PH Logistics Performance Drops the Philippines Continues to Be Lackluster in Terms of Logistics Sector Performance
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44 BUSINESS PH logistics performance drops The Philippines continues to be lackluster in terms of logistics sector performance. This according to the latest report of the World Bank, “Connecting to Compete 2016: Trade Logistics in the Global Economy.” ased on the Logistics Performance Index (LPI) data, the country's competitiveness on trade logistics dropped 14 Bspots from 57th place in 2014 to 71st place in 2016 among 160 countries worldwide. The report showed that the country’s poor infrastructure attributed to its overall low score of 2.86 index. The World Bank’s LPI, which is conducted every 2 years, measures the efficiency and performance of a country’s logistics infrastructure. It can help countries identify challenges and opportunities and improve their logistics performance based on 6 parameters: h Efficiency of customs and border management clearance; h Quality of trade and transport infrastructure; h Ease of arranging competitively priced shipments; h Competence and quality of logistics services; h Ability to track and trace consignments and since 2007 (see Philippines-Logistics Performance). The World h Frequency with which shipments reach consignees within Bank identified the Philippines as a ‘partial performer’ in terms scheduled or expected delivery times. of its logistics efficiency based on the results of 2016 LPI index. Over the past 4 years, the Philippine logistics performance Meanwhile, National Council for Competitiveness Philippines has been declining drastically (see Philippines Logistic co-Chairman Guillermo Luz said that the country’s decline in Performance). This year has been the lowest ranking since LPI ranking was due to the Manila port congestion in 2014. 2007. The Philippines’ Logistics Performance Index (LPI) He added that there is “no surprise” in the downgrade of score dropped to 2.86 in 2016 from 3.0 score 2 years ago. the country’s logistics sector due to the effects of the Manila Across the components monitored by the index, only the country’s truck ban in which the flow of goods and services were timeliness of shipments improved by 20 spots from 90th to 70th affected, also taking a toll on businesses’ cost effectiveness. place this year. Most of the components of Philippines logistics The Philippines was placed as the 4th lowest in terms of sector have declined when compared to its 2014 past performance. logistics performance when compared to its ASEAN neighbors, The Philippines ranked the lowest in terms of infrastructure in trailing behind Singapore, Malaysia, Thailand, Indonesia, Vietnam 2016 at 82nd place, with a score of 2.55 among all the components. and Brunei. The country ranked 7th followed by Cambodia, The country’s customs and border management clearance, Myanmar and Laos (see ASEAN Countries-LPI Ranking). tracking and tracing of consignments and its performance on international shipments in 2016 were the worst recorded ranking Philippine ANALYST BUSINESS July 2016 45 BUSINESS Part of the country’s decline in LPI ranking was due to the Manila port congestion in 2014 PHILIPPINES—LOGISTICS PERFORMANCE 2016 2014 2012 2010 2007 LPI Ranking 71 57 52 44 65 Customs 78 47 67 54 53 Infrastructure 82 75 62 64 87 International shipments 60 35 56 20 63 Logistics quality and competence 77 61 39 47 70 Tracking and tracking 73 64 39 44 69 Timeliness 70 90 69 42 70 Source: World Bank’s Logistic Performance Index ASEAN COUNTRIES—LPI RANKING 2016 2014 2012 2010 2007 Singapore 5 5 1 2 1 Malaysia 32 25 29 29 27 Thailand 45 35 38 35 31 Indonesia 63 53 53 75 43 Vietnam 64 48 59 53 53 Brunei 70 * * * * Philippines 71 57 52 44 65 Cambodia 73 83 101 129 81 Myanmar 113 145 129 133 147 Laos 152 131 109 118 117 *Brunei was not included in the previous LPI editions Source: World Bank’s Logistic Performance Index Far better support is needed from the government. Philippine ANALYST BUSINESS July 2016 46 BUSINESS INTERnatiONAL LOGISTICS TRACKING COUNTRY YEAR LPI RANK LPI SCORE CUSTOMS INFRASTRUCTURE TIMELINESS SHIPMENTS PERFORMANCE & TRACING REGION: EAST ASIA 2016 2.98 3.02 3.08 3.07 3.12 3.54 3.14 & PACIFIC PHILIPPINES 2016 71 2.86 2.61 2.55 3.01 2.70 2.86 3.35 Source: World Bank’s Logistics Performance Index 2014, 2016 top 10 countries IN logistics performance INDEX-2016 COUNTRY LPI RANK 2016 LPI SCORE 2016 LPI RANK 2014 LPI SCORE 2014 Germany 1 4.23 1 4.12 Luxembourg 2 4.22 8 3.95 Sweden 3 4.20 6 3.96 Netherlands 4 4.19 2 4.05 Singapore 5 4.14 5 4.00 Belgium 6 4.11 3 4.04 Austria 7 4.10 22 3.65 United Kingdom 8 4.07 4 4.01 Hong Kong 9 4.07 15 3.83 United States 10 3.99 9 3.92 Source: World Bank’s Logistics Performance Index 2014, 2016 The Philippines logistics sector is expecting to earn a higher spot in the next LPI rankings in 2018. Philippine ANALYST BUSINESS July 2016 47 BUSINESS The country’s logistics infrastructure was also ranked as The challenge of unlocking the PH aviation the 4th lowest among the ASEAN countries. Highlighting industry’s potential the need for far better support from the government in order to compete with other ASEAN countries. These past years marked progress for the aviation industry as In terms of geographical region, East Asia and Pacific posted the Philippines concluded multiple air services agreements 2.98 LPI index, a 0.12 score points difference from the Philippines’ with several countries. But, the industry’s international LPI index. The Philippines does reasonably well on the timeliness expansion is hampered by poor air transport infrastructure. of shipments when compared with the region. However, the country’s customs, infrastructure, international shipments, Over the past 3 years, the country has signed several bilateral logistics competence and tracking & tracing continues to lag behind air agreements, most of which were for expansion (see Recent the Asia region (see Philippines’ LPI ranking VS. Asia Region). developments in PH aviation). The past administration pursued Out of the 160 countries covered by this year’s report, air talks as part of its "pocket" open skies policy, wherein Germany remained the top performer in terms of logistics airports other than the country’s main gateway, the Ninoy performance with a LPI score of 4.23, while Syria has the Aquino International Airport (NAIA), were opened to more lowest score of 1.6 index. Germany was 70 spots afar from foreign traffic. And just last February, the ASEAN Open Skies the Philippines LPI ranking. Other countries that top the LPI Policy, a landmark aviation agreement that is expected to lead ranking were Luxembourg (4.22), Sweden (4.20), Netherlands to better connectivity in Southeast Asia, was signed. ASEAN (4.19), and Singapore (4.14). Among Asian countries, Singapore Open Skies allows designated carriers of ASEAN countries and Hong Kong posted a high logistics performance (see to operate unlimited flights between capitals in the region. Top 10 Countries in Logistics Performance Index-2016). These air agreements improve market access which The World Bank also classified the 160 economies into 5 groups: should expand the aviation industry’s growth. The sector’s top 10 LPI economies, bottom 10 LPI economies, lower-middle- development, in turn, is expected to contribute to the country’s income economies, upper-middle-income economies, and the low- economic development since aviation is a key enabler of income economies. The Philippines is considered by the World travel and tourism. However, the country’s current poor air Bank as among the ‘top-performing lower-income economies.’ transport infrastructure poses the biggest hindrance to the According to the World Bank, countries characterized industry’s growth. The main challenge to Philippine aviation by low logistics performance, such as the Philippines, face is the ability of infrastructure to keep up with the growth in high costs, not merely because of transportation costs but demand: the volume of passengers into and across the country also because of unreliable supply chains, a major handicap and the number of aircraft movements are increasing, but in integrating and competing in global value chains. infrastructure development is moving at a too slow pace. The Philippine logistics sector is expecting to earn International and domestic air traffic in the country have higher spot in the next LPI rankings in 2018 as the new increased quite significantly over the past 5 years (see PH’s administration of President Rodrigo Duterte pushes to air passenger traffic), but infrastructure has suffered, with improve the country’s logistics sector and infrastructure, only minimal improvements over the years making it still one which are included in his 10-point economic agenda. of the poorest in Southeast Asia (see PH’s world ranking in terms of air transport infrastructure). The country’s 4 main terminals which are all based in Metro Manila, as well as provincial airports, are currently mired in passenger and air traffic congestion (see NAIA’s congestion problems). Although NAIA Terminal 1 has recently undergone renovation and major improvements, it is still not fit to cater to growing demand. Currently, the new administration is weighing its options on the location of a new airport outside Metro Manila and is reviewing the projects aimed at improving the country’s provincial airports. These are necessary but what would really matter is if they are actually built and developed. The government needs to act urgently on building a better air transport infrastructure if it is to boost the country’s tourism sector. In addition to this, as airline companies are also in the process of increasing operations, improved aviation infrastructure is ever more needed.