Philippines Freight Transport Report Q3 2007: Industry Research Report

Philippines Freight Transport Report Q3 2007

Published Date: November 2007

Published By: Business Monitor International

Page Count: 48

Order Code: R302-2440

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The Philippines has renewed International Container Terminal Services Inc (ICTSI)’s cargo handling contract at the state-owned Manila International Container Terminal (MICT) for another 25 years, it was revealed in December. MICT is ICTSI ‘sflagship operation, accounting for more than 60% of its annual container throughput. The new contract also paves the way for the injection of additional investments to modernise the terminal’s facilities and expand its 1.5mn 20-foot equivalent unit (TEU) capacity. ICTSI said in mid-May that its first-quarter net profit surged 36% year-on-year (y-o-y) on strong performances by its major local ports and international operations. ICTSI said January-March net profit rose to PHP510mn (US$11mn) from PHP375mn in the year-earlier period as revenue jumped 16% y-o-y to PHP3.12bn. BMI’s newly released Philippines Freight Transport Report concludes that international shipping volumes will grow by an annual average of 4.8% in 2007-2011, a rate still somewhat constrained by slow port infrastructure growth. Coastal shipping freight tonnage will rise by 5.5% per annum, restricted by the lack of open competition on freight rates.

The outlook for the Philippines economy over the next five years is for fair to moderate growth, averaging 4.6% per annum in 2007-2011. The effect is to give the freight transport a reasonable but not spectacular platform for development. We expect overall freight tonnage volume to increase by an annual average of 5.0% per annum over the forecast period, ahead of overall GDP by 0.4 percentage points (pps). In many developing economies freight growth usually exceeds GDP growth by a significant margin, so 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 airfreight sector is expected to experience the most significant growth rate, averaging approximately 8.1% y-o-y. This takes account of the recent negative impact of record jet fuel prices. Next will be rail freight, growing by 5.6% from a low base as a result of the Northrail and Southrail projects. Despite the unavailability of official figures for road haulage, based on our estimates, we are expecting the segment to continue experiencing positive growth rates - an annual average rate of 5.0% during the forecast period. One constraint facing the industry is the operating environment. The Philippines’ BMI freight industry Business Environment Rating comes at the bottom end compared to regional peers, with an overall score of 35.0 (out of a potential maximum of 70.0). 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 2007-2011 forecast period, we expect the transport and communications sector to outpace the economy as a whole by a small margin. It will achieve average annual growth of 5.0%, versus 4.8% for overall GDP. The total value of transport and communications GDP will rise to US$13.0bn in nominal terms by 2011, representing 7.1% of the Philippine’s GDP.

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