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Trade war

FedEx expands in Philippines, cutting China dependence

Courier to build terminal at former US base as trade war bites

MANILA -- U.S. courier FedEx will develop a regional cargo terminal at Clark Air Base in the Philippines as the bruising U.S.-China trade war forces the company to rely less on its Guangzhou hub.

The construction of the new and larger gateway, which began late last year, will be completed by the end of 2020 and will house FedEx's expanded Philippine operations, government and company officials confirmed.

"We are really very excited," Secretary Vince Dizon, President Duterte's adviser for flagship projects who also heads the state agency in charge of redeveloping former military bases, told the Nikkei Asian Review. "FedEx is one of the biggest locators that the Duterte administration has been able to attract."

FedEx's decision to push ahead with plans to build a terminal at Clark, a former U.S. military base, is also a vote of confidence in the Philippines, despite President Rodrigo Duterte's renewed antagonism toward the U.S.

Dizon said FedEx's 2 to 3 hectare facility at the Clark International Airport complex will be expanded in phases, and could be larger than FedEx's former facility at Subic Bay.

In a blow to the Philippines' reputation for retaining big foreign investments, in 2009 FedEx moved its regional hub to Guangzhou from Subic, a former U.S. naval base turned industrial zone, which had served as its hub since 1995 -- three years after U.S. troops pulled out of the Philippines.

"It is very symbolic because they left for China and now they are back," Dizon said in a recent interview.

FedEx has said it was keeping its Asia Pacific hub in Guangzhou. The company confirmed a Clark gateway will be completed within the year, but did not comment on the size of its investment.

"It is very symbolic because they left for China, and now, they are back," Secretary Vince Dizon, President Duterte's special adviser for flagship projects, told the Nikkei Asian Review. (Photo by Cliff Venzon) 

"This facility is the latest in a series of strategic investments that FedEx has made in the Philippines and across Asia-Pacific to enhance coverage and improve service levels in this important region," John Peterson, managing director at FedEx Philippines, told Nikkei in an email.

The Clark gateway, Peterson said, will triple FedEx's sorting capability in the Philippines to 9,000 documents and parcels per hour. "This expansion brings small- and medium-sized businesses enhanced connectivity to the global market," he said.

FedEx's Philippine expansion is part of a trend among companies that are looking to cut their reliance on China amid a stinging trade war with the U.S., said Deborah Elms, executive director at the Asian Trade Centre in Singapore.

Elms said FedEx's ability to operate in China came under scrutiny last year after it misrouted a U.S. shipment by Chinese communications giant Huawei.

Combined with the trade war between Beijing and Washington that has dramatically altered trade flows between the US and China, Elms said the incident "has led management to diversify resources."

"FedEx is not alone in this situation," said Elms. "Other firms, including logistics providers of various types, are rethinking their previous overreliance on a China-only footprint."

FedEx is charging into the Philippines despite strained ties between Manila and Washington.

Last week, the Philippines formally moved to terminate a major military agreement with the U.S., Manila's only treaty ally, after U.S. authorities canceled the visa of Duterte's politically ally, Sen. Rolando Dela Rosa, the former chief enforcer of the president's drug war. That crackdown has resulted in thousands of deaths and is the subject of investigations by the United Nations and the International Criminal Court.

President Donald Trump brushed off Manila's move, saying it will allow U.S. " to save a lot of money."

Dizon said FedEx had also been drawn by the infrastructure buildup in Clark.

"It's a former U.S. base, they feel very comfortable there," said Dizon, who personally went to FedEx's headquarters in Memphis, Tennessee, in April after learning the company was looking at Clark as part of an expansion into the Philippines. "Being a private company, their decisions are primarily driven by profit and commercial reasons," he said.

Dizon said FedEx's investment in Clark could spur renewed interest from other U.S. companies in the former U.S. base.

Elms, however, said nontariff barriers, high operating costs and underdeveloped infrastructure in the Philippines could make investors think twice. "It's a market that is very promising, but also tricky for companies to navigate," Elms said.

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