Trade growth to and from the Philippines is being held back by poor gateway performance and a lack of hinterland infrastructure, claim lines and forwarders.
While many of its Asian neighbors have suffered slowing economies this year, the Philippines is expected to enjoy GDP growth of over 7 percent. Much of this has been driven by the expansion in Manila of financial services offshoring and remittances from overseas Filipino workers, but container lines also report rising demand for cargo movements, particularly retail imports to meet thriving domestic demand.
However, trade growth is being stifled by a lack of suitable facilities to serve the major industrial and population centers of the 7,000-island nation. “Infrastructure in the Philippines, such as roads, is not well developed,” said Eric Eng, APL Vice President for Global Reefer Trade.
“There is no rail system linking the islands and everything is via sea transportation. Ships have to call at many ports.”
Indeed, the Philippines ranks 52nd out of the 155 countries in the World Bank’s Logistics Performance Index for 2012, and in the sub-categories of “timeliness,” “customs” and “infrastructure” its global ranking are even lower: 69th, 67th and 62nd, respectively.
Stephen Ly, country manager at DHL Global Forwarding, confirmed that the Philippines remains a difficult country in which to operate efficiently due to multiple regulatory hurdles and a lack of logistics capacity. “There are issues at ports with customs queues at gates and with trucking efficiency,” he said.
Shippers said truck congestion at port gates at Manila can often result in delays of more than 24 hours, while DHL said port turnaround times at Manila varied from two to 10 hours but averaged around five hours.
Despite being the country’s largest container terminal, MICT — ICTSI’s flagship facility at Manila - offers capacity of just 2.5 million TEUs, tiny for a port serving an Asian super city. Delays at both MICT and rival terminals operated in the port by Asian Terminals Inc. are frequent and often lengthy. Both ICTSI and ATI refused to respond when asked if they expect any improvements in productivity in the near future.
Government efforts to transfer liner traffic away from congested Manila to the ports of Batangas and Subic have yielded limited success, with both currently operating at a fraction of their capacity.
The other key gateway of Davao, which serves Mindanao, also suffers from a lack of hinterland connectivity, resulting in delays and additional supply chain costs.
However, operators remain optimistic that the Philippines can improve its trade performance.
“The market is developing positively — both for the domestic and international trade — and we are optimistic that this will likely continue in the years to come,” said Tim Wickmann, CEO of MCC Transport, AP Moller-Maersk’s intra-Asia shipping subsidiary, which serves most major ports in the country. “Many of the ports in the Philippines have seen significant upgrades and improvements during recent years through investments made by private terminal operators, and both the shipping lines as well as the business communities in these ports have benefitted from these investments.”
Ly said ocean volumes had increased by 4 to 5 percent this year and the import-export trade was now more balanced, as imports have grown. “If we can get logistics costs down, then more companies will warehouse or manufacture here,” he told JOC. “Land here is very cheap compared to Hong Kong and China and the people are highly educated and speak English. With its large population and rising consumption it offers a good domestic market, and there’s also no reason why it can’t become a hub for exports.”
”We are very confident and positive about the situation here,” he said.
Contact Mike King at firstname.lastname@example.org.