Southeast Asia’s maritime hub
THE LOGISTICAL NIGHTMARE OF PROVIDING A SHIPPING SERVICE TO LINK THE PHILIPPINE ARCHIPELAGO'S 7,000-PLUS ISLANDS IS ALSO AN OPPORTUNITY FOR PRIVATE OPERATORS TO MAKE THEIR PRESENCE FELT

Setting up and maintaining a viable transport infrastructure can be a major headache and financial drain for the most developed of countries. For the Philippines, however, an archipelago with more than 7,000 islands and with an economy that is just getting off the ground, the challenge is even more daunting. Only so much freight can be flown in and out, leaving the shipping industry to carry much of the load, so to speak, for an economy that is heavily dependent on imports and exports.

ENDIKA ABOITIZ President and CEO of WG&A

And then of course there is the logistical nightmare of providing a maritime service that can move those goods, as well as people, within the Philippines’ network of ports. Thanks to government foresight, the shipping industry in the Philippines was deregulated and liberalized between 1992 and 1993. As a result, availability, quality of service and maritime safety improved as the industry began to attract investors and spawn mergers.
One such merger occurred among the country’s three big inter-island shippers–William Lines Inc., Carlos A. Gothong Lines Inc., and Aboitiz Shipping Corp., a division of the Aboitiz group of banking and energy companies–to form the WG&A, the Philippines largest shipping company offering domestic passenger and cargo transport across major routes and to 23 principal ports across the archipelago with its fleet of 28 modern vessels.
“Without a doubt that merger was the right thing to do,” says Endika Aboitiz, president and CEO of WG&A as well as Aboitiz and Aboitiz Jebsen. “The first three years we had a lot of adjusting to do, but now the operation is running very well. The technical management is fine, we’ve got a good hold on the business and it is fully integrated.”

A WEIGHTY MATTER With deregulation of port infrastructure in sight, the upgrading of facilities is vital.

A good hold means that currently all WG&A routes are profitable, with last year’s revenues over the $100 million mark. The company can hardly miss on the profit scale, as it accounts for nearly 50% of shipping in the Philippines.
But management refuses to flounder in the sea of ever-increasing competition. WG&A has fully embraced the IT age by installing operating systems that it needs to function in the global and e-business environment. “By the year 2003 or 2004 we will be a fully e-business company. Today we are already able to take applications on-line. The operating systems of our passage group, freight group and financial systems are all increasingly being integrated,” Mr. Aboitiz proudly notes.
One of the main priorities for WG&A and for the entire shipping industry in the Philippines, Mr. Aboitiz says, is the liberalization of the port infrastructure management to the private sector, as many of the facilities need to be upgraded. The industry is also pushing for an even playing field with the airline industry, which gets special tax treatment from the government that allows it to close in on maritime transport rates.

ROBERTO C. DELGADO Chairman and CEO of TDG

For other companies in the shipping industry, diversification is the key to growth. Transnational Diversified Group (TDG), as its name suggests, is a prime example. Roberto C.Delgado, TDG chairman and CEO, founded the company with 16 employees in 1976 on what he calls the principles of a win-win partnership: synergy and mutual trust. Today TDG is one of the largest service intermediaries in the Philippines, with more than 7,000 employees and a turnover of some $300 million. Its core business is shipping transport and logistics, as well as land and air cargo, all of which represent 70% of its revenue.

ARTHUR TUGADE President of TDG

“Today we have evolved into a solid dynamic group of more than 30 operating companies, and we have diversified into five operating divisions,” says Mr. Delgado. “These divisions are: Total Logistics, which includes shipping, distribution, air cargo, cargo consolidation, warehousing, third party logistics, chassis leasing and customs brokerage; Ship management, comprised of seafarer training, international deployment of seamen, crewing of luxury liners and maritime e-training; Air and travel, which includes Asiana Airlines, American Express Travel and aviation services;
ICT, which includes e-business solutions, business processes outsourcing services, software development, and contact center/call center customer e-care; and Investments, which includes real estate and property development, construction and project management, food services and franchising, securities trading and insurance risk management.”