Transport Summit 2014:Cargo Transport Prospects Amid Economic Growth

Deputy Director- General Emmanuel F. Esguerra

National Economic and Development Authority

23 April 2014

2

Outline

I. Recent Economic Performance

II. Near- Term Outlook/ Medium- Term Target

III. The Transport Sector

IV. Policy Directions

3

I. RECENT ECONOMIC PERFORMANCE

The Philippine economy has been growing robustly…

Source: Philippine Statistics Authority and National Economic and Development Authority.

Philippine Real GDP at 2000 Prices (Millions Php)

(1960 to 2013)

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000Real GDP growth

6.8% (2012)

7.2% (2013)

4

On the demand side, although household spending continued to have the largest contribution to GDP, investment is increasingly becoming a major driver of growth.

1991-2001 2001-2010 2010-2012 2013-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Household Final Consumption Expenditure Government Final Consumption Expenditure InvestmentNet Exports

in ppt

2.9%4.8% 6.0%

7.2%

5

On the supply side, the services sector still takes the lion’s share of economic growth, but industry, particularly manufacturing, is increasingly picking up as a major growth driver.

1991-2001 2001-2010 2010-2012 20130.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Agriculture Industry Services

in ppt

2.9%

4.8%

6.0%

7.2%

6

Strong macroeconomic fundamentals supported this remarkable performance

Low and Stable inflation

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

*

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Headline Infla-tion

Note: Actual inflation figures are based on the 2006 CPI series.*January – March 2014

Favorable interest rate & sound banking system

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0

5

10

15

20

0

2

4

6

8

10

Real interest rates, LHS**

CAR, LHS***

NPL Ratio, RHS*

* December 2013, **As of Jan 2014, *** As of Sept 2013

Sustainable fiscal and external position

2005 2006 2007 2008 2009 2010 2011 2012 20130.0

20.0

40.0

60.0

80.0

-4.0

-3.0

-2.0

-1.0

0.0

NG Debt to GDP (LHS) Fiscal Balance to GDP (RHS)2005 2006 2007 2008 2009 2010 2011 2012 2013

0.010.020.030.040.050.060.0

0.01.02.03.04.05.06.0

52.744.1

37.131.3 32.6 30.1 27.0

24.1 21.51.9

5.75.4

0.1

5.0

3.6

2.5

2.83.5

External Debt to GDP Ratio (LHS)Current Acct. to GDP Ratio (RHS)

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ANNUAL PLAN TARGETS

Indicators Baseline (2012)

2014 2015 2016

Gross Domestic Product (%) 6.8 6.5 -7.5 7.0-8.0 7.5-8.5 GVA in agriculture 2.8 (0.9)-0.1 2.0-3.0 2.5-3.5

GVA in industry 6.8 9.8-11.0 8.6-9.7 9.3-10.3

GVA in services 7.6 6.0-6.9 6.8-7.8 7.2-8.1

II. NEAR TERM OUTLOOK/MEDIUM TERM TARGETWe aim to sustain the growth momentum

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More vibrant manufacturingRobust construction and logisticsBuoyant international and domestic tourismUpbeat wholesale and retail trade Robust Business Process Management (BPM) fueling growth in

the real estate, renting and business activities sectorAgribusiness

Supply

Demand

Fixed capital formation: higher public construction, including infrastructure and reconstruction; robust private investment in construction and durable equipment

Strong household consumption: strong remittance inflows, better employment opportunities, and improved consumer confidence

Stronger export of services: good prospects on business process management

Improvement of external trade conditions

Supported by the following growth drivers…

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III. TRANSPORT AND STORAGE SECTOR PERFORMANCE

From 2009-2013, the sector grew by an average of 4.1 percent comprising 2.8 percent share of the country’s total output.

Transport and Storage Sector Real Growth Rate (%)

(2009 to 2013)

2009 2010 2011 2012 2013-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

-2.2

1.4

7.1

8.3

6.2

AHFF (10.4%)

Industry (32.7%)

Services (54.0%)

Land

Water

Air

Storage and services incidental to transport

Transport and Storage Sector Share to Real GDP (%)

(2013)

Source: Philippine Statistics Authority and National Economic and Development Authority.

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Transport and Storage Contribution to Real GDP

(2009 to 2013)in ppt

2009 2010 2011 2012 2013-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

Land WaterAir Storage and services incidental to transport

Source: Philippine Statistics Authority and National Economic and Development Authority.

On the supply side, the sector’s contribution to real GDP improved since 2009 although remained modest since 2011 at around 0.2 percentage points.

-0.07

0.04

0.19

0.23

0.18

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Expenditure on Transport Equipment Contribution to Real GDP

(2009 to 2013)in ppt

Source: Philippine Statistics Authority and National Economic and Development Authority.

On the demand side, the demand for transport equipment continues to have positive contribution to economic growth

2009 2010 2011 2012 2013 (0.60)

(0.40)

(0.20)

-

0.20

0.40

0.60

0.80

1.00

1.20

Road vehicles Railway transport Air transport Water transport

-0.03

0.97

0.38

0.82 0.78

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CARGO TRANSPORT

Growth Performance of the Philippine Maritime Cargo Sector

Country/TerritoryThroughputs

(TEUs)Annual Growth

RateCongo 518,000 44.60%Ghana 889,129 30.00%Kenya 903,000 22.74%Mauritius 417,567 19.06%

Saudi Arabia 6,557,448 15.15%

Russian Federation 3,942,628 14.31%

South Africa 4,424,254 10.88%Philippines 5,720,749 8.68%China 155,017,351 7.73%Singapore 32,421,602 5.51%

ASEAN Country/Territory

Throughputs (TEUs)

Annual Growth Rate

Singapore 32,421,602 5.51%Malaysia 20,866,875 3.61%Indonesia 9,324,792 4.00%Thailand 7,373,298 2.80%

Vietnam 6,588,855 4.00%

Philippines 5,720,749 8.68%

Cambodia 246,465 4.00%Myanmar 208,914 4.00%Brunei Darsussalam 109,210 4.00%Laos - -

Top 10 Developing Countries with Highest Growth Rate in 2012

Container Port Throughput and Growth Rate for ASEAN Countries in 2012

Source: UNCTAD Review of Maritime Transport 2013

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Challenges and Constraints facing the Sector

o Need for adequate port infrastructure

o Support infrastructure for landside access to and from ports to production areas

o Lack of economies of scale

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IV. POLICY DIRECTIONS

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IV. POLICY DIRECTIONSCargo Transport in the Updated PDP 2011-2016

To support the expansion of Philippine industries, the government will encourage investments in the development of logistics infrastructure to cater to both domestic and international supply chains.

Review and develop/reform related policies and rules, such as customs practices; trans-shipment of cargoes through various modes (i.e. air-air, sea-air, and air-sea); and foreign shipping services along the entire multimodal transportation chain.

The government, in coordination with the private sector, will formulate and implement the National Logistics Plan and will target to reduce the share of logistics costs (including shipping) in the cost of goods and services from 23 percent to 15 percent by 2016.

Source: Philippine Development Plan Midterm Update , Chapter 3

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IV. POLICY DIRECTIONS

Improve connectivity and efficiency among urban centers, regional growth hubs

Philippine Transport Infrastructure Development Framework Plan (World Bank) and Roadmap for Transport Infrastructure Development for Metro Manila, Region III and IV-A (JICA).

Transport Summit 2014:Cargo Transport Prospects Amid Economic Growth

Deputy Director- General Emmanuel F. Esguerra

National Economic and Development Authority

23 April 2014