Abstract
The leading South Korean shipping and logistics company, Daewoo Logistics, was
at the beginning of
July reported to be in receivership. According to the
Financial Times (FT), Daewoo filed for bankruptcy
at Seoul' s Central
District. The failed sale of the company to South Korean steel producer Posco
is
reported to have left Daewoo unable to overcome rising financial losses
with the downturn in the global
shipping industry. Meanwhile, its
expansion into resource development - overseas farming and mining in
developing states - is thought to have hit the company hard after a farming
deal with the Madagascan
government to develop land for corn production
collapsed in March.
After considering the country’s wider trade
prospects, our newly released South Korea Freight Transport
Report
concludes that overall freight carried will grow by a reduced annual average
of 2.4% in 2009-
2013. Despite the current financial turmoil, our
five-year perspective is that the country will continue to
have a dynamic
trade-oriented economy, increasingly geared to opportunities in China. At some
point in
the future, the opening up of a rail link through North Korea
will boost land-based freight routes.
However, intra-Korean relations have
become tense recently and we expect many starts and stops. South
Korean
shipping companies are facing a squeeze on margins. On the road haulage front
the current
national development plan calls for the construction of seven
new north-south expressways and nine eastwest
ones, part of the
government’s commitment to ensure that it should not take more than half
a day to
move people or goods between any two points in the country.
Bearing the economic slowdown in mind,
we foresee that road haulage
tonnage will increase by an average of 2.8% per annum in 2009-2013. Cargo
traffic on rail, on the other hand, has dwindled in recent years, given that
capacity has not expanded and
the share of passenger traffic has
increased. We expect rail freight tonnage to grow at an average rate of
1.5% during the forecast period. With high jet fuel prices and tough global
market conditions taking their
toll, airfreight tonnage will grow by
around 2.9% a year.
BMI has given South Korea a score of 50.2 (out of a
potential maximum of 100) in our freight ratings
index. The
country’s strong points are long-term political risk and transport
infrastructure growth, with
good scores for long-term economic risk and
the regulatory environment.
The total value of transport and
communications GDP will rise to US$140.4bn in nominal terms by 2013,
representing 9.7% of South Korea’s GDP. The transport and communications
sector employed 1.36mn
people, or 6.0% of the labour force, in 2008. We
see those figures rising to 1.39mn and 6.1% by 2013.
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