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Philippines Freight Transportation Report Q2 2008Product Type: Market Research ReportPublished by: Business Monitor International Published: April 2008 Product Code: R302-3173 Description Port operator International Container Terminal Services Inc (ICTSI) said in December that it hadsigned an agreement with a consortium of international banks for a US$250mn credit, designed torefinance various other loans, fund new acquisitions, and provide general working capital. ICTSI operatesport terminals in the Philippines, Poland, Brazil, Madagascar, Indonesia, Syria and Japan. It is alsoacquiring ports in Ecuador and China. In August, ICTSI said its net profit in the first-half increased 23%to PHP1.04bn (US$23.17mn) year-on-year (y-o-y), boosted by its expanding operations overseas. Athome, at the end of 2006, ICTSI saw its cargo handling contract at the state-owned Manila InternationalContainer Terminal (MICT) renewed for another 25 years. BMI’s newly released Philippines FreightTransport Report concludes that international shipping volumes should grow by an annual average of5.5% in 2008-2012, a rate still somewhat constrained by slow port infrastructure growth. Coastal shippingfreight tonnage should rise by 5.0% 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 thePhilippines economy over the next five years is for moderate to strong growth, averaging 5.6% per annumin 2008-2012. 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 5.7% per annum over theforecast period, ahead of overall GDP by 0.1 percentage points. While in many developing economiesfreight growth usually exceeds GDP growth by a significant margin, the narrower gap between the tworates in the Philippines shows the extent to which the transport sector is failing to live up to its fullpotential. The air freight sector is expected to experience the most significant growth rate, averaging 7.8% y-o-y.This takes account of the recent negative impact of record jet fuel prices. Next in importance will be railfreight, growing by 6.6% from a low base as a result of the Northrail and Southrail projects. Despite theunavailability of official figures for road haulage, based on our estimates, we are expecting that thesegment will continue to experience positive growth rates. We expect tonnage carried by road to grow atan annual average rate of 6.0% during the forecast period. One constraint facing the industry is theoperating environment. Comparatively speaking, the Philippines’ BMI freight rating comes at the lowend in relation to regional peers, with an overall score of 44.8 (out of a potential maximum of 100.0).Under most categories, the national industry received a medium to low score. Freight and infrastructuregrowth rates, together with the transport intensity index (a measure of the dynamism of foreign trade) areall at the lower end of the scale. For the 2008-2012 forecast period, we expect the transport and communications sector to outpace theeconomy as a whole by a small margin, as far as value of output is concerned. It will achieve averageannual growth of 5.7%, versus 5.6% for overall GDP. Again, the gap between these two rates is narrowerthan experienced in many other emerging economies. The total value of transport and communicationsGDP will rise to US$14.1bn in nominal terms by 2012, representing 7.1% of the Philippine’s GDP. Table of Contents
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