Port of Busan handled over 17 million TEUs (JIFFA,2014) ranking after Shanghai, Singapore, Shenzhen, and Hong Kong. Busan port’s facility is controlled and managed by the Korea Container Terminal Authority (KCTA), which is a non-profit organization authorized by the Ministry of Maritime Affair and Fisheries. From the 1970s to 2004, four container terminals were built to resolve the congestion and get ready for increased demand due to the economic development of China. To scope the trend of variation in vessel size, the Korean government encouraged private companies to participate in the new Busan port development project which eventually attract more transshipment cargo and extend the port’s berth to 30 berths and can serve the world’s largest super post-Panamax vessels.
In 2010, Busan port also ran into a great dispute related to waterfront development (WFD); this forced the port to develop its WFD plan with the local government and community to enhance access to the waterfront. Through this plan, the Busan port facility is extended with a cruise terminal that can serve 335 ships and 356,593 passengers the period 2007 – to 2012.
Busan port facility is heavily invested to increase its infrastructure. According to the research by Rom Kim (2016), the Busan port facility ranks number one among the top ten big container ports.
Port Busan created a space of 6,704 million square meters for developing hinterland infrastructure which consisted of 4,039 million square meters for the comprehensive logistic facility (Min and Jun 2014). The old Busan north port is located in a residential area which caused high traffic jams, air pollution, and noise in the area this means Busan port is built close to the city which also strengthens the port’s hinterland connection to the city.
In March 2010, the New Busan port is completed; along with the completion of the new port 2 hinterland roads, 1 hinterland railway, and 1 port hinterland road were constructed. The 2 hinterland roads which are 23 km and 17.1 km respectively connect the port of Busan with the Chojeong interchange and Jillye interchange which also connected to the Seoul-Busan expressway and Namhae expressway. The hinterland railway with 38.8 km from Busan port to Samrangjin and connect to Seoul-Busan and Namhae expressway. This hinterland road and railway do not run through a residential area which enhances smoother and continuous flow for transportation. For enhancing all hinterland infrastructure potential, the port hinterland road was constructed with a length of 25 km and designed to avoid all residential areas by building a bridge over the seas to connect Busan north port and the new port. Guangdong hinterland complex is a free trade zone for Busan port which presents excellent conditions for operating a logistics center, including simplified process requires for logistics, indefinite storage for bonded cargo and areas for sorting, other logistics operation, and value-added services.
Busan port is located in Northeast Asia which included 7 countries. With its location between China, Japan, and Russia, Busan port obtained a great opportunity to enhance its ability to capture transshipment cargoes from other parts of the world to and from North America, Europe and feeder for cargo shipped to and from Russia port; the transshipment covers 42.3 to 47.8% of total container throughput handled at the port. The Northeast Asia area served 61 international shipping lines with over 358 container liner services per week (BPA,2013). Due to this ideal location, the Korean government plan to develop the Busan port into a mega-hub for Northeast Asia, comparable to the role of Singapore in Southeast Asia. The port is also located inside Busan city, the second busiest city after Seoul. Busan city is considered the 9th busiest city in the world. The port is also located near Fukuoka and Hiroshima in Japan, Beijing, and Shanghai in China, and Taipei in Taiwan. However, limited inland transportation from China and Russia through North Korea could reduce Busan port competitiveness; with a signed peace covenant between North and South Korea, Busan port competitiveness will be enhanced due to a higher connection to Russia and China through North Korea. This is the reason why Busan is not high referable port location compare to Shanghai, Hong Kong, and Shenzhen port (Yeun, Zhang, and Cheung, 2012)
Chinese ports in recent years are becoming more competitive compared to Busan ports in terms of transshipment cargoes captured from north China and Japan. This caused Busan port to redesign its pricing policy and incentives. During the time of the financial crisis, Busan port changes its port pricing and incentive to enhance port competitiveness (Lee and Lee,2012). Unfortunately, port cost or pricing is not the main focus of the government through low autonomous decision-making power for port authority which leads to negative financial incentives, and low attractiveness to shipping liners and forwarders (Lee and Lam, 2015). According to table 3.1, Busan is used as a base for a cost comparison to other major container ports in Northeast Asia. Through the table, Shanghai and Gwanyang ports implemented better pricing strategies compared to Busan in terms of terminal services cost for Gwanyang, terminal facility cost, and terminal handling cost/warehousing for Shanghai; both ports in China impose a free tax for container tax. On the other hand, Japanese ports are not priced competitive compared to Busan.
Busan Port is an international seaport listed in the top ten largest ports in Asia. However, the Korean government doesn’t provide any tax incentives to foreign shipowners and maritime-related businesses. The local authority has limited power for implementing and providing tax incentive policy not authorized to use portland; all activities related to the port must request permission from the government. However, Korean customs improved its process through the Electronic Data Interchange (EDI) system which reduces paperwork for import clearance and the frequency of visiting the custom house. For transshipment cargoes, cargoes are not compulsory to be inspected by customs authorities and cargoes can be laid outside custom areas. (Export. gov,2017).