South Korea - Transport and Logistics: Government investments to drive growth (Strategy, Performance and Risk Analysis)
South Korea is a growth economy. Nominal GDP registered a CAGR of 4.4%, rising from US$1.2 trillion in 2012 to US$1.5 trillion in 2017, and is anticipated to post a CAGR of 3.7%, to reach US$1.8 trillion in 2022. This will be due in part to export growth. The country has strong political and economic support from the US. South Korea’s infrastructure is some of the most advanced in the world and scores higher than both the global and regional median on this parameter. Evidently, the country has a well-developed network of roads, airways and waterways yet it is the presence of advanced infrastructure that provides growth opportunities for the transportation and warehousing sectors.
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Increase in international trade to drive air freight
Air transport freight in South Korea recorded a CAGR of -1.0%, falling from 12.3 billion ton km in 2012 to 11.7 billion ton km in 2017, but is anticipated to post a CAGR of 2.4%, from 11.9 billion ton km in 2018 to 13.1 billion ton km in 2022. The increase will be driven by a global demand for air cargo services due to the popularity of e-commerce platforms. Incheon International Airport’s plan to expand its capacity due to demand from Japan and Southeast Asia, Europe and the Americas.
Korea Shipping Partnership to drive freight volume
Water transport freight volume registered a CAGR of 0.1%, from 1,728.0 million ton kms in 2012 to 1,738.4 billion in 2017, and is anticipated to post a CAGR of 0.7%, from 1,740.7 million ton km in 2018 to 1,793.1 million in 2022. Freight volume will increase as a result of the mega alliance of 14 carriers.
Private investments to drive warehousing and storage GVA
Warehousing and storage GVA registered a CAGR of 8.1%, rising from US$10.9bn in 2012 to US$16.1bn in 2017, and is anticipated to post a CAGR of 7.3%, from US$17.4bn in 2018 to US$23.1bn in 2022. The increase will be due in part to investments from private players. In April 2016, Nippon Express Korea Co., Ltd. completed the construction of its first wholly owned warehouse with a capacity of 18,700m2 in the Busan Free Trade Zone. In November 2015, APG Asset Management and Canada Pension Plan Investment Board (CPPIB) established a joint venture platform with e-Shang and Kendall Square Logistics Properties.