earlier in March, Beijing-headquartered China Harbour Engineering Company (Chec) was awarded a contract by Rak Ports to build a new terminal at Ras Al Khaimah port as part of the Rak Coast Guard port reconstruction project in the UAE's northern emirate.

Also in March, Bahri Logistics, a business unit of Saudi Arabia’s national shipping company Bahri, laid the foundation stone for a new logistics and distribution centre at Jeddah Islamic Port.

In January, AD Ports Group signed a definitive agreement with the Red Sea Ports Authority for the development and operation of a multi-purpose terminal at Safaga sea port in Egypt.

Advanced-stage projects make up the largest share of the global pipeline, with those in the execution stage accounting for 50.1% of total pipeline value ($248.8bn). While projects in the pre-execution stages, comprising design, tender and award, account for 13.9% ($69.2bn).

Projects in the earlier planning and pre-planning stages of announcement and study account for 36%. Assuming all projects proceed as planned and that spending is evenly distributed over the construction phase of all projects, annual spending on the global port projects pipeline could rise from $57.4bn in 2024 to $70.6bn in 2025.

The port projects are being developed at a time when the immediate outlook for global trade is challenged. According to the World Trade Organisation (WTO), global merchandise trade volume declined by 0.4% in the third quarter of 2023 compared to the previous quarter, in seasonally adjusted terms.

The Red Sea disruptions have further aggravated the trade situation, with the WTO now expected to revise down the projected trade growth in 2024 from its earlier estimate of 3.4%.

This decline is due to slowing economic growth, the effects of tighter monetary policy in the US and the EU, high inflation and the potential impact of disruptions to shipping through the Suez Canal.

In Q1-Q3 2023, the value of global merchandise trade in current US dollar terms fell 1.4% year-on-year, partly due to falling commodity prices, increased shipping costs due to Suez Canal disruptions and partly due to US dollar appreciation, which tends to reduce the value of trade measured in other currencies.

However, the outlook is more positive over the long term, with the IMF and logistics companies such as DHL predicting trade will expand its role in the global economy over the next five to 10 years. This is likely to drive investment in port infrastructure, particularly in emerging markets that will benefit from changing trade patterns.

The IMF predicts that Southeast Asia, South Asia, and Sub-Saharan Africa will be central to future trade growth. It expects China’s influence on global trade growth to wane as trade becomes more diversified across many countries. By 2026, it is expected that emerging economies will account for 45% of trade growth.

Due to the importance of global trade integration to economic growth and development, investment in ports in these regions in the short to medium term will be crucial for future prosperity. However, owing to heavy reliance on dollar-denominated debt and foreign investment, the current macroeconomic environment poses several downside risks.

Rising interest rates, a strong dollar and a greater commitment to domestic spending in many advanced economies due to cost-of-living crises and geopolitical unrest are likely to hit investment levels in emerging markets over the coming quarters.