In International Shipping News 26/07/2016
Business confidence
Source: The Hindu BusinessLine
For India, as one of the fastest growing large economies with a substantial working age population, the ability to transport passengers and freight around the world is crucial for further development into an economic superpower.
It is little surprise then that India’s potential is being recognised by the global transport sector. According to Norton Rose Fulbright’s annual survey, ‘The Way Ahead’, 14 per cent of respondents across the global aviation, rail, road and shipping industries named India as the country offering the best investment opportunities over the next two to five years, second only to China.
The need for a strong transport sector to support economic growth is recognised by India’s government. Indian Railways is embarking on a $130-billion capacity expansion plan over the next four years. Sagarmala, the flagship programme of the Ministry of Shipping, is focusing on port modernisation and connectivity and coastal community development. Projects are being considered to develop new inter-modal rail infrastructure, to boost India’s competitiveness.
Appetite for air travel is already booming. India was the world’s fastest growing aviation market in 2015, expanding by over 20 per cent. It is estimated that Indian airlines will require $240 billion of new aircraft in the next 20 years, encouraging many airlines to enter the Indian market.
Combined with interest in India and the Asia Pacific region, the survey respondents indicated that the global transport sector is ripe for consolidation. Mergers and acquisitions are seen as the optimal investment opportunity by 25 per cent of respondents, while 10 per cent are looking for joint ventures, alliances and pools. To emphasise this, 20 per cent consider that a merger or acquisition, or a less formal tie-up, will form the most important part of a transport business’ strategy over the next 12 months, with aviation and shipping favouring merger and acquisition, and rail and road looking to form joint ventures, alliances and pools.
The confidence among respondents from the aviation and rail industries is high, owing to lower oil prices, the availability of funding and infrastructure improvements. But the global shipping industry looks the least optimistic due to overcapacity in many sub-sectors. Despite this, most respondents from the aviation, rail, road and shipping industries agree that the transport sector can expect further growth over the next five years. Passenger numbers and freight volumes are expected to rise 58 per cent and routes and services by 52 per cent.
The transport sector is also set to benefit from the adoption of new technology, which will help it address a number of issues that it has been grappling with. Low carbon and fuel-efficient technology is expected to be the biggest catalyst for change in the medium term, given the impact of recent environmental regulation on the transport sector and the expectation that fuel costs will rise.
Predictive analytics — enabling operators to anticipate repairs and maintenance and better understand and forecast consumer behaviour — is also highlighted. Autonomous technology finds enthusiastic supporters across the rail and road industries, but rather more sceptics in aviation and shipping. Most respondents from these industries are yet to be convinced that pilot-less aircraft and crewless ships will reshape their businesses in the next five years.
Unsurprisingly, infrastructure remains a priority. After merger and acquisition, infrastructure improvements are reported to offer the best investment opportunity for the sector. For the aviation, rail and road industries, inadequate infrastructure is seen as the greatest challenge to the operational efficiency.
Overall, investment in infrastructure is seen as the most helpful form of government support for the sector. The investment the government is already making, combined with increasing demand as a result of population growth and an economy that is powering ahead, will make India’s transport market even more attractive to international investment.
Source: The Hindu BusinessLine
