The transportation and logistics industry of the Philippines is in the midst of a much-needed transformation, thanks in large part to the aggressive push for infrastructure development of President Rodrigo R. Duterte’s administration through its “Build, Build, Build” program.
“The country’s transport network has struggled to keep pace with rising levels of urbanization driven by robust economic growth; traffic congestion has become a national issue and roads and ports are over capacity,” Oxford Business Group (OBG), a publisher of investment and economic reports, says in an article.
“To address this situation, the government has set about accelerating infrastructure investment, focusing on projects to integrate the archipelago’s islands and stimulate development, including major upgrades to road, railway and port systems.”
In a paper released in March of this year by the state think tank Philippine Institute for Development Studies (PIDS), it was noted that a combination of the archipelagic nature of the country and the “burdensome, and sometimes inconsistent, regulations” has led to the Philippines having “the highest logistics cost among the member-states of the Association of Southeast Asian Nations.”
“Despite this, the Philippine logistics market has still managed to grow as a result of the country’s strong economic growth, growing outsourcing sector, and rising globalization,” Jose Tongzon, author of the aforementioned PIDS article, wrote.
Both Mr. Tongzon and OBG made mention of the 2016 edition of the Logistics Performance Index (LPI) of the World Bank, which is based on a worldwide survey of operators on the ground — global freight forwarders and express carriers — that provide feedback on the logistics “friendliness” of the countries in which they operate and those with which they trade.
The Philippines ranked 71st out of 160 countries, with an LPI score of 2.86. It was behind Singapore (5th), Malaysia (32nd), Thailand (45th), Indonesia (63rd), Vietnam (64th) and Brunei (70th).
In the 2018 LPI, the country fared a bit better, getting an LPI score of 2.90 and placing 60th out of 160 countries. Still, Singapore (7th), Thailand (32nd), Vietnam (39th), Malaysia (41st) and Indonesia (46th) were ahead of it.
OBG also brought attention to how the quality of the country’s overall infrastructure stacked up against those of its Southeast Asian neighbors in the World Economic Forum’s “Global Competitiveness Report” for 2017-18.
“[T]he Philippines ranked 113th out of 137 countries in terms of its quality of overall infrastructure, with its roads ranking 104th, railways (91st), seaports (114th) and airports (124th). Conversely, the country’s ASEAN counterparts Singapore, Malaysia and Thailand ranked second, 21st and 76th, respectively,” OBG said.
The Global Competitiveness Report 2018 showed that the Philippines had made remarkable strides. The country scored 59.4 points in the infrastructure pillar, ranking 92nd out of 140 countries. It lagged way behind Singapore (1st), Malaysia (32nd), Brunei (54th), Thailand (60th), Indonesia (71st), and Vietnam (75th), though.
The Philippines also ranked 129th in the road connectivity index, 88th in the quality of roads, 87th in railroad density, 100th in efficiency of train services, 26th in airport connectivity, 92nd in efficiency of air transport services, 61st in the liner shipping connectivity index, and 84th in efficiency of seaport services.
Multiple infrastructure projects under the government’s “Build, Build, Build” program are now being undertaken across the country. Early this year, it was reported that 75 projects worth a combined $36 billion in investments were being rolled out. Among those projects were three bus rapid transits, four seaports, six airports, nine railways and 32 roads and bridges.
In a news release last January from the Department of Finance (DoF), Grace Karen Singson, an undersecretary of DoF, was quoted as saying during an infrastructure forum that the enactment into law of the Tax Reform for Acceleration and Inclusion Act or TRAIN, coupled with prudent fiscal management and declining debt service payments would make the infrastructure buildup of the government feasible.
“Though ambitious, every penny is worth spending for. The ‘Build, Build, Build’ program will create 1.7 million jobs by 2022 as well as secure our country’s fast-paced growth in the medium term,” Ms. Singson said.
She noted that the administration intends to spend around $158 billion over the next five years for its “Build, Build, Build” program so that the infrastructure spending would reach 7.3% of the country’s gross domestic product by the end of Mr. Duterte’s term, in 2022.
In June, DoF Secretary Carlos Dominguez III noted in a news release that the program would also be financed, besides TRAIN, through the following: increased Official Development Assistance (ODA) flows from Japan and China, which have committed $9 billion worth of investments and ODA each, and Korea, which has pledged up to $1 billion; investments from multilateral institutions such as the Asian Development Bank, World Bank and Asian Infrastructure Investment Bank; floating bonds at investment-grade rates; and hybrid public-private partnerships, in which the government undertakes the projects and the completed ones are passed on to private partners for management or acquisition.
In the same news release, Mr. Dominguez said 35, or almost half, of the 75 high-impact infrastructure projects under “Build, Build, Build” had gone through the approval process and were ready to be carried out.
Just this month, during his meeting with top executives of Standard Chartered Bank, in Bali, Indonesia, Mr. Dominguez said the administration would continue the program in the face of global headwinds facing the Philippine economy. In a DoF news release, Mr. Dominguez cited the rising prices of oil in the world market, the trade dispute between the United States and China, and the stance of the United States’ Federal Reserve on monetary policy normalization by means of hiking interest rates.
“[T]he ‘Build, Build, Build’ program is doing very well,” Mr. Dominguez reportedly told the Standard Chartered Bank executives, Karby Leggett, managing director for Asia and public sector head, and Paul Skelton, global head for global banking and institutional banking head, adding that the current administration was expanding its inventory of big-ticket assets that succeeding administrations could privatize so that they could raise funds for their own priority programs.