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COA nixes Aviation Authority’s insurance investment

THE Commission on Audit (CoA) flagged a Civil Aviation Authority of the Philippines (CAAP) insurance investment saying it was done without approval of the Board members and without adequate criteria for the selection 10 insured officers.

Although the CAAP stressed that the investment — P500-million single-pay variable life insurance with the United Coconut Planter’s Life Assurance Corp. (COCOLIFE) — was approved by the board, the auditing agency said that “there is no duly signed Board Resolution approving the investment in single-pay variable life insurance, being a new mode of investment.”

COA added that the Board did not take an action on the investment based on the minutes of the meeting.

The auditors also noted that there were issues with the officers who were insured.

CAAP suggested that the officials to be considered as key men for the insurance should come from the ranks of Department Manager or above.

“It is also worthy to note that two of the 10 officers insured are political appointees and they generally serve at the pleasure of the President of the Philippines who is the appointing authority or are co-terminus with the President who has only three years left in office as of report date,” said CoA.

Hence, CoA recommended that CAAP should “recover the full amount of P500 million paid to COCOLIFE.” — Vince Angelo C. Ferreras

ACPC approves P1.5-B funding for SURE Aid

THE Agricultural Credit Policy Council (ACPC) has approved P1.5 billion in funding for the expanded Survival and Recovery Assistance Program for Rice Farmers (SURE Aid).

In a statement, ACPC said the program will be implemented by the Land Bank of the Philippines, which will also work with ACPC on crafting the program’s guidelines.

“This loan assistance is a manifestation of the strong desire of the government to help Filipino rice farmers,” DA Secretary William D. Dar said in a statement.

With the approval of the loan assistance, Mr. Dar said he is positive production and income of rice farmers will improve.

The SURE Aid funding was approved during the 66th Governing Council Meeting of ACPC last Aug. 15.

The program targets rice farmers affected by the reduction or loss of their income, providing loan assistance.

Starting Sept. 1, rice farmers farming one hectare and below may avail a one-time, zero-interest loan of P15,000 payable for up to eight years.

The National Food Authority will also buy the produce of the farmers who will avail of the loan assistance.

“We will continue to look at measures to improve the living conditions of our rural stakeholders. Rest assured that with RCEF (Rice Competitiveness Enhancement Fund), farmers will increase productivity and earn more,” Mr. Dar said. — VMPG

Ayala unit launches P16-B One Vertis Plaza

By Arra B. Francia, Senior Reporter

THE luxury residential unit of Ayala Land, Inc. (ALI) is venturing into its first office-for-sale project with the launch of the P16.1-billion One Vertis Plaza in Quezon City.

Ayala Land Premier (ALP) said Friday that it has already sold 65% of the 43-storey office tower, or about P10.6 billion. The average selling price of each square meter (sq.m.) has risen 20% to P352,000 by August, from its launch price of P269,000 per sq.m. in June 2018.

With office spaces ranging from 101 to 325 sq.m., each unit costs about P28 million to P114 million. The tower has a net saleable area of 60,784 sq.m., excluding the five topmost floors which ALP is keeping for itself.

The tower will provide 19 elevators, six basement parking levels, and one service lift. The company is likewise applying for LEED, or Leadership in Energy and Environmental Design, Gold certification.

ALP Head of Sales and Marketing Paolo O. Viray said floor buyers include local firms in the manufacturing and industrial sector, food, and pharmaceutical businesses. Companies involved in real estate and professional services have also bought small office units.

“Our market includes corporations looking for headquarter space in Quezon City, established companies looking for a place or needing an extension of their office in the north, and people already in the north that are upgrading,” Mr. Viray said in a press briefing in Makati Friday.

He added that more than 50% of the buyers are end-users, while the rest are investors.

Construction for One Vertis Plaza is now ongoing, with target completion by the second quarter of 2024.

One Vertis Plaza is located at the southern most tip of Vertis North, ALI’s 45-hectare mixed use estate in partnership with the National Housing Authority. It will stand next to a two-hectare green park, and will be surrounded by several retail establishments, Ayala Malls Vertis North, and the 438-room Seda Vertis North hotel.

“Vertis North presents a lot of value given the future infrastructure projects we expect to be available in the next few years,” Mr. Viray said, referring to the Metro Rail Transit Line 7 and the Metro Manila Subway.

ALI is spending P65 billion over a 10-year period for the estate’s development.

Meanwhile, ALP said it remains on the lookout for land banking opportunities for more office projects in the future.

“We continue to look for opportunities given the success of this project…We’re quite selective given the expectations for ALP and needs of the high-end market,” Joseph Carmichael Z. Jugo, ALP managing director, said in the same briefing.

KKR, Blackstone among bidders for stake in MPIC hospital unit

SINGAPORE — Buyout firms KKR, Blackstone and CVC are among bidders competing for a stake in the hospital unit of Philippines’ Metro Pacific Investments Corp. (MPIC), people with knowledge of the matter told Reuters.

MPIC, which has interests in power, water and other sectors, has said it plans to sell a 40% stake in Metro Pacific Hospitals at a valuation of $2-$2.5 billion, marking the country’s biggest healthcare deal.

The bidders are, however, valuing the hospital unit at about $1.5-$2 billion, pegging the valuation at 15 to 20 times next year’s estimated core profit of the unit, the people said.

The stake in the unit, the operator of 14 hospitals, many of which are among the country’s largest and most modern, has also attracted interest from other financial and strategic investors, the people said, declining to be named as the talks are private.

The interest in the subsidiary underscores a strong appetite for healthcare deals in emerging markets, which are benefiting from rising spending by a rapidly growing consumer class.

“There’s no asset of this sort in the Philippines. So, if you are looking to get exposure to local healthcare, this is a good play,” one private-equity executive said.

MPIC, which owns an 85.6% stake in the hospital unit and has said it plans to use the funds from the sale to expand this business, declined to comment.

More than half a dozen investors have submitted first-round indicative bids and could team up with other parties for their final offers, the sources said.

Singapore state investor Temasek Holdings is among those interested in the hospital unit, one person said.

KKR, CVC, Blackstone and Temasek declined to comment.

One of Temasek’s portfolio firms is Sheares Healthcare Group, which invests and provides healthcare services in Asia, focusing on China, India, the Philippines, Indonesia and others.

MPIC is a unit of First Pacific Co Ltd, that is owned by Indonesian tycoon Anthoni Salim.

HEALTHCARE ASSETS IN PLAY
Sources said while majority control was not being offered in Metro Pacific Hospitals, some bidders were keen to take a bigger stake by setting up different shareholding structures at a later stage. The Philippines’ 40% cap on foreign ownership will apply as the unit owns real estate.

Besides running hospitals, MPIC’s hospital subsidiary operates a network of primary care clinics and cancer centres.

Singapore sovereign wealth fund GIC, which bought a 14.4% stake in the hospital unit in 2014, and has an option to boost its holding via an exchangeable bond, is open to paring its stake, the people said. GIC declined to comment.

The Philippine sale process comes months after the Asian hospital business of Columbia Pacific Management, estimated to be valued at $2 billion, was launched, other sources said.

The sale of Columbia Pacific’s Asia hospital business attracted keen interest from many investors, but steep valuations for the portfolio of mid-sized medical facilities on offer, mainly in India and Malaysia, affected the process.

A buyout firm and a strategic buyer are expected to jointly acquire part of the Columbia Asia business at a lower-than-expected valuation, the sources added.

There was no reply from Columbia Pacific to a Reuters email sent outside U.S. opening hours. — Reuters

Crown Asia profit rises by 53% in Q2

CROWN Asia Chemicals Corp. reported a 53% increase in its net income in the second quarter, driven by improved infrastructure operations, higher sales, and wider market reach.

In a regulatory filing, the listed manufacturer of polyvinyl chloride (PVC) and Crown pipes said it grew its profit to P45.74 million in the three-month period ending June from P29.86 million it booked in the same period last year.

Revenues grew 28% to P379.75 million in the second quarter from P297.52 million, year-on-year.

This led to a 27% jump in its first-half earnings to P88.4 million, as revenues rose 18% to P718.27 million. Crown Asia said the topline growth was driven by “increase in export sales, more aggressive sales efforts, broader geographic market, and market segment diversification.”

The company noted that growth was also mirrored in all its divisions, namely PVC Compounds, PVC Pipes, polypropylene random copolymer (PPR) and high-density polyethylene (HDPE) Pipes and PVC Roofing.

Crown Asia said it expects growth to be sustained for the rest of the year, as it continues with efforts to improve fuel operations and revenues.

The company also completed its 2019 dividend pay-out of P0.09 per share.

Incorporated in 1989, Crown Asia engages in the production of plastic compounds, plastic pipes, and other related products, which are used directly and indirectly in the construction and telecommunications industries.

It was tapped as the supplier of pipes for the Cavite-Laguna expressway and the Metro Manila Skyway Stage 3.

Shares in Crown Asia dropped 3 centavos or 1.46% to close at P2.02 apiece on Friday. — Vincent Mariel P. Galang

Bill seeks regulation of ATM transaction fees

THE Bayan Muna Party-list has refiled a bill regulating fees and charges on transactions done via automated teller machines (ATM).

Representatives Carlos T. Zarate, Ferdinand R. Gaite, and Eufemia C. Cullamat filed House Bill 4019 or the “ATM Fee Regulation Act of 2019” which regulates charges on ATM transactions such as balance inquiry, deposit, withdrawal, and fund transfer.

The bill also requires the posting of fees on the monitor before any transaction.

“Banks are likewise required to disclose the amount of fees they charge and collect from ATM user for every transaction. The fees shall be conspicuously posted on the screens of automated teller machines prior to the completion of any transactions,” the bill read.

According to the bill’s explanatory note, banks are charging P10 to P15 for interbank withdrawals and P2 for interbank balance inquiries.

The bill penalizes any bank officials who will violate the law with a P50,000 to P200,000 fine or imprisonment for two months up to one year.

Makati City 2nd district Rep. Luis Campos Jr. earlier filed House Resolution 210 for an inquiry into the increase of ATM transaction fees.

Mr. Campos on Friday called on the Bangko Sentral ng Pilipinas (BSP) to name the banks that have already submitted applications to increase their transaction charges following the lifting of the six-year moratorium on ATM fees.

The BSP said earlier this week that less than 10 banks have applied to adjust their ATM fees.

“While it might be understandable for the smaller banks with fewer ATMs to want to raise their fees, it might be harder for the bigger banks to justify their plans to jack up charges,” Campos said. — V.A.C. Ferreras

Peso gains ground on upbeat US data

THE PESO ended stronger on Friday as traders took profit after favorable July retail sales data from the United States.

On Friday, the local unit closed at P52.44 versus the greenback, adding 10.5 centavos from its Thursday finish of P52.545 per dollar.

The peso opened the session at P52.55, which was also its lowest point for the day. Its strongest intraday showing was at P52.37 against the dollar.

However, volume of dollars traded on Friday thinned to $1.397 billion from the $1.661 billion seen last Thursday.

“The peso strengthened today as the upbeat US retail sales report signified lingering strength in the US economy which has eased some recession concerns,” a bond trader said via e-mail on Friday.

According to a Reuters report, US retail sales increased 0.7% in last month from downward-revised 0.3% in June, the Commerce department said.

On a year-on-year basis, retail sales in July rose 3.4%.

Consumer spending, which accounts for more than two-thirds of the economy, is being underpinned by the lowest unemployment rate in nearly half a century.

Meanwhile a trader interviewed separately via phone said the peso’s performance on Friday was due to profit taking ahead of the weekend.

“As of now, we are consolidating as the market searches for new leads before moving again,” the trader said. — Mark T. Amoguis

Local stocks continue slump

By Arra B. Francia, Senior Reporter

THE main index continued its descent for the second day on the back of lingering fears of an looming recession in the United States.

The 30-member Philippine Stock Exchange index (PSEi) slumped 0.42% or 32.88 points to close at 7,795.98. The broader all shares index likewise slipped 0.11% or 5.21 points to 4,741.14.

“The local market extends its losses by 32.88 points as investors continue to digest the recession signals brought about by the US bond market,” Philstocks Financial, Inc said in a market note.

Yields of short-term and long-term US Treasury notes inverted earlier this week, which analysts take as a sign of an upcoming recession. Markets over the world have been reacting negatively to the warning sign since.

Asian markets started to improve Friday, as China announced plans to boost disposable income and stabilize employment. Japan’s Nikkei 225 was up 0.06% or 13.16 points to 20,418.81; the Shanghai Composite gained 0.28% or 8.03 points to 2,823.82, while the Hang Seng index jumped 0.94% or 238.76 points to 25,734.22.

Wall Street indices ended mixed, with the Dow Jones Industrial Average up 0.39% or 99.97 points to 25,579.39. The S&P 500 index advanced 0.25% or 7 points to 2,847.60, while the Nasdaq Composite index dipped 0.09% or 7.32 points to 7,766.62.

Meanwhile, Papa Securities Corp. Sales Associate Gabriel Jose F. Perez attributed the local market’s movement to the rebalancing on Monday.

“It was a dull end for the PSEi after closing 32.88 points in the red at 7,795.98, after trading in the green late in the afternoon. Volume was quite substantial at P8.7 billion on the index’s rebalancing,” Mr. Perez said in an email.

The PSE earlier this month announced the recomposition of the Industrial and Property indices, while the PSEi and the rest of the sectoral counters will stay intact. The changes will take effect on Monday, Aug. 19.

Four sectoral indices closed in negative territory: financials lost 1.46% or 26.42 points to 1,779.29; mining and oil dropped 0.26% or 21.14 points to 8,051.19; services shed 0.22% or 3.51 points to 1,568.85; while industrial went down 0.13% or 13.80 points to 10,844.32.

In contrast, holding firms rose 0.26% or 19.76 points to 7,727 and property added 0.22% or 9.03 points to 4,036.97.

Some 692.52 million issues switched hands valued at P8.695 billion, lower than Thursday’s P11.81 billion.

Advancers outpaced decliners, 127 to 73, while 47 names were unchanged.

Foreign investors snapped their eight-day net selling streak Friday, with net inflows of P298.69 million versus net sales of P1.75 billion in the previous session.

How logistics keeps the world turning

If business and enterprise is the beating heart of an economy, then logistics is the lifeblood. Just as blood transports nutrients to different parts of the human body to keep it whole, freight trains, cargo ships, and trucks deliver goods and resources to wherever they need to go.

As an economy grows, the more crucial the role logistics networks play to its development. More so with the rise of e-commerce.

Southeast Asia alone is predicted to become a $240 billion e-commerce industry by 2025. With such a massive market of buyers and sellers, the importance of a free-flowing transport network is evident.

“Infrastructure is an essential ingredient for economic development and growth. Transport infrastructure, for example, facilitates cheaper and more efficient movement of goods, people and ideas across places,” Ejaz Ghani, a lead economist from the World Bank, wrote on the organization’s Web site in 2015.

“It also impacts the distribution of economic activity and development across regions to the extent that agglomeration economies and efficient sorting can be realized, the levels of competition among industries and concomitant reallocation of inputs towards more productive enterprises are achieved, and much more.”

Many business leaders, policy makers, and academics, Mr. Ghani noted, point to inadequate infrastructure as a critical obstacle to sustained growth.

One recent example of logistics’ effect on economic growth is China’s Belt and Road Initiative (BRI), an effort to create jointly-built trade routes emulating the ancient and historic Silk Road and promote regional cooperation in Asia, Europe, and Africa.

In 2013, Chinese President Xi Jinping announced plans to build the BRI as a 21st century maritime Silk Road economic belt. The BRI is geared towards encouraging greater policy coordination, infrastructure connectivity, investment and trade cooperation, financial integration, cultural exchange and regional cooperation between Asia, Europe and Africa, by creating jointly-built trade routes emulating the ancient Silk Road. The BRI will encompass more than 70% of the world’s population (4.4 billion) and 62% of the world’s GDP (around US$21 trillion) illustrating the colossal scale of the initiative.

Research initiated by the RAND Corporation titled “China Belt and Road Initiative: Measuring the impact of improving transport connectivity on international trade” measured the impact that improving multimodal transport connectivity might have on multilateral trade and economic growth in countries and regions across the BRI.

The research found that multimodal transport infrastructure and connectivity can facilitate trade expansion, attract foreign direct investment, speed up the industrialization process, facilitate regional integration, and accelerate the process of economic growth. Additionally, they found that having a rail connection between trading partners has the largest impact on improving trade in the BRI region.

Logistics in a globalized world

The value of logistics is compounded in a rapidly shrinking world. As of 2018, the World Bank estimates the logistics industry to have reached $4.3 trillion, owing to the explosion of trade and commerce brought about by progress.

In nearly every country in the world, logistics is the network of services that supports the physical movement of goods within and across borders, comprising of an array of activities from transportation, warehousing, brokerage, express delivery, terminal operations, and even data and information management. The more efficiently this system can direct the flow of goods to their destinations, the easier it is for a country to facilitate trade and grow.

“Logistics are the backbone of global trade,” Caroline Freund, director, Macroeconomics, Trade & Investment Global Practice at the World Bank Group, wrote in the organization’s Web site.

“As supply chains become more globally dispersed, the quality of a country’s logistics services can determine whether or not it can participate in the global economy.”

That the world is connected through — and relies on — an unobstructed system of roads, bridges, and trade routes is clear in the manufacturing of modern everyday objects like the smartphone. In one device, there could be any number of mineral imports from mines in Europe or circuitry from China; one device could then have been assembled by robots in the US.

The relationship between economic development and logistics is further explored in the World Bank’s “Connecting to Compete” report, which evaluates countries’ logistical capabilities across a number of indicators, taking into account factors such as including logistics competence and skills, the quality of trade-related infrastructure, the price of international shipments, and the frequency with which shipments reach their destination on time. The Logistics Performance Index (LPI) aims to aid governments benchmark their progress over time and in comparison to similar countries.

The report scores countries based on two factors. Domestic LPI covers quantitative and qualitative assessments of a country’s services from logistics professionals working inside the country. Factors such as infrastructure, quality of service providers, border procedures, and supply chain reliability are detailed in this component.

International LPI provides evaluations of a country’s services by logistics professionals located outside the country. This component provides qualitative information of how a country’s trading partners perceive the efficiency and quality of its logistics services.

Not surprisingly, high-income countries, particularly those in Western Europe, emerge as world leaders on logistics, gaining scores 48% higher, on average, than low-income countries. Among the 30 top performing countries, 24 are members of the Organization for Economic Co-operation and Development (OECD).

“Across the board, we have seen most countries investing in logistics-related reforms, especially in the areas of building infrastructure and facilitating trade,” Jean Francois-Arvis, economist at the World Bank Group and report co-author, wrote.

“Despite these efforts to modernize services, developing countries face many remaining challenges. This explains a persistent gap between high- and low-income countries in terms of logistics performance.”

However, the report also found that among their respective income groups, Vietnam, Thailand, Rwanda, China, and India all outperform in logistics. These countries tend to have access to seaports or large international transportation hubs.

Meanwhile, the bottom 10 countries in the ranking are composed of mostly low-income and lower-middle-income countries. These are either fragile economies affected by armed conflict, natural disasters, political unrest, or landlocked countries that are naturally challenged by geography or economies of scale in connecting to global supply chains.

For individual countries, logistics performance could be the key to their economic growth and competitiveness is clear. The World Bank found that inefficient logistics raise the cost of doing business and reduce the potential for integration with global value chains. The toll can be particularly heavy for developing countries trying to compete in the global marketplace.

“The modern era of international trade is one of increasingly complex interactions between people, firms, and organizations. Supply chains cross countries and regions. Trade has become a 24/7 business and good performance in trade requires connectivity along not only roads, rail, and sea, but in telecommunications, financial markets and information-processing. Having inefficient or inadequate systems of transportation, logistics, and trade-related infrastructure can severely impede a country’s ability to compete on a global scale,” the World Bank wrote. — Bjorn Biel M. Beltran

Technological innovations that are remaking the logistics industry

Disruptive technological forces are reshaping the logistics industry in ways that are profound and unprecedented. And industry players, faced with the constant challenge of addressing rapidly evolving consumer needs and interests, have not been shy about embracing them.

Among the major tech-fueled shifts in the industry is toward automation. According to a 2016 report by the professional services firm PricewaterhouseCoopers (PwC), some of the industry’s labor-intensive processes, from warehousing to last-mile delivery, were already being fully or partially automated.

“Automated solutions in the warehouse are already being implemented and their level of sophistication is increasing. For example, automated loading and unloading systems are already available, but in the future these are likely to be able to bypass obstacles and adjust routes automatically. Advances in data processing and optics now allow tasks to be automated which were once thought too complex — like trailer loading and offloading at acceptable speeds,” the report said.

Meanwhile, the report said package delivery could actually make more use of automation, particularly through delivery drones and autonomous vehicles. “Google has already started working on self-driving lockers and the trucking industry is partnering with OEMs on partially automated truck convoys. Even if more radical solutions are a long time coming, other technologies which could make drivers more efficient are in the offing too, like augmented reality solutions that give drivers more information about their environment and the packages still on board,” it said.

An article published on the Web site of Innovation Enteprise, a business media company, said that the online retail giant Amazon’s experimentation with drone-based delivery services is “an awesome idea because drones and unmanned aerial vehicles offer incredible potential in this regard if only because they can provide a variety of economic and environmental benefits.”

A large number of transports and ground vehicles would disappear from roads if there was a major shift to aerial delivery, the article noted, and this would provide benefits like reduced traffic buildup, reduced costs associated with ground-based transportation and reduced greenhouse gas emissions.

The article also touched on another important tech trend in logistics: the Internet of Things or IoT. “IoT is often associated with consumer-level devices such as smart home technology. While it definitely has its place in that market, there are enterprise-level applications of the technology already in use. In manufacturing and development, for example, IoT sensors are used to monitor and maintain expensive equipment,” it said.

In logistics, meanwhile, IoT sensors and devices can be deployed by companies in order to have a more connected production floor that gives real-time alerts and updates, the article said. It added, “But these devices are also leveraged across the entire supply chain. Imagine enhancing in-transit visibility, being able to track entire shipments along every minute of their full route. Suddenly, equipment and employee monitoring are also possible much like you’d see in a modern fleet thanks to real-time GPS systems. The difference is, of course, you’re tracking goods, equipment and people with a great amount of detail.”

Then there are predictive maintenance solutions. According to a 2019 PwC report, they have compelling benefits, including cost reduction. “Predictive maintenance helps reduce downtime and allows companies to use their equipment without breaks. Moreover, regular periodic maintenance is a waste of money if the assets are in good condition,” it said.

It also helps improve the quality of service, the report added, by stabilizing delivery times and ensuring that a company’s entire fleet is not only available but also ready to work at full capacity. Even the environment can benefit from predictive maintenance. “Better maintenance has a positive impact on environment and waste management. Sub-optimal operation is spotted, allowing machines to be used for longer times, resulting in savings in raw materials and natural resources,” the report said.

Even blockchain and distributed ledger technologies are starting to make an impact on the logistics industry. They offer four advantages: security (End-to-end product identification and auditability while maintaining privacy with hash keys); efficiency (Reduced need for document processing); transparency (Easier and reliable tracking and source checking); and reliability (Once a piece of information is put into the network it cannot be easily changed).

“Overall, companies from the transportation and logistics sector tend to value blockchain-based solutions for the possibility to create internally robust, transparent and secure systems that allow them to deliver higher service levels at a lower cost,” the report said. However, the report also emphasized, “Blockchain, and in the wider sense all distributed ledger technologies, are expected to have a moderate influence on all T&L segments, with effects visible in three years’ time at minimum.”

Possibilities in a disrupting logistics sector

Logistics continues to be foreseen as a thriving industry in the Philippines. In a report by Ken Research, a global aggregator and publisher of market intelligence, equity, and economy reports, the Philippine logistics and warehousing market is projected to reach over P970 billion by 2023, along with a positive compound annual growth rate of 8.8% during the forecast period 2018E-2023E.

“The market is further expected to be driven by expanding industrial activities, growing e-commerce industry, upcoming infrastructure in the country & continuous investment by the government in development of logistics infrastructure and consistent economic growth,” Ken Research said in a statement.

On the other hand, the logistics industry is being disrupted on a global scale, creating possibilities that logistics firms should consider. In a recent report by multinational professional services network PricewaterhouseCoopers (PwC) titled “Shifting Patterns: The Future of the Logistics Industry”, logistics is perceived to be driven by disruptions coming from growing consumer expectations, technological breakthroughs, new entrants to the industry, and a redefined model of collaboration.

The first disruption comes from expectations of both individuals and businesses “to get goods faster, more flexibly, and — in the case of consumers — at low or no delivery cost.”

“Manufacturing industries are facing far greater expectations around efficiency and performance than ever before,” the report said of expectation in business-to-business (B2B) markets. “Their customers expect faster time-to-market, reduced defect rates, and customized products.”

Among business-to-consumer (B2C) markets, the report says that some parts of the sector are still struggling to keep up with consumers who have gone digital long before many of the retailers.

Emerging technologies such as data analytics, automation, and cloud technology are changing the way logistics operate, hoping to address the growing pressure to deliver a better service. However, while there is a huge potential provided by these technological breakthroughs, the industry has been slow to seize it.

“In our recent Industry 4.0 study, the percentage of [transport & logistics] companies that rated themselves as ‘advanced’ on digitization was just 28%,” the research noted. Thus, the lack of ‘digital culture’ and training is a challenge the industry must face and conquer, lest they risk being left behind.

Furthermore, start-ups with new business models, major players from other industries, and even the customers of logistics companies are entering the industry. Start-ups among the industry are taking advantage of new technology, especially in freight forwarding and last-mile delivery. Among the major players outside logistics, autonomous vehicles is cited as a possible entrant; while among the industry’s own consumers, e-commerce companies Amazon and Alibaba are apparent examples.

Redefining collaboration, being perceived as a means to increase efficiency, is another disruptor in the industry. Collaboration can become more dynamic through new technology, but inconsistencies in the processes make collaborations difficult. The report sees the concept of ‘Physical Internet’ (PI) as a viable solution. PI is based on the idea that “physical objects can be more efficiently moved around if they become more standardized and share common channels, like data packets on the Internet.”

“The Physical Internet could help address this ‘grand challenge’ by drastically increasing co-operation between companies and across transport modes through greater standardisation,” the research read.

Along with these key disruptions in the industry, the report looked at ways in how these changes might work together and shape logistics in 5 to 10 years. The report noted four possible scenarios: “Sharing the PI(e)”, “Start-up, shake-up”, “Complex competition”, and “Scale matters”.

Under the “Sharing the PI(e)” scenario, the dominant theme is the growth of collaborative working where current market leaders (or incumbents) retain their dominance.

“Incumbents increase their efficiency and reduce their environmental impact by collaborating more, and developing new business models, such as sharing networks,” the report explained. “Research around the ‘Physical Internet’ (PI) leads to shared standards for shipment sizes, greater modal connectivity, and IT requirements across carriers.”

Another possibility is the “Start-up, shake-up”, wherein new entrants in the form of startups will bring a bigger impact. With crowd-sharing platforms and blockchain as dominant technologies in this scenario, startups become significant players, take market share from the incumbents through new business models, and collaborate with them and complement their service offers.

“Complex competition,” meanwhile, is characterized by the expansion of logistics offerings of big retail players. As a result, they shift from being customers to competitors. “They purchase small logistics players to help cover major markets, and draw on their deep understanding of customer behavior to optimize supply chains,” the report further explained. From serving as suppliers to the industry, technology firms are also seen entering this industry and creating a wider competition.

On the other hand, incumbent firms further improve in the “Scale matters” scenario. As current market leaders, they “compete for a dominant market position by acquiring smaller players, achieving scale through consolidation, and innovation through the acquisition of smaller entrepreneurial startups.” — Adrian Paul B. Conoza

Connecting countries with improved logistics

In today’s modern world, international trade contributes significantly to the growth of the global economy that promotes progress and prosperity across countries, down to communities. The success of seamless trade activities between nations depends greatly on uninterruptible flow of goods within and across borders. In this matter, the need for improved logistics infrastructure cannot be overemphasized.

“Logistics plays a crucial role in today’s economy. Improved trade logistics infrastructure such as roads and highways, ports, railways, airports including dry ports, warehousing infrastructure and labs and testing facilities are necessary for sustainable and balanced economic development of all parts of the country,” market research company Export Genius said on its Web site.

According to a report, “Connecting to Compete 2018: Trade Logistics in the Economy”, prepared by the World Bank’s Global Trade and Regional Integration Team in the Macroeconomics, Trade and Investment Global Practice, good logistics services reduce the cost of trade.

Compared from 10 years ago, the role of logistics in the global economy is better recognized today, the report said. “The growing scope of logistics performance and increasing recognition of its contribution to growth and economic integration call for holistic policies. More and more countries, especially emerging economies, see logistics as a sector of the economy requiring consistent policy making that cuts across traditional logistics areas,” it added.

Logistics has become one of the most important sectors in the world. It is recognized as one of the core enablers of development, ensuring rapid economic growth, bridging the gap between demand and supply, and cutting business costs.

Export Genius said that the expansion in trade and logistics infrastructure creates demand in economic system for different products, such as iron and steel, cement and manpower. For instance, India, it said, has to make its logistical infrastructure better to not only grow its economy but also help its companies to accomplish a sustained superior performance in international markets through enhanced trade supply chain process.

In terms of demand and supply, Export Genius said that more efficient transportation of goods from one place to another guarantees timely supply of products, thus, meeting the demand from the market at a given time.

“For example, China with main economic clusters on the east coast results to transporting commodities at far-away regions in the western and remote northern parts of the country. This creates the problem of demand and supply in the country’s economic system. Better connectivity from road, rail network, airstrips and sea helps companies to distribute their resources between places where there are abundant resources and where there are scarce,” Export Genius said.

Moreover, the market research company said that improved logistics infrastructure helps cut the cost of doing business by means of providing uninterrupted flow of goods. It said that any delay in the transportation of goods not only extends trade cycle, the quality of certain goods also get poor and fetches lower prices in markets.

“For individual countries, logistics performance is key to economic growth and competitiveness. Inefficient logistics raises the cost of doing business and reduces the potential for both international and domestic integration. The toll can be particularly heavy for developing countries trying to compete in the global marketplace,” the World Bank report said.

Given the utmost importance of logistics, it has become an elevated priority for many member countries of the International Transport Forum (ITF), an intergovernmental organization with 59 member countries, said ITF Secretary-General Young Tae Kim.

“Because facilitating trade and transport is at the core of stimulating economic development, several countries have developed comprehensive national logistics strategies. Well-functioning domestic and international logistics is a precondition of national competitiveness,” Mr. Kim was quoted as saying in the same report.

Of all the countries, Germany has taken the top spot in terms of logistics performance, measured against benchmarks like logistics competence and skills, the quality of trade-related infrastructure and the price of international shipments. It was followed by Sweden, Belgium, Austria, and Japan.

“High-income countries occupied the top 10 rankings in 2018, eight in Europe plus Japan and Singapore — countries that have traditionally dominated the supply chain industry,” the World Bank report revealed.

Meanwhile, mostly low-income and lower-middle-income countries in Africa or isolated areas fell to the bottom of the list. These are Afghanistan, Angola, Burundi, Niger, Sierra Leone, Eritrea, Libya, Haiti, Zimbabwe, and Central African Republic.

Among the lower-middle-income countries, large economies such as India and Indonesia and emerging economies such as Vietnam and Côte d’Ivoire stand out as top performers, the report said, noting that most of these countries either have access to sea or are located close to major transportation hubs.

“The composition of the top-performing upper-middle-income economies has changed marginally, with China, Thailand, and South Africa leading the group. Romania, Croatia, and Bulgaria also improved their rankings. Among low-income countries, those in East and West Africa lead in this year’s edition,” the report said. — Mark Louis F. Ferrolino