Singapore airfreight 'an exciting market'
20 / 09 / 2013
REMEMBER the Asian Tigers? In the 1990s, economies such as Singapore, Thailand and Taiwan were the wonders of the age, developing fast and grabbing the world’s economic headlines. Their airports and airlines developed likewise, with carriers such as Singapore Airlines and China Airlines [of Taiwan] rapidly expanding their freighter fleets.
Then along came China, and one would be forgiven for thinking that the tigers are now more like pussy cats. At Singapore’s Changi Airport, for example, 2012 cargo volumes fell 3.2 per cent, putting them back to the same level as 2010. In the first seven months of this year the airport managed a sedate 1.3 per cent rise in tonnage.
Meanwhile, in June, Singapore Airlines announced that it was parking a second B747-400 freighter, having already parked one in December.
Look again. Kelvin Wong, executive director for logistics at the Economic Development Board – Singapore’s government agency, which is responsible for developing the island’s economy – sees those largely static airfreight volumes as an indicator of Singapore’s success.
Why? Because the city state has rapidly been advancing up the manufacturing and logistics value chain, and one consequence of that is that some individual products have become smaller.
Wong points out that whereas not so long ago Singapore was a huge exporter of HP printers and Compaq computers – “all those large brown boxes” as he puts it – now it is moving sophisticated medical devices, microelectronics, and aerospace parts.
“These are higher-end products, but smaller,” he points out. There is also what he acknowledges is a drift to sea freight. “Businesses are realising that they must find a lower cost, more efficient way to move their goods, and they are learning that through better phasing of shipments, they do not have to fly. So given these two trends – a shift to smaller products and a shift to sea freight – the fact that our volumes are holding up is a very strong indicator of how we have been able to develop the economy.”
Certainly you don’t have to look far to find good news for air cargo operators. Wong points particularly to Singapore’s continued success as the pre-eminent logistics hub in Asia – not just his view, but the view of the World Bank which, in its reports, has consistently rated Singapore as the first or second most competitive place in the world for logistics.
Plenty of companies seem to agree too, with many making Singapore their Asia-Pacific hub or adding high-end logistics or manufacturing facilities there. Some recent examples include Texas Instruments, which, in partnership with DHL and logistics automation company Swisslog, has just opened Autostore, a highly automated bin-based logistics system.
UK vacuum cleaner and bladeless fan maker Dyson, a Singapore manufacturer since 2004, also announced in February that it would build a new factory to manufacture precision motors and, later, heart-pacemaker company Medtronic announced on August 29 the opening of a global centre for excellence in Singapore, to add to its existing Asia-Pacific headquarters and manufacturing facilities.
Meanwhile, in November Rolls Royce rolled out the first Asian-built Trent aero engine for the Boeing Dreamliner at Singapore’s Seletar Aerospace Park. As Wong points out, this example shows that not all air cargo products are becoming smaller.
Making all these investments possible is the fact that logistics is not just another industry in Singapore – it is built into the country’s DNA. “Logistics has always been part of the whole economy here,” Wong says. “We really put it at the heart of our economic masterplan to ensure that there is very little friction when cargo moves between air, sea and Customs.
“Our seaport is the world’s biggest for transhipment cargo, and we have air service agreements, Customs agreements, secure trade partnerships, and double taxation agreements with many of the world’s major economies. Over 90 per cent of all cargo coming into Singapore is cleared in 10 minutes.
“We are one of the very few nations where in one portal you can clear all the requirements of all of the regulatory authorities.”
It is for this reason that many logistics players have a major and expanding presence in Singapore. Panasonic in April 2012 moved its procurement and logistics operations from Osaka to Singapore, and Infineon as its supply chain competence centre there. (EDB says that 10 per cent of all silicon wafers and more than 40 per cent of the world’s hard disk media devices are manufactured in Singapore.)
Big forwarders expanding their logistics capabilities in Singapore include SDV, which opened a 42,000-sq m warehouse in December 2012 aimed at luxury retail, aerospace, healthcare, and oil and gas clients; and DB Schenker Logistics, which has announced a new 54,520-sq m integrated logistics centre aimed at healthcare, electronics and automotive, due to open in the second quarter of 2014.
Wong says that Singapore is increasingly becoming the ‘supply chain control tower’ for many companies in Asia. “Many companies are trying to design their supply chains to be more responsive, and Singapore is the place with the expertise and capabilities to enable them to do that.”
One of the questions raised by all this investment is how a crowded island like Singapore finds space for all this new development, but Wong insists that is not a problem. “The EDB is very active in planning, and we are proactively making sure we have the resources for important industries,” he says.
He points to the announcement in late August of a major expansion at Changi Airport, adding a fourth and fifth terminal by the mid-2020s and turning the current third runway – a 2750- metre strip used by the military – into a full 4000-metre commercial one.
That move will ultimately double the passenger capacity of the airport, but will also include new space at the airport for more air cargo. “It will be a combination of us building and providing space for others to do so. There will be scope for airside facilities. In fact, FedEx opened one at the end of last year – its new regional hub.”
The EDB has also been lending its support to the e-freight@Singapore initiative, which has gone further than many other countries in offering a government-run datacentre to act as a central data exchange for carriers and forwarders. Wong reveals that so far 17 companies have adopted this and 37 are committed to it. He adds that participants are fully committed to the IATA goal of having 80 per cent of routes e-freight enabled by 2016.
One other factor in Singapore’s favour as an airfreight hub is often forgotten in all the excited chatter about China and India’s economic potential: ASEAN, the Association of South East Asian Nations. With a growing population of 600 million it is an economic block as big as the Beijing, Shanghai and Guangzhou regions combined, Wong reckons or, to put it another way, as the same size as South America.
ASEAN plans to install a common economic community by 2015, and Wong says that this is expected to lead to a doubling in trade – 25 per cent of it within Asia and the rest with the rest of the world.
“So, it is an interesting and important market, and we are very excited about it. With all the talk about China, maybe many companies have not yet realised how big ASEAN is but, increasingly, they are going to hear a lot more about it.”