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
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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
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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
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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