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Home > Business/Finance > Diversified Services > Shipping & Logistics
South Korea Freight Transport Report Q3 2008
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South Korea lifted its ban on US beef imports in May, removing an obstacle to a free trade agreementbetween the two countries which could boost trade and therefore freight demand. An agreement to lift theban was reached in April after President Lee Myung-bak’s first official visit to Washington. Before theban, introduced after an outbreak of mad-cow disease in the US, South Korea had been the third-largestimporter of US beef, buying US$790mn worth in 2003. Analysts said there were still other obstacles toovercome on the road to a free trade deal. In an election year amid an economic slowdown, sentiment inthe US was said to be turning in a more protectionist direction, with enthusiasm for globalisation on thewane. Nevertheless US Trade Representative Susan Schwab said that the ending of the beef ban removeda ‘major obstacle’ to consideration of the free trade agreement. Bilateral trade in 2007 amounted to overUS$80bn, with officials saying the FTA could boost that figure significantly. After considering thecountry’s wider trade prospects, our newly released South Korea Freight Transport Report concludes thatdespite a slightly less dynamic performance by exports, overall freight carried will grow by an annualaverage of 6.8% in 2008-2012.
The country will continue to have a dynamic trade-oriented economy, increasingly geared toopportunities in China. At some point in the future, the opening up of a rail link through North Korea willboost land-based freight routes. The latest partial thaw in North-South relations points to future progressfor this project, but we expect many starts and stops. South Korean shipping companies are reasonablyhealthy, despite a squeeze on margins. Shipping’s good prospects are mirrored by other transport modes.In road haulage, the current national development plan calls for the construction of seven new north-southexpressways and nine east-west ones, part of the government’s commitment to ensure that it should nottake more than half a day to move people or goods between any two points in the country. Bearing thesecapacity increases in mind, we foresee that road haulage tonnage will increase by an average of 7.7% perannum in 2008-2012, and remain the fastest-growing cargo mode. Cargo traffic on rail on the other hand,has dwindled in recent yeas, given that capacity has not expanded and the share of passenger traffic hasincreased. We expect rail freight tonnage to grow at an average rate of 2.4% during the forecast period.Airfreight tonnage will grow by around 7.1% a year.
BMI has given South Korea a score of 59.8 (out of a potential maximum of 100) in our freight ratingsindex. The country’s strong points are long-term political risk and transport infrastructure growth, withgood scores for long-term economic risk and the regulatory environment.
The total value of transport and communications GDP will rise to US$141bn in nominal terms by 2012,representing 9.6% of South Korea’s GDP. The transport and communications sector employed 1.36mnpeople, or 6.0% of the labour force, in 2007. We see those figures rising to 1.41mn and 6.1% by 2012.
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