The economic importance of the Straits of Malacca and Singapore: An extreme‐scenario analysis

The economic importance of the Straits of Malacca and Singapore: An extreme‐scenario analysis

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Article ID: iaor201110111
Volume: 48
Issue: 1
Start Page Number: 258
End Page Number: 265
Publication Date: Jan 2012
Journal: Transportation Research Part E
Authors: ,
Keywords: transportation: water, security, risk, military & defence
Abstract:

This paper proposes a decision tree model to estimate the loss to global economy on the hypothesis of an extreme scenario of blockade of the Straits of Malacca and Singapore. The insurance surcharges, inventory costs and the time values of cargoes, and Time Charter Equivalent rate are used to estimate the psychological loss, the loss to industries, and the loss to carriers, respectively. Interestingly, there is a pseudo‐paradoxical phenomenon with respect to the loss to carriers. An illustrative example is also provided to explain the ‘Malacca Paradox’.

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