Abstract
In February, Federal Express (FedEx), one of the world' s top two express
transport companies, ended
operations at its Asia Pacific hub in Subic Bay
Freeport, Philippines. The company has shifted its
logistics hub to China
and is expected to move its other operations to China by May 2009. Armand
Arreza, Subic Bay Metropolitan Authority administrator, said the government
would lose some
PHP150mn (US$3.2mn) a year as a result of FedEx' s
departure. FedEx is a global leader in the express
package transportation
segment, delivering around 3mn packages a day. The company has a network
in
more than 210 countries and territories around the world, using 640
aircraft and some 47,000 motorised
vehicles and trailers. Industry
observers believe the company' s decision can be attributed to the fact
that
China provides more trade opportunities than South East Asia. For the
Philippines freight sector the
decision is a setback at a time when the
global economic slowdown will moderate demand growth across
all transport
modes. That said, the industry will continue seeking to attract new
investment. BMI’s newly
released Philippines Freight Transport
Report notes that overall cargo volume should grow by an annual
average of
4.1% in 2009-2013, down from 5.4% in the preceding five years.
The outlook
for the Philippines economy over the next five years is for moderate to slow
growth,
averaging 3.9% per annum in 2009-2013. The effect is to give
freight reasonable, platform for
development although companies will face
greater pressure on their margins than before. Our predicted
tonnage
growth at 4.1% will be just ahead of the average expansion of GDP over the
next five years
which we put at 3.9%. While in many developing economies
freight growth usually exceeds GDP growth
by a significant margin, the
narrower gap between the two rates in the Philippines shows the extent to
which the transport sector is failing to live up to its full potential.
The air freight sector is expected to experience the most significant growth
rate, averaging 4.8% year-onyear
(y-o-y). This takes account of the
cooling of demand. Next in importance will be rail freight,
growing by
4.6% from a low base as a result of the Northrail and Southrail projects. We
see shipping
growing by 4.1%. One constraint facing the industry is the
environment in which it operates.
Comparatively speaking, the
Philippines’ BMI freight rating is relatively poor in relation to
regional
peers, with an overall score of 41.0 (out of a potential 100.0).
Under most categories, the national industry
received a medium to low
score. Freight and infrastructure growth rates, together with the
transport
intensity index (a measure of the dynamism of foreign trade) are
all at the lower end of the scale.
For the 2009-2013 forecast period, we
expect the transport and communications sector to outpace the
economy as a
whole by a small margin, as far as value of output is concerned. It will
achieve average
annual growth of 4.2%, versus 3.9% for overall GDP. Again,
the gap between these two rates is narrower
than experienced in many other
emerging economies. The total value of transport and communications
GDP
will rise to US$15.8bn in nominal terms by 2013, representing 7.2% of the
Philippines’ GDP.
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