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Golden Opportunities Identified in Philippines' Booming Port Sector

A combination of a strong domestic economy, robust government support and the windfall expected from China's Belt and Road Initiative saw many exhibitors at the recent Philippines Ports and Shipping expo in particularly optimistic form.

Photo: Sunrise industry: Bright prospects loom for ports across the Philippines. (Shutterstock.com)
Sunrise industry: Bright prospects loom for ports across the Philippines.
Photo: Sunrise industry: Bright prospects loom for ports across the Philippines. (Shutterstock.com)
Sunrise industry: Bright prospects loom for ports across the Philippines.

A distinctly optimistic view of the future prospects of the local maritime industry pervaded throughout most of the exhibitors at the Philippines Ports and Shipping 2017 trade show. Indeed, with a strong domestic economy, robust government support and China's Belt and Road Initiative moving into a more active phase, the already booming sector looks set for steady growth for years to come.

This generally upbeat sentiment even had an official endorsement, with a spokesperson for the Philippines Ports Authority (PPA) on hand to tell delegates: "Yesterday, we received a directive from the Secretariat of the Philippine Department of Transportation – and the battle cry is 'build, build, build'.

"For us, that means a focus on developing our domestic and international port infrastructure. To this end, we now have several ports earmarked for modernisation through public-private partnerships, including Davao, General Santos and Cagayan de Oro.

"We have also fast-tracked the Indonesia Ro-Ro shipping link, which will be launched in April. This will be the model that will be adopted by all of our ASEAN counterparts as a means of connecting each country by sea.

"We are currently reviewing our own documentation requirements with a view to improving efficiency. In line with this, we have streamlined certain shipping and port processes so that the paperwork required has been reduced from eight documents to just two."

In financial terms, the PPA has every reason to feel confident about the future. In February, it declared a net profit for the year of nearly P6.2 billion (US$123 million), an almost 200% overshoot of its official target.

The story is pretty much the same for many private port operators, including the Harbour Centre Port, the first private port in Manila. Providing an update on the development of the facility, Geraldine Santos, Marketing Vice-principal for the Harbour Centre Port Terminal, said: "We started operations in 1990 and we are now the largest port in Manila in terms of break bulk and bulk. The facility extends across 10 hectares and much of the cargo we deal with is related to the construction sector, including imports of steel, cement, logs and heavy equipment cargoes, with a lot of it coming in from China.

"Our growth is primarily coming from our existing clients, many of whom are significantly expanding their activities. As a result, we are looking at expanding and have a reclamation project in development that will add another 32 hectares to the port area. We are also strengthening our intra-island relations and plan to expand our services into such cities as Cebu and Davao."

Growth and upgrades in ports means big opportunities for those companies that supply them, including Konecranes, a Finnish specialist in cranes and lifting equipment. Highlighting the importance of the Philippines to his company, Kimmo Nyman, Sales Support Director of Konecranes' Port Cranes division, said: "We see it as a very important market. The Philippines is a big country and home to 100 million people. It also has one of the highest economic growth rates in the region.

"As an archipelago of more than 7,000 islands, it not only needs to build more ports, it also needs to expand the capacity of its existing ones. This is what will drive demand for our products."

For foreign companies selling into the Asian markets, price competitiveness has always been a problem, particularly given the emergence of China as the prime supplier of cheaper products with steadily improving quality. Nyman, however, believes that this won't be too much of problem for Konecranes' Philippines operations.

Putting it a little into perspective, he said: "We have been in the lift-truck sector in the Philippines for five years now and business is good and growing. As of the beginning of this year, we have had a broader product range. We now have a product for just about every application our customers are likely to need. We are also developing new products using all the current technology that are priced at pretty at much the same level as comparable Chinese equipment.

Photo: Uplifting experience: Konecranes.
Uplifting experience: Konecranes.
Photo: Uplifting experience: Konecranes.
Uplifting experience: Konecranes.
Photo: Shore power from Stemmann-Technik.
Shore power from Stemmann-Technik.
Photo: Shore power from Stemmann-Technik.
Shore power from Stemmann-Technik.

"Although we are not the cheapest supplier, when assessing the total cost you need to take into account not only initial purchase costs, but also maintenance and operating costs. If you buy this sort of equipment you will be using it for the next 20 years, so you need to factor all of this into your overall cost evaluation."

Similarly confident that the market will look beyond short-term costs was Julia Tanquintic, Business Development Manager of Alatas, a UK-headquartered crane parts and maintenance company. Outlining her company's approach to the Philippines, she said: "Our main markets are in Europe and the US, but the marine and offshore industry is growing here and a lot of potential is still to be tapped. In recognition of this, we recently opened a representative office here.

"Our competitive edge comes from the fact that we have been in this industry for a long time and that definitely helps. The company is also well-known throughout the world and we have a good reputation for precision and attention to detail. To date, we don't see any major obstacles to growing our business here. There are a lot of companies here that need parts and need our services."

Given the optimism in the sector, it was not surprising that a number of would-be entrants to the market were also attending the show. Among these was Daiel Hoffmans, International Sales Manager for Germany's Stemmann-Technik. Confessing himself impressed by the opportunities on offer in the Philippines, he said: "We specialise in energy and data transfer products. We are a subsidiary of Westinghouse, a global engineering giant with a turnover of US$4.5 billion.

"For us, the Philippine market is very much on our radar. In Europe, at the moment, there are very few big projects emerging, making Asia particularly appealing to us. I am particularly keen to promote our shore-power services here, a product we have developed over recent years."

Essentially, shore power is the facility that allows ships to connect to onshore electricity grids, removing the need for them to run their engines to supply power while docked, a potential environmental risk.

Keen to highlight his company's expertise in this sector, Hoffmans said: "Shore-power systems mean less pollution, with politicians everywhere increasingly looking to support such innovations. Although we are part of a very big corporation, we are still interested in smaller projects – US$2-3 million. We are also on the look-out for agents as we definitely want to be bigger in Asia."

One overseas company that has already proved its worth in the local market is 1-Stop, an Australian provider of IT freight and logistics solutions. In 2014, when traffic congestion led to a ban on trucks arriving or departing from Manila's port facilities during certain times of day, the company was tasked with finding a way around the problem.

Its solution was to introduce a new system for controlling traffic flows. This vastly improved the efficiency of trucks coming in and out of the port without the need for any costly investment in new infrastructure.

Looking back on this milestone for the company, Cam Tran, 1-Stop's Head of Marketing and International Sales Support, said: "We ran a very successful project here and, as a result, we won a lot of new business on the back of it, leading us to open an office here.

"We now see opportunities beyond remedying the congestion problems of existing ports. In line with this, we are looking to work with newer ports to prevent congestion before it ever becomes a problem."

A recent change in local maritime law is also seen as providing a need for overseas expertise. Last July, the Philippine government announced a crackdown on compliance with international cargo weight and loading requirements, a development that Singapore-based Bellmond Technologies has been swift to take advantage of.

Brian Swan, the Managing Director of the company, a specialist industrial equipment supplier, said: "The Philippines is a bit special to us. Following these recent legal changes, we are now getting a lot of work on the safety side. This is mainly from clients looking to bring their cargo-handling equipment up to the standards required by international law."

Photo: Looking to expand its capacity and facilities: Manila’s Harbour Centre Port Terminal.
Looking to expand its capacity and facilities: Manila's Harbour Centre Port Terminal.
Photo: Looking to expand its capacity and facilities: Manila’s Harbour Centre Port Terminal.
Looking to expand its capacity and facilities: Manila's Harbour Centre Port Terminal.

Philippines Ports and Shipping 2017 was held at The Peninsula Manila Hotel from 23-24 February.

Geoff de Freitas, Special Correspondent, Manila

Content provided by Picture: HKTDC Research
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