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July 14, 2005
Shifting local assets
The following item caught my eye recently -
WSJ.com - FedEx to Move Asia Hub To China From Philippines:
To exploit China's fast-growing market, U.S. express carrier FedEx Corp. said Wednesday it will move its Asian-Pacific hub to Guangzhou by the end of 2008 and close its current regional logistics center at Subic Bay in the Philippines.
The reason why it is interesting has to do with the shift in assets underlying the change. We have long been a proponent of economic development based on local intangible assets and what MaryAnn Feldman calls "jurisdictional advantage" (see her papers and presentation to an Athena Alliance policy forum last year).
FedEx moved to the Philippines in the first place because of a specific jurisdictional advantage -- the recently vacated huge space at the former US military at Subic Bay. It was not because the Philippines was a major air-freight destination -- just like Memphis is not a major air-freight destination. It was a hub.
Part of the reason given for the shift is that Subic Bay's runway was too short to accommodate Airbus's A380-800 airplane. The other reason was the need to be centered in the growing Chinese market. With the opening of the Chinese hub, the company said there was no need to have two such operations in Asia.
The story of the FedEx shift illustrates how jurisdictional can disappear. The Philippines hub had an advantage of being in the middle of the Pacific region market -- and large unused space. The center of that market has shifted to China - taking the advantage with it.
While there are numerous reasons why such a shift would not occur within the US, I hope Memphis is watching.
Posted by Ken Jarboe at July 14, 2005 8:39 AM
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