The recent typhoon that hit the Philippine Islands is reported to be one of the strongest storms in history. Wind gusts were well over 100 km/h. Assessment of the losses that the Philippine Islands have sustained is ongoing, but some context can be provided to give a picture of the economic state of the Philippines before the Typhoon Haiyan/Yolanda. Companies that primarily use the Philippine ports, oil refineries, and plantations as strategic points of commerce to the rest of Asia will also be affected by the disruption in the supply chain and infrastructure.
Royal Dutch Shell (NYSE:RDS-B) subsidiary Pilipinas Shell Petroleum Corporation has headquarters in Makati City. The typhoon disrupted Shell's refining ability as well as its ability to export, compounding existing concerns with the eroding security situation in Nigeria; Shell should have continued cash flow concerns in Q4.
Chevron Corporation (NYSE:CVX) subsidiary Chevron Philippines also has headquarters is located in Makati City.
Impact of Typhoon Haiyan on the Workforce
The majority of labor is in the agricultural sector (32%) while 15% work in industry. The agricultural sector primarily deals with exporting exotic fruits and vegetables to include fishing. The industrial sector works largely in electronics, making components for computers and semiconductors. In 2012 the unemployment rate was only 7%.
After Typhoon Haiyan, the agricultural sector, which employs the majority of the Philippines workforce, will undoubtedly be affected. The more profitable sector of industry may not be that severely damaged if their supply chain and manufacturing capabilities remain intact after the storm. Rebuilding efforts will more than likely focus on reestablishing industry and industrial supply chains to bring in greater revenue.
If the worst-case scenario is realized, the agricultural sector will be severely affected; importing food and other essential commodities will become essential for not only national security but for the national well-being of the Philippine government. The top three import partners are the United States, which comprises 11.5%, China at 10.8%, and Japan at 10.4%. These figures are from 2012 estimates. All three of these import partners were not affected by Typhoon Haiyan and should be able to maintain their levels of import if not increase their levels to meet the demand.
As with any industrialized nation, communications will be paramount to reconstruction efforts. There's an estimated 103 million cellular users that tap into a communications network, which is bolstered by submarine cables and international radiotelephone lines. For the most part these two assets should be relatively undamaged.
The Philippines have endured typhoons in the past and are not strangers to rebuilding. The recent rise in GDP will be beneficial for reconstruction efforts. As bad as Typhoon Haiyan was, it could have been worse. Manila was relatively untouched and has traditionally accounted for nearly 1/3 of the economy. A great deal of critical infrastructure and industry still exists and will be key components in the reconstruction efforts.
Andrew Foote has no position in any stocks mentioned. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.