Global Competitiveness, Logistics and SMEs

1. Global Competitiveness, Logistics and SMEs Larry Llamzon – Country Manager

2. Today’s Agenda • SME Overview • The Role of Express Integrators in the Global Economy • Benefits Specific to SMEs • Key Industry Challenges

3. SMEs – A Prominent Sector of the Economy • SMEs in the Philippines: • Are made up of 64,000 firms • Make up 60% of all export firms • Together with micro firms, contribute around 32% to value added • Account for 25% of total export revenue • Act as subcontractors to large export firms • Employs 30% of the labor force Source: DTI SME Statistical Report (2003 data)

4. SMEs – Top Locations by Region • 69% of SMEs are in NCR, Calabarzon, Central Luzon and Central Visayas Source: DTI SME Statistical Report (2003 data)

5. SMEs – Top 5 Manufacturing Sub-industries • The top 5 sub-industries account for 57% of total number of SME firms • Other sub-industries include machinery and equipment Source: DTI SME Statistical Report (2003 data)

6. SMEs – A Priority Sector in the Economy • National Vision: To create globally competitive SMEs in the new industrial economic environment • SMEs – Focus of Government Initiatives: • Magna Carta for Small Enterprises • Philippine SME Development Plan • Philippine Export Development Plan • Philippine Medium Term Development Plan • National SME Development Agenda Source: DTI

7. SMEs – Main Concerns in the Philippines • Availability of Inputs • Difficulty in sourcing & transporting raw materials due to poor infrastructure • Access to markets • Access to overseas markets • Supply chain efficiency • Inferior transport and communication infrastructure • Limited access to market information, especially Web-based • Inconsistent quality due to low technology and lack of standards Source: Making SMEs Work, Making SMEs Create Work (FINEX and ACERD, BusinessWorld Forum); Express Delivery Services: Integrating ASEAN to Global Markets

8. The Role of Express Operators in the Global Economy What are Integrators? • Express operators who: • Offer global, door-to-door, time-definite, guaranteed integrated services • Maintain control over all aspects of the distribution process • Track each shipment at every step throughout its journey Source: Oxford Economic Forecasting

9. The Role of Express Operators in the Global Economy The express industry simplifies and speeds up the process of transporting goods. Express operators are part of the critical infrastructure for efficient supply chain management resulting to the following: • Reduced Inventory and Other Indirect Cost • Introduced Flexibility into Business Structure • Export Growth • The networks built by Express Operators firms are critical as they render supply chains more efficient and contribute greatly to export growth and foster SME growth. • Foreign Direct Investments (FDI) and Promoting Regional Development

10. Benefits Specific to SMEs • Trade Facilitation – Enables small companies to utilize high-quality, rapid delivery services with dynamically linked networks which facilitates participation in export markets • Competitiveness – Reliable, secure and fast delivery services help ensure continued competitiveness in almost all aspects of operations, win export markets and encourage investment • Expertise in trade regulations – Handling of customs clearance and duties, as well as other provisions of free-trade agreements • Efficient E-commerce – Growth in web sales can be driven by greater reliance on express services as speedy delivery is essential • Just-in-time Inventory system – Reliability of express deliveries enables SMEs to save on inventory and warehousing costs, deliver made-to-order goods quickly and benefit from greater flexibility • Economies of Scale – The same quality of service available to high-value, time-sensitive industries like electronics is offered to SMEs

11. Benefits to the Electronics Industry available also to SMEs • Door to door delivery - frees manufacturer from the need to make complex transportation arrangement for pickup and delivery. • Security - shipments are given close custodial and administrative control, reducing risk of loss or damage for goods in transit. • Track and Trace technology- Shipment movements are tracked with extreme precision in time and location. • Expedited Customs Clearance - assists manufacturer navigating customs regimes and required paperwork. • High level of reliability - guarantees timely and secured packages, particularly important for high-tech components due for production • Global Service - delivers to almost all major cities and countries around the world, even to remote area such as North Korea, Iraq, and Afghanistan. • Speed of delivery- Ability to reduce overall inventory and warehousing, maximizing supply chain efficiency

12. Other SME Challenges Addressed by Express Carriers For continued enhancement of the SME business and trade climate • Express operators compensate for the shortcomings in physical infrastructure in expediting transportation of goods and providing access to markets • Close coordination with the government on key trade and shipment processing issues • Support and advocacy for the government’s export and SME development plans • Streamlining of shipment processing fees • Access to inter-modal markets • ASEAN Business Summit – push for infrastructure development • Partner with SMEs in providing innovative solutions catering to their unique logistics needs

13. Customer Delivering Value to our SMEs

14. DHL Industry Solutions

15. Easier Interaction Excellent Product Offering Higher ServiceLevels Global Consistency across all services Strategic Partnerships Customer Focus We continue to service the Customer through…

16. DHL Express Product Offering • Worldwide Document Express (DOX) • Worldwide Package Express (WPX) • Import Express (IMP) • Jumbo Junior & Jumbo Box • Express Pallet • Global Mail • Fast Forward* Fast Forward* - Heavy weight WPX / IMP Shipments

17. 100% End-to-End Shipment Visibility HUB Gateway Gateway Ground Ground Checkpoints Ops Ops Shipment Information Consignee Shipper Shipment and Shipment Status Transit Information Times Proactive Overall performance Tracking and trend measurement Shipment Status Query

18. DHL Connect DHL Express SMS Web-enabled shipping software programme that can handle all your shipment processing needs Text DHL<space><awb#> to 2333 for GLOBE or 288 for SMART subscribers and get real-time shipment status DHL Easyship DHL Web Shipping Ultimate shipment management system with EDI capabilty On-line shipping and tracking tool that helps you prepare your shipments and book a pick-up in a few simple steps E-Com Tools for Customer Shipment Visibility

19. DHL and SMEs: Delivering Excellence Together

20. Appendix

21. More services, more benefits for your business CUSTOMER DHL Global Customer Solutions Worldwide express services – ranging from documents to parcels to pallets; network consists of 5,000 branches and serves more than 120,000 destinations. Worldwide logistics solutions for air and ocean freight, supported by a dedicated team of experts for industrial projects and sophisticated IT applications. Customised logistics solutions from consulting to supply chain design, from warehousing and distribution logistics to order management. Domestic and international transport solutions for groupage, part-and full-loads – by road, rail and intermodal transport.

22. Hong KongUS$ 82m • Express Logistics center • Service centers US$ 100m • DHL’s Central Asian Hub US$ 400m • joint venture with Cathay Pacific and Air Hong Kong MalaysiaUS$ 6m • Service centers US$ 52m • Asia Pacific Information Services (APIS) Center DHL Investments in Asia Pacific JapanUS$ 125m • 26 Service centers South KoreaUS$ 15m • Bonded warehouse at New International Airport • Service centers ChinaUS$ 9m • Gateways • Pudong Gateway • Beijing airport • Service centers US$ 200m • Will be invested into DHL-Sinotrans infrastructure over the next 5 years US$ 58m • 5% stake of Sinotrans TaiwanUS$ 30m • Gateway movement • 4 Service centers PhilippinesUS$ 30m • Stations • Gateway • Vehicles SingaporeUS$ 10m • Southeast Asia Hub • Service centers ... up to a total of US$ 1.1 B

23. · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · DHL Express Philippines

24. DHL 32 years in the Philippines • Pioneered in 1971 by Rod Feliciano (now company chairman) together with the late Guy F. Coombs • The first international station outside the USA, and the first that provided the service in the Philippines • Initially handled the simple documents courier service • In 1979, the Small Parcel Express Service was developed to handle the thriving business community’s shipments • In 1981, the first provincial station, DHL Cebu • 1984: Cargo Express was introduced for heavyweights • 1985: Personal Package Service launched • 1986: Computerization begins • 05 July 2001: Agreement on J.V. signed. • 01 Jan. 2002: New management commences PH operations. • Focus service areas: M. Manila, Calabarzone, Cebu • Balance Philippines : 102 branches through domestic agent: Wide Wide World Express Phils.

25. DHL Express Product Offering • Worldwide Document Express (DOX) • Worldwide Package Express (WPX) • Import Express (IMP) • Jumbo Junior & Jumbo Box • Express Pallet • Global Mail • Fast Forward* Fast Forward* - Heavy weight WPX / IMP Shipments

26. TAPA Technology Asset Protection Association (TAPA), is an association of security professionals and related business partners from high technology companies who have organized for the purpose of addressing the emerging security threats that are common to the technology industry.

27. A demanding customer portfolio

28. A demanding customer portfolio