Global Value Chains and Air Transport Policy

Global Value Chains and Air Transport Policy David T. Fung ACDEG Group Western Aviation Summit Winnipeg, Manitoba, Canada May 2, 2013 1 2013.05.02 G...
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Global Value Chains and Air Transport Policy David T. Fung ACDEG Group Western Aviation Summit Winnipeg, Manitoba, Canada May 2, 2013 1 2013.05.02

Globalization Reality Globe & Mail April 11, 2012e

Todd Evans, Director of Corporate Research, EDC 2013.05.02

2

Growth of Canadian Globalization - 2009 (C$ billion)

500

450

400

350

300

250

200

150

100 50 0

Foreign Affiliate Revenue

2013.05.02

Export of Goods and 3 Services

Presentation • The ACDEG Group • Driving Forces in Global Value Chains • Canadian participation in Evolving Markets and Supply Chains • Innovative transportation policies to encourage competition and global access • Summary 4 2013.05.02

ACDEG Businesses

Energy Environment Efficiency 5 2013.05.02

ACDEG Characteristics

Risks seekers -Unwanted >>> Value 6 2013.05.02

Partnerships and Joint Ventures • • • • • • • • •

Waste gas to electrical power Renewable energy Recycling packaging wastes Forestry wastes to bio-fuels Wood pulps to paper products Specialty chemicals distribution Products fabrication and branding Marine Equipment Agri-food and seafood 7

2013.05.02

Distribution Innovation Unit Trains of Sulphuric Acid

8 2013.05.02

Economic Distance of Acid Distribution

300 km extended

to

2,000 km

2013.05.02

Source: NorFalco LLC

9

Shanghai WEI-Gang Energy Co., Ltd.

10 2013.05.02

Container Cranes for Tuen Mun Port (Hong Kong)

Courtesy of Halifax Port Authority and Atlantic Institute for Market Studies 2013.05.02

11

Fireboats in Hong Kong

Courtesy of Halifax Port Authority and Atlantic Institute for Market Studies 2013.05.02

12

Container Barges

Courtesy of Halifax Port Authority and Atlantic Institute for Market Studies 2013.05.02

13

Manufacturing • Drywall Finishing Tools

14 2013.05.02

Consumer and Industrial Hardware

15 2013.05.02

Small solar and wind turbine powered lamp standards

Courtesy of Anthony Ivanoff 16 2013.05.02

Energy Equipment Packages

17 2013.05.02

TFPM –Transverse Flux Permanent Magnet

Leading designer and manufacturer of Transverse Flux Permanent Magnet (TFPM) Generators & Motors 2013.05.02

18 Source: Cycle Capital Management

Large wind Eocycle TFPM competitive advantage Eocycle’ TFPM generator technology offers significant reduction when compared to the best PM alternative:

Overall smaller generator volume



Overall lighter generator



25% less

Less permanent magnets



35% less

Lower quality permanent magnets



Significant copper reduction

→ 75% less

cost

50% less

Easier supply – lower price

Those estimates are based on replacing the highest quality RFPM generator combined with a single stage - 1:10 gearbox (see next slide). 19 Source: Cycle Capital management

2013.05.02

New Products from Recycled Plastics

German Recycling Plants

Plastics Pallets 20 2013.05.02

Wet Mechanical Preparation

Central separation of composites Pulping and washing the raw materials

21 2013.05.02

A Virtual Specialty Chemicals Business • • • •

Markets in North America Sourcing from China and Europe Quality control at ports of shipment Marketing and logistics from Montreal • Technical support from Toronto • Financing from Vancouver 22 2013.05.02

Global Supply Chain and Marketing Pulp and Paper

Wood Pulps

Paper Board and Tissues

23 2013.05.02

Decorative and Consumer Products

24 2013.05.02

Sustainable Aquaculture Location

Biofans Management

Biotech Manufacturing 25 2013.05.02

Economy of Scale Aquaculture Production (000 MT) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

34,000

180

China 2013.05.02

Canada

Sources: USDA (2008); Canadian Aquaculture Industry Alliance (2006)

26

2011 GDP Ranking

GDP (US$ Trillion)

(Purchasing Power Parity Basis)

Source: CIA World Fact Book 2013.05.02

27

2011 Trading Country Ranking

GDP (US$ Trillion)

Source: CIA World Fact Book

Source: CIA World Fact Book 2013.05.02

28

2011 Real GDP Growth Rate (%)

GDP Growth Rate (%)

Source: CIA World Fact Book

Source: CIA World Fact Book 2013.05.02

29

China Imports Growth (% of U.S. Imports)

Sources: Statistics Canada, PRC Ministry of Commerce, U.S. Census Bureau, CIA World Fact 2013.05.02

30

Retails Sales Growth - China (2005-2010)

U.S. Retail Sales Growth in 2010 = 6.6%

31 2013.05.02

China Grew While North America Diddled

Automobiles Sales (million)

Automobiles Sales in China (1978-2010) 20 18 16 14 12 10 8 6 4 2 0

2010 USA Vehicle Sales

2010 Canadian Vehicle Sales

19 2013.05.02

19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 1032

Exports (C$ Million)

Canadian Exports to South Korea

33 2013.05.02

Source: Statistics Canada

Exports (C$ Million)

Canadian Exports to China

34 2013.05.02

Source: Statistics Canada

Canadian Exports to U.S.A. as % of Total

35 2013.05.02

Source: Statistics Canada

Driving Forces in Global Value Chains • Labour and skills availability – Education and training

• Innovations – Technologies and business models

• Infrastructure • Resources – Natural and recovered

• Global Partnerships and markets 36 2013.05.02

Economics of Advanced Technology Industries

Fabrication

Courtesy of

2013.05.02

37

The Apple I-Pod Assembly

Parts

1.5 Cents

23.5 Cents

25 Cents

Distribution &Retail

50 Cents 2013.05.02

38

Worldwide Sourcing – Industrial Electronic Equipment Printed Circuit Boards

Industrial Electronic Equipment 39 2013.05.02

Victoria’s Secrets Lingerie • 2005 – 65% by marine – 35% by air

• 2009 – 10% by marine – 90% by air

2013.05.02

Source: Boston Consulting Group

40

Canadian Auto Parts Export to China

Source: Statistics Canada 41 2013.05.02

Global Vision Flexible business models In Home Market

In China

In Hong Kong

Producing in China for global markets

Strategic Financing development

Research

Design

Transport

Sourcing

QC

Value Chain Manufacturing IT Inventory

Sales 2013.05.02

Distribution

Post Production Marketing 42

Managing Risks for Canadian Manufacturers and Exporters • Risks – Currency volatility – Commodities price volatility – Skilled labour availability – Regulatory changes

• Risks management through diversification 43 2013.05.02

Risks Management through Diversification • Natural currency hedging • Geographically distributed skilled labour availability and costs • Technologies exposure beyond Canada • Alternative materials and process options • Minimize impact of localized “Black Swans” 44 2013.05.02

Strategic Opportunities for Canadian Manufacturers and Exporters • Leverage natural resources into high value services and solutions • Leverage fabrication competitiveness in emerging economies to expand global market share • Adapt strategy, culture and skills to manage rapidly growing emerging economies 45 2013.05.02

Global Value Generation

Recovery

Global value Left to Rot

46 2013.05.02

47 2013.05.02

15 of 62

Factories in China 48 2013.05.02

e

49 2013.05.02

Investment and Management of Global Ventures

-

International talent flow Direct international flights Competitive air fares Flight frequencies

50 2013.05.02

Air Cargoes Service for Wealth Generation

- Access to global markets - Access to global supply chains - Access to high-valued niche markets

51 2013.05.02

52 2013.05.02

High Liner Foods World Wide Sourcing

53 2013.05.02

Clearwater Seafood

World Wide Sourcing

54 2013.05.02

Fish Can Fly Too!

55 2013.05.02

Hog Industry in China (2012) • Pork Production - 80 million MT - 1,000 million animals

Source: Chinese Ministry of Agriculture and Chinese National Bureau of Statistics 2013.05.02

56

Canadian Advantages

• Carcass Weight per Animal -

77 kg (Species in China)

-

89 kg (Species in Canada)

2013.05.02

57

Pigs Can Fly

• 800 breeder sows per flight from Canada by air

• 200,000 pigs for slaughter in China 2013.05.02

58

Pigs Can Fly • 1 Airbus A340 flight /day everyday from Winnipeg International Airport • 73 million pigs per year for slaughter in China (8% of China’s pork consumption) • Annual export value – $930 million 2013.05.02

59

Trans-oceanic Air Cargoes City-Pairs Guangzhou - Chicago Printed Circuit Boards, I-phones

Chicago

Guangzhou

60 2013.05.02

Trans-oceanic Air Cargoes City-Pairs Chongqing - Winnipeg ????????

Winnipeg

Chongqing

61 2013.05.02

Air Cargoes Global Routes Santiago – Winnipeg – Chongqing – Paris

Paris

Computers

Winnipeg

Chongqing

Cut Flowers

Fashion Garments 2013.05.02

62

Policy Innovations to Meet Market Needs • Define a reasonable scope to protect Air Canada’s interests as a national carrier • Open up the rest to international competition • Offer subsidized services to low-density domestic destinations through tendering by private carriers • Encourage open sky global route air cargo service 63 2013.05.02

Summary (1) • Canada has a favorable manufacturing environment

• Driving forces of global value chains – Resistance is futile

• Risks management through diversification of markets and supply chains 64 2013.05.02

Summary (2/2) • Offer reasonable but limited scope of protection to Air Canada as a national carrier

• Support low-density destinations with subsidies through open competition • Encourage open sky air cargo policies as an economic development tool to help Canadian businesses access global markets and supply chains 65 2013.05.02

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