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Philippines Freight Transport Report Q1 2008Product Type: Market Research ReportPublished by: Business Monitor International Published: November 2007 Product Code: R302-1507 Description In August, Philippines port operator International Container Terminal Services (ICTSI) said its netprofit in the first-half increased 23% to PHP1.04bn (US$23.17mn) from a year ago, boosted by its expanding operations overseas. Its revenue for the same period rose 16% to PHP6.4bn. ICTSI's second quarter net profit rose 12% year-on-year to PHP535mn. The company said its second quarter revenue, which grew 16% to PHP3.2bn, came mostly from the combined operations of its ports in Manila, Poland, Brazil and Madagascar, accounting for 71% of total revenue. The rest were from its new subsidiaries in Indonesia, China and Davao in southern Philippines. ‘The solid financial results of the first six months of the year are a result of the good execution of the company's growth strategy by our business units,’ ICTSI chairman and president Enrique Razon Jr said in a statement. ICTSI recently won a 20-year concession to operate a cargo terminal in Ecuador and acquired a stake of 60% in Yantai Gangtong Container Terminal, which manages a port in China. At present, ICTSI operates container terminals in the Philippines and in Poland, Brazil, Madagascar, Indonesia, Japan and Syria. At home, earlier in December 2006, ICTSI saw its cargo handling contract at the state-owned Manila International Container Terminal (MICT) renewed for another 25 years. BMI’s newly released Philippines Freight Transport Report concludes that international shipping volumes will grow by an annual average of 5.7% in 2007-2011, a rate still somewhat constrained by slow port infrastructure growth. Coastal shipping freight tonnage will rise by 6.5% per annum, restricted by the lack of open competition on freight rates. Our shipping forecast is in line with prospects for the freight industry in general. The outlook for the Philippines economy over the next five years is for moderate to strong growth, averaging 5.6% per annum in 2007-2011. The effect is to give freight transport a good, but not spectacular platform for development. We expect overall freight tonnage volume to increase by an annual average of 6.0% per annum over the forecast period, ahead of overall GDP by 0.4 percentage points. 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 airfreight sector is expected to experience the most significant growth rate, averaging 9.8% year on year (y-o-y). This takes account of the recent negative impact of record jet fuel prices. Next in importance will be rail freight, growing by 6.7% 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 that the segment will continue to experience positive growth rates. We expect tonnage carried by road to grow at an annual average rate of 6.1% during the forecast period. One constraint facing the industry is the operating environment. Comparatively speaking, the Philippines’ BMI freight industry Business Environment Rating comes at the bottom end in relation to regional peers, with an overall score of 37.0 (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, as far as value of output is concerned. It will achieve average annual growth of 5.8%, versus 5.6% 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$13.3bn in nominal terms by 2011, representing 7.1% of the Philippine’s GDP. Table of Contents
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