"The policymakers and the business community have seen the light."
"The policymakers and the business community have seen the light."
Whenever they have thought about economic activity, Filipinos have taken into consideration only the two ends of the economic-activity spectrum, namely, production and consumption. They have tended to not consider that goods that are produced need to be readied and made accessible to consumers. In short, they have tended to not think of logistics as a key important component of economic activity.
As a result of such disregard, the components of the logistics sector—the facilities of the processing, customs and brokering and forwarding services, storage and transportation industries—have been inadequate, inefficient and poorly maintained. Warehouses tend to be old and badly constructed, processing of goods is generally below par, customs brokering and forwarding services are inefficient and transportation equipment is notoriously poorly maintained.
No longer. Policymakers and the business have at last realized that the logistics sector of the Philippine economy has not been accorded the attention it deserves—a neglect which has proven costly for domestic and foreign consumers of Filipino products in terms of inflation and uncompetitive exports. As they say, the cavalry is on the way, bringing the needed resources and skills.
There are several driving forces behind the at-long-last heightened interest in the logistics sector of the Philippine economy. The first and foremost factor is the greater demand created by the now-higher pace of GDP (gross domestic product) growth; obviously above-6-percent GDP growth is bound to require more and better logistics than 4-5 percent growth.
Another upward force is the continuing rise of e-commerce activity in this country. The entry of such online-selling giants such as Lazada, Zalora, Shopee and S&R Membership Shopping has created a growing demand for space in which to warehouse e-commerced items. A property research company has reported that during the period 2012-2017 the industrial/retail business group was the leading contributor to the growth of the demand for warehouse space.
A third—and certainly not the least—driving force behind the ongoing rise of the logistics sector is the Duterte administration’s infrastructure (Build, Build, Build) program. The program has created a sharp increase in demand for storage space for the equipment and supplies requirements of the program.
Clearly, warehousing is a key element in the ongoing upsurge of the logistics sector. Apparently, the point is slowly being reached where there will be a deficit in the supply of efficiently built and well located warehouse space. The business conglomerates realize this and have begun to include warehouses—including warehouses with refrigeration facilities—in their capex (capital spending) budgets.
Just how far the logistics upsurge has come can be seen in, among other things, the rise in the Philippines’ ranking in the World Bank LPI (Logistics Performance Index), which covers 160 countries. The Philippines used to be in 71st place; today it is No. 60. The WB-LPI found that the Philippines had registered better performance in four areas (tracking and tracing, logistics competence, infrastructure and international shipment) out of six.
Perhaps the biggest problem facing the logistics sector is a deteriorating land-availability situation. As urbanization proceeds, demand for warehouse space is more intensely competing with demand for land for commercial and residential purposes.
At this point the leader in the drive to provide first-rate warehouse space for in this country’s industry and commerce is Double Dragon Properties Inc., a company affiliated with the Jollibee group of companies. In highly strategic fashion Double Dragon has put up massive warehouses—called Central Hubs—in Tarlac and Iloilo. The first is intended to service the needs of the booming Metro Manila-Clark-Central Luzon mega-region; the second is intended to service the needs of one of the Visayas’ most progressive islands. Apparently, other Central Hubs are on the drawing-board.
The policymakers and the business community have seen the light. Hereafter the logistics sector will no longer be the neglected component of the Philippine economy.