Phl seen as global hub for logistics
MANILA, Philippines - The Philippines has the potential to become a major hub for logistics services providers as the size of the market is expected to hit over P71 billion in 2020, a regional research firm said.
In its report titled “Philippines Transport & Logistics 2015,” Transport Intelligence (TI) said the country could improve on its performance as it currently lags behind other countries in Southeast Asia in terms of logistics.
Michael King, head of operations in Asia of TI, said the Philippines needs to encourage inward investment by manufacturers as well as investments in infrastructure.
“TI believes that if the Philippines can overcome many of the infrastructure difficulties it currently endures at its ports and airports and, especially, on Luzon’s blocked highways, then it has every chance of becoming a major growth region for manufacturers to migrate towards,” King said.
He cited strong economic growth in the Philippines has been fuelled by strong remittances from Filipinos living and working abroad.
“It boasts a fast growing economy and a thriving consumer market driven by its growing middle class, remittances and the offshoring of back-office functions by many knowledge and financial institutions,” he added.
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Aside from investing heavily in outdated infrastructure, he pointed out that the government should take steps to improve trade flows.
“As such, by removing existing logistics performance issues and the many obstacles to doing business in the country, TI believes it is well placed to become a growing market across the various logistics sectors,” King said.
The gradual integration of the Asean Economic Community next year offers a huge opportunity for the Philippines and other member states to boost regional trade.
Likewise, the company added that the Logistics Performance Indicator (LPI) of the Philippines should reach a certain threshold as it based its market sizing analysis using the low, medium, and high growth scenarios from 2013 to 2020.
The research provider believes the size of the country’s contract logistics market would hit P71.41 billion (1.412 billion euros) in 2020 from P24.17 billion (478 million euros) in 2013.
“At the upper range of LPI improvement, we believe the size of the Philippines’ contract logistics market increase from €478 million in 2013 to €1.412 billion by 2020,” TI said.
This translates to a compound annual growth rate (CAGR) of 16.7 percent in 2013-2020.
However, it explained the Philippines could see a slower CAGR at 10.5 percent to P48.65 billion (962 million euros) by 2020 if it fail to pursue business-friendly reforms.
“A lot will depend on the determination of whichever candidate wins the looming presidential elections to drive through policy reform,” TI said.
It also cited bureaucracy, corruption, the lack of transparent rules and codes of business and a sometimes “murky” legal system all create barriers to business success in the Philippines.
It said streamlining many of the processes and removing obstacles that make business in the Philippines so difficult could be a major driver of economic growth, trade and logistics demand.
Likewise, it said many of the same drivers of contract logistics market expansion would determine growth rates for forwarding. It believes the total freight forwarding market could grow by a CAGR of 15.1 percent during the period under a high LPI increase scenario and only by nine percent under a low forecast.
“TI believes that if the next Philippine government embraces policy change to address its current LPI performance, then it will become a major regional growth engine for both contract logistics and forwarding,” King added.
Major players in the industry include 2Go Group, AAI Worldwide Logistics, ASL Logistics, JRS Express, LBC Express, LF Global Logistics Solutions, LF Logistics Philippines, Lorenzo Shipping Corp.n, Magsaysay Transport and Logistics, Oceanic Container Lines (OCLI), Agility, DB Schenker Logistics, DHL Express, DHL Global Forwarding, DHL Supply Chain, Expeditors, FedEx, Kintetsu World Express, Kuehne + Nagel, Nippon Express, Panalpina, Toll Holdings, UPS, UTi and Yusen Logistics.