CHA Industry Analysis 2

23 May, 2007 SHANTANU BHADKAMKAR FFFAI CONVENTION 2007

18TH FFFAI BIENNIAL CONVENTION

FEDERATION OF FREIGHT FORWARDERS’ ASSOCIATIONS IN INDIA

INDUSTRY TRENDS&

INDUSTRY ANALYSISConvention Theme: CHA: BEYOND HORIZON

Increasing Opportunities -Diminishing Yields, Escalating Responsibilities, Forced Liabilities


Colour Palette•Background & Review

•Statistics & Economic Indicators

Planning For Growth

•Survey Reports

•Market Forces

•Analysis


India Story•India has 27 Billionaires & 83000 Millionaires

Mumbai has more Millionaires per square mile than Manhattan

April 2006 – March 2007•Exports : US$124.6 billion

Increase of almost 24%•Imports to US$181.4 billion.

Rose by 29%Global interest in India is escalating, and the world’s perception of India as a competitor to China is shifting from “also ran” to “a force to be reckoned with”.


Advantage India

India’s Geographical Position As a Major Asian Transport and Distribution Hub

Location for Outsourcing a Range of Activities (Including Manufacturing, IT and Communication Services, Etc.)

Highly Evolved Banking SystemIndia’s Security Focused Banking Regulations

Eyefortransport India Market Report 2007


Shipping & Ports Initiatives

Port Privatisation Gaining MomentumForeign Players In Container Terminal Development National Maritime Development Programme:

Launched 30.12.2005 Envisage Investment Rs. 1,003 B (Us$ 22 B) In 387 Port & Shipping Sector Projects Over 20 YearsPort Sector Investment: Rs. 558 B (Us$ 12 B) Over Next 6 Years - Public Private Partnership FundingAugmenting Container Capacity At Indian Ports From 49.55 Mt (4.13 M. TEU) On 31.03.2005 To 235.56 Mt (19.63 M TEU) By 2013-14

Shipping & LWT Sector Investment: Rs. 445 B (Us$ 10 B) – Ship Acquisition, Coastal Shipping, Etc.


NATIONAL HIGHWAY DEVELOPMENT PROGRAMME

Phase I: Golden Quadrilateral ProjectWidening (4/6 Lane) 5,500 Km Of National Highways (NH) Connect Delhi - Mumbai – Chennai – Kolkata.

Phase II: 4/6 Lane 7,500 Km Of NH Connect DiagonalsPhase III: 11,113 Km - Connect Cities Of Economic & Religious ImportanceOther Phases:

Upgrading NH (2 Lane 20,000 Km, 6 Lane 6,500 Km)Develop 1000 Km ExpresswayBypasses, Railway Over-bridges Etc


NATIONAL RAIL VIKAS YOJANA

Freight Corridor: Dedicated Rail Corridor Between Delhi & Kolkata And Delhi & Mumbai - Investment Over Rs 250 B (Us$ 5.4 B) Delhi-MumbaiRail Privatisation: Containerised Operations Open To All Private & Public Carriers

RAIL-PORT CONNECTIVITY


Civil Aviation & Trade

QuickTime™ and aTIFF (LZW) decompressor

are needed to see this picture.QuickTime™ and aTIFF (LZW) decompressor

are needed to see this picture.

CIVIL AVIATION


Ease Of Doing Business175 COUNTRIES

Ease Of Doing Business Rank : 134 World Bank Report

ACTIVITY RANKING

Starting A Business 88

Protecting Investors 33

Dealing With Licenses 155

Paying Taxes 158

Employing Workers 112

Trading Across Borders 139

Registering Property 110

Enforcing Contracts 173

Getting Credit 65

Closing A Business 133

World Bank Ease Of Doing Business Index is more important & the most relevant factor for Reducing the Transaction Cost in India.Not more regulations & penal provisions, we have excessive controls already.


Corruption Perceptions IndexThe 2006 Transparency

International Corruption Perceptions Index

Country Rank

Country(163 Countries)

2006CPI Score

70 India 3.3

Squeaky Clean 10

Borderline 5

Highly Corrupt 0

India has significantly improved rating since the

2005 index


Global Logistics Industry Interest

A survey among European & North American 3PLs placed India second to China in terms of growth potential

• DOMESTIC• 42% of air, road and rail carriers say that India’s domestic market is the focus for 80% or more of their business, followed by 3PLs (22%).

• INTERNATIONAL• Only a small percentage of freight forwarders (5%) and ocean carriers(4%) focus more than 80% of their energies on the local market, which suggests that they concentrate primarily on international markets.



Expansion StrategyAlmost half of all respondents are

planning to expand their international networks.

Another high priority is the development of infrastructural and operational strengths throughout India.

Interest Group Covers Not Just Multinational Forwarders but also SME



Key Focus Areas ForBusiness Expansion



Joint ventures

28%are engaged in joint ventures

2% are global companies with Indian Operations

Many are actively looking for either suitable joint venture opportunities or potential acquisitions.

Others prefer to work together with local associates, rather than formal partnership agreement.


Greatest Level Of Joint Venture Participation Is By 3pls And Freight Forwarders


Key Benefits OfA Joint Venture



Industry Specific Growth Opportunities



Foreign Companies Looking For Opportunities



Key ChallengesEyefortransport India Market Report 2007

While rest of the world is moving determinedly towards compliance with standards set by trade-related global bodies to simplify and speed up the international trade processes, India needs to catch up.


MULTIMODAL TRANSPORT

30% Of Total Container Traffic Handled By Major Ports Moves Between Gateway Ports And Inland CentresMore Reliance On Smaller / Feeder VesselsHigher Cost Of Inland Container Movement, In Comparison To ASEAN


Emerging Security Concerns



Multiple

Secu

rity

Regime

s

Will

We

Nee

d To

Be

Secu

rity

Expe

rts?


Safety Vs Security



BA

LAN

CIN

G S

ECU

RIT

Y &

SA

FETY

Com

mon

& D

iver

gent

Ele

men

ts


GOOD NEWS &BAD NEWS

‘This year we got 30% increment but we have cost reduction exercise & we want you to reduce your rates by at least 30%’

- Sometimes 50%


Forced Liability

Liability Insurance Does Not Cover Such Claims & LiabilitiesFIATA view is Forwarders should not be responsible / liableactions & consequences not in their control.Customers should not hold Forwarders responsible for issues they can't hold Carriers responsible / liable

•Unjust Enrichment•Blank Cheques With Shipping Lines•Liability For Demurrage & Detention Charges•Liability of Charges for Change of Vessel


Banking & Insurance

Lending without Interest - Partnership

No SecurityNot Even Credit Check

Insurance Without PremiumSettlement Beyond Principles of Insurance


Feelings Shared In FIATA MeetingSecurity : Uniform Standards that are globally acceptable to all stake holders.Authorities have recognised, regulating i.e. passing regulations is one thing and successfully implement is another. Even well intentioned are often impractical.We can't accept regulations that make our lives miserable.


GLOBALISATIONIm

plem

ent B

est P

ract

ices

Ahe

ad o

f Tim

es

EMERGING TRADE REQUIREMENTS•New Markets

•Premium On Competitiveness•Cheaper & Better Suppliers

•Production Facilities Spread Globally•Global Distribution Facilities & Reach

•End-to-end Logistics Solutions•Realtime Visibility On Supply Chain•Realtime Control On Supply Chain


Summary

Global Trade Expected To More Than Double In Less Than 20 YearsGlobal Container Trade Growth About 9% P.A. Over Last Decade, India Matched ThisExpected Addition Of 80 Million To Country’s Labour Pool By 2010If Integrated Into Global Supply Chain, Could Yield Still Faster Growth Of Indian EconomyGrowth In Logistics Sector has been almost Double of GDP GrowthCompetition at arms breaking barrierMore & More Cargo on Delivered Terms


THANKS

CHA: BEYOND HORIZONIncreasing Opportunities -Diminishing Yields, Escalating Responsibilities, Forced Liabilities