Malaysia Airlines expects a decline in air cargo imports because of the region's currency problems.Prospects for growth in southeast Asia's air and seafreight business next year appear increasingly uncertain following the economic turbulence that has been experienced in much of that region.
Up until the equity and financial market turmoil in July this year, the future had looked rosy for the region, with the industry continuing to register double-digit year-on-year growth across the board in general freight volumes.
After two decades of spectacular growth in GDP rates, countries in the region - with the possible exception of Singapore - are bracing themselves for a definite slowdown.
Malaysia for example, has trimmed its public sector spending by some 20 per cent and revised its GDP growth rate downwards to between four and five per cent.
Thailand and Indonesia which have both come under the International Monetary Fund rescue package deal have already seen a drastic drop in public sector expenditure with the postponement of a number of major infrastructural projects. The Philippines, which has also seen its own currency, the peso, badly battered, is likewise being forced to slow down growth.
Singapore, only mildly affected so far by the equity and financial market upheavals in the region, is possibly the only southeast Asian country - apart from the small, oil rich sultanate of Brunei - which will continue to register about a seven per cent growth rate because of its attractive location as an international entrepot.
With the exception of Singapore and Brunei, southeast Asian governments have announced drastic cuts in imports, implemented in order to save foreign exchange, and plan to increase exports.
Given the fact that their trade is largely intra-Asean and intra-Asian, and with some of the North Asian economies facing similar problems, growth in exports will be dictated by the European and US markets.
"Trade will definitely shrink and costs are going up because of the currency depreciation," Bernard Chong of Malaysian-based feeder operator Perkapalan Dai Zhun, told Cargonews Asia.
He added that it was unlikely that any significant increase in the region's exports could be organised in the short term to make up for the anticipated shortfall in import volume. Thus, the situation will translate into an overall decline in seafreight volumes, beginning most probably after the Chinese New Year holidays at the end of January, Chong said.
Malaysia Airlines is also anticipating a decline in air cargo imports because of the region's continuing currency problems. "This may not be so apparent now because of the traditional imports ahead of the Christmas, New Year and Chinese New Year seasons," general manager cargo sales Hayati Ali, said
She was, however, optimistic that exports would remain strong because of the weak currencies. The latest trade statistics for October indicated the best ever export performance by Malaysia in a single month, with a 10.6 per cent growth from the manufacturing sector.
More than 50 per cent of Malaysia's export value comes from electrical and electronic products.
Equally optimistic about export growth was Singapore Airlines' deputy chairman and chief executive officer Dr Cheong Choong Kong, who said he believed that the regional currency depreciation should be a boon to airlines as it would augur well for air cargo volumes.
But in the face of rising competition and new challenges, he added that airlines that wanted to be strong and profitable might seek to act as integrated service providers, looking for quality in the whole distribution chain and not just adopting the role of air cargo carriers from one point to another.
But not all projections are rosy. Some industry analysts are less positive about the future and believe that the freight industry was likely to see declining volume overall. Market expectations indicate that after the Chinese New Year period there will be a definite decline in freight volumes due to reduced imports and slower export growth, according to Johnny Tang, managing director of container haulier Tang Containers.
"Certain major export industries in Malaysia have a high import content in their raw materials," he pointed out. "Therefore, manufacturing costs are likely to go up as well, and it is unlikely that exports from the traditional sectors will get a sudden big boost because of the currency depreciation."
Tang said he expected overall freight business across the southeast Asian region to go down by at least 20 per cent next year, adding that this could worsen when the full effects of the austerity drive and increasingly tight credit controls were felt.