TPP seen lifting logistics firms in S'pore

LOCAL logistics firms are in good stead to profit from the Trans-Pacific Partnership (TPP) but have to familiarise themselves with the new trade rules for the full benefits to be realised, says the chief executive of US-based BDP International, Richard Bolte.

The recently concluded TPP agreement involves 12 Pacific Rim countries and effectively creates the world's largest free trade area. Among the 12 are the United States, Japan, Singapore, Malaysia, Vietnam, New Zealand, Canada, Australia and Mexico.

The 12-country bloc collectively covers some 800 million people and a combined GDP of around US$30 trillion (S$42 trillion), accounting for about 40 per cent of the global economy.

Negotiations for the TPP finally concluded in October this year, after over five years of protracted discussions. China is not part of the TPP family. However, other countries - such as Indonesia and South Korea - have already expressed interest in joining the TPP down the line.

The TPP is expected to boost trade and in turn, bolster economic growth and job creation for the countries involved. However, it will take time for the benefits to materialise, especially since the TPP first needs to be ratified by each of the 12 countries.

According to Mr Bolte, logistics firms in Singapore stand to benefit from increased trade, thanks in part to Singapore's geographical position.

"Singapore's geography makes it the ideal trade hub to facilitate movements of goods between TPP nations," he said. "Trade volumes through Singapore will increase, which will be to the benefit of Singapore logistics companies. Any boost to regional trade volumes, such as that promised by the TPP, will be amplified in the logistics sector."

Local firms in the logistics sector would do well to familiarise themselves with the complexities of the trade agreements so that the full benefits of the TPP can be extended to other industries, Mr Bolte advised.

In 2013, the TPP countries accounted for 30 per cent of Singapore's total goods trade, worth S$300 billion.

"Singapore logistics companies need to become experts on the new trade rules so they can help companies, especially small and medium enterprises (SMEs), to take advantage of the changes. They need to become the knowledge partners that can show their customers how the TPP works, what the 'country-of- origin' requirements are and be able to manage the documentation and compliance requirements."

This is especially important as the logistics industry grows increasingly competitive, requiring industry players to go the extra mile to provide "better value, intelligence and analytics" to customers to stay ahead of rivals.

"This means logistics companies need to become more innovative and explore new ways of meeting their customers' needs," he stressed.

"Nobody can say with certainty that all aspects of the agreement will pass every country," Mr Bolte acknowledged. "But one thing is certain - each of the 12 governments recognises that liberalised trade in the region will help create jobs and bring prosperity. It is for this reason that I am confident that the TPP will eventually pass."

According to Mr Bolte, it will take "a few years" before tariffs reduction "unblocks the region's trade arteries". "But in the next two decades, there is no doubt the TPP will transform the region's economy," he added.

The TPP aims to benefit not just multi-national corporations but SMEs as well. In Singapore, the government will have to set up a website with easy access to the details of the agreement and highlight how local SMEs can ride on the TPP. The agreement also requires the establishment of an SME Committee to study the extent to which SMEs are reaping the benefits of the TPP.

Privately-held BDP International offers freight logistics as well as transportation management services, serving over 4,000 customers worldwide. With annual revenues of over US$2 billion, it counts firms such as Bayer, DuPont, Heineken USA, Honeywell, Johnson & Johnson and Revlon among its client base.

"We expect the TPP will help to improve our business in the region but it is too early to speculate by how much," Mr Bolte added. "As a general rule, for every percentage point the region's GDP increases, we would expect trade volumes to increase by twice as much. So we would expect to grow our business by twice the rate of the region's GDP growth."

In the Asia-Pacific, the company has a broad footprint, and set up its Singapore office more than two decades ago.

"What the TPP will do is increase the volume of shipments processed by each of our offices each year," he continued. "So we will need to ramp up our capacity as volumes increase."

Where expansion is concerned, BDP is also open to mergers and acquisitions if the right opportunity presents itself, he added.

This article was first published on December 7, 2015.
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