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The Philippine Multimodal Transportation

and Logistics Industry Roadmap


The Philippine Multimodal Transportation
and Logistics Industry Roadmap
The Philippine Multimodal Transportation
and Logistics Industry Roadmap

Copyright 2017
by Philippine International Seafreight Forwarders Association

Printed in the Philippines


January 2017
In memory of

Dr. Cayetano Paderanga, Jr.,

former Socioeconomic Planning Secretary and

National Economic and Development Authority Director-General,

whose guidance gave us the courage to pursue this project,

and the clarity to map our way forward.


TABLE OF CONTENTS

List of Figures ......................................................................................................................................................................... viii


List of Tables .............................................................................................................................................................................ix
Foreword ..................................................................................................................................................................................... x
Acknowledgements .............................................................................................................................................................. xii
Executive Summary ............................................................................................................................................................. xiv
Abbreviations ......................................................................................................................................................................... xvi
1. Introduction ...........................................................................................................................................................................1
2. Vision, Goals, and Targets ................................................................................................................................................3
3. Strategies and Timelines ..................................................................................................................................................5
Phase I (2015-2017): Capacity building ................................................................................................................... 5
Institutional and Regulatory Framework Improvements............................................................................. 5
Skills development ...................................................................................................................................................... 11
Information and communications technology................................................................................................. 12
Phase II (2018-2023): Capacity extension and efficiency enhancement .................................................. 13
Hard/Physical infrastructure.................................................................................................................................. 13
Skills development ...................................................................................................................................................... 13
Information and communications technology................................................................................................. 14
Phase III (2024-2030): Integrated multimodal logistics.................................................................................. 15
4. State of the Industry ........................................................................................................................................................ 16
Structure............................................................................................................................................................................... 16
Sectoral Coverage ........................................................................................................................................................ 16
Industry Players ........................................................................................................................................................... 19
Linkages with Other Industries.............................................................................................................................. 27
Regulatory Framework ............................................................................................................................................. 29
Historical performance .................................................................................................................................................. 32
Share to Gross Domestic Product .......................................................................................................................... 32
Share to Employment ................................................................................................................................................. 35

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Trade Performance .......................................................................................................................................................... 37
Investments in the sector .............................................................................................................................................. 41
Industry Costs .................................................................................................................................................................... 42
Supply and demand ......................................................................................................................................................... 46
Sea and Costal Freight Transport .......................................................................................................................... 46
Freight Transport by Road....................................................................................................................................... 48
Air Freight Transport ................................................................................................................................................. 49
Inland Water Freight Transport ............................................................................................................................ 51
Challenges and Issues ..................................................................................................................................................... 54
Institutional and Regulatory Concerns ............................................................................................................... 54
Physical infrastructure .............................................................................................................................................. 56
Information and communications technology infrastructure................................................................... 57
5. Industry Advantages and Pitfalls: Strengths, Weaknesses, Opportunities, and Threats .................... 59
Strengths .............................................................................................................................................................................. 59
Weaknesses ......................................................................................................................................................................... 59
Opportunities ..................................................................................................................................................................... 60
Threats .................................................................................................................................................................................. 60
6. Support to Industry Development ............................................................................................................................. 61
7. Impact Mapping................................................................................................................................................................. 65
8. Recommendations............................................................................................................................................................ 68
9. References ........................................................................................................................................................................... 70

vii
LIST OF FIGURES

Figure 1: The Logistics System........................................................................................................................................... 1


Figure 2: Goals and targets for the logistics industry ............................................................................................... 3
Figure 3: IDEAL Setup for freight Forwarders ............................................................................................................ 6
Figure 4: Percent Distribution of Establishments by Industry Group, Transportation and Storage
Sector (2012) .......................................................................................................................................................................... 20
Figure 5: Revenue Share by Sub-industry, 2012 (in %) ........................................................................................ 21
Figure 6: Domestic Air Freight Forwarders Cargo Traffic, 2002-2013 (in kilograms) ............................ 23
Figure 7: Domestic Scheduled Cargo Traffic (2004-2013)................................................................................... 24
Figure 8: Levels and Growth Rates (Q1 2009-Q1 2014) ....................................................................................... 32
Figure 9: GHG Emissions from Road Transport by Vehicle Type in 2007 ..................................................... 34
Figure 10: Value of Domestic Trade by Region, in Thousand Pesos (2013) ................................................. 35
Figure 11: Ship calls, at berth and anchorage (1999-2013) ................................................................................ 39
Figure 12: Cargo throughput, in metric tons (1999-2013) .................................................................................. 40
Figure 13: Philippine Total Trade Annual Growth Rates, % (October 2013-October 2014)................. 40
Figure 14: Revenue and Cost for Transport and Storage Establishments by Industry Group (2010)
....................................................................................................................................................................................................... 44
Figure 15: Internet Users per 100 People, 2000 to 2014 ..................................................................................... 58
Figure 16: Infographic: Average Internet Connection Speed among ASEAN Countries, 2014 ............. 58
Figure 17: Impact Map of a Multimodal Integrated Logistics Sector ............................................................... 65

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LIST OF TABLES

Table 1: Logistics performance ranking of ASEAN countries ............................................................................... 2


Table 2: Freight transport by road subclass............................................................................................................... 16
Table 3: Sea and coastal freight water transport subclasses .............................................................................. 17
Table 4: Freight air transport subclasses .................................................................................................................... 17
Table 5: Storage and Warehousing ................................................................................................................................ 18
Table 6: Support Activities to Transportation........................................................................................................... 18
Table 7: Postal and Courier Activities ........................................................................................................................... 19
Table 8: Major players in the Philippine Logistics Industry, 2012 ................................................................... 21
Table 9: Number of Vessels by type of Operation (2012) .................................................................................... 25
Table 10: Registered Motor Vehicles (2007-2012) ................................................................................................. 26
Table 11: Input requirements for the logistics industry ....................................................................................... 28
Table 12: Distribution of demand for logistics services ........................................................................................ 29
Table 13: Regulatory Functions of PPA ........................................................................................................................ 30
Table 14: Shipping Industry Regulatory Framework ............................................................................................. 31
Table 15: Quantity and Value of Domestic Trade by Mode of Transport (2012-2013) ........................... 33
Table 16: Mode share of annual commodity movement, 2005 .......................................................................... 33
Table 17: Percentage Share to Total Employment by Industry Group, 2014 ............................................... 36
Table 18: Distribution of ASEAN merchandise trade with rest of the world, % share (2013) ............. 37
Table 19: Philippines Export and Import in Total Services and Transport Sector, .................................. 38
Table 20: Total Approved Investments by Industry (2012-2013; Jan-Jun 2012 to 2014) ..................... 41
Table 21: Year-on-Year Growth of Total Approved Investments by Industry, %....................................... 42
Table 22: Export and Import Procedures Duration (number of days) ........................................................... 43
Table 23: Export and Import Procedures Cost (US$) ............................................................................................. 45
Table 24: Container Port Demand, 1995-2013 ......................................................................................................... 46
Table 25: Containerized Cargo Import/Export balance, in Thousand TEU .................................................. 47
Table 26: Paved National Roads, in Kilometers ........................................................................................................ 48
Table 27: Vehicle Growth in the Philippines .............................................................................................................. 49
Table 28: Summary of Registered Airports in the Philippines ........................................................................... 50
Table 29: Summary of Aircraft, Cargo, and Passenger Movements by Region (2006)............................. 51
Table 30: Shipping Statistics by Port Management Office (PMO), 2012......................................................... 52
Table 31: Summary of Port Performance (October December 2013) ......................................................... 53

ix
FOREWORD

The achievement of the Philippines development goals of rapid, sustained growth and shared
prosperity presumes a well-functioning services sector that is critical to reducing transactions
costs and raising productive capacity. In this quest for inclusive development, an efficient
transport and logistics industry is essential.

Logistics integrates transport, storage, freight forwarding, and information services in the
process of managing the flow of goods, services, and information from the point of origin to the
point of use. As an economy undergoes structural transformation and industries increasingly
take on higher-value-added activities, the demand for seamless connectivity to support the
greater intersectoral linkages is bound to increase. The involvement of multiple services across
the supply chain, however, requires a high degree of coordination in the actions of various
private service providers in order to ensure the efficient and timely delivery of the product or
service to the end-users. Fragmented and uncoordinated public policies and regulations that
influence the behaviors of private actors multiply the risk of coordination failures, exacerbate
inefficiencies, and raise the cost of doing business leading to loss of competitiveness and a
lower level of societal welfare.

The role of government in providing an enabling environment to reduce the risk of


coordination failures thus looms large in the logistics sector. Through the promulgation and
enforcement of consistent policies, laws, and regulations governing infrastructure development
(particularly transport), promoting competition, encouraging innovation, developing technical
standards, and eliminating administrative bottlenecks, government can help raise the
competitiveness of logistics service providers and create the conditions for the development of
a thriving logistics market.

As transport is a central component of logistics, improving the efficiency of the various modes
of transport and facilitating the coordination and smooth interchange of different transport
modes easily come to mind as low-hanging fruits.

Industry associations equally play an important role in logistics development; they can be
effective channels of communication amongst various industry players themselves and
between industry players and the government. Amongst actors in the supply chain (e.g.
suppliers, manufacturers, distributors, end-users), they can contribute towards improving
coordination. Between logistics industry stakeholders and the government, they can help
overcome the effects of fragmentation in the scope and design of regulation arising from the
diversity of stakeholders' objectives and government regulators' mandates.

The Philippine Multimodal Transportation and Logistics Industry Roadmap which follows is
the result of a private sector initiative to open a dialogue with government on the basis of
concrete and specific proposals aiming to catapult the Philippines to the status of a logistics
hub in Southeast Asia by 2030 capitalizing on a robust multimodal transportation system. The

x
Roadmap describes the industry structure, discusses key concerns, does a SWOT assessment,
and maps out specific goals and time-bound strategies.

Among the issues highlighted that constrain the development of an efficient multimodal
transport and logistics industry are: the underdeveloped transport infrastructure, inconsistent
and outdated government regulations, bureaucratic red tape that breeds corruption, the
absence of a national skills training program for new hires and industry professionals,
government's non-compliance with international agreements, and the lack of a national
masterplan to guide industry stakeholders on the future direction of the logistics industry.

By no means the last word on the subject matter, the Roadmap nevertheless provides a starting
point for thinking about the strategic direction of transport and logistics services in the
Philippines. The present administration's thrust to develop agriculture and manufacturing and
raise the contribution to GDP of regions outside the national capital on the one hand, and the
opportunities opened up by ASEAN Economic Community on the other hand certainly make the
Roadmap a timely contribution to current policy discussions.

DR. EMMANUEL F. ESGUERRA


Former Philippine Socioeconomic Planning Secretary and
National Economic and Development Authority Director-General
Convenor, Asia-Pacific Economic Cooperation Group on Services, APEC Philippines 2015
Manila, Philippines
August 2016

xi
ACKNOWLEDGEMENTS

Our thanks to officials of the following companies, organizations and agencies for providing inputs
to and supporting this roadmap:

1. Aduana Business Club


2. Asian Development Bank
3. Air2100
4. Aircargo Forwarders of the Philippines
5. Asian Tigers Mobility
6. Asian Terminals Inc
7. Association of Off-Dock CFS Operators of the Philippines
8. Bureau of Customs
9. Cargo Data Exchange Center
10. Chamber of Customs Brokers, Inc
11. Civil Aeronautics Board
12. Confederation of Truckers Association of the Philippines
13. Container Depot Alliance of the Philippines
14. DHL Express
15. DHL Supply Chain
16. Department of Trade and Industry
17. Department of Transportation
18. Export Development Council
19. FedEx
20. GIZ (Deutsche Gesellschaft fr Internationale Zusammenarbeit)
21. InterCommerce Network Services
22. International Container Terminal Services, Inc
23. Joint Foreign Chambers of Commerce
24. Manila North Harbour Port, Inc
25. National Economic and Development Authority
26. Pair-Pags
27. Palafox Associates
28. Philippine Chamber of Air Express Operators
29. Philippine Economic Zone Authority
30. Philippine Exporters Confederation
31. Philippine Institute for Development Studies
32. Philippine Interisland Shipping Association
33. Philippine International Seafreight Forwarders association
34. Philippine Liner Shipping Association
35. PortCalls

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36. Procurement and Supply Institute of Asia
37. Royal Cargo
38. Subic-Clark Alliance for Development
39. Subic Bay International Terminal Corp
40. Supply Chain Management Association of the Philippines
41. TNT
42. UPS
43. United Portusers Confederation
44. Philippine Exporters Confederation, Inc
45. Philippine Chamber of Commerce and Industry
46. World Bank

xiii
EXECUTIVE SUMMARY

The main purpose of this roadmap is to produce a common vision for the Philippine multimodal
transportation and logistics industry by mapping the structure of the industry, identifying key
concerns, and providing specific goals and time-bound strategies for the sector.

This roadmap was prepared by the Institute for Development and Econometric Analysis (IDEA)
with inputs from various private and public transport and logistics industry stakeholders who
attended four focus group discussions over a period of more than one year, from December 2014 to
February 2016. A number of other stakeholders submitted their written recommendations. The
roadmaps core group regularly met to incorporate all inputs.

The industry organizations, associations and government and multilateral agencies that
participated in the focus group discussions are listed in the Acknowledgements page.

During the focus group discussions, many of the problems facing the industry came to the fore.
These included:

1. Poor infrastructure
2. Governments non-compliance to international agreements
3. Lack of a national master plan
4. Absence of one central, coordinating agency
5. Unclear, confusing and sometimes conflicting and outdated government regulations
6. Red tape that has led to corruption; and
7. Lack of a national skills training program for both new hires and industry professionals

These problems have led to uncompetitive practices that contribute to high logistics costs in the
Philippines.

On the other hand, considered favorable to the industry are the countrys large and young
workforce; the growing consumer base; the governments renewed focus on infrastructure
development, manufacturing and agriculture; and the promise of a bigger market resulting from
ASEAN integration and the countrys participation in various free trade agreements.

Recommendations were divided into three phases: short term, covering the period 2015-2017;
medium term, 2018-2022; and long term, 2023-2030. The recommendations identified government
agencies whose participation was critical to effect any kind of change in the process or system.

This Executive Summary is succeeded by an introduction of the industry (Chapter 1) then a


discussion of industry vision, goals, and concrete targets (Chapter 2). Strategies and timelines in the
short, medium, and long terms are tackled in Chapter 3. The structure of the industry, including a
profile of stakeholders, historical performance of major players, and market and other conditions
affecting the industry, are discussed in Chapter 4. Chapter 5 presents an integrative SWOT analysis;

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Chapter 6, the role of supporting government agencies; Chapter 7, impact mapping; and Chapter 8
recommendations, prioritization of strategies, activities and implementation of strategies.

xv
ABBREVIATIONS

1. AEI ASEAN Economic Integration


2. ASEAN Association of Southeast Asian Nations
3. ASPBI Annual Survey of Philippine Business and Industry
4. ATO Air Transportation Office
5. BFP Bureau of Fire Protection
6. BIR Bureau of Internal Revenue
7. BOC Bureau of Customs
8. BOI Board of Investments
9. CAAP Civil Aviation Authority of the Philippines
10. CAB Civil Aeronautics Board
11. CATIF Center for the Advancement of Trade Integration & Facilitation
12. CHED Commission on Higher Education
13. CMTA Customs Modernization and Tariff Act
14. DA Department of Agriculture
15. DBM Department of Budget and Management
16. DENR Department of Environment and Natural Resources
17. DILG Department of Interior and Local Government
18. DOE Department of Energy
19. DOF Department of Finance
20. DOTr Department of Transportation
21. DPWH Department of Public Works and Highways
22. DTI Department of Trade and Industry
23. EMB Environmental Management Bureau
24. GCR Greater Capital Region
25. GHG Greenhouse Gas
26. GRT Gross-Registered Tonnage
27. GVA Gross Value Added
28. ICT- Information and Communications Technology
29. IDEA Institute for Development and Econometric Analysis
30. JICA Japan International Cooperation Agency
31. LGUs Local Government Units
32. LFS Labor Force Survey
33. LPI Logistics Performance Index
34. LTFRB Land Transportation Franchising and Regulatory Board
35. MARINA Maritime Industry Authority
36. MICT Manila International Container Terminal
37. MSME- Micro Small and Medium Enterprises
38. NCR - National Capital Region

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39. NEDA National Economic and Development Authority
40. OECD Organization for Economic Cooperation and Development
41. OTS Office of Transport Security
42. PAL Philippine Airlines
43. PCCI Philippine Chamber of Commerce and Industry
44. PCG Philippine Coast Guard
45. PDEA Philippine Drug Enforcement Agency
46. PDO Port Development Office
47. PEZA Philippine Economic Zone Authority
48. PIP Public Investment Program
49. PNP-HPG Philippine National Police-Highway Patrol Group
50. PPA Philippine Ports Authority
51. PPP Public-Private Partnerships
52. PSA Philippine Statistics Authority
53. PSIC Philippine Standard Industrial Classification
54. RORO Roll on-Roll off
55. SEC Securities and Exchange Commission
56. TESDA Technical Education and Skills Development Authority
57. TEU Twenty-foot Equivalent Unit
58. TRB Toll Regulatory Board
59. UNCTAD United Nations Conference on Trade and Development
60. UNESCAP United Nations Economic and Social Commission for Asia and the Pacific
61. WB World Bank

xvii
1. INTRODUCTION

The link between logistics, economic growth, and poverty reduction has long been established,
evident in growth experienced by developed and emerging economies.

According to the United Nations Economic and Social Commission for Asia and the Pacific
(UNESCAP), logistics encompasses the planning, implementation and control of forward and
reverse flow of goods, services, and information from the point of origin to the point of
consumption. Logistics also involves the storage of goods and information.

The Transport and Communications Bulletin for Asia and the Pacific No 70 published by UNESCAP
(2001) offered a simplified structure of logistics systems (Figure 1). The model focuses on the
customers perspective, from the point of supply through to the end user. The objective is to deliver
superior value at the lowest cost. The competencies required depend upon building strong
customer partnerships, client-specific solutions, and innovation and supply-chain systems
integration. This model clearly takes a holistic approach and is the trend in modern economies.
(UNESCAP, 2001).

FIGURE 1: THE LOGISTICS SYSTEM

Source: UNESCAP Transport and Communications Bulletin No 70 (2001)

1
The World Bank (WB) considers an efficient and effective logistics sector as one of the pillars of
trade competitiveness. With ASEAN Economic Integration (AEI), the role of logistics in helping
ensure the Philippines is competitive becomes even more critical.

Under the Philippine Development Plan 2011-2016, logistics has been identified as one of the key
elements in achieving inclusive growth and reducing poverty incidence. The full potential of the
local logistics sector, however, remains largely untapped and, in its current condition, may even
dampen gains of the AEI.

In 2014, the World Bank reported a lower logistics performance index (LPI) for the Philippines,
57th out of 160 countries, down from 44 out of 155 countries in 2010 (Table 1). The country trailed
ASEAN nations such as Singapore, Malaysia, Thailand, Vietnam, and Indonesia in 2014.

TABLE 1: LOGISTICS PERFORMANCE RANKING OF ASEAN COUNTRIES

2014 2012 2010


Country
Score Rank Score Rank Score Rank
Singapore 4.00 5 4.13 1 4.09 2
Malaysia 3.59 25 3.49 29 3.44 29
Thailand 3.43 35 3.18 38 3.29 35
Vietnam 3.15 48 3.00 53 2.96 53
Indonesia 3.08 53 2.94 59 2.76 75
Philippines 3.00 57 3.02 52 3.14 44
Cambodia 2.74 83 2.56 101 2.37 129
Lao PDR 2.39 131 2.50 109 2.46 118
Myanmar 2.25 145 2.37 129 2.33 133

Source: World Bank

The logistics sectorpart of transportation and storage under the Philippine Standard Industrial
Classification (PSIC)contributed 6.1% to the countrys total gross domestic product during the
third quarter of 2014. The sectors impact on economic growth is certainly extensive considering
logistics cost, according to the Department of Trade and Industry (DTI), accounts for 24% to 53% of
the wholesale price of goods in the country.

This roadmap is intended to coordinate efforts of all stakeholdersshippers (importers, exporters,


manufacturers), cargo and logistics service providers, private industry associations, and
government agenciesto attain a common vision for the logistics industry by providing concrete
goals and time-bounded strategies.

2
2. VISION, GOALS, AND TARGETS

Industry players envision the Philippines as a competitive logistics hub in Southeast Asia by 2030
with an integrated multimodal transportation1 system. This goal will be achieved in three phases, as
seen in Figure 2.

FIGURE 2: GOALS AND TARGETS FOR THE LOGISTICS INDUSTRY

2015-2017 2018-2022 2023-2030


Capacity building Capacity Integrated
extension and multimodal
(Institutions, skills efficiency logistics
development, ICT enhancement
readiness) (Information
(Hard infrastructure, linkages, physical
skills development, linkages)
ICT readiness)

Phase I (2015-2017): Capacity Building. Phase I involves the formulation of soft infrastructure as
well as refining and concretizing existing policies essential for a solid and environmentally
sustainable logistics system. Soft infrastructure includes policies with the corresponding
implementing rules and regulations that will facilitate execution of hard infrastructure and other
programs for capacity building. These policies consist of programs in the following areas: (1)
institutions, (2) skills development and (3) information and communications technology (ICT)
readiness.

Phase II (2018-2022): Capacity Extension and Efficiency Enhancement. Phase II involves the
material implementation of policies, including building and expanding transport and storage
infrastructure, and the adoption of efficiency measures, specifically programs that promote skills
development.

1 Under the United Nations Convention on International Multimodal Transport of Goods (Geneva, 24 May
1980), "international multimodal transport" means the carriage of goods by at least two different modes of
transport on the basis of a multimodal transport contract from a place in one country at which the goods are
taken in charge by the multimodal transport operator to a place designated for delivery situated in a different
country.
3
Phase III (2023-2030): Integrated Multimodal Logistics. Phase III creates information and
physical linkages with the global community embracing multimodal transport links.

4
3. STRATEGIES AND TIMELINES

This chapter identifies concrete strategies under each phase. The strategies aim to address issues
that obstruct growth of the logistics sector, and are directed at facilitating the integration of all
modes of freight transport and other nodes of the logistics network.

PHASE I (2015-2017): CAPACITY BUILDING


INSTITUTIONAL AND REGULATORY FRAMEWORK IMPROVEMENTS

1. There is a need to align domestic policies with international agreements.

a. Government should recognize multimodal transport operators2 and institutionalize their


operation by formulating an integrated long-term national master plan for multimodal
transportation and logistics. The master plan should include infrastructure programs (roads,
sea and air ports, rail, and logistics centers) in which all stakeholders are properly
consulted. (Action required from Department of Transportation [DOTr], DTI, Department of
Public Works and Highways [DPWH], Department of Finance [DOF], Department of Interior
and Local Government [DILG], Department of Budget and Management [DBM], Department
of Energy [DOE])
b. There is a need to implement the ASEAN Framework Agreement on Multimodal Transport
signed in 2005 by the DOTr. The Agreement requires the creation of a competent national
body for Philippine multimodal transport operators that will allow them to use the one
single document. (Action required from DOTr, DTI, DOF)
i. In order to implement the Agreement, an Executive Order must be signed creating a
multimodal transport bureau under the DOTr that will accredit and supervise
multimodal transport operators. This Executive Order will place all freight
forwarders (sea or air) under the jurisdiction of only one agency, the DOTr, as is the
practice in many countries. (Under the present setup, seafreight forwarders are
accredited and supervised by the DTI-Fair Trade Enforcement Bureau [FTEB] while
airfreight forwarders are under the jurisdiction of DOTr-Civil Aeronautics Board
[CAB].) The new DOTr bureau will also accredit and supervise operations of cargo
and delivery vehicles (this function currently falls under the Land Transportation

2The United Nations Convention on International Multimodal Transport of Goods (Geneva, 24 May 1980)
defines multimodal transport operator as any person who on his own behalf or through another person
acting on his behalf concludes a multimodal transport contract and who acts as a principal, not as an agent or
on behalf of the consignor or of the carriers participating in the multimodal transport operations, and who
assumes responsibility for the performance of the contract.
5
Franchising and Regulatory Board [LTFRB]), road transportation being a
component of multimodal transport. See Figure 3 for ideal setup of forwarding
sector.
ii. If the issuance of an Executive Order is not immediately practicable, the transfer of
the function of accreditation and supervision of seafreight forwarders from DTI to
DOTr-Maritime Industry Authority [MARINA] should be effected instead. (Save for
seafreight forwarders, MARINA, under its present charter, already supervises all
other maritime enterprises.) It should be noted that while this transfer to MARINA
rationalizes the setup of the forwarding sectoreffectively placing all freight
forwarders under one agency (the DOTr, with seafreight under attached agency
MARINA and airfreight under another DOTr-attached agency CAB)it still does not
allow forwarders to operate as multimodal transport operators because of the
absence of a national competent body.

FIGURE 3: IDEAL SETUP FOR FREIGHT FORWARDERS

c. The ASEAN Framework Agreement on the Facilitation of Goods in Transit must be fully
adopted. (Action required from DOF, DOTr, DTI)
d. Government needs to support the action items on transport facilitation and green logistics
from the ASEAN Kuala Lumpur Transport Strategic Plan 2016-2025. (Action required from
DOTr, DPWH, DTI, DENR)

6
2. Institutions must be strengthened.

a. A Transport Logistics and Supply Chain agency composed of both public and private
sector representatives must be created via an Executive Order. (Action required
from Office of the President, DOTr, DTI, DPWH, DILG, DOF, Department of
Agriculture [DA], Department of Environment and Natural Resources [DENR], and
all other agencies overseeing regulated products and requiring transport and
transport-related permits).

i. The agency will play a key role in drafting the integrated long-term national
master plan for supply chain and transport logistics.

ii. The agency will ensure consultation and coordination with stakeholders at
all times so that policies affecting all industry players are aligned, not
contradictory with other policies, and subsequently complied with.

iii. The head of the agency must be a Career Executive Service Officer with
wide-ranging experience in the field of logistics and supply chain.

b. The PPA must add at least two more private sector representatives to its Board.
These representatives should head a major stakeholder organization to ensure
proper industry representation.

c. MARINA should fully exercise its mandate to accredit and regulate maritime
enterprises, including international shipping lines (both principal and ship agents).

i. As part of its requirements, Marina should ensure accredited enterprises


have skilled personnel; proper infrastructure to support operations,
including the provision of container yards (whether owned, leased or
subcontracted); ample insurance liability; and an IT infrastructure that
supports electronic payments.

3. The policy and regulatory environments must be streamlined to reduce the cost of logistics.

a. The following policies must be put in place:

i. Freedom of Information Act passed by Congress that will ensure, among


others, government statistics and data crucial to the logistics industry are
readily available.

ii. A national development plan for industry clusters, specifically


manufacturing and production centers. These clusters should preferably be
outside urban areas in order to help with decongestion, and should have
access to port, airport and rail infrastructure for easy delivery of goods to
market. An example of such a cluster is the Beijing Tongzhou Logistics Park.
Positioned as a "road-sea freight hub", the logistics park is an important hub
for distribution in the area around Chinas Bohai Bay as well as distribution

7
to the adjacent Beijing Development Area, the most important economic
zone in Beijing. The park has attracted a number of overseas and local
developers such as Globle Logistics Properties and China Merchants
Logistics. (Action required from DTI, DOTr, DPWH, DOF, DILG, National
Economic and Development Authority [NEDA], Philippine Economic Zone
Authority [PEZA], Board of Investments [BOI]).

iii. The implementing rules for Republic Act 10863 or the Customs
Modernization and Tariff Act (CMTA). These will overhaul of the Bureau of
Customs (BOC) and update the Tariff and Customs Code of the Philippines.
(As of the writing of this Roadmap, only a few provisions of the CMTA have
been operationalized.)

iv. A Green Freight and Logistics Program, as a public-private initiative, aimed


at increasing energy efficiency of road freight transportation. (Action
required from DOTr, DTI, DPWH, DENR)

1. The use of cost-efficient fuel-saving technologies (e.g. low-rolling


resistance tires, telematics, aerodynamic equipment, anti-idling
devices) must be encouraged.

2. The use of hybrid buses that ferry both passenger and cargo must be
explored.

v. A dangerous goods handling and storage national policy. (Action required


from Philippine Ports Authority [PPA], Philippine Coast Guard [PCG], BOC,
CAB, Civil Aviation Authority of the Philippines [CAAP], Office of Transport
Security [OTS], Bureau of Fire Protection [BFP])

vi. An order prohibiting local government units from unilaterally implementing


policies that have a national impact. (Action required from Office of the
President, DILG, local government units [LGUs]).

vii. A freight transport data collection system, with logistics operators required
to regularly report certain information, in order to improve the basis for
evidence-based policy-making and to enhance monitoring of policy
implementation. (Action required from DOTr, DTI, DOF, NEDA, Philippine
Statistics Authority [PSA])

viii. An order that actively encourages use of Batangas and Subic ports as well as
other international sea ports and airports outside Metro Manila as gateways
to cater to the needs of industry in and around such ports, and for purposes
of decongesting urban areas. (Action required from Office of the President,
DOTr, DTI, PEZA and other free ports)

8
ix. A program for the rehabilitation and use of the rail network for cargo
transportation. Railways should ideally be connected to production,
manufacturing and dry ports. (Action required from DOTr)

x. An order that jump starts discussions on leveling the playing field for
domestic and international shipping. Foreign shipping lines enjoy benefits
not accorded to ships plying the domestic trade. Foreign carriers, for
instance, do not pay duties on fuel and lube oil while their domestic
counterparts pay duties and the 12% VAT. (Action required from DOTr, DTI,
DOF, NEDA)

xi. Policies that will make data and information work for the growth and
development of the cargo and logistics sector. To this end:

1. The PSA must adopt standard data measurements and indices for all
industry sectors (e.g. 20-foot container for shipping, kilos for
airfreight, etc.)

xii. A sustained information dissemination and training campaign focusing on


cargo security, safety and green logistics. (Action required from DOTr, DTI,
DPWH)

xiii. Consultation program with the cargo community related to DoTr efforts to
formulate a checklist for infrastructure projects.

xiv. Full automation of Customs processes to minimize face-to-face transactions


and expedite clearance at borders in keeping with the BOCs customs
clearance target of four hours. (Action required from DOF-BOC)

1. The National Single Window must be fully implemented in


accordance with the countrys commitment to the ASEAN Single
Window.

2. A single customs unit allowing importers and exporters the option to


choose their port of loading and discharge should be studied. This
will eliminate the current practice of port shopping and lead to
standardization of implementation of all customs policies and
regulations.

xv. A clear network of major trucking routes properly disseminated to truck


drivers to facilitate flow of traffic and avoid corruption among law enforcers.
(Action required from DPWH, DOTr, DTI, Metro Manila Development
Authority [MMDA, PNP-Highway Patrol Group [PNP-HPG])

1. Major highways should have dedicated truck stops.

9
xvi. A redefined logistics industry via a review of the PSIC to reflect these
changes:

1. The recognition of the unique role of air express operators through


the inclusion of the sector under Air Transport (PSIC Division 51).

2. Addition of multimodal transportation as a sub-sector.

3. The use of the term Brokerage and Customs Clearance instead of


Customs BrokerageShip and Aircraft under Division 52 of
Warehousing and Support Activities for Transportation. This is in
recognition of the expanded scope of the customs broker profession.

(Action required from DOTr, DTI, NEDA)

xvii. The designation of PEZA and/or the Philippine Chamber of Commerce and
Industry (PCCI) as the certifying body/ies in the issuance of the Certificate of
Origin under the Generalized System of Preferences. (Action required from
PEZA, PCCI, BOC)

xviii. A BOC order mandating sea and airport terminal operators to provide truck
holding areas and drivers' lounges. (Action required from BOC, PPA, CAAP,
sea and air port operators)

b. The following policies and regulations must be reviewed, streamlined and/or


standardized:

i. Truck ban, road users fee and toll fees (Local government units adopt
varying policies leading to much confusion among road users.) (Action
required from DILG, LGUs, Mayors League)

ii. LTFRB requirement for truck operators to operate trucks no more than 15
years old. (This impending regulation would mean an estimated 80% of
trucks will no longer be given a franchise and therefore banned on the
streets. The policy could trigger another round of port congestion.) The
implementation of a reasonable transition period to comply with the
requirement to phase out old trucks is recommended; a public consultation
that will look into incentive schemes for truck fleet modernization would
also be helpful. (Action required from DOTr and LTFRB)

iii. LTFRBs mandate and screening procedures in the grant of truck franchises.
LTFRB should ensure franchised truckers comply with all safety and
operational requirements such as liability insurance and personnel training.
(Action required from DOTr and LTFRB)

iv. Gross vehicle weight regulations under the Anti-Overloading Law (Republic
Act No 8794). Under the law, most trucks operating in the Philippines are

10
already considered overloaded. Road weight limitations should be aligned
with ASEAN cross-border trade agreements. (Action required from DPWH,
DOTr)

v. Smoke belching, inconsistent implementation and monitoring of anti-smoke


belching regulations. (Action required from DOTr-LTFRB, Toll Regulatory
Board [TRB], DPWH, LGUs)

vi. Accreditation of importers and customs brokers at the Bureau of Internal


Revenue (BIR) and the BOC. (Action required from DOF, BIR and BOC)

vii. Philippine National Police (PNP) list of controlled chemicals. Some chemicals
in the list are commonly used in manufacturing, and are thus now more
difficult to procure.

viii. Requirements for transportation and storage of dangerous goods. Too many
requirements (sometimes redundant) create much confusion. (Action
required from PPA, CAB, CAAP, PCG, BFP, Philippine Drug Enforcement
Agency [PDEA], Environmental Management Bureau [EMB])

ix. Requirements governing temporary importation of trade promotion


materials, equipment and paraphernalia. (Action required from BOC)

x. Reportorial requirements required by some agencies. (For example, cargo


data submitted by seafreight forwarders to DTI-FTEB does not seem to have
any use as FTEB does not generate industry statistics; manifest submission
at the BOC is allowed after office hours but there is no one at the BOC to read
it.) (Action required from DTI, DOF, BOC)

xi. All other regulations pertaining to transportation and logistics activities that
are deemed redundant, obsolete, and inconsistent with other regulations.
(Action required from DOTr, DTI, DOF)

xii. Application for other business licenses, permits, and other procedures.
(Action required from DTI, DOTr, DOF, DPWH, DILG, DA, DENR, Securities
and Exchange Commission [SEC])

SKILLS DEVELOPMENT

The absence of a skills certification program in the cargo transportation industry has been
identified as an immediate concern among players, prompting a call to create a National
Qualification Framework that is in keeping with ASEAN standards. This would ensure that
whatever manpower advantages the industry has is preserved, even enhanced, with the constant
supply of labor properly trained and always updated on industry developments.

11
The establishment of a skills development programs for all stakeholders in the cargo and logistics
industry (freight forwarders, terminal and warehouse personnel, container yard and port operators,
truckers, shipping line personnel, airline staff, ground handlers, express operators and integrators,
etc.) is necessary to promote market-relevant skills. This activity is now ongoing with the Technical
Education Skills and Development Authority (TESDA) as lead agency. As of the writing of this report,
only a few industry associations are building their certification programs, including the Philippine
International Seafreight Forwarders Association and Supply Chain Management Association of the
Philippines.

INFORMATION AND COMMUNICATIONS TECHNOLOGY

1. There is a need to fully automate processes involving:

a. The BOC in order to reduce, if not entirely eliminate, submission of hard copies of
documents.
b. Application for business license and requirements of LGUs.

2. Cross-border electronic transactions, information sharing, electronic payment and


electronic signatures must be facilitated.

3. There should be active promotion of relevant technologies for advanced information


systems to be shared among government agencies, shippers, and industry, in advancing
supply-chain security initiatives.

12
PHASE II (2018-2023): CAPACITY EXTENSION AND EFFICIENCY ENHANCEMENT

This phase involves carrying out of physical projects that will advance both infrastructure and skills
development. The projects are intended to expand capacity and enhance transport efficiency.

HARD/PHYSICAL INFRASTRUCTURE

1. The following facilities and infrastructure should be built:


a. Dedicated access roads to sea and air ports, freight centers and railway stations
b. Dedicated air cargo terminals. Storage facilities in airports should also be expanded.
c. Freight centers and dry ports
d. New sea and air port facilities that would promote economic activity in accordance
with cross-border agreements such as the Brunei Darussalam-Indonesia-Malaysia-
PhilippinesEast ASEAN Growth Area or BIMP-EAGA.

2. The following must be improved and/or expanded in anticipation of economic growth:


a. All international and secondary sea and air ports
b. Railway network to service both passenger and cargo requirements. This will help
change modality of transporting goods and support green logistics initiatives.

SKILLS DEVELOPMENT

The greatest asset of an organization is its people. Hence, sustained investment in human resource
must be pushed. The following can be implemented in the medium to long term:

1. Creation of ASEAN Virtual Learning Resources Centers. AVLRC aims to foster greater
information and knowledge sharing about ASEAN and its member countries by using IT
technology to make it easier to access and share information about the people, culture,
history, places of interest, and economies of each ASEAN Member State. (ASEAN-Australia
Development Cooperation Program)

2. Formulation of ASEAN common core curriculum for multimodal transportation and logistics
management. This could include tertiary curriculum or applied graduate programs for
logistics professionals.

3. Institutionalization of mandatory training for truckers and logistics operators on safe and
eco-driving, preventive maintenance and truck fleet financial management.

13
4. Building of national/sub-regional centers of excellence (e.g. training centers).

INFORMATION AND COMMUNICATIONS TECHNOLOGY

An integrated and seamless logistics service is inseparable from the seamless exchange and
communication of information. Hence, improving ICT infrastructure is crucial in attaining the 2030
vision of the industry.

ASEAN defines ICT infrastructure as any fixed, mobile or satellite communication network, as well
as the internet. Also included are software supporting the development and operation of these
communication networks.

The following strategies are part of the ASEAN Roadmap for Integration of Logistics Services and
should therefore be adopted:

1. Promoting the use of Radio Frequency Identification applications to facilitate cross-border


trade as well as cross-border tracking of goods;

2. Encouraging enterprises to adopt/develop interoperable supply chain management


systems in ASEAN to link up planning solutions, automated storage and retrieval systems
and wireless tracking technologies; and

3. Promoting increased use of telematics as a promising area for fuel efficiency and safety
improvements in truck transport; data collection; and monitoring (e.g. driver training, low-
rolling resistance tires and other improvements that affect fuel consumption).

14
PHASE III (2024-2030): INTEGRATED MULTIMODAL LOGISTICS

This phase involves programs and projects intended to connect the Philippines to ASEAN countries
and other economic regions. Some form part of the Roadmap and Master Plan for ASEAN
Connectivity:

1. Reevaluation of projects with the view toward upgrading and expanding infrastructure to
further implement the ASEAN Framework Agreement on Multimodal Transport.

2. Establishment of an ASEAN Broadband Corridor. The ASEAN Broadband Corridor aims to


promote greater broadband penetration, affordability and universal access in ASEAN in
order to enhance economic growth. It aims to create an environment where e-business, e-
commerce, venture capital, talents and ideas flow easily so that the region is better
positioned to tap into the benefits of ICT and keep pace with the rapid development in other
parts of the world. (ASEAN Connectivity, 2012)

3. Expansion of port infrastructure to accommodate the ASEAN Single Shipping Market.

4. Upgrade of road quality of missing links in the ASEAN Highway Network (AHN). In the 2010
status report of the AHN Project, around 211 kilometers of the designated transit transport
routes in the country remain to be upgraded to at least Class III roads.

5. Conduct of a study on potential multimodal transport corridors to empower parts of ASEAN


to function as land bridges in global supply routes.

15
4. STATE OF THE INDUSTRY

STRUCTURE

SECTORAL COVERAGE

Being an archipelago, the Philippines intermodal logistics system is anchored on its maritime
transport system, supported by a road network linking ports to production areas, markets and
logistics terminals; and an air transport system with strategic regional and local airports (Lidasan &
Castro, 2009).

There is currently no comprehensive profiling of the Philippine logistics industry. The PSIC
provides a listing of the industrys major subsectors and their corresponding activities: (1) freight
rail transport, (2) freight transport by road, (3) sea and coastal freight water transport, (4) inland
freight water transport, (5) freight air transport, (6) storage and warehousing, and (7) support
activities to freight transport, including freight forwarding.

Freight Rail Transport (PSIC Code: 4912). This sector includes freight transport using
railroad rolling stock on mainline networks, usually spread over an extensive geographic
area. It covers inter-urban, suburban and urban railways as well as freight transport over
short-line railroads. Activities of the freight rail sub-sector are negligible as of this writing.
The Duterte administration has, however, identified the building of rail infrastructure as
one of its key projects to address the countrys growing passenger and freight
transportation requirements.

Freight Transport by Road (PSIC Code: 4933). Operations that provide over-the-road
transportation of freight using motor vehicles such as trucks and tractor-trailers comprise
this sector. Table 2 lists subclasses contained within the road freight transport group.

TABLE 2: FREIGHT TRANSPORT BY ROAD SUBCLASS

PSIC code Subclass


49331 Truck-for-hire operation (with driver)
49332 Freight truck operation
49333 Tank truck delivery
49339 Freight transport operation, by road, n.e.c.

Source: 2009 Philippine Standard Industrial Classification (PSIC) Handbook

16
Sea and Coastal Freight Water Transport (PSIC Code: 5012). The transport of freight on
vessels designed for operating on sea or coastal waters, whether scheduled or not; and
transport by towing or pushing of barges, oil rigs, etc are part of this sector. Table 3 lists
subclasses contained within the sea and coastal freight water transport group.

TABLE 3: SEA AND COASTAL FREIGHT WATER TRANSPORT SUBCLASSES

PSIC code Subclass


50121 Ocean freight transport
50122 Inter-island water freight transport
Towing and pushing services on coastal and
50123
trans-oceanic waters

Source: 2009 PSIC Handbook

Inland Freight Water Transport (PSIC Code: 5022). The sector covers transport of freight
via rivers, canals, lakes and other inland waterways, including harbor and ports.

Freight Air Transport (PSIC Code: 5120). The sector encompasses transport of freight by
air over regular routes and on regular schedules; non-scheduled airfreight transport;
launching of satellites and space vehicles; and renting of air transport equipment with
operator for the purpose of freight transportation. Table 4 lists subclasses contained within
the freight air transport group.

TABLE 4: FREIGHT AIR TRANSPORT SUBCLASSES

PSIC code Subclass


51201 Domestic air-freight transport
51202 International air-freight transport
51203 Non-scheduled air-freight transport

Source: 2009 PSIC Handbook

Storage and Warehousing (PSIC Code: 5210). This group covers warehousing of all types
of goods, including blast freezing, but excludes operation of self-storage facilities and
parking for motor vehicles. Listed in Table 5 are subclasses in this group.

17
TABLE 5: STORAGE AND WAREHOUSING

PSIC code Subclass


52101 General bonded warehouses except grain warehouse
52102 Grain warehouses
52103 Customs bonded warehouses
52104 Cold Storage
52109 Storage and warehousing, nec.

Source: 2009 PSIC Handbook

Support Activities to Freight Transport (PSIC Code: 5220). Activities incidental to and
supporting freight transport, such as operation of transport infrastructure, cargo handling,
and forwarding are part of this group. The sub-groups are listed in Table 6.

TABLE 6: SUPPORT ACTIVITIES TO TRANSPORTATION

PSIC code Subclass


5221 Service activities incidental to land transportation
52211 Freight terminal facilities for trucking companies
52212 Operation of parking lots
55213 Operation of toll roads and bridges
52219 Other supporting land transporting activities
5222 Service activities incidental to water transportation
5223 Service activities incidental to air transportation
5224 Cargo Handling
52241 Containerized cargo handling
52242 Non-containerized cargo handling
5229 Other transportation support activities
52291 Freight forwarding services
52292 Customs brokerage
52293 Logistics Services
52299 Activities of other transport agencies, nec.

Source: 2009 PSIC Handbook

18
Another sector classified under the industry is postal and courier service. This involves
pick-up, transport, and delivery of letters and parcels under various arrangements. Table 7
lists down activities under this sub-sector.

TABLE 7 : POSTAL AND COURIER ACTIVITIES

PSIC code Subclass


53100 Postal activities
53200 Courier activities
53201 Private postal service
53202 Messenger Service

Source: 2009 PSIC Handbook

INDUSTRY PLAYERS

According to the final results of the 2010 Annual Survey of Philippine Business and Industry
(ASPBI), the entire Transport and Storage sector (including both passenger and cargo transport)
comprised 2,891 establishments. Support activities for transportation topped the sector with 1,433
establishments or 49.6 percent. Majority of establishments under this industry group were engaged
in freight forwarding services and customs brokerage (ship and aircraft), comprising 78.4 percent
of the total establishments in the industry group. This was followed by other land transport and
transport via buses, industries with 639 establishments (22.1%) and 303 establishments (10.5%),
respectively. Figure 4 shows the percent distribution of establishments by industry group in 2012.

Gross revenue earned by the whole Transport and Storage sector reached P284.1 billion in 2012.
Passenger air transport industry was the top contributor with revenue of P102.9 billion or 36.2
percent of the total. Support activities for transportation industry were second with P76.7 billion
(27.0%), followed by sea and coastal water transport with P48.5 billion (17.1%).

The SECs Top 25,000 Corporations List for 2010 identified 908 players under the 12 considered
subsectors of the logistics industry. Listed firms had consolidated revenues amounting to P141.51
billion while consolidated assets hit P141.53 billion.

Among the 12 sub-industries, the Freight Forwarding Services sector stood out as the largest;
estimates place the sectors revenue share at 33.8 percent of the entire industrys earnings. The top
10 firms from the freight forwarding services sector cornered 12.1 percent of the entire industry
revenue. Four firms grabbed a lions share of the entire industrys revenues, due largely to the
status accorded to them by the government, by virtue of their respective exclusive 25-year port
management concessions. Figure 5 shows the revenue share by sub-industry in 2012. Table 8
shows the major logistics industry players in 2012.

19
FIGURE 4: PERCENT DISTRIBUTION OF ESTABLISHMENTS BY INDUSTRY GROUP,
TRANSPORTATION AND STORAGE SECTOR (2012)

Source: Census of Philippine Business and Industry

20
FIGURE 5: REVENUE SHARE BY SUB-INDUSTRY, 2012 (IN %)

Source: Census of Philippine Business and Industry

TABLE 8: MAJOR PLAYERS IN THE PHILIPPINE LOGISTICS INDUSTRY, 2012

Net
Revenues Income
Firm Subsector
(in million P) (Loss), (in
million P)
SMC Shipping and Lighterage Interisland water freight
5,346 494
Corp. transport
Interisland water freight
Oceanic Container Lines, Inc. 1,996 84
transport
Interisland water freight
NMC Container Lines, Inc. 1,956 28
transport
Interisland water freight
Lorenzo Shipping Corp. 1,838 62
transport
Storage and Warehousing,
Redsystems Co., Inc., The 4,047 153
N.E.C.
International Container Terminal Service activities incidental to
16,692 3,037
Services, Inc. water transportation
Service activities incidental to
Philippine Ports Authority 10,482 3,158
water transportation
Service activities incidental to
Asian Terminals, Inc. 4,644 1,585
water transportation

21
Service activities incidental to
Lufthansa Technik Philippines, Inc. 5,437 (327)
air transportation
DHL Express (Philippines) Corp. 2,904 (25) Freight forwarding services
Federal Express Corp. 2,734 (1,101) Freight forwarding services
Schenker Philippines, Inc. 2,558 61 Freight forwarding services
Panalpina World Transport
1,785 18 Freight forwarding services
(Philippines), Inc.
Nippon Express Philippines Corp. 1,645 107 Freight forwarding services
LF (Philippines), Inc. 7,717 92 Logistics services
Analog Devices Gen. Trias, Inc. 6,649 798 Logistics services
Toyota Tsusho Philippines Corp. 4,962 158 Logistics services
JR & R Distributors, Inc. 4,950 9 Logistics services
SIIX Logistics Phils., Inc. 4,858 115 Logistics services
Sumitronics Phils., Inc. 3,062 2 Logistics services
Hitachi Cable Asia Pacific (HCAP)
1,582 3 Logistics services
Pte. Ltd.
Mitsui Bussan Frontier
1,579 (112) Logistics services
(Philippines), Inc.
Nagase Philippines International
1,463 (12) Logistics services
Services Corp.

22
Air

Average revenues registered by this sector grew by 20.8 percent to P99.7 million in 2010 after a
slump of 21.8 percent in 2009. Profits, however, experienced a slight dip of 1.9 percent to P4.4
million. Average firm size in 2010 stood at P89.26 million, an increase of 7.7 percent from 2009.

According to the CAB, cargo traffic handled by air freight forwarders has been on an uptrend since
2003, except for slumps in 2009 and 2011, and a slight dip in 2012. In 2013, air freight chargeable
weights increased by 15.7 percent to 57.39 million kilograms. Direct shipments made up more than
half of the total, followed by consolidations (47.3 percent) and breakbulking (0.06 percent).

FIGURE 6: DOMESTIC AIR FREIGHT FORWARDERS CARGO TRAFFIC, 2002-2013 (IN KILOGRAMS)

Source: Civil Aeronautics Board (CAB)

Cargo traffic handled by domestic scheduled air services also registered positive growth for 2013,
increasing by 9.8 percent to 226.89 million kilograms.

23
FIGURE 7: DOMESTIC SCHEDULED CARGO TRAFFIC (2004-2013)

Source: Civil Aeronautics Board (CAB)

Water

Almost 100% of commodity movements are carried by water transport vessels, which conveyed
P638.83 million worth of goods in 2013.

Domestic interisland shipping consists of liner, tramping, tanker, ferry/fast craft, roll on-roll off
(RoRo), and barging operations, according to the Center for the Advancement of Trade Integration
& Facilitation (CATIF, 2012).

Liner ships transport passenger and cargo with fixed sailing schedules.

Trampers are freight vessels that are chartered, hence they do not have a regular route or schedule,
and only handle cargoes.

Tankers specialize in oil, liquefied petroleum gas, and chemicals. Ferries or fastcraft and roll on-roll
off (RoRo) vessels have fixed schedules and routes but travel short distances; the former carry
passengers while the latter carry both passengers and vehicles as rolling cargo.

Barges and tugs are used in the ship-to-shore movement of cargo while some companies own
industrial carriers to transport their own cargo using their own ports. An inventory is shown in
Table 9.

24
TABLE 9: NUMBER OF VESSELS BY TYPE OF OPERATION (2012)

Service Type Operation


Fishing Liner Tramper
Barges, floating docks 0 1 179
Bulk carrier 0 0 1
Cargo, LCT 34 97 1143
Cargo and passenger 44 756 40
Catcher 10 3 0
Tanker, gas carrier, liquid cargo 5 2 190
Company use, service boat 5 53 49
Container 0 2 7
Dredger, tug, towing, salvage 65 3 457
Fish carrier, vessel 4,976 18 24
Miscellaneous, special purpose 0 6 29
Yacht 0 3 1
Passenger 53 2,315 45
Private, skiff, sonar boat 6 3 15
Pilot 0 2 5
Pleasure 1 86 52
Ferry 0 10 0
RoRo 2 40 0
TOTAL 5,201 3,400 2,237

Source: Maritime Industry Authority (MARINA) cited in CATIF (2012)

25
Road

Trucks are the main mode of transporting cargo from producers to ports and markets. There were
341,505 trucks, 33,564 buses, and 37,458 trailers registered in 2012. A breakdown of registered
motor vehicles is provided below.

TABLE 10: REGISTERED MOTOR VEHICLES (2007-2012)

2007 2008 2009 2010 2011 2012


Motor Vehicles 5,530,052 5,891,272 6,220,433 6,634,855 7,138,942 7,463,393
Private 4,558,727 4,908,332 5,216,646 5,631,377 6,096,423 6,417,809
Cars 700,384 713,175 732,659 759,683 788,372 808,968
Utility vehicles 1,534,634 1,535,003 1,609,698 1,707,705 1,764,865 1,821,527
Buses 6,696 6,184 7,045 7,753 8,769 5,653
Trucks 255,522 269,367 281,282 288,427 298,789 308,644
Motorcycle/ Tricycle 2,039,850 2,360,304 2,559,997 2,841,646 3,206,255 3,440,777
Trailers 21,641 24,299 25,965 26,163 29,373 32,240
For hire 887,023 899,211 931,048 934,176 970,946 969,784
Cars 37,648 35,342 39,812 41,787 33,131 36,426
Utility vehicles 215,585 215,929 217,967 217,338 229,330 220,114
Buses 23,142 23,032 25,519 26,566 25,262 27,298
Trucks 16,919 17,941 21,435 21,373 21,786 23,867
Motorcycle/ Tricycle 591,254 604,238 623,663 624,078 658,466 658,675
Trailers 2,475 2,729 2,652 3,034 2,971 3,404
Government 70,528 73,307 68,230 65,060 67,324 72,204
Cars 6,798 6,591 3,684 3,355 3,326 3,653
Utility vehicles 38,406 39,586 37,910 36,660 37,959 39,900
Buses 275 487 442 590 403 613
Trucks 8,687 8,813 8,779 7,974 8,734 8,994
Motorcycle/ Tricycle 16,159 17,754 17,301 16,415 16,728 17,230
Trailers 203 76 114 66 174 1,814
Total 11,046,330 11,772,122 12,436,357 13,265,468 14,273,635 14,923,190

Source: Land Transportation Office

26
LINKAGES WITH OTHER I NDUSTRIES

The logistics industry, owing to its nature, has extensive linkages with several industries.

According to the 2006 NSO Input-Output Table, primary inputslabor, capital, taxes and surpluses
account for 38.4 percent of total inputs, while the remaining 61.6 percent come from various
industries.

Intermediate demandor demand from other industries where logistics services are used as inputs
in producing other commoditiesconstitutes 48.9 percent of the total. Final demand, pertaining to
demand driven by end-user consumption, accounts for the remaining 51.1 percent.

Backward linkages

The manufacturing sector has the biggest contribution with 59.5 percent share in total value of all
intermediate inputs. Most come from the manufacture of materials used in vehicle maintenance
such as leather, machines and non-electric machinery and equipment, rubber tires, and wires and
cables.

The next largest source of intermediate inputs is the transportation, communication and storage
sector with a 17.2 percent share (or, equivalently, nearly 11 percent of total inputs). The majority of
these inputs come from the communications sector, such as telephone services and wireless
telecommunications.

The finance sector is the third largest source of intermediate inputs, accounting for almost 16
percent of the total intermediate inputs. Contributing the largest from this sector is insurance.

Operating surplus is another important input (accounting for 16.8 percent of total inputs) to
finance investment costs and other operating expenses. All other industries share the remaining 7.3
percent.

One other main input of the logistics industry is labor, accounting for 6.2 percent of the combined
value of all inputs. The industry relies on quality workers to operate transport vehicles and ensure
the orderly and cost-efficient movement of cargoes.

Another item that affects the industrys backward linkages is oil. The price of oil has considerable
effect on the sectors ability to keep its fees and charges at competitive rates.

27
TABLE 11: INPUT REQUIREMENTS FOR THE LOGISTICS INDUSTRY

Percent Share per Unit


of Output
Intermediate Inputs 0.616
Manufacturing 0.366
Construction 0.001
Transportation, Communication, and Storage 0.106
Trade 0.006
Finance 0.098
Ownership of Dwellings and Real Estate 0.000
Government Services 0.009
Private Services 0.029
Primary Inputs 0.384
Compensation (Wages) 0.062
Depreciation 0.117
Indirect Taxes - Subsidies 0.037
Operating Surplus 0.168
Total Inputs 1.000

Source: 2006 NSO Input-Output Table; IDEAs computations

Forward linkages

The demand for logistics services comes mostly from two sources: (1) transactions owing to
personal consumption and (2) the manufacturing sector, accounting for the bulk of total output.

Personal consumption refers to the purchase of households and individuals of logistics services for
their own use. Manufacturing firms, mostly those involved in radio and TV, toys, machines and
other heavy equipment, purchase logistics services as an input in producing their products.

In the Philippines, the manufacturing and agricultural sectors heavily utilize containerized cargo for
their production and trading requirements.

After manufacturing, the transport, communication and storage sector is the second largest source
of intermediate demand. Most of this demand comes from telephone services. The transport,
communication and storage sector is followed by the private service sector, with banks and hotels
cornering the biggest share in demand.

28
The logistics industry is expected to face stable demand since almost all industries that produce or
manufacture and consume or utilize physical goods require the sectors services.

TABLE 12: DISTRIBUTION OF DEMAND FOR LOGISTICS SERVICES

Share in demand
Intermediate demand 0.489
Agriculture, Fishery, and Forestry 0.036
Mining and Quarrying 0.004
Manufacturing 0.216
Construction 0.001
Utilities 0.028
Transportation, Communication, and Storage 0.128
Trade 0.009
Repairs 0.001
Finance 0.024
Ownership of Dwellings and Real Estate 0.000
Government Services 0.006
Private Services 0.036
Final demand 0.511
Personal Consumption Expenditure 1.325
Gross Government Consumption Expenditure 0.000
Gross Fixed Capital Formation 0.000
Changes in Stocks (0.001)
Net Exports (0.814)
Total demand 1.000

Source: 2006 NSO Input-Output Table; IDEAs computations

REGULATORY FRAMEWORK

Regulation of Port Systems

The Philippine Port System has four categories: (a) the PPA ports system consisting of public and
private ports; (b) ports under the jurisdiction of independent port authorities (IPA); (c) municipal
ports under LGUs; and (d) the RORO terminal system (RRTS).

29
The PPA port system is the largest and most extensive of the four categories, comprising more than
100 PPA-owned ports and over 500 commercial and industrial private ports. The largest common-
use ports in the country the Manila International Container Terminal (MICT), South Harbor and
the North Harbor are under the supervision of PPA.

Llanto, et. al. (2005) noted the conflicting roles of PPA, a government-owned and -controlled
corporation attached to the DOTC. In addition to being developer, operator and regulator of public
ports, it carries out regulatory functions over private ports. It also approves cargo-handling rates
and port charges. PPA has the power to limit entry of private port operators if potential entrants
can pose a threat to the operations of PPA. Table 13 summarizes the regulatory roles of PPA.

TABLE 13: REGULATORY FUNCTIONS OF PPA

Port Functions
1. PPA develops, owns, maintains and regulates its ports.
2. It sets and collects port charges such as wharfage dues, berthing/usage
fees, and terminal handling costs.
3. It approves increases in cargo-handling rates and receives 10% and 20%
from cargo handling revenues on domestic and foreign cargo, respectively.
Public 4. It awards contracts to private terminal operators (e.g., 25-year
management contract with International Container Terminal Services, Inc
for the operation of MICT; and the 10-year contract with Asian Terminals
Inc for South Harbor), and cargo-handling operators (two-year
probationary contract/10-year contract without public bidding). Under
such concessions, port charges and cargo handling rates are set by the
PPA.
5. The regulation comes in the form of issuance of permit to construct and
operate the port.
Private Ports 6. It approves increases in cargo-handling rates and port charges such as
berthing/usage fees and wharfage dues.
7. It collects shares from port charges (50%).

Source: World Bank Meeting Infrastructure Needs, Philippine Transportation Sector Review (2004)

30
Regulation of Shipping Industry

The MARINA is the primary regulatory body in the shipping industry. It is under the supervision of
DOTr, and carries out developmental and regulatory functions. The other regulatory agencies, with
their corresponding functions, are listed in Table 14.

TABLE 14: SHIPPING INDUSTRY REGULATORY FRAMEWORK

Institution Regulatory Functions

Tasked to oversee the development and promotion of the shipping


Maritime Industry
industry, thus, vested with economic regulatory powers. Marina is
Authority
also in charge of certification of Filipino seafarers.
Together with PPA and MARINA, tasked to implement safety
shipping-related marine pollution rules and standards, maintains
Philippine Coast Guard
and operates aids to navigation, and enforces maritime laws and
regulations.
Department of
Regulates all kinds of environmental pollution, including marine
Environmental and
(e.g. oil spillage, garbage dumping).
Natural Resources
Commission on Higher
Education (CHED), CHED regulates all specialized schools, including those that offer
TESDA, Maritime maritime education and training of various types of seamen
Training Council
National
Regulates all forms of telecommunication, including grant of radio
Telecommunications
frequencies for vessels whether ship-to-ship, ship to shore
Commission
Professional Regulatory Grants license to professionals, including those who completed a
Commission course on Marine Engineering and Customs Brokerage

Source: World Bank Meeting Infrastructure Needs, Philippine Transportation Sector Review (2004)

31
HISTORICAL PERFORMANCE

SHARE TO GROSS DOMESTIC PRODUCT

The logistics industry is generating greater value than before, primarily due to the birth of a more
competitive environment and the fragmentation of the production process especially in the
manufacturing sector.

The transport and storage sectors jointly generated P48.57 billion of gross-value added (GVA) in Q3
2014, of which P25.64 billion was generated by land transport, P14.23 billion by storage and
services incidental to transport, P5.63 billion by air transport, and P3.08 billion by water transport.

For the Q1-Q3 2014 period, GVA grew 11.7 percent year-on-year from P143.13 billion in Q1-Q3
2013. The transport and storage sector made up 3.05 percent of Philippines total GVA from Q1-Q3
2014. On a quarterly basis, however, the combined GVA of the transport and storage sectors fell
19.5 percent in the third quarter of 2014 compared to the previous quarter.

The year 2013 also registered positive growth with the combined GVA rising 6.6 percent (modest
compared to 2012s 8.3 percent growth), to P190.47 billion from P178.75 billion in 2012. In 2011,
GVA grew 7.1 percent. The robust growth in personal and household consumption has driven the
strong performance of the logistics industry in previous years.

FIGURE 8: LEVELS AND GROWTH RATES (Q1 2009-Q1 2014)

Source: Philippine Statistics Authority (PSA)

32
The total quantity of domestic trade transactions in 2013 also increased by 0.6 percent, from 21.57
million tons reported in 2012 to 21.7 million tons in 2013. Likewise, the total value of commodities
that flowed within the country increased by 10.8 percent, from P578.21 billion in 2012 to P640.51
billion, in 2013. The local water transport sector was responsible for more than 99 percent of the
countrys volume and value of domestic trade commodities movement.

TABLE 15: QUANTITY AND VALUE OF DOMESTIC TRADE BY MODE OF TRANSPORT (2012-2013)

2013 2012
Quantity Value Quantity Value
(in tons) (in P '000s) (in tons) (in P '000s)
Philippines 21,697,595.00 640,509,026.00 21,567,772.00 578,205,973.00
Water 21,663,010.00 638,828,737.00 21,532,690.00 575,923,076.00
Air 34,585.00 1,680,289.00 35,082.00 2,282,898.00

Source: PSA

A 2005 survey on Inter-Regional Passenger and Freight Flow conducted by the University of the
Philippines National Center for Transportation Studies shows that road transport had, by far, the
largest share of freight transport in terms of volume and tonne-kilometers, whereas other modes
were comparatively negligible. The Australian Agency for International Development (AusAID) in
2008 reported a more balanced yet still prevalent share of 58% for road freight and 42% for sea
freight.

TABLE 16: MODE SHARE OF ANNUAL COMMODITY MOVEMENT, 2005

Weight Ton-km
Mode (thousand Share travelled Share
metric tons) (thousand)
Road 178,797.89 86.61% 34,643,567.46 99.97%
Rail 2.14 0.00% 0.30 0.00%
Water 27,581.68 13.36% 11,455.26 0.03%
Air 48.68 0.02% 33.04 0.00%
TOTAL 206,430.38 34,655,056.06

Source: UP NCTS 2005

Despite the lack of more recent data, it is safe to assume that road transport remains the countrys
principle freight mode. This skewed distribution strengthens the case of this roadmap to improve

33
multimodal transportation, thus shifting freight from road to other, more environment-friendly
modes such as rail. It also underscores the need to focus energy-efficiency actions on the road
freight sector.

Data on the significance of the freight transport sector in terms of energy consumption or emissions
in comparison to other sectors in the Philippines is limited. According to DOE (2010), utility
vehicles and trucks are the main sources of transport greenhouse gas (GHG) emissions, comprising
only about 5% of total vehicle stock but emitting as much as 37% and 33%, respectively, of the total.
This is consistent with evidence from other Asian countries where despite generally fewer vehicle
numbers, freight transport accounts for a disproportionate share of emissions and fuel
consumption. Transport (passenger and freight) consumes more energy than any other sector in
the Philippines. In 2009, it accounted for 37.7% of total energy consumption, about 80% of which is
typically consumed by the road sector.

FIGURE 9: GHG EMISSIONS FROM ROAD TRANSPORT BY VEHICLE TYPE IN 2007

Source: DOE, 2010

The National Capital Region (NCR) accounted for the largest share among the regions at 36.1
percent (P230.25 billion) in the total value of domestic trade in 2013. Central Visayas was next with
transactions amounting to P103.09 billion (16.2%). Western Visayas followed, contributing P79.92
billion (12.5%). Northern Mindanao was fourth with P59.30 billion (9.3%) and Central Luzon fifth
with P40.03 billion (6.3%). Cagayan Valleys domestic trade contributed the least share with only
P177,000.

34
Of the total value of commodities coming from NCR, the major regions of destination were Central
Visayas (P59.96 billion), Western Visayas (P52.14 billion), Northern Mindanao (P35.00 billion),
Davao Region (P29.56 billion), and Zamboanga Peninsula (P16.47).

The top three commodities traded from NCR were food and live animals, manufactured goods
classified chiefly by material, and machinery and transport equipment with values amounting to
P66.36 billion (26.8%), P52.02 (22.2%) and P31.76 (14.5%), respectively.

FIGURE 10: VALUE OF DOMESTIC TRADE BY REGION, IN THOUSAND PESOS (2013)

Source: Philippine Statistics Authority

SHARE TO EMPLOYMENT

Consistent with its share to the economy, the services sector of which logistics is a part also
contributes the largest to the countrys total employment, and this has been on an uptrend.

In 2012, this sector contributed 52.6% to total employment. Preliminary results of the Labor Force
Survey (LFS) show that for 2014, this increased to a 53.6% share to total employment.

35
Among all industries under the services sector, wholesale and retail trade, as well as repair of
motor vehicles and motorcycles employed the most number of persons, contributing 34.9% to the
total employment in the services sector (or 18.7% of total national employment). This was followed
by the trade and storage sector, registering a 13.0% share of the total employment in the services
sector (or 7.0% of total national employment).

The transport and storage sector is one of the top five biggest contributors to total employment in
the Philippines. It follows the agriculture, hunting and forestry sector (comprising 26.9% of total
employment), wholesale and retail trade and repair of motor vehicles and motorcycles (18.7%),
and manufacturing (8.3%).

TABLE 17: PERCENTAGE SHARE TO TOTAL EMPLOYMENT BY INDUSTRY GROUP, 2014

ALL INDUSTRIES 100.0%


Agriculture 30.4%
Agriculture, Hunting and Forestry 26.9%
Fishing and Aquaculture 3.6%
Industry 15.9%
Mining and Quarrying 0.6%
Manufacturing 8.3%
Electricity, Gas, Steam and Air Conditioning Supply 0.2%
Water Supply; Sewerage, Waste Management and Remediation Activities 0.1%
Construction 6.6%
Services 53.6%
Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles 18.7%
Transportation and Storage 7.0%
Accommodation and Food Service Activities 4.3%
Information and Communication 0.9%
Financial and Insurance Activities 1.3%
Real Estate Activities 0.4%
Professional, Scientific and Technical Activities 0.5%
Administrative and Support Service Activities 2.8%
Public Administration and Defense; Compulsory Social Security 5.1%
Education 3.3%
Human Health and Social Work Activities 1.3%
Arts, Entertainment and Recreation 0.9%
Other Service Activities 5.6%
Activities of Households as Employers; Undifferentiated Goods and Services-
1.4%
producing Activities of Households for Own Use
Activities of Extraterritorial Organizations and Bodies 0.0%

Source: Bureau of Labor and Employment Statistics (BLES)

36
TRADE PERFORMANCE

The logistics sector plays a critical role in trade facilitation. Reducing cost and improving the quality
of logistics and transport systems improve international market access and lead directly to
increased trade.

According to data from the World Trade Organization (WTO), the Philippines accounted for 0.3%
(or USD56.7 billion) of the worlds exports in 2013, of which 73.4% were manufactures, 11.3%
were agricultural products, and 9.8% were fuels and mining products.

Top destinations were Japan (cornering 21.2% of Philippine exports), the United States (14.5%),
China (12.2%), European Union (11.4%), and Hong Kong (8.2%). For imports, the country
registered a 0.34% share (or USD65.1 billion), of which 64.9% were manufacturers, 23.7% were
fuels and mining products, and 11.0% were agricultural products. The main import sources were
China (13.1% of imports), the United States (10.9%), European Union (10.0%), Japan (8.6%), and
Chinese Taipei (7.8%).

In the ASEAN region, the Philippines ranked 6th out of 11 countries in terms of merchandise
exports, cornering 4.5% of ASEANs exports to the world after Singapore (representing 32.2% of
ASEANs exports), Thailand (17.9%), Malaysia (17.9%), Indonesia (14.4%), and Vietnam (10.4%).
In terms of imports, Philippines also ranked 6th out of 11 countries, representing 5.2% of ASEANs
imports from other parts of the world.

TABLE 18: DISTRIBUTION OF ASEAN MERCHANDISE TRADE WITH REST OF THE WORLD, % SHARE (2013)

Country Exports Imports


Singapore 32.2 29.9
Thailand 17.9 20.1
Malaysia 17.9 16.5
Indonesia 14.4 15.0
Vietnam 10.4 10.6
Philippines 4.5 5.2
Cambodia 0.7 1.0
Myanmar 0.9 1.0
Brunei Darussalam 0.9 0.3
Lao People's Dem. Rep. 0.2 0.2
Timor-Leste 0.0 0.1
ASEAN 100.0 100.0

Source: World Trade Organization

37
According to data from the United Nations Conference on Trade and Development (UNCTAD), about
7.2 percent of the total services export in 2013 is from the transport sector a decline from ten
years ago when the transport sector registered a 28.1 percent share of total services export. The
same trend can be seen in imports despite the increase in both exports and imports of the total
services sector. From a 45.2 percent share of total services imports in 2003, the share of the
transport sector to total services imports declined to only 24.0 percent in 2013.

The Philippines has relatively balanced trade flows, with total service exports comprising 50 to 60
percent of the total. The situation is different for the transport sector in terms of trade balance.
Transport imports generally account for 70 to 75 percent range of the total transport trade.

TABLE 19: PHILIPPINES EXPORT AND IMPORT IN TOTAL SERVICES AND TRANSPORT SECTOR,

IN MILLION USD (2003-2013)

2006 2007 2008 2009 2010 2011 2012 2013


Exports 6,444 9,766 9,717 13,951 17,607 18,740 20,322 21,685
Total Services
Imports 6,307 7,517 8,557 9,020 11,864 12,085 14,009 14,628
Exports 1,151 1,323 1,295 1,002 1,345 1,418 1,590 1,557
Transport
Imports 3,452 3,844 4,209 2,605 3,311 3,202 3,611 3,516

Source: United Nations Conference on Trade and Development (UNCTAD)

Trends on the frequency of shipcalls at Philippine ports and the volume of cargo handled suggest an
overall positive impact on trade, especially for domestic cargo.

From 1999 to 2013, shipcalls by domestic vessels increased 21.6 percent. Compared to 2012,
shipcalls by domestic vessels slightly increased by 0.5 percent. The number of shipcalls by foreign
vessels, however, remained almost constant, probably because the Philippines is not a major
destination of foreign vessels in the same way that Port Klang in Malaysia and the Port of Singapore
are major transshipment hubs for ASEAN, according to Llanto and Navarro (2012).

38
FIGURE 11: SHIP CALLS, AT BERTH AND ANCHORAGE (1999-2013)

Source: Philippine Ports Authority

Figure 12 shows total cargo throughput handled at Philippine ports generally increased from 1999
to 2013. Foreign cargo led the growth, with foreign cargo exports growing 280.5 percent and
imports growing 23.2 percent for the period in review. Compared with 2012, foreign cargo
throughput handled at Philippine ports in 2013 increased by 4.5 percent. Domestic cargo handled
in ports, on the other hand, decreased by 0.4 percent from 1999 to 2013 and increased only slightly
by 1.7 percent from 2012 to 2013. The data must be interpreted with caution, given the growing
population and demand for domestically traded goods. Llanto and Navarro (2012) cite the growing
inter-island trade via RORO ferries as reason for some cargoes no longer being measured by port
authorities.

Data from the Philippine Statistics Authority (PSA) reveals that total external trade in goods
increased by 4.9 percent from USD9.87 billion in October 2013 to USD10.36 billion in October 2014.
The growth is primarily driven by an increase in imports due to the positive performance of eight
out of the top ten major commodities for October 2014. These were: Plastics in Primary and Non-
Primary Forms; Iron and Steel; Other Food & Live Animals; Miscellaneous Manufactured Articles;
Mineral Fuels, Lubricants and Related Materials; Telecommunication Equipment and Electrical
Machinery; Industrial Machinery and Equipment; and Cereals and Cereal Preparations.

39
FIGURE 12: CARGO THROUGHPUT, IN METRIC TONS (1999-2013)

Source: Philippine Ports Authority

FIGURE 13: PHILIPPINE TOTAL TRADE ANNUAL GROWTH RATES, % (OCTOBER 2013-OCTOBER 2014)

Source: Philippine Statistics Authority (PSA)

40
INVESTMENTS IN THE SECTOR

Based on DTI figures, the total approved investments for the transport and storage sector increased
20.6% to P7.39 billion for January-June 2014 from P6.12 billion in the same period in 2013. This is
a turnaround from the slump experienced in the previous year, where investments dropped 64.7%
from P17.23 billion in the first half of 2012 to P6.12 billion during the same period in 2013.

On a yearly basis, investments for the transport and storage sector declined 7.8% from P84.15
billion in 2012 to P77.60 billion in 2013. Investments in the sector comprised 10.3% of the total
investments in the country in 2013. The industry followed electricity, gas, steam and air-
conditioning supply which cornered 45.8% of the total investments; real estate activities, 15.2%;
and manufacturing, 14.2%.

Tables 20 and 21 present the levels and growth rates of approved investments by industry,
respectively.

TABLE 20: TOTAL APPROVED INVESTMENTS BY INDUSTRY (2012-2013; JAN-JUN 2012 TO 2014)

Jan-Jun Jan-Jun Jan-Jun


2012 2013
2012 2013 2014
(in P M) (in P M)
(in P M) (in P M) (in P M)
TOTAL APPROVED INVESTMENTS 697,677.90 754,032.50 217,247.30 329,114.80 365,185.40
Electricity, gas, steam & air
156,828.80 345,656.30 97,080.10 198,333.10 178,540.60
conditioning supply
Real estate activities 120,046.00 114,731.40 36,594.40 63,291.40 67,449.10
Manufacturing 203,827.60 107,347.30 31,706.50 22,199.50 54,980.60
Transportation and storage 84,151.20 77,604.10 17,228.70 6,124.10 7,386.30
Accommodation and food service
39,516.60 64,450.10 9,395.70 26,461.80 17,593.30
activities
Administrative and support
18,030.30 26,117.50 3,179.50 6,226.90 7,480.20
service activities
Information and communication 27,997.40 4,447.70 982.20 2,046.20 2,942.30
Agriculture, forestry and fishing 8,128.30 4,023.00 5,656.00 888.30 2,566.50
Construction 18,786.40 575.70 8,523.50 569.00 24,799.00
Others 20,365.30 9,079.40 6,900.70 2,974.50 1,447.50

Source: Department of Trade and Industry (DTI)

41
TABLE 21: YEAR-ON-YEAR GROWTH OF TOTAL APPROVED INVESTMENTS BY INDUSTRY, %

Jan-Jun Jan-Jun
2012 2013
2013 2014
TOTAL APPROVED INVESTMENTS (6.62) 8.08 51.49 10.96
Electricity, gas, steam & air conditioning
(5.55) 120.40 104.30 (9.98)
supply
Real estate activities (37.38) (4.43) 72.95 6.57
Manufacturing (20.34) (47.33) (29.98) 147.67
Transportation and storage 217.48 (7.78) (64.45) 20.61
Accommodation and food service activities 250.65 63.10 181.64 (33.51)
Administrative and support service activities 17.73 44.85 95.85 20.13
Information and communication 412.28 (84.11) 108.33 43.79
Agriculture, forestry and fishing 357.73 (50.51) (84.29) 188.92
Construction 17,998.65 (96.94) (93.32) 4,258.35
Others (72.14) (55.42) (56.90) (51.34)

Source: Department of Trade and Industry (DTI)

Net foreign direct investments (FDI) for the transport, storage and communications sector were
highest during the January-October 2014 period since 2010. Based on Bangko Sentral ng Pilipinas
(BSP) data stretching back to 2005, the industry registered net FDI of USD 85.1 million, compared
with the whole of 2013s USD 21.3 million and 2012s USD 3.8 million.

INDUSTRY COSTS

According to CATIF, Costs for operating the transport and storage industry summed up to P204.22
billion, according to the 2010 ASPBI. Passenger air transport industry incurred the highest cost
with P84.9 billion (41.6%) followed by support activities for transportation with P38.8 billion
(19.0%). Sea and coastal water transport industry came in third with P35.6 billion (17.4%).

Based on the World Bank Doing Business data for 2015, it takes Philippine firms an average of 15
days to export and 15 days to import (Table 22). Both figures are better than the East Asia and
Pacific average of 20.2 days and 21.6 days, respectively, but are worse than the Organization for
Economic Cooperation and Development (OECD) average of 10.5 days and 9.6 days, respectively.

The cost of exporting is lower in the Philippines (USD755.0 per container) than the East Asia and
Pacific (USD864.0 per container) and OECD (USD1,080.3 per container) averages. Importing,
however, costs more in the Philippines (USD915.0 per container) than the East Asia and Pacific

42
TABLE 22: EXPORT AND IMPORT PROCEDURES DURATION (NUMBER OF DAYS)

Customs
Ports and Inland
Export procedures duration Documents clearance
terminal Transportation TOTAL
(number of days) Preparation and
handling and handling
inspections
Brunei 11 2 3 3 19
Cambodia 14 3 3 2 22
East Timor 14 4 8 2 28
Indonesia (Jakarta) 11 1 2 3 17
Laos 15 2 3 3 23
Malaysia 5 1 2 3 11
Myanmar 12 3 3 2 20
Philippines 8 2 3 2 15
Singapore 2 1 1 2 6
Thailand 8 1 3 2 14
Vietnam 12 4 3 2 21

Customs
Ports and Inland
Import procedures duration Documents clearance
terminal Transportation TOTAL
(number of days) Preparation and
handling and handling
inspections
Brunei 11 1 2 1 15
Cambodia 15 3 4 2 24
East Timor 12 5 7 2 26
Indonesia (Jakarta) 13 4 7 2 26
Laos 13 7 2 4 26
Malaysia 3 1 2 2 8
Myanmar 10 4 6 2 22
Philippines 8 2 3 2 15
Singapore 1 1 1 1 4
Thailand 8 2 2 1 13
Vietnam 12 4 4 1 21

Source: World Bank

43
(USD895.6 per container) average but less than the OECD average (USD1,100.4 per container). The
import and export procedures cost among ASEAN countries (plus East Timor) is shown on Table 23.

FIGURE 14: REVENUE AND COST FOR TRANSPORT


AND STORAGE ESTABLISHMENTS BY INDUSTRY GROUP (2010)

Source: 2010 Annual Survey of Philippine Business and Industry (ASPBI)

44
TABLE 23: EXPORT AND IMPORT PROCEDURES COST (US$)

Customs Ports
Inland
Export procedures Documents clearance and
Transportation TOTAL
cost (USD) Preparation and terminal
and handling
inspections handling
Brunei 190 50 240 225 705
Cambodia 220 275 100 200 795
East Timor 140 50 120 100 410
Indonesia (Jakarta) 135 125 165 160 585
Laos 290 150 160 1350 1950
Malaysia 85 60 120 260 525
Myanmar 175 80 165 200 620
Philippines 105 85 225 340 755
Singapore 120 50 150 140 460
Thailand 175 50 160 210 595
Vietnam 160 100 150 200 610

Customs Ports
Inland
Import procedures Documents clearance and
Transportation TOTAL
cost (USD) Preparation and terminal
and handling
inspections handling
Brunei 150 80 315 225 770
Cambodia 225 280 225 200 930
East Timor 145 50 120 100 415
Indonesia (Jakarta) 210 125 165 160 660
Laos 205 195 160 1350 1910
Malaysia 120 60 120 260 560
Myanmar 165 80 165 200 610
Philippines 90 185 300 340 915
Singapore 100 50 150 140 440
Thailand 135 255 160 210 760
Vietnam 130 95 175 200 600

Source: World Bank

45
SUPPLY AND DEMAND

SEA AND COSTAL FREIGHT TRANSPORT

Production Capacity

Located within the Greater Capital Region (GCR), the Port of Manila is the premier trading hub for
the Philippines maritime trade. It hosts three major facilities: Manila International Container
Terminal, Manila South Harbor and Manila North Harbor. From 1995 to 2013, the utilization rate at
the Port of Manila averaged 63 percent with the 60 percent in 2012 as its lowest point (see Table
24). During the same year, the container traffic at Manila reached 2.7 million twenty-foot equivalent
units (TEUs).

In comparison, the combined capacity of the Batangas and Subic ports was 1 million TEUs with a
utilization rate of only 5 percent, according to a 2014 study commissioned by the Japan
International Cooperation Agency (JICA) and NEDA. The Roadmap for Transport Infrastructure
Development for Metro Manila and Its Surrounding Areas (Region III and Region IV-A) pointed out
that due to increasing congestion at Manila ports, for the short-term, incentives to encourage
shippers to use the ports of Subic and Batangas as well as placing a capacity limit for future
expansion of Manila ports are necessary.

TABLE 24: CONTAINER PORT DEMAND, 1995-2013

Year GCR Total GCR share, in percent


1995 1,690.2 2,509.1 67.4
2000 2,293.1 3,568.4 64.3
2005 2,692.2 3,870.1 69.6
2006 2,754.6 4,284.8 64.3
2007 2,880.3 4,538.8 63.5
2008 3,027.8 4,678.1 64.7
2009 2,902.5 4,651.3 62.4
2010 3,192.8 5,207.4 61.3
2011 3,514.7 5,727.0 61.4
2012 3,539.2 5,947.5 59.5
2013 3,653.7 6,150.0 59.4

Source: PPA

46
According to the study, the main challenge to the development of the ports of Manila is
tempering its continued growth, so that more cargo can flow into Subic and Batangas. JICA
helped build the Subic and Batangas ports. The study said the phaseout of the ports of Manila,
as called for by certain sectors, is not tenable in the short- to medium-term period because
the total capacity in the two alternate ports (Batangas and Subic) is insufficient to handle all
the container traffic (in Manila ports)which in 2012 exceeded the 2.7 million TEUs mark.

Demand

According to the Center for the Advancement of Trade Integration and Facilitation or CATIF (2012),
almost 100% of commodity movements are by water transport vessels. Trends on the frequency of
shipcalls and cargo volume suggest an increasing demand for water transport service. From 1999
to 2013, shipcalls by domestic vessels rose 21.6 percent and total cargo throughput generally
increased. Shipcalls by foreign vessels, however, remained almost constant, the Philippines not
being a major transshipment hub like Singapore.

When it comes to container demand, imports trumps exports (Table 25). This trend is likely to be
sustained given robust growth in the consumption and investment sectors. The concentration of
economic activity in the GCR, which accounts for around two-thirds of national output, also
indicates continued growth in container traffic in the Port of Manila. Given capacity constraints, this
points to the need for steady port capacity investments and expansion.

TABLE 25: CONTAINERIZED CARGO IMPORT/EXPORT BALANCE, IN THOUSAND TEU

Port 2005 2010 2013*


Exports 530,633 442,156 501,778
Manila Imports 899,757 1,224,104 1,354,800
I/E Ratio 1.70 2.77 2.70
Exports 5 35 670
Batangas Imports 152 587 5,698
I/E Ratio 30.40 16.77 8.50
Exports 5,052 7,772 7,920
Subic Imports 14,249 17,496 17,424
I/E Ratio 2.82 2.25 2.20
Exports 535,690 449,963 510,368
GCR Imports 914,158 1,242,187 1,377,922
I/E Ratio 1.71 2.76 2.70

*-partial estimates
Excludes empty containers in either direction

Source: OSC and PPA

47
FREIGHT TRANSPORT BY ROAD

Production Capacity

Road transport is the prime option for conveyance of freight and people within the Philippines,
with trucks and trailers the main mode of transporting cargo from producers to ports and markets.
This is evident in the consistent increase in number of registered trucks and trailers in the past
seven years. From 2007 to 2012, the number of registered trucks increased by 21 percent and the
number of registered trailers by 49 percent.

The capacity of this sub-sector is highly contingent on the countrys road infrastructure. The road
network is composed of two types in the GCR: private and national roads. The DPWH continues to
upgrade its national road network through local and foreign-aided funding. According to the DPWH,
the national road runs through 29,479 kilometers. The table below breaks down the length of
national road by region.

TABLE 26: PAVED NATIONAL ROADS, IN KILOMETERS

Region Concrete Asphalt Gravel Earth Total


CAR 510 105 1,205 23 1,844
Metro Manila 690 308 1 0 1,000
Region I 874 567 150 19 1,609
Region II 877 315 566 3 1,769
Region III 972 746 263 2 1,985
Region IV-A 901 1,083 369 0 2,353
Region IV-B 655 353 1,176 1 2,185
Region V 894 681 620 1 2,195
Region VI 1,198 955 723 4 2,880
Region VII 796 834 324 16 1,970
Region VIII 1,510 287 505 12 2,313
Region IX 511 296 317 0 1,154
Region X 744 419 455 0 1,619
Region XI 681 226 539 0 1,446
Region XII 563 252 486 0 1,301
Region XIII 596 72 689 0 1,357
ARMM 244 58 200 0 501
Total 13,215 7,559 7,875 90 29,479

Source: Department of Public Works and Highway (DPWH)

48
Demand

The main driver of demand for road network is the number of vehicles on the road. In terms of type
of vehicle used, two- and three-wheeled vehicles posted the fastest expansion of almost 11% from
2000 to 2010 (Table 27). In comparison, buses and utility vehicles posted growth rates of 2.17
percent, and .61 percent, respectively. With trucks being older than 15 years, the situation points to
problems with fleet renewal and poor fuel efficiency.

TABLE 27: VEHICLE GROWTH IN THE PHILIPPINES

2W+3W Cars + SUVs Utility Vehicles Bus Trucks Total


1980-1990 8.12 3.41 5.08 -0.46 1.77 4.68
1990-2000 12.15 5.47 8.65 6.62 6.2 9.1
2000-2010 10.98 3.42 2.1 0.61 2.17 6

Source: National Statistics Coordination Board (NSCB)

AIR FREIGHT TRANSPORT

Production Capacity

Air transportation is a significant contributor in the transport and storage sector in terms of supply.

In 2006, there were a total of 85 airports servicing air transport in the Philippines, of which 10
were classified International Airports; 15 Principal Airport Class 1; 19 Principal Airport Class 2; and
41 Community Airports. Table 28 provides a summary of registered airports in the Philippines from
1986 to 2006.

There are three domestic air carriers, which dominate air transportation services in the country,
namely: low-cost carrier Cebu Pacific Airways, Philippine Airlines (PAL), and PALs low-cost carrier,
PAL Express. PAL was the only airline carrier allowed to operate in Philippine airports until 1986,
when the aviation industry was liberalized.

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TABLE 28: SUMMARY OF REGISTERED AIRPORTS IN THE PHILIPPINES

Year National Private Total


1986 87 143 230
1987 84 143 227
1988 86 94 180
1989 86 122 208
1990 86 133 219
1991 84 140 224
1992 86 130 216
1993 87 162 249
1994 86 214 300
1995 86 104 190
1996 86 180 266
1997 89 103 192
1998 92 75 167
1999 85 87 172
2000 85 87 172
2001 87 70 157
2002 87 87 174
2003 85 78 163
2004 85 111 196
2005 85 118 203
2006 85 118 203

Source: Department of Transportation and Communications (DOTC)

Demand

According to the Civil Aeronautics Board (CAB), cargo traffic handled by air freight forwarders has
been on an upward trend since 2003, except for slumps in 2009 and 2011. In 2013, air freight
chargeable weights increased by 15.7 percent to 57.39 million kilograms. Cargo traffic handled by
domestic scheduled air services also registered positive growth for 2013, increasing by 9.8 percent
to 226.89 million kilograms. Table 29 illustrates the summary of aircraft movements by region in
2006. The highest number of movements of aircraft and passengers was observed in NCR.

50
TABLE 29: SUMMARY OF AIRCRAFT, CARGO, AND PASSENGER MOVEMENTS BY REGION (2006)

Region Aircraft Cargo Passenger


NCR 20,652 412,759 18,229,221
CAR 878 147,656 18,352
I 2,772 2,803,162 132,901
II 4,115 828,292 66,636
III 6,638 7,022 530,490
IV 5,608 5,181,544 363,051
V 1,999 1,202,563 237,371
VI 20,565 26,303,602 2,512,159
VII 3,967 8,590,025 667,747
VIII 3,008 3,676,340 422,764
IX 3,209 5,778,614 472,053
X 3,001 10,374,488 609,241
XI 6,986 40,753,487 1,341,814
XII 1,884 10,379,731 334,024
XIII 1,417 2,043,794 175,455
ARMM 485 17,963 9,917
Total 86,684 530,487,433 26,123,196

Source: Air Transportation Office (ATO)

INLAND WATER FREIGHT TRANSPORT

Production Capacity

The inland water freight sector refers to the transport of passengers or freight on inland waters,
involving vessels not suitable for sea transportation. Rivers, canals, and lakes are among the
passageways for inland transport. According to the Census on Philippine Business and Industry
(CPBI), there were 49 firms engaged in the sector with overall revenues of P285 million in 2009.

Being an archipelago, the Philippines has few large land masses that host waterways and which
allow for inland water freight. In a few cases, such as in the Pasig River and Laguna de Bay, inland
water freight is not a well-developed mode of transport as sea and coastal freight. Thus, there is
limited data on the sector. But if small inter-island vessels that operate within archipelagic waters
are considered, domestic shipping tonnage may be used as a proxy for capacity for this sector.

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Among five PPA port groups, the Visayas Region has the highest gross registered tonnage (GRT);
Southern Mindanao Region has the lowest GRT.

TABLE 30: SHIPPING STATISTICS BY PORT MANAGEMENT OFFICE (PMO), 2012

Gross Registered Tonnage


PMO
Domestic
PDO MANILA/NORTHERN LUZON 28,192,928
Manila - N. Harbor 14,497,044
Manila - S. Harbor 7,343,544
- M.I.C.T. 883,388
Limay 5,223,312
San Fernando 245,640
PDO SOUTHERN LUZON 47,540,061
Batangas 22,686,039
Calapan 14,023,800
Legazpi 8,889,918
Puerto Princesa 1,940,304
PDO VISAYAS 55,631,365
Dumaguete 8,257,249
Iloilo 14,834,540
Ormoc 4,631,222
Pulupandan 13,256,955
Tacloban 7,687,543
Tagbilaran 6,963,856
PDO NORTHERN MINDANAO 33,414,076
Cagayan de Oro 12,159,719
Iligan 6,157,506
Nasipit 3,503,274
Ozamiz 7,718,420
Surigao 3,875,157
PDO SOUTHERN MINDANAO 19,104,080
Cotabato 19,972
Dapitan 2,342,117
Davao 5,006,495
General Santos 3,725,307
Zamboanga 8,010,189
TOTAL 183,882,510

Source: PPA-Philippine Development Office

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Demand

As noted earlier, limitations on data availability and the underdeveloped nature of the inland water
freight sector prevents direct estimates of demand for services. Domestic shipping data is again
used as a proxy for the sectors demand. Container traffic is highest in the Manila-Northern Luzon
area, and lowest in the Southern Luzon region as shown in table below. In terms of passenger traffic,
Southern Luzon has the most significant figure and ManilaNorthern Luzon the least significant.

TABLE 31: SUMMARY OF PORT PERFORMANCE (OCTOBER DECEMBER 2013)

PORT DISTRICT OFFICE


MANILA/
SOUTHERN NORTHERN SOUTHERN
PARTICULARS TOTAL Northern VISAYAS
LUZON Mindanao Mindanao
Luzon
357,480 17,138 97,763 138,726 53,776 50,077
1. Shipcalls Domestic 347,841 12,960 96,005 138,125 52,663 48,088
Foreign 9,639 4,178 1,758 601 1,113 1,989
210,552,565 76,793,769 37,873,836 26,291,533 51,447,589 18,145,838

Domestic 76,061,090 24,170,036 12,511,117 18,158,173 11,712,474 9,509,290

2. Cargo
Inward 39,967,037 9,545,820 6,380,623 11,483,649 6,029,607 6,527,338
Throughput
Outward 36,094,053 14,624,216 6,130,494 6,674,524 5,682,867 2,981,952
(m.t.)

Foreign 134,491,475 52,623,733 25,362,719 8,133,360 39,735,115 8,636,548

Import 66,108,587 40,992,280 16,938,681 1,833,257 2,921,139 3,423,230


Export 68,382,888 11,631,453 8,424,038 6,300,103 36,813,976 5,213,318
5,293,762 3,648,472 182,266 277,436 317,473 868,117

Domestic 2,050,678 988,218 84,542 277,436 317,473 383,011

3. Container
Inward 1,042,658 486,465 45,211 143,407 160,642 206,934
Traffic (in
Outward 1,008,020 501,753 39,331 134,029 156,831 176,077
TEU)

Foreign 3,243,084 2,660,254 97,724 0 0 485,106

Import 1,660,329 1,371,894 52,731 0 0 235,704


Export 1,582,755 1,288,360 44,993 0 0 249,402

Source: Philippine Ports Authority (PPA)

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CHALLENGES AND ISSUES

Industry stakeholders cited red tape, unclear and redundant government regulations, and non-
standard implementation of policies and inefficient transport infrastructure as causes of
inefficiencies in the supply chain which have translated to high transport costs in the Philippines.

INSTITUTIONAL AND REGULATORY CONCERNS

Red Tape. Stakeholders concur that red tape and the presence of various government regulatory or
coordinating agencies with no clear delineation of supervisory functions are barriers to efficient
logistics.

According to the World Banks 2014 Logistics Performance Report, around five agencies monitor
import shipments and four agencies monitor export shipments in the Philippines. Equally
numerous are forms required to clear shipments: seven for import shipments and four for export
shipments. This leads to two-day clearance processing time, which could lengthen to five days if
inspection is required. This compares with one-day clearance or two days processing (with physical
inspection) in Malaysia, and one-day clearance in Thailand, including for shipments requiring
inspection.

Examples of red tape:

1. BIR and BOC accreditation for importers and customs brokers are not integrated leading to
submission of similar documents to two agencies that are under one department, the DOF.

2. Despite the push for the National Single Window, only a handful of government agencies are
plugged into the system. This means shippers have to submit the same documentary
requirements to different government agencies each time they deal with these agencies.

3. Similar documentary requirements for transportation and handling of dangerous goods are
required by the CAB and the CAAP, both of which are attached agencies of the DOTC.

4. The BOC still requires submission of hard copies of manifests even if manifests are already
electronically lodged under the electronic-to-mobile (e2m) system.

Unclear and poorly thought-out government regulations. The unclear and often confusing
regulations implemented by some government agencies lead to uneven implementation of policies
and instability in the supply chain. Public consultation on issues affecting the entire supply chain is
also lacking or sometimes cursory.

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A few examples of these:

1. Truck ban policy implemented by various LGUs;

2. Implementation of importer and customs broker accreditation when the BIR and BOC have
few personnel to attend to the rush in entities seeking accreditation. The policy caused
much confusion among stakeholders and caused delays in trade;

3. Rule requiring the presence of BOC personnel during stuffing of export containers when
there are not enough staff to do this. (This policy was eventually scrapped by former
Commissioner John Phillip Sevilla but only after much lobbying from the export industry);

4. The adoption of the joint administrative order (JAO) on higher penalties for colorum
(unfranchised) trucks at a time when port congestion was at its peak. Trucks were later
given provisional authority to avoid apprehension for violation of the JAO;

5. The imposition of new storage rates for overstaying containers to counter congestion at
Manila ports in 2014. At a public consultation on the issue, the private sector was led to
believe there would be more discussions on the subject. But very soon after, the storage
rates were increased; and

6. The PNP list of regulated shipments, which included chemicals commonly used by the
manufacturing sector, making it difficult to import the same.

Non-compliance. While there are government-approved rates charged by freight forwarders


(based on a DTI order) as well as BOC-prescribed rates for offdock operations, there are numerous
reports these are widely disregarded.

Informal payments. Corollary to the problem of unclear regulations is the issue of informal
payments which jack up logistics costs. Informal payments, many times related to transactions at
the BOC, are usually resorted to in order to quickly settle disputes in the interpretation and
application of unclear government rules or tariff regulations.

In the 2014 Enabling Trade Index Report by World Economic Forum, the Philippines ranked 103rd
out of 138 countries in terms of irregular payments in exports and imports. In terms of customs
transparency index, it ranked 102nd.

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PHYSICAL INFRASTRUCTURE

Poor transport infrastructure has resulted in longer lead times and consequently high logistics
costs. Frequent calamities and the transport infrastructure's inability to deal with them have also
impaired the supply chain many times over.

In the World Bank 2014 LPI Report, the country ranked low in infrastructure index. In the 2014
Enabling Trade Index Report by the World Economic Forum, the country was ranked 96th out of
138 countries in terms of availability of transport infrastructure. The latter report also ranked the
country 107th in terms of seaport infrastructure, and 105th in airport infrastructure.

Bhattacharyay (2010), who estimated infrastructure needs in Asia from 2010-2020, noted that
transport infrastructure occupied the largest share of the total infrastructure needs in the
Philippines, followed by energy infrastructure, then ICT infrastructure.

Road Infrastructure. Inadequate road infrastructure is a constant source of frustration among


stakeholders, with some key roads poorly maintained and others taken over by informal settlers
and vendors and illegally parked vehicles. Some roads that do not seem to need maintenance also
somehow undergo repair.

The lack of planning and coordination with utility companies undertaking repairs of facilities has
also been noted by stakeholders.

According to a study by the Joint Foreign Chambers of Commerce in the Philippines, in spite of
increased budgets directed to infrastructure, road rating remains low. Funds were primarily
directed to barangay roads, side stepping national highways. In 2007, around 60.7% of total
growth in road length was accounted for by barangay roads; national roads only accounted for
14.5%.

In the 2013 road assessment made by the DPWH, around 27% of respondents ranked national
roads from bad to poor, while 63% gave a fair to good mark.

The government has tapped public-private partnerships (PPP) to implement some road
infrastructure projects. This setup has its own complex issues though. For example, the
construction of rural roads via PPP is not as attractive to the private investor due to lower financial
returns. Even if it offers high social benefits, roads connecting economic centers constructed via
PPP may just be a pipe dream.

Seaport facilities. Government-operated seaports outside the National Capital Region are in dire
need of modernization, lacking cargo-handling equipment required for an efficient supply chain.

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The privatization of Davao-Sasa, one of Mindanao's key ports, has been held in abeyance for years
due to opposition from local groups who claim they were not properly consulted about the project;
and that the project is harmful to the environment and its contract price too high.

Cebu port has not kept pace with growth of volume in the region and is now congested and in need
of major expansion.

Airport Facilities. There is no provision for adequate air cargo facilities, much more a dedicated
cargo facility, including a truck holding area.

Rail Freight. While acknowledged as the most efficient and eco-friendly among all modes of
transport, rail freight is deemed a non-existent subsector in the Philippines. Rail freight services
initiated previously by port operator International Container Terminal Services, Inc. did not
prosper because of poor volumes.

INFORMATION AND COMMUNICATIONS TECHNOLOGY INFRASTRUCTURE

Seamless connectivity in logistics requires automation and adoption of IT solutions in its processes.
Although ICT infrastructure in the country has improved in previous years, much needs to be done
to attain a cloud readiness level that will benefit various sectors, foremost of which is the logistics
industry.

In the 2014 Cloud Readiness Index in the Asia-Pacific, the country went up two notches. The
country received the lowest ranking in the following indices: (1) government regulatory
environment and government usage, and (2) broadband quality. The regulatory environment index
assesses the extent to which the national legal framework facilitates ICT penetration and safe
development of business activities. The government usage index evaluates the implementation of
ICT policies intended to enhance competitiveness and well-being of citizens, as well as the efforts to
develop ICT. It also measures the number of services the government provides online.

Adoption of ICT in operations not only speeds up processing time but can also be a tool to minimize
the presence informal payments due to red tape.

Internet penetration in the Philippines was among the lowest in ASEAN although improvement has
been seen in recent years. From 2009-2010, the number of internet users per 100 people doubled,
and this has continued to increase since.

Still, the connection speed in the country leaves much to be desired; a report by the ASEAN DNA
states that the Philippines may have the slowest internet connection speed in the region.

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FIGURE 15: INTERNET USERS PER 100 PEOPLE, 2000 TO 2014

Source: World Bank

FIGURE 16: INFOGRAPHIC: AVERAGE INTERNET CONNECTION SPEED AMONG ASEAN COUNTRIES, 2014

Source: ASEAN Briefing

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5. INDUSTRY ADVANTAGES AND PITFALLS: STRENGTHS,
WEAKNESSES, OPPORTUNITIES, AND THREATS

STRENGTHS
The strength of the sector rests primarily in its young labor force, providing the industry with a
large and stable supply of manpower.

The workforce is also adaptable, educated and proficient in the English language. A more educated
labor force increases labor productivity and promotes versatility among members of the force.

WEAKNESSES
Institutional and structural issues mainly constitute the industrys weak points.

Poor and inadequate transport infrastructure restricts provision of logistics services translating to
high transport costs. The country's archipelagic makeup makes transportation even more
challenging. Infrastructure projects are sometimes poorly planned, leading to legal challenges and
delays in project completion.

The industry is fragmented. Despite players being classified under one PSIC, overseeing agencies
for different activities of the industry are varied. For example, seafreight forwarders are under the
jurisdiction of the DTI while airfreight forwarders are under the DOTr.

Unclear, uncoordinated, overlapping and sometimes even contradictory regulations and policies
result in red tape and corruption, leading to informal payments and sometimes agency turfing.

There is much to be desired when it comes to the role of government in the industry, with
collaborative efforts between the government and the private sector seemingly limited. This
became especially evident in 2014 when it took government a few months to finally address the
problem of the Manila port congestion.

Government's information campaign for new or revised major policies is not institutionalized.
Oftentimes, the private sector has to take the initiative to educate stakeholders about new
government regulations.

National and local government policies are not aligned. Case in point is the adoption of truck bans
with different times by various local government units.

The lack of a national curriculum, including technical courses, specific to transportation and
logistics industry practitioners is a major weakness. This oftentimes means new hires have to learn
on the job, translating to higher costs for companies.

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OPPORTUNITIES
The large domestic market with a growing middle class is a key opportunity. The stable growth of
middle-income families will keep consumption demand high in the next few years, a development
that can only be favorable for the industry.

The present administrations renewed focus on infrastructure development, manufacturing, and


agriculture are likewise expected to provide the logistics sector with significant business.

The market is expected to grow even more with the Philippines entering into various free trade
agreements as well as the advent of the ASEAN Economic Community, a market of 600 million
people. As the fourth-largest exporting region in the world and cornering 7% of global exports,
ASEAN offers enormous opportunities for trade and therefore logistics.

The relative ease of market access to the Philippines, partly due to favorable trading conditions
(zero or lower tariffs), is another opportunity for the sector. In the 2014 Enabling Trade Index
Report, the country ranked 11th out of 138 countries in terms of market access, 19th in domestic
market access index, and 26th in terms of foreign market access. Similarly, the countrys exporters
have favorable access to foreign markets, enabling greater trade.

THREATS
Non-compliance with international agreements such as the ASEAN Framework Agreement on
Multimodal Transport is a grave threat. The countrys multimodal transport operators will lose the
ability to operate as such in other ASEAN countries if the Agreement is not implemented.

For smaller home-grown and undercapitalized companies, the entry of more competitive foreign
firms once ASEAN Economic Integration is in full swing may be considered a threat.

Due to the expected easing of restrictions on labor flow among ASEAN countries due to integration,
the industry may suffer from brain drain, with Filipino nationals seeking higher pay overseas.

Calamities are a constant source of threat for the industry. Year in and year out, the supply chain
suffers from much disruption due to flooding and repair of damaged infrastructure. This has led to
delivery delays and consequently higher transport costs.

Another threat is the lack of awareness of green logistics. As the world gears toward greener jobs
and procedures, the industry's lack of awareness to meet global standards means its inability to
participate in reducing the global carbon footprint and contribute to national energy efficiency and
climate goals.

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6. SUPPORT TO INDUSTRY DEVELOPMENT
Logistics is critical to industry development. The government recognizes that inadequate and poor
logistics networks are developmental constraints, thus vital infrastructure and logistics chains have
to be built and expanded. Under the governments 2011-2016 Philippine Development Plan (PDP),
the capital outlay for infrastructure is targeted at 5 percent of GDP by 2016.

Transport and logistics have also been identified as priority sectors under the PDP. The plan aims
to:

Review entire supply chain and eliminate deficiencies


Reinforce linkage between agricultural and non-agricultural sectors
Prioritize investments in infrastructure with focus on integrated/multi-modal transport
and logistics system
Enhance inter-island logistics by developing the RORO transport system
Explore ASEAN connectivity and ASEAN RORO network
Expand air services, and endeavor integrated, coordinated transport network through the
National Transport Policy

The PDP is supported by the Public Investment Program (PIP) 2011-2016, which encompasses the
National Logistics Plan. Part of this plan is the Central RORO Spine Project, which aims to facilitate
seamless, expeditious and economical movement of passengers, vehicles and goods along the Luzon
Island-Panay-Negros-Cebu-Bohol-Mindanao route.

Among recently NEDA Board-approved projects also under the PIP are:

Bicol International Airport Project


New Bohol (Panglao) Airport Construction Project
Bridge Construction Acceleration Project for Calamity-Stricken Areas Phase II
National Roads Bridge Placement Project
Restructuring of the Bridge Construction and Replacement Project
Roads Improvement Project

The PIP is complemented by the PPP Program, which taps into private sector resources and
expertise for the development of key public infrastructure and services. Many of the PPP projects
under the program will support the development of the logistics industry, such as the following:

Daang Hari-SLEX Link Road (construction in progress)


NAIA Expressway Project (construction in progress)
Mactan-Cebu International Airport Passenger Terminal Building (construction in progress)
Southwest Integrated Transport System (construction in progress)
Cavite-Laguna Expressway (awarded)

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Metro Manila Skyway Stage 3 (under a Joint Venture Agreement; construction in progress)
Other projects in the procurement stage but have encountered delays are the regional airports
development project, the Davao Sasa Port Modernization Project, the NLEX-SLEX Connector Road,
and the Laguna Lakeshore Expressway-Dike Project.

Helping plan and implement projects related to trade, logistics, and transportation are the following
government agencies:

Bureau of Customs

Under the DOF, the BOC regulates import and export shipments. Among its responsibilities
are accrediting importers and customs brokers; implementing tariff and customs rules; and
preventing smuggling.

Department of Energy

The DOE has developed the Philippine Energy Efficiency Roadmap 2014-2030 which eyes a
40% reduction in energy intensity compared to 2010, of which one quarter will be achieved
by the transport sector. Short- and medium-term measures (2014-2020) include fuel
efficiency standards, tax incentives for energy-efficient vehicles, promotion of energy-
efficient vehicle technologies, driver education and fleet management programs. From 2020
to 2030, the roadmap foresees energy efficiency programs beyond road transport
(passenger and cargo ships, aviation fuels), reintegration of urban planning and transport
energy use.

Department of Environment and Natural Resources

The DENR is in charge of setting fuel and emission standards for vehicles. Per
Administrative Order 2015-14, all new vehicles to be used and introduced in the market by
2016 should comply with Euro 4 emission standards.

Department of Labor and Employment

Through Project Jobs Fit, DOLE is able to recognize occupations that are in demand and
hard to fill, including those for transport and logistics. In-demand jobs are checkers and
maintenance mechanics while hard-to-fill ones include gantry operators, ground engineers,
heavy equipment operators, long-haul drivers, pilots, machinery operators, and aircraft
mechanics.

Department of Public Works and Highways

The DPWH is responsible for the planning of infrastructure and other public works, as well
as their design, construction, and maintenance. As such, it is the engineering and
construction arm of the government tasked to develop technologies that ensure the safety,
quality and efficiency of all infrastructure facilities such national roads and bridges, flood
control and water projects, and other public works.

62
Department of Trade and Industry

The DTI is tasked to expand Philippine trade, industries and investments as a means to
generate jobs and raise incomes. The agencys FTEB accredits seafreight freight forwarders
while the Supply Chain and Logistics Management Division oversees supply chain activities.

Department of Transportation

The DOTr is the primary government agency responsible for the Philippines' land, air, sea
and rail activities. It has the following attached agencies:

PPA oversees management, operations and financing, of public ports throughout the
archipelago.

MARINA integrates the development, promotion and regulation of the maritime


industry in the country.

CAB regulates commercial air carriers, including airfreight forwarders, and issues
Certificates of Public Convenience to domestic and international airlines allowed to
operate in the Philippines.

CAAP regulates airports and enforces traffic rules under the mandate of the Civil
Aviation Authority of the Philippines. CAAP has corporate attributes and powers by
virtue of RA 9497 enacted in 2008 to restructure the civil aviation system and to
promote, develop, and regulate the technical, operational, safety, and aviation
security functions under the civil aviation authority.

LTFRB is the regulator of public land transportation services supporting the supply
chain (e.g., trucking services) As a regulator, LTFRB leads the testing,
implementation and monitoring of traffic routes and issuance of Certificate of Public
Convenience or franchise to operate

LTO is responsible for implementing laws, rules and regulations pertaining to land
transport in the country. Its services include the registration of motor vehicles and
issuance of drivers licenses, and its functions include the enforcement of safety
standards for land transport.

OTS is responsible for the security of transportation systems nationwide, including


civil aviation, sea transport and maritime infrastructure, land transportation, rail
system and infrastructure.

Metro Manila Development Authority

The MMDA implements the Unified Vehicular Volume Reduction Program to prevent both
public and private vehicles from using all national, city, and municipal roads in the
metropolitan area based on certain hours of the day.
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Another related regulation is the truck ban, which is implemented from 6:00 a.m. to 10:00
a.m. and from 5:00 p.m. to 10:00 p.m. every day except Sundays and holidays on specific
roads and highways.

National Economic and Development Authority

NEDA is the countrys premier socioeconomic planning and policy coordinating body,
providing high-level advice to policymakers in Congress and the Executive Branch. Its key
responsibilities include the coordination of policies, plans and programs; review, evaluate,
and monitor infrastructure projects; and undertake policy reviews and analyses of
development issues.

Technical Education and Skills Development Authority

TESDA is responsible for helping manage the country's labor pool. Through its Technical
and Vocational Education Training programs, individuals undergo training to equip them
with skills, enhance their competence, and boost their ability of being hired.

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7. IMPACT MAPPING

A well-coordinated and integrated logistics sector will have multi-tier effects, positively affecting
the performance of various stakeholders, ultimately translating to inclusive growth and effective
poverty reduction.

An integrated logistics sector is seen to increase trade competitiveness, as well as expand market
reach and depth.

FIGURE 17: IMPACT MAP OF A MULTIMODAL INTEGRATED LOGISTICS SECTOR

65
INCREASED TRADE COMPETITIVENESS
Buoyed by efficient operation at all nodes, particularly in goods clearance, the industry can take on
the competitiveness challenge posed by an increasingly integrated global market.

With improved timeliness and effective delivery of both intermediate and final goods, costs could
be minimized. Patalinhug, et. al. (2015) outlined the cost of delayed trucking and delivery of goods
due to transport policies, including the truck ban and yellow-plate requirement. They reported that
trucks in order to enter the port had to queue for at least five days, which could extend up to 14
days. Without the truck ban, the queue took only two days. Moreover, long lines resulted in lost
business among trucking companies due to lower turnaround per truck, creating an artificial
shortage of trucks. Smaller trucking companies had to shut down due to significant reductions in
revenue. Patalinhug, et. al also noted several manufacturers lost customers due to delayed delivery
of time-sensitive freight, and spoilage of perishable goods. The congestion also resulted in high fuel
waste as trucks idle and crawl forward.

Improvements in various aspects of delivery, particularly timeliness and predictability through


efficient tracking and tracing and maximizing trips (less empty return trips), lower cost and
wastage, thus contributing to stability of prices and fuel savings. Stable prices lead to less volatile,
and even higher real wages, which in turn could boost consumer demand that will provide both
breadth and depth to the consuming market.

Coupled with higher demand, lower logistics cost will promote increased production and
profitability among companies. This should trigger business expansion, higher employment and
output in the economy. In addition to improved profitability among companies in the logistics
sector, other sectors stand to benefit, including the agriculture and manufacturing industries which
employ logistics services extensively.

Furthermore, investment in green freight improves competitiveness of the industry as international


stakeholders, driven by consumer preferences and policy, increasingly demand certain
environmental practices from their local logistics service providers.

INCREASED MARKET REACH AND DEPTH


Efficient logistics services could help expand the domestic market and increase the purchasing
capacity of untapped markets.

Business activity spillovers from centers of economic development to less developed regions can be
facilitated through a more efficient value chain. With improved farm-to-market and farm-to-
industry roads, the cost of transporting agricultural produce from small farmers in underdeveloped
rural areas to centers of economic activities and industrial zones can be reduced. Lower logistics
expense could boost the profitability of small farmers, as well as the wholesale and retail traders in
rural areas.

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The DA estimates that the interventions under the Philippine Rural Development Project (2014-
2020), including construction of farm-to-market roads and food terminals in rural areas, could
result in the following: (1) at least 5% increase in real farm income of beneficiaries, (2) around 30%
increase in income for the enterprise development beneficiaries, and (3) around 7% increase in
value of annual marketed output.

The logistics market can expand internationally, particularly in ASEAN. Overcoming clearing
systems and regulatory barriers in member countries could lead to expansion of operations in
various untapped markets in ASEAN. Southeast Asia is a particularly exciting market because of a
growing middle-class that is expected to double by 2020, according to Nielsen (2014). From 28% of
total population in 2012, the middle class in Southeast Asia is expected to increase to around 55%
in 2020.

67
8. RECOMMENDATIONS

1. An integrated long-term national master plan for supply chain and logistics should be
crafted in consultation with all stakeholders. This master plan must include nationwide
infrastructure requirements and the development of a strong nautical highway and a roll-
on/roll-off terminal system linking the entire country. The plan must be reviewed regularly
to ensure it remains responsive to industry requirements.

2. An agency for Supply Chain and Logistics should be created to coordinate all initiatives
related to the supply chain and to follow through on implementation and compliance to
national and international policies and commitments.

3. There is an urgent need to review, streamline and standardize logistics-related policies


implemented by various government agencies.

4. Automation in government agencies must be pushed to the greatest extent possible to boost
efficiency and eliminate corruption.

5. The countrys compliance with international agreements it entered into is essential. The
ASEAN Framework Agreement on Multimodal Transport, signed by the DOTC in 2005, must
be immediately implemented. The Agreement requires the creation of a national
accreditation system for multimodal transport operators that will allow freight forwarders
based in the Philippines to operate as multimodal transport operators in other ASEAN
member states.

6. There should be continuous development of transport infrastructure, including the road


network, to cater to the projected long-term growth of the Philippine economy. The
following are needed to carry out this development:

a. Dedicated access roads to sea and air ports, freight centers and railway stations as
well as dedicated air cargo facilities must be constructed.

b. Manila ports need to be further expanded to keep pace with expected volume
growths owing to an expanding economy. But this expansion will only be more
consequential if there is corresponding expansion of support facilities outside ports
(roads, warehouses and other off-dock facilities) to match ports development.

c. The capacity of Subic and Batangas ports as well as all other international sea and
air gateways need to be expanded in anticipation of larger volumes but always
keeping in mind that infrastructure outside the gateways need expansion too.

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d. In the interest of more efficient and eco-friendly transport solutions, it is time to
harness the railway network to service not only passengers but also cargo
requirements.

7. In addition to strengthening the domestic freight systems efficiency by improving


multimodal transportation, industry and government should take coordinated action to
advance the efficiency of road freight transport and thus leverage the potential for saving
fuel, reducing congestion and protecting the environment.

8. A nationwide skills development training program should be institutionalized to ensure the


logistics industry has a steady pool of workers who are competent and up-to-date with
industry requirements.

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Asian Development Bank (2012). Infrastructure for Supporting Inclusive Growth and Poverty
Reduction in Asia. Philippines

Association of Southeast Asian Nations (2007). Roadmap for the Integration of Logistics Services.
Makati, Philippines

Association of Southeast Asian Nations (2011). Master Plan for ASEAN Connectivity. Indonesia

Association of Southeast Asian Nations (2012). ASEAN Connectivity Project Information Sheets.
Indonesia

Bubner, N., Bubner, N., Helbig, R. and Jeske, M. 2014. Logistics trend radar: delivering insight today.
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online: http://www.apec.org.au/docs/10_tp_supply/7.%20trade%20and%20logistics%20-
%20an%20east%20asian%20perspective.pdf

Center for the Advancement of Trade Integration & Facilitation (CATIF). July 2012. Philippine
agribusiness and benchmarking study: component on trade facilitation and logistics.
Prepared for the International Finance Corporation (IFC). Accessed online:
http://www.catif.org/wp-content/uploads/2013/10/PhilAgribusiness_Final-
Report_July2012_IFC.pdf

ALMEC Corporation (2014). Roadmap for Transport Infrastructure Development for Metro Manila
and Its Surrounding Areas (Region III and Region IV-A). Japan International Cooperation
Agency (JICA) and National Economic and Development Authority (NEDA). Philippines.

Lidasan, H. and Castro, J. 05 February 2009. Philippine Intermodal Logistics System and Policies.
Presented in Logistics Conference, Dusit Hotel, Makati, Metro Manila, Philippines. Accessed
online: http://philexport.ph/philippines/RP%20Logistics%20Policy-Feb09.ppt

Llanto, Gilberto and Adoracion Navarro (2012). The Impact of Trade Liberalization and Economic
Integration on the Logistics Industry: Maritime Transport and Freight Forwarders.
Philippine Institute for Development Studies (PIDS), Discussion Paper, 2012-19

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Neilsen (2014). ASEAN 2015: Seeing Around the Corner in a New Asian Landscape.

Porter, M. 1985. Competitive advantage: creating and sustaining superior performance. The Free
Press. New York, USA.

Technical Education and Skills Development Authority (2012). Labor Market Intelligence Report:
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The World Bank (2014). Connecting to Compete 2014: Trade Logistics in the Global Economy.
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The World Bank (2014). The Philippine Rural Development Project. Accessed online:
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program?lang=en&tab=overview.

The World Bank (2015). Doing Business. Accessed online: http://www.doingbusiness.org

United Nations Economic and Social Commission for Asia and the Pacific (2001). Transport and
Communications Bulletin for Asia and the Pacific No 70. Logistics for the Efficient
Transportation of Domestic Goods. New York, USA.

World Economic Forum (2014). The Global Enabling Trade Report 2014. Geneva

World Trade Organization Trade Facilitation Agreement. Accessed online:


https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm

2006 National Statistics Office Input-Output Table

2009 Philippine Standard Industrial Classification

2010 Annual Survey of Philippine Business and Industry

ASEAN Briefing

Bureau of Labor and Employment Statistics

Civil Aeronautics Board

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Philippine Ports Authority

PortCalls

Securities and Exchange Commission

The World Bank Open Data

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