Participating in the international trade connects an economy to other markets across the world. And this connection is substantially enabled by developed logistics.
Logistics deals with various activities involved in the movement of goods across borders when it comes to international trade. “The critical role of logistics services in trade and economic development can never be overemphasized,” World Trade Organization (WTO) Deputy Director-General Anabel González has said. “As trade is more and more organized through value chains, be it global or regional, logistics services are the ‘glue’ that holds value chains together.”
According to Ms. González, there is a correlation between a country’s logistics performance and its competitiveness, which many studies have shown. As such, in pursuing development goals, she pointed out that developing countries must immediately boost their logistics capacity.
In this area of logistics, the Philippines has seen some progress after a few years since the pandemic disrupted supply chains globally. The country improved with its overall score of 3.3 out of 5 in the seventh edition of the World Bank’s Logistics Performance Index (LPI) released last April, placing it in the 43rd place out of 139 economies. This latest LPI score was up by 0.4 points and climbed 17 notches in the ranking from its performance in 2018.
The World Bank’s LPI is a measure of an economy’s capacity to promptly and reliably transport goods across borders. It examines a country in six areas, which include customs and border management clearance; infrastructure related to trade and transport; international shipments; quality of logistics services; tracking and tracing consignments; and timeliness. The index “helps developing countries identify where improvements can be made to boost competitiveness,” according to Mona Haddad, global director for Trade, Investment, and Competitiveness at the World Bank.
Among these six components in the LPI, the Philippines scored best in timeliness with 3.9 points, placing it 21st in the ranking. In terms of the country’s logistics competence and equality as well as its tracking and tracing, both are scored at 3.3 points. Meanwhile, it received scores of 3.2 and 3.1 in infrastructure and international shipments, respectively. Among the six areas, the country scored lowest concerning customs with 2.8 points.
While showing progress in its logistics performance, the Philippines could make further improvements in this sector. One of the ways to do so is by looking at the maritime side. This could be valuable because, in global trade, around 90% of traded goods get transported by the sea.
The European Chamber of Commerce of the Philippines (ECCP) lauded the country’s improved performance in the World Bank’s LPI after the index’s release. Still, the ECCP believed this performance could be bettered through the implementation of the 10-year Maritime Industry Development Plan (MIDP).
The MIDP was launched in 2018 and was updated by the Maritime Industry Authority (MARINA) earlier this year. The roadmap’s 2028 target is to develop a “strong and reliable Philippine merchant fleet” that addresses the country’s sea transport requirements in support to the government’s socio-economic agenda.
Aside from the MIDP, the ECCP also considered “fully operationalizing the National Single Window (NSW) and integrating it with the ASEAN Single Window (ASW); upholding the International Commerce Terminology (INCOTerms); and officially clarifying the lead government agency responsible for a matter relating to shipping rates and port congestion” for the further improvement of the country’s logistics performance.
The United Nations Conference on Trade and Development (UNCTAD) similarly called for increasing investments in maritime supply chains in its Review of Maritime Transport in the previous year, adding that ports, shipping fleets, and hinterland connections must be further prepared for future global crises.
Furthering investment in shipping fleets was also agreed upon by the Philippine Liner Shipping Association (PLSA), according to a BusinessWorld report from November last year. Yet, it also underscored the need for infrastructure to be prioritized to deal with congestion in ports.
To decongest the gateway in Manila, the Philippine Ports Authority (PPA) is considering the expansion of three international seaports beyond the capital, particularly the international ports in Iloilo City, Sasa in Davao City, and General Santos City, PPA Commercial Services Department Manager Mark Jon S. Palomar said in April.
Mr. Palomar believed that redirecting more international cargo to and from these ports could cut transshipment costs.
The World Bank pointed out in its 2023 LPI report that the biggest delays took place when containers are stalled at the origin and destination, such as ports, airports, or multimodal facilities.
“Policies targeting these facilities, such as investing in port productivity, modernizing customs, and new technologies, can improve reliability,” the World Bank said.
Meanwhile, the Bureau of Customs (BOC) welcomed the World Bank’s LPI report, with Customs Commissioner Bienvenido Rubio also considering the result of the LPI as proof that the bureau is “on the right track” concerning trade efficiency.
“We shall continue these trade facilitation efforts while implementing new measures to maximize the performance of Customs processes,” he added.
BOC said they are looking to achieve a digital approach to customs processes for better effectiveness. “We will continue to automate our systems and processes, computerize our work, and modernize our facilities and procedures,” Mr. Rubio said.
In July, the BOC introduced six automation projects, which could improve efficiency and transparency in its operations. Among these projects are the Customs Auction Monitoring System, which seeks to provide better transparency in the auction process for seized goods; as well as the Automated Export Declaration System, which could simplify export processes and documentation. — Chelsey Keith P. Ignacio