Philippine Multimodal Transportation and Logistics Industry Roadmap_Key Recommendations_2016.04.14

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The Philippine Multimodal Transportationand Logistics Industry Roadmap




Copyright © 2017by Philippine International Seafreight Forwarders Association

Printed in the PhilippinesJanuary 2017



In memory of

Dr. Cayetano Paderanga, Jr.,

former Socioeconomic Planning Secretary and

National Economic and Development Authority Director-General,

whose guidance gave us the courage to pursue this project,

and the clarity to map our way forward.



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TABLE OF CONTENTS

List of Figures ......................................................................................................................................................................... viii

List of Tables ............................................................................................................................................................................. ix

Foreword ..................................................................................................................................................................................... x

Acknowledgements .............................................................................................................................................................. xii

Executive Summary ............................................................................................................................................................. xiv

Abbreviations ......................................................................................................................................................................... xvi

1. Introduction ........................................................................................................................................................................... 1 2. Vision, Goals, and Targets ................................................................................................................................................3

3. Strategies and Timelines .................................................................................................................................................. 5

Phase I (2015-2017): Capacity building ................................................................................................................... 5

Institutional and Regulatory Framework Improvements ............................................................................. 5

Skills development ...................................................................................................................................................... 11

Information and communications technology ................................................................................................. 12

Phase II (2018-2023): Capacity extension and efficiency enhancement .................................................. 13

Hard/Physical infrastructure.................................................................................................................................. 13

Skills development ...................................................................................................................................................... 13

Information and communications technology ................................................................................................. 14

Phase III (2024-2030): Integrated multimodal logistics .................................................................................. 15

4. State of the Industry ........................................................................................................................................................ 16

Structure ............................................................................................................................................................................... 16

Sectoral Coverage ........................................................................................................................................................ 16

Industry Players ........................................................................................................................................................... 19

Linkages with Other Industries .............................................................................................................................. 27

Regulatory Framework ............................................................................................................................................. 29

Historical performance .................................................................................................................................................. 32

Share to Gross Domestic Product .......................................................................................................................... 32

Share to Employment ................................................................................................................................................. 35



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Trade Performance .......................................................................................................................................................... 37

Investments in the sector .............................................................................................................................................. 41

Industry Costs .................................................................................................................................................................... 42

Supply and demand ......................................................................................................................................................... 46

Sea and Costal Freight Transport .......................................................................................................................... 46

Freight Transport by Road ....................................................................................................................................... 48

Air Freight Transport ................................................................................................................................................. 49

Inland Water Freight Transport ............................................................................................................................ 51

Challenges and Issues ..................................................................................................................................................... 54

Institutional and Regulatory Concerns ............................................................................................................... 54

Physical infrastructure .............................................................................................................................................. 56

Information and communications technology infrastructure ................................................................... 57

5. Industry Advantages and Pitfalls: Strengths, Weaknesses, Opportunities, and Threats .................... 59

Strengths .............................................................................................................................................................................. 59

Weaknesses ......................................................................................................................................................................... 59

Opportunities ..................................................................................................................................................................... 60

Threats .................................................................................................................................................................................. 60

6. Support to Industry Development ............................................................................................................................. 61

7. Impact Mapping ................................................................................................................................................................. 65 8. Recommendations ............................................................................................................................................................ 68

9. References ........................................................................................................................................................................... 70



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LIST OF FIGURES

Figure 1: The Logistics System........................................................................................................................................... 1 Figure 2: Goals and targets for the logistics industry ............................................................................................... 3 Figure 3: IDEAL Setup for freight Forwarders ............................................................................................................ 6 Figure 4: Percent Distribution of Establishments by Industry Group, Transportation and StorageSector (2012) .......................................................................................................................................................................... 20 Figure 5: Revenue Share by Sub-industry, 2012 (in %) ........................................................................................ 21 Figure 6: Domestic Air Freight Forwarders Cargo Traffic, 2002-2013 (in kilograms) ............................ 23 Figure 7: Domestic Scheduled Cargo Traffic (2004-2013)................................................................................... 24 Figure 8: Levels and Growth Rates (Q1 2009-Q1 2014) ....................................................................................... 32 Figure 9: GHG Emissions from Road Transport by Vehicle Type in 2007 ..................................................... 34 Figure 10: Value of Domestic Trade by Region, in Thousand Pesos (2013) ................................................. 35 Figure 11: Ship calls, at berth and anchorage (1999-2013) ................................................................................ 39 Figure 12: Cargo throughput, in metric tons (1999-2013) .................................................................................. 40 Figure 13: Philippine Total Trade Annual Growth Rates, % (October 2013-October 2014) ................. 40 Figure 14: Revenue and Cost for Transport and Storage Establishments by Industry Group (2010)......................................................................................................................................................................................................

Figure 15: Internet Users per 100 People, 2000 to 2014 ..................................................................................... 58 Figure 16: Infographic: Average Internet Connection Speed among ASEAN Countries, 2014 ............. 58 Figure 17: Impact Map of a Multimodal Integrated Logistics Sector ............................................................... 65



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LIST OF TABLES

Table 1: Logistics performance ranking of ASEAN countries ............................................................................... 2 Table 2: Freight transport by road subclass ............................................................................................................... 1 Table 3: Sea and coastal freight water transport subclasses .............................................................................. 17 Table 4: Freight air transport subclasses .................................................................................................................... 17 Table 5: Storage and Warehousing ................................................................................................................................ 18 Table 6: Support Activities to Transportation ........................................................................................................... 18 Table 7: Postal and Courier Activities ........................................................................................................................... 19 Table 8: Major players in the Philippine Logistics Industry, 2012 ................................................................... 21

Table 9: Number of Vessels by type of Operation (2012) .................................................................................... 25 Table 10: Registered Motor Vehicles (2007-2012) ................................................................................................. 26 Table 11: Input requirements for the logistics industry ....................................................................................... 28 Table 12: Distribution of demand for logistics services ........................................................................................ 29 Table 13: Regulatory Functions of PPA ........................................................................................................................ 30 Table 14: Shipping Industry Regulatory Framework ............................................................................................. 31 Table 15: Quantity and Value of Domestic Trade by Mode of Transport (2012-2013) ........................... 33 Table 16: Mode share of annual commodity movement, 2005 .......................................................................... 33 Table 17: Percentage Share to Total Employment by Industry Group, 2014 ............................................... 36 Table 18: Distribution of ASEAN merchandise trade with rest of the world, % share (2013) ............. 37

Table 19: Philippines’ Export and Import in Total Services and Transport Sector, .................................. 38

Table 20: Total Approved Investments by Industry (2012-2013; Jan-Jun 2012 to 2014) ..................... 41 Table 21: Year-on-Year Growth of Total Approved Investments by Industry, %....................................... 42 Table 22: Export and Import Procedures Duration (number of days) ........................................................... 43 Table 23: Export and Import Procedures Cost (US$) ............................................................................................. 45 Table 24: Container Port Demand, 1995-2013 ......................................................................................................... 46 Table 25: Containerized Cargo Import/Export balance, in Thousand TEU .................................................. 47 Table 26: Paved National Roads, in Kilometers ........................................................................................................ 48 Table 27: Vehicle Growth in the Philippines .............................................................................................................. 49 Table 28: Summary of Registered Airports in the Philippines ........................................................................... 50 Table 29: Summary of Aircraft, Cargo, and Passenger Movements by Region (2006) ............................. 51 Table 30: Shipping Statistics by Port Management Office (PMO), 2012 ......................................................... 52 Table 31: Summary of Port Performance (October – December 2013) ......................................................... 53



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FOREWORD

The achievement of the Philippines’ development goals of rapid, sustained growth and sharedprosperity presumes a well-functioning services sector that is critical to reducing transactionscosts and raising productive capacity. In this quest for inclusive development, an efficienttransport and logistics industry is essential.

Logistics integrates transport, storage, freight forwarding, and information services in theprocess of managing the flow of goods, services, and information from the point of origin to thepoint of use. As an economy undergoes structural transformation and industries increasinglytake on higher-value-added activities, the demand for seamless connectivity to support thegreater intersectoral linkages is bound to increase. The involvement of multiple services acrossthe supply chain, however, requires a high degree of coordination in the actions of variousprivate service providers in order to ensure the efficient and timely delivery of the product orservice to the end-users. Fragmented and uncoordinated public policies and regulations thatinfluence the behaviors of private actors multiply the risk of coordination failures, exacerbateinefficiencies, and raise the cost of doing business leading to loss of competitiveness and alower level of societal welfare.

The role of government in providing an enabling environment to reduce the risk ofcoordination failures thus looms large in the logistics sector. Through the promulgation andenforcement of consistent policies, laws, and regulations governing infrastructure development(particularly transport), promoting competition, encouraging innovation, developing technicalstandards, and eliminating administrative bottlenecks, government can help raise thecompetitiveness of logistics service providers and create the conditions for the development of

a thriving logistics market.

As transport is a central component of logistics, improving the efficiency of the various modesof transport and facilitating the coordination and smooth interchange of different transportmodes easily come to mind as low-hanging fruits.

Industry associations equally play an important role in logistics development; they can beeffective channels of communication amongst various industry players themselves andbetween industry players and the government. Amongst actors in the supply chain (e.g.suppliers, manufacturers, distributors, end-users), they can contribute towards improvingcoordination. Between logistics industry stakeholders and the government, they can help

overcome the effects of fragmentation in the scope and design of regulation arising from thediversity of stakeholders' objectives and government regulators' mandates.

The Philippine Multimodal Transportation and Logistics Industry Roadmap which follows isthe result of a private sector initiative to open a dialogue with government on the basis ofconcrete and specific proposals aiming to catapult the Philippines to the status of a logisticshub in Southeast Asia by 2030 capitalizing on a robust multimodal transportation system. The



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Roadmap describes the industry structure, discusses key concerns, does a SWOT assessment,and maps out specific goals and time-bound strategies.

Among the issues highlighted that constrain the development of an efficient multimodal

transport and logistics industry are: the underdeveloped transport infrastructure, inconsistentand outdated government regulations, bureaucratic red tape that breeds corruption, theabsence of a national skills training program for new hires and industry professionals,government's non-compliance with international agreements, and the lack of a nationalmasterplan to guide industry stakeholders on the future direction of the logistics industry.

By no means the last word on the subject matter, the Roadmap nevertheless provides a startingpoint for thinking about the strategic direction of transport and logistics services in thePhilippines. The present administration's thrust to develop agriculture and manufacturing andraise the contribution to GDP of regions outside the national capital on the one hand, and theopportunities opened up by ASEAN Economic Community on the other hand certainly make the

Roadmap a timely contribution to current policy discussions.

DR. EMMANUEL F. ESGUERRA

Former Philippine Socioeconomic Planning Secretary andNational Economic and Development Authority Director-GeneralConvenor, Asia-Pacific Economic Cooperation Group on Services, APEC Philippines 2015Manila, Philippines August 2016



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ACKNOWLEDGEMENTS

Our thanks to officials of the following companies, organizations and agencies for providing inputsto and supporting this roadmap:

1. Aduana Business Club2. Asian Development Bank3. Air21004. Aircargo Forwarders of the Philippines5. Asian Tigers Mobility6. Asian Terminals Inc7. Association of Off-Dock CFS Operators of the Philippines

8. Bureau of Customs9. Cargo Data Exchange Center10. Chamber of Customs Brokers, Inc11. Civil Aeronautics Board12. Confederation of Truckers Association of the Philippines13. Container Depot Alliance of the Philippines14. DHL Express15. DHL Supply Chain16. Department of Trade and Industry17. Department of Transportation

18. Export Development Council19. FedEx

20. GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit)21. InterCommerce Network Services22. International Container Terminal Services, Inc23. Joint Foreign Chambers of Commerce24. Manila North Harbour Port, Inc25. National Economic and Development Authority26. Pair-Pags27. Palafox Associates28. Philippine Chamber of Air Express Operators29. Philippine Economic Zone Authority30. Philippine Exporters Confederation31. Philippine Institute for Development Studies32. Philippine Interisland Shipping Association33. Philippine International Seafreight Forwarders association34. Philippine Liner Shipping Association35. PortCalls



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36. Procurement and Supply Institute of Asia37. Royal Cargo38. Subic-Clark Alliance for Development39. Subic Bay International Terminal Corp40. Supply Chain Management Association of the Philippines41. TNT42. UPS43. United Portusers Confederation44. Philippine Exporters Confederation, Inc45. Philippine Chamber of Commerce and Industry46. World Bank



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EXECUTIVE SUMMARY

The main purpose of this roadmap is to produce a common vision for the Philippine multimodaltransportation and logistics industry by mapping the structure of the industry, identifying keyconcerns, and providing specific goals and time-bound strategies for the sector.

This roadmap was prepared by the Institute for Development and Econometric Analysis (IDEA)with inputs from various private and public transport and logistics industry stakeholders whoattended four focus group discussions over a period of more than one year, from December 2014 toFebruary 2016. A number of other stakeholders submitted their written recommendations. Theroadmap’s core group regularly met to incorporate all inputs.

The industry organizations, associations and government and multilateral agencies thatparticipated in the focus group discussions are listed in the Acknowledgements page.

During the focus group discussions, many of the problems facing the industry came to the fore.These included:

1. Poor infrastructure2. Government’s non-compliance to international agreements3. Lack of a national master plan4. Absence of one central, coordinating agency5. Unclear, confusing and sometimes conflicting and outdated government regulations6. Red tape that has led to corruption; and

7. Lack of a national skills training program for both new hires and industry professionals

These problems have led to uncompetitive practices that contribute to high logistics costs in thePhilippines.

On the other hand, considered favorable to the industry are the country’s large and youngworkforce; the growing consumer base; the government’s renewed focus on infrastructuredevelopment, manufacturing and agriculture; and the promise of a bigger market resulting fromASEAN integration and the country’s participation in various free trade agreements.

Recommendations were divided into three phases: short term, covering the period 2015-2017;

medium term, 2018-2022; and long term, 2023-2030. The recommendations identified governmentagencies whose participation was critical to effect any kind of change in the process or system.

This Executive Summary is succeeded by an introduction of the industry (Chapter 1) then adiscussion of industry vision, goals, and concrete targets (Chapter 2). Strategies and timelines in theshort, medium, and long terms are tackled in Chapter 3. The structure of the industry, including aprofile of stakeholders, historical performance of major players, and market and other conditionsaffecting the industry, are discussed in Chapter 4. Chapter 5 presents an integrative SWOT analysis;



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Chapter 6, the role of supporting government agencies; Chapter 7, impact mapping; and Chapter 8recommendations, prioritization of strategies, activities and implementation of strategies.



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ABBREVIATIONS

1. AEI– ASEAN Economic Integration2. ASEAN – Association of Southeast Asian Nations3. ASPBI – Annual Survey of Philippine Business and Industry4. ATO – Air Transportation Office5. BFP – Bureau of Fire Protection6. BIR – Bureau of Internal Revenue7. BOC – Bureau of Customs8. BOI – Board of Investments9. CAAP – Civil Aviation Authority of the Philippines10. CAB – Civil Aeronautics Board11. CATIF – Center for the Advancement of Trade Integration & Facilitation12. CHED – Commission on Higher Education13. CMTA – Customs Modernization and Tariff Act14. DA – Department of Agriculture15. DBM – Department of Budget and Management16. DENR – Department of Environment and Natural Resources17. DILG – Department of Interior and Local Government18. DOE – Department of Energy19. DOF – Department of Finance20. DOTr – Department of Transportation

21. DPWH – Department of Public Works and Highways22. DTI – Department of Trade and Industry23. EMB – Environmental Management Bureau24. GCR – Greater Capital Region25. GHG –Greenhouse Gas26. GRT – Gross-Registered Tonnage27. GVA – Gross Value Added28. ICT- Information and Communications Technology29. IDEA – Institute for Development and Econometric Analysis30. JICA – Japan International Cooperation Agency

31. LGUs – Local Government Units32. LFS – Labor Force Survey

33. LPI – Logistics Performance Index34. LTFRB – Land Transportation Franchising and Regulatory Board35. MARINA – Maritime Industry Authority36. MICT– Manila International Container Terminal37. MSME- Micro Small and Medium Enterprises38. NCR - National Capital Region



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39. NEDA – National Economic and Development Authority40. OECD – Organization for Economic Cooperation and Development41. OTS – Office of Transport Security42. PAL – Philippine Airlines43. PCCI – Philippine Chamber of Commerce and Industry44. PCG – Philippine Coast Guard45. PDEA – Philippine Drug Enforcement Agency46. PDO– Port Development Office47. PEZA – Philippine Economic Zone Authority48. PIP – Public Investment Program49. PNP-HPG – Philippine National Police-Highway Patrol Group50. PPA – Philippine Ports Authority51. PPP – Public-Private Partnerships52. PSA – Philippine Statistics Authority

53. PSIC – Philippine Standard Industrial Classification54. RORO – Roll on-Roll off55. SEC – Securities and Exchange Commission56. TESDA – Technical Education and Skills Development Authority57. TEU – Twenty-foot Equivalent Unit58. TRB – Toll Regulatory Board59. UNCTAD – United Nations Conference on Trade and Development60. UNESCAP – United Nations Economic and Social Commission for Asia and the Pacific61. WB – World Bank



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1. INTRODUCTION

The link between logistics, economic growth, and poverty reduction has long been established,evident in growth experienced by developed and emerging economies.

According to the United Nations Economic and Social Commission for Asia and the Pacific(UNESCAP), logistics encompasses the planning, implementation and control of forward andreverse flow of goods, services, and information from the point of origin to the point ofconsumption. Logistics also involves the storage of goods and information.

The Transport and Communications Bulletin for Asia and the Pacific No 70 published by UNESCAP(2001) offered a simplified structure of logistics systems (Figure 1). “The model focuses on the

customer’s perspective, from the point of supply through to the end user. The objective is to deliversuperior value at the lowest cost. The competencies required depend upon building strongcustomer partnerships, client-specific solutions, and innovation and supply-chain systemsintegration. This model clearly takes a holistic approach and is the trend in modern economies.”(UNESCAP, 2001).

FIGURE 1: THE LOGISTICS SYSTEM

Source: UNESCAP Transport and Communications Bulletin No 70 (2001)



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The World Bank (WB) considers an efficient and effective logistics sector as one of the pillars oftrade competitiveness. With ASEAN Economic Integration (AEI), the role of logistics in helpingensure the Philippines is competitive becomes even more critical.

Under the Philippine Development Plan 2011-2016, logistics has been identified as one of the key

elements in achieving inclusive growth and reducing poverty incidence. The full potential of thelocal logistics sector, however, remains largely untapped and, in its current condition, may evendampen gains of the AEI.

In 2014, the World Bank reported a lower logistics performance index (LPI) for the Philippines,57th out of 160 countries, down from 44 out of 155 countries in 2010 (Table 1). The country trailedASEAN nations such as Singapore, Malaysia, Thailand, Vietnam, and Indonesia in 2014.

TABLE 1: LOGISTICS PERFORMANCE RANKING OF ASEAN COUNTRIES

Country 2014 2012 2010 Score Rank Score Rank Score Rank

Singapore 4.00 5 4.13 1 4.09 2 Malaysia 3.59 25 3.49 29 3.44 29 Thailand 3.43 35 3.18 38 3.29 35 Vietnam 3.15 48 3.00 53 2.96 53 Indonesia 3.08 53 2.94 59 2.76 75 Philippines 3.00 57 3.02 52 3.14 44 Cambodia 2.74 83 2.56 101 2.37 129 Lao PDR 2.39 131 2.50 109 2.46 118

Myanmar 2.25 145 2.37 129 2.33 133

Source: World Bank

The logistics sector–part of transportation and storage under the Philippine Standard IndustrialClassification (PSIC)–contributed 6.1% to the country’s total gross domestic product during thethird quarter of 2014. The sector’s impact on economic growth is certainly extensive consideringlogistics cost, according to the Department of Trade and Industry (DTI), accounts for 24% to 53% ofthe wholesale price of goods in the country.

This roadmap is intended to coordinate efforts of all stakeholders–shippers (importers, exporters,

manufacturers), cargo and logistics service providers, private industry associations, andgovernment agencies–to attain a common vision for the logistics industry by providing concretegoals and time-bounded strategies.



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2. VISION, GOALS, AND TARGETS

Industry players envision the Philippines as a competitive logistics hub in Southeast Asia by 2030with an integrated multimodal transportation 1 system. This goal will be achieved in three phases, asseen in Figure 2.

FIGURE 2: GOALS AND TARGETS FOR THE LOGISTICS INDUSTRY

Phase I (2015-2017): Capacity Building . Phase I involves the formulation of soft infrastructure aswell as refining and concretizing existing policies essential for a solid and environmentallysustainable logistics system. Soft infrastructure includes policies with the correspondingimplementing rules and regulations that will facilitate execution of hard infrastructure and otherprograms for capacity building. These policies consist of programs in the following areas: (1)institutions, (2) skills development and (3) information and communications technology (ICT)readiness.

Phase II (2018-2022): Capacity Extension and Efficiency Enhancement . Phase II involves thematerial implementation of policies, including building and expanding transport and storageinfrastructure, and the adoption of efficiency measures, specifically programs that promote skills

development.

1 Under the United Nations Convention on International Multimodal Transport of Goods (Geneva, 24 May1980), "international multimodal transport" means the “carriage of goods by at least two different modes oftransport on the basis of a multimodal transport contract from a place in one country at which the goods aretaken in charge by the multimodal transport operator to a place designated for delivery situated in a differentcountry.”

2015-2017

Capacity building

(Institutions, skillsdevelopment, ICT

readiness )

2018-2022

Capacityextension and

efficiencyenhancement

(Hard infrastructure,skills development,

ICT readiness )

2023-2030

Integratedmultimodal

logistics

(Informationlinkages, physical

linkages )



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Phase III (2023-2030): Integrated Multimodal Logistics . Phase III creates information andphysical linkages with the global community embracing multimodal transport links.



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3. STRATEGIES AND TIMELINES

This chapter identifies concrete strategies under each phase. The strategies aim to address issuesthat obstruct growth of the logistics sector, and are directed at facilitating the integration of allmodes of freight transport and other nodes of the logistics network.

PHASE I (2015-2017): CAPACITY BUILDING

I NSTITUTIONAL AND R EGULATORY F RAMEWORK I MPROVEMENTS

1. There is a need to align domestic policies with international agreements.

a. Government should recognize multimodal transport operators 2 and institutionalize theiroperation by formulating an integrated long-term national master plan for multimodaltransportation and logistics. The master plan should include infrastructure programs (roads,sea and air ports, rail, and logistics centers) in which all stakeholders are properlyconsulted. (Action required from Department of Transportation [DOTr], DTI, Department ofPublic Works and Highways [DPWH], Department of Finance [DOF], Department of Interiorand Local Government [DILG], Department of Budget and Management [DBM], Departmentof Energy [DOE])

b. There is a need to implement the ASEAN Framework Agreement on Multimodal Transportsigned in 2005 by the DOTr. The Agreement requires the creation of a competent nationalbody for Philippine multimodal transport operators that will allow them to use the onesingle document. (Action required from DOTr, DTI, DOF)

i. In order to implement the Agreement, an Executive Order must be signed creating amultimodal transport bureau under the DOTr that will accredit and supervisemultimodal transport operators. This Executive Order will place all freightforwarders (sea or air) under the jurisdiction of only one agency, the DOTr, as is thepractice in many countries. (Under the present setup, seafreight forwarders areaccredited and supervised by the DTI-Fair Trade Enforcement Bureau [FTEB] while

airfreight forwarders are under the jurisdiction of DOTr-Civil Aeronautics Board[CAB].) The new DOTr bureau will also accredit and supervise operations of cargoand delivery vehicles (this function currently falls under the Land Transportation

2 The United Nations Convention on International Multimodal Transport of Goods (Geneva, 24 May 1980)defines multimodal transport operator as “any person who on his own behalf or through another personacting on his behalf concludes a multimodal transport contract and who acts as a principal, not as an agent oron behalf of the consignor or of the carriers participating in the multimodal transport operations, and whoassumes responsibility for the performance of the contract.”



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Franchising and Regulatory Board [LTFRB]), road transportation being acomponent of multimodal transport. See Figure 3 for ideal setup of forwardingsector.

ii. If the issuance of an Executive Order is not immediately practicable, the transfer ofthe function of accreditation and supervision of seafreight forwarders from DTI to

DOTr-Maritime Industry Authority [MARINA] should be effected instead. (Save forseafreight forwarders, MARINA, under its present charter, already supervises allother maritime enterprises.) It should be noted that while this transfer to MARINArationalizes the setup of the forwarding sector—effectively placing all freightforwarders under one agency (the DOTr, with seafreight under attached agencyMARINA and airfreight under another DOTr-attached agency CAB)—it still does notallow forwarders to operate as multimodal transport operators because of theabsence of a national competent body.

FIGURE 3: IDEAL SETUP FOR FREIGHT FORWARDERS

c. The ASEAN Framework Agreement on the Facilitation of Goods in Transit must be fullyadopted. (Action required from DOF, DOTr, DTI)

d. Government needs to support the action items on transport facilitation and green logisticsfrom the ASEAN Kuala Lumpur Transport Strategic Plan 2016-2025. (Action required fromDOTr, DPWH, DTI, DENR)



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2. Institutions must be strengthened.

a. A Transport Logistics and Supply Chain agency composed of both public and privatesector representatives must be created via an Executive Order. (Action requiredfrom Office of the President, DOTr, DTI, DPWH, DILG, DOF, Department of

Agriculture [DA], Department of Environment and Natural Resources [DENR], andall other agencies overseeing regulated products and requiring transport andtransport-related permits).

i. The agency will play a key role in drafting the integrated long-term nationalmaster plan for supply chain and transport logistics.

ii. The agency will ensure consultation and coordination with stakeholders atall times so that policies affecting all industry players are aligned, notcontradictory with other policies, and subsequently complied with.

iii. The head of the agency must be a Career Executive Service Officer withwide-ranging experience in the field of logistics and supply chain.

b. The PPA must add at least two more private sector representatives to its Board.These representatives should head a major stakeholder organization to ensureproper industry representation.

c. MARINA should fully exercise its mandate to accredit and regulate maritimeenterprises, including international shipping lines (both principal and ship agents).

i. As part of its requirements, Marina should ensure accredited enterpriseshave skilled personnel; proper infrastructure to support operations,

including the provision of container yards (whether owned, leased orsubcontracted); ample insurance liability; and an IT infrastructure thatsupports electronic payments.

3. The policy and regulatory environments must be streamlined to reduce the cost of logistics.

a. The following policies must be put in place:

i. Freedom of Information Act passed by Congress that will ensure, amongothers, government statistics and data crucial to the logistics industry arereadily available.

ii. A national development plan for industry clusters, specificallymanufacturing and production centers. These clusters should preferably beoutside urban areas in order to help with decongestion, and should haveaccess to port, airport and rail infrastructure for easy delivery of goods tomarket. An example of such a cluster is the Beijing Tongzhou Logistics Park.Positioned as a "road-sea freight hub", the logistics park is an important hubfor distribution in the area around China’s Bohai Bay as well as distribution



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to the adjacent Beijing Development Area, the most important economiczone in Beijing. The park has attracted a number of overseas and localdevelopers such as Globle Logistics Properties and China MerchantsLogistics. (Action required from DTI, DOTr, DPWH, DOF, DILG, NationalEconomic and Development Authority [NEDA], Philippine Economic Zone

Authority [PEZA], Board of Investments [BOI]).

iii. The implementing rules for Republic Act 10863 or the CustomsModernization and Tariff Act (CMTA). These will overhaul of the Bureau ofCustoms (BOC) and update the Tariff and Customs Code of the Philippines.(As of the writing of this Roadmap, only a few provisions of the CMTA havebeen operationalized.)

iv. A Green Freight and Logistics Program, as a public-private initiative, aimedat increasing energy efficiency of road freight transportation. (Actionrequired from DOTr, DTI, DPWH, DENR)

1. The use of cost-efficient fuel-saving technologies (e.g. low-rollingresistance tires, telematics, aerodynamic equipment, anti-idlingdevices) must be encouraged.

2. The use of hybrid buses that ferry both passenger and cargo must beexplored.

v. A dangerous goods handling and storage national policy. (Action requiredfrom Philippine Ports Authority [PPA], Philippine Coast Guard [PCG], BOC,CAB, Civil Aviation Authority of the Philippines [CAAP], Office of Transport

Security [OTS], Bureau of Fire Protection [BFP])

vi. An order prohibiting local government units from unilaterally implementingpolicies that have a national impact. (Action required from Office of thePresident, DILG, local government units [LGUs]).

vii. A freight transport data collection system, with logistics operators requiredto regularly report certain information, in order to improve the basis forevidence-based policy-making and to enhance monitoring of policyimplementation. (Action required from DOTr, DTI, DOF, NEDA, PhilippineStatistics Authority [PSA])

viii. An order that actively encourages use of Batangas and Subic ports as well asother international sea ports and airports outside Metro Manila as gatewaysto cater to the needs of industry in and around such ports, and for purposesof decongesting urban areas. (Action required from Office of the President,DOTr, DTI, PEZA and other free ports)



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ix. A program for the rehabilitation and use of the rail network for cargotransportation. Railways should ideally be connected to production,manufacturing and dry ports. (Action required from DOTr)

x. An order that jump starts discussions on leveling the playing field for

domestic and international shipping. Foreign shipping lines enjoy benefitsnot accorded to ships plying the domestic trade. Foreign carriers, forinstance, do not pay duties on fuel and lube oil while their domesticcounterparts pay duties and the 12% VAT. (Action required from DOTr, DTI,DOF, NEDA)

xi. Policies that will make data and information work for the growth anddevelopment of the cargo and logistics sector. To this end:

1. The PSA must adopt standard data measurements and indices for allindustry sectors (e.g. 20-foot container for shipping, kilos for

airfreight, etc.)

xii. A sustained information dissemination and training campaign focusing oncargo security, safety and green logistics. (Action required from DOTr, DTI,DPWH)

xiii. Consultation program with the cargo community related to DoTr efforts toformulate a checklist for infrastructure projects.

xiv. Full automation of Customs processes to minimize face-to-face transactionsand expedite clearance at borders in keeping with the BOC’s customsclearance target of four hours. (Action required from DOF-BOC)

1. The National Single Window must be fully implemented inaccordance with the country’s commitment to the ASEAN SingleWindow.

2. A single customs unit allowing importers and exporters the option tochoose their port of loading and discharge should be studied. Thiswill eliminate the current practice of port shopping and lead tostandardization of implementation of all customs policies andregulations.

xv. A clear network of major trucking routes properly disseminated to truckdrivers to facilitate flow of traffic and avoid corruption among law enforcers.(Action required from DPWH, DOTr, DTI, Metro Manila DevelopmentAuthority [MMDA, PNP-Highway Patrol Group [PNP-HPG])

1. Major highways should have dedicated truck stops.



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xvi. A redefined logistics industry via a review of the PSIC to reflect thesechanges:

1. The recognition of the unique role of air express operators throughthe inclusion of the sector under Air Transport (PSIC Division 51).

2. Addition of multimodal transportation as a sub-sector.

3. The use of the term “Brokerage and Customs Clearance” instead of“Customs Brokerage–Ship and Aircraft” under Division 52 ofWarehousing and Support Activities for Transportation. This is inrecognition of the expanded scope of the customs broker profession.

(Action required from DOTr, DTI, NEDA)

xvii. The designation of PEZA and/or the Philippine Chamber of Commerce andIndustry (PCCI) as the certifying body/ies in the issuance of the Certificate of

Origin under the Generalized System of Preferences. (Action required fromPEZA, PCCI, BOC)

xviii. A BOC order mandating sea and airport terminal operators to provide truckholding areas and drivers' lounges. (Action required from BOC, PPA, CAAP,sea and air port operators)

b. The following policies and regulations must be reviewed, streamlined and/orstandardized:

i. Truck ban, road user’s fee and toll fees (Local government units adopt

varying policies leading to much confusion among road users.) (Actionrequired from DILG, LGUs, Mayors’ League)

ii. LTFRB requirement for truck operators to operate trucks no more than 15years old. (This impending regulation would mean an estimated 80% oftrucks will no longer be given a franchise and therefore banned on thestreets. The policy could trigger another round of port congestion.) Theimplementation of a reasonable transition period to comply with therequirement to phase out old trucks is recommended; a public consultationthat will look into incentive schemes for truck fleet modernization wouldalso be helpful. (Action required from DOTr and LTFRB)

iii. LTFRB’s mandate and screening procedures in the grant of truck franchises.LTFRB should ensure franchised truckers comply with all safety andoperational requirements such as liability insurance and personnel training.(Action required from DOTr and LTFRB)

iv. Gross vehicle weight regulations under the Anti-Overloading Law (RepublicAct No 8794). Under the law, most trucks operating in the Philippines are



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already considered overloaded. Road weight limitations should be alignedwith ASEAN cross-border trade agreements. (Action required from DPWH,DOTr)

v. Smoke belching, inconsistent implementation and monitoring of anti-smoke

belching regulations. (Action required from DOTr-LTFRB, Toll RegulatoryBoard [TRB], DPWH, LGUs)

vi. Accreditation of importers and customs brokers at the Bureau of InternalRevenue (BIR) and the BOC. (Action required from DOF, BIR and BOC)

vii. Philippine National Police (PNP) list of controlled chemicals. Some chemicalsin the list are commonly used in manufacturing, and are thus now moredifficult to procure.

viii. Requirements for transportation and storage of dangerous goods. Too manyrequirements (sometimes redundant) create much confusion. (Actionrequired from PPA, CAB, CAAP, PCG, BFP, Philippine Drug EnforcementAgency [PDEA], Environmental Management Bureau [EMB])

ix. Requirements governing temporary importation of trade promotionmaterials, equipment and paraphernalia. (Action required from BOC)

x. Reportorial requirements required by some agencies. (For example, cargodata submitted by seafreight forwarders to DTI-FTEB does not seem to haveany use as FTEB does not generate industry statistics; manifest submissionat the BOC is allowed after office hours but there is no one at the BOC to readit.) (Action required from DTI, DOF, BOC)

xi. All other regulations pertaining to transportation and logistics activities thatare deemed redundant, obsolete, and inconsistent with other regulations.(Action required from DOTr, DTI, DOF)

xii. Application for other business licenses, permits, and other procedures.(Action required from DTI, DOTr, DOF, DPWH, DILG, DA, DENR, Securitiesand Exchange Commission [SEC])

S KILLS DEVELOPMENT

The absence of a skills certification program in the cargo transportation industry has beenidentified as an immediate concern among players, prompting a call to create a NationalQualification Framework that is in keeping with ASEAN standards. This would ensure thatwhatever manpower advantages the industry has is preserved, even enhanced, with the constantsupply of labor properly trained and always updated on industry developments.



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The establishment of a skills development programs for all stakeholders in the cargo and logisticsindustry (freight forwarders, terminal and warehouse personnel, container yard and port operators,truckers, shipping line personnel, airline staff, ground handlers, express operators and integrators,etc.) is necessary to promote market-relevant skills. This activity is now ongoing with the TechnicalEducation Skills and Development Authority (TESDA) as lead agency. As of the writing of this report,

only a few industry associations are building their certification programs, including the PhilippineInternational Seafreight Forwarders Association and Supply Chain Management Association of thePhilippines.

I NFORMATION AND COMMUNICATIONS TECHNOLOGY

1. There is a need to fully automate processes involving:

a. The BOC in order to reduce, if not entirely eliminate, submission of hard copies ofdocuments.

b. Application for business license and requirements of LGUs.

2. Cross-border electronic transactions, information sharing, electronic payment andelectronic signatures must be facilitated.

3. There should be active promotion of relevant technologies for advanced informationsystems to be shared among government agencies, shippers, and industry, in advancingsupply-chain security initiatives.



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PHASE II (2018-2023): CAPACITY EXTENSION AND EFFICIENCY ENHANCEMENT

This phase involves carrying out of physical projects that will advance both infrastructure and skillsdevelopment. The projects are intended to expand capacity and enhance transport efficiency.

H ARD /P HYSICAL INFRASTRUCTURE

1. The following facilities and infrastructure should be built:a. Dedicated access roads to sea and air ports, freight centers and railway stationsb. Dedicated air cargo terminals. Storage facilities in airports should also be expanded.c. Freight centers and dry portsd. New sea and air port facilities that would promote economic activity in accordance

with cross-border agreements such as the Brunei Darussalam-Indonesia-Malaysia-Philippines–East ASEAN Growth Area or BIMP-EAGA.

2. The following must be improved and/or expanded in anticipation of economic growth:a. All international and secondary sea and air portsb. Railway network to service both passenger and cargo requirements. This will help

change modality of transporting goods and support green logistics initiatives.

S KILLS DEVELOPMENT

The greatest asset of an organization is its people. Hence, sustained investment in human resourcemust be pushed. The following can be implemented in the medium to long term:

1. Creation of ASEAN Virtual Learning Resources Centers. “AVLRC aims to foster greaterinformation and knowledge sharing about ASEAN and its member countries by using ITtechnology to make it easier to access and share information about the people, culture,history, places of interest, and economies of each ASEAN Member State.” (ASEAN-Australia

Development Cooperation Program)

2. Formulation of ASEAN common core curriculum for multimodal transportation and logisticsmanagement. This could include tertiary curriculum or applied graduate programs forlogistics professionals.

3. Institutionalization of mandatory training for truckers and logistics operators on safe andeco-driving, preventive maintenance and truck fleet financial management.



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4. Building of national/sub-regional centers of excellence (e.g. training centers).

I NFORMATION AND COMMUNICATIONS TECHNOLOGY

An integrated and seamless logistics service is inseparable from the seamless exchange andcommunication of information. Hence, improving ICT infrastructure is crucial in attaining the 2030vision of the industry.

ASEAN defines ICT infrastructure as any fixed, mobile or satellite communication network, as wellas the internet. Also included are software supporting the development and operation of thesecommunication networks.

The following strategies are part of the ASEAN Roadmap for Integration of Logistics Services andshould therefore be adopted:

1. Promoting the use of Radio Frequency Identification applications to facilitate cross-bordertrade as well as cross-border tracking of goods;

2. Encouraging enterprises to adopt/develop interoperable supply chain managementsystems in ASEAN to link up planning solutions, automated storage and retrieval systemsand wireless tracking technologies; and

3. Promoting increased use of telematics as a promising area for fuel efficiency and safety

improvements in truck transport; data collection; and monitoring (e.g. driver training, low-rolling resistance tires and other improvements that affect fuel consumption).



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PHASE III (2024-2030): INTEGRATED MULTIMODAL LOGISTICS

This phase involves programs and projects intended to connect the Philippines to ASEAN countriesand other economic regions. Some form part of the Roadmap and Master Plan for ASEANConnectivity:

1. Reevaluation of projects with the view toward upgrading and expanding infrastructure tofurther implement the ASEAN Framework Agreement on Multimodal Transport.

2. Establishment of an ASEAN Broadband Corridor. The “ASEAN Broadband Corridor aims topromote greater broadband penetration, affordability and universal access in ASEAN inorder to enhance economic growth. It aims to create an environment where e-business, e-commerce, venture capital, talents and ideas flow easily so that the region is better

positioned to tap into the benefits of ICT and keep pace with the rapid development in otherparts of the world.” (ASEAN Connectivity, 2012)

3. Expansion of port infrastructure to accommodate the ASEAN Single Shipping Market.

4. Upgrade of road quality of missing links in the ASEAN Highway Network (AHN). In the 2010status report of the AHN Project, around 211 kilometers of the designated transit transportroutes in the country remain to be upgraded to at least Class III roads.

5. Conduct of a study on potential multimodal transport corridors to empower parts of ASEANto function as land bridges in global supply routes.



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4. STATE OF THE INDUSTRY

STRUCTURE

S ECTORALC OVERAGE

Being an archipelago, the Philippines’ intermodal logistics system is anchored on its maritimetransport system, supported by a road network linking ports to production areas, markets andlogistics terminals; and an air transport system with strategic regional and local airports (Lidasan &Castro, 2009).

There is currently no comprehensive profiling of the Philippine logistics industry. The PSICprovides a listing of the industry’s major subsectors and their corresponding activities: (1) freightrail transport, (2) freight transport by road, (3) sea and coastal freight water transport, (4) inlandfreight water transport, (5) freight air transport, (6) storage and warehousing, and (7) supportactivities to freight transport, including freight forwarding.

Freight Rail Transport (PSIC Code: 4912). This sector includes freight transport usingrailroad rolling stock on mainline networks, usually spread over an extensive geographicarea. It covers inter-urban, suburban and urban railways as well as freight transport overshort-line railroads. Activities of the freight rail sub-sector are negligible as of this writing.The Duterte administration has, however, identified the building of rail infrastructure asone of its key projects to address the country’s growing passenger and freighttransportation requirements.

Freight Transport by Road (PSIC Code: 4933). Operations that provide over-the-roadtransportation of freight using motor vehicles such as trucks and tractor-trailers comprisethis sector. Table 2 lists subclasses contained within the road freight transport group.

TABLE 2: FREIGHT TRANSPORT BY ROAD SUBCLASS

PSIC code Subclass 49331 Truck-for-hire operation (with driver) 49332 Freight truck operation 49333 Tank truck delivery 49339 Freight transport operation, by road, n.e.c.

Source: 2009 Philippine Standard Industrial Classification (PSIC) Handbook



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Sea and Coastal Freight Water Transport (PSIC Code: 5012). The transport of freight onvessels designed for operating on sea or coastal waters, whether scheduled or not; andtransport by towing or pushing of barges, oil rigs, etc are part of this sector. Table 3 listssubclasses contained within the sea and coastal freight water transport group.

TABLE 3: SEA AND COASTAL FREIGHT WATER TRANSPORT SUBCLASSES

PSIC code Subclass 50121 Ocean freight transport 50122 Inter-island water freight transport

50123

Towing and pushing services on coastal and

trans-oceanic waters

Source: 2009 PSIC Handbook

Inland Freight Water Transport (PSIC Code: 5022). The sector covers transport of freightvia rivers, canals, lakes and other inland waterways, including harbor and ports.

Freight Air Transport (PSIC Code: 5120). The sector encompasses transport of freight byair over regular routes and on regular schedules; non-scheduled airfreight transport;launching of satellites and space vehicles; and renting of air transport equipment withoperator for the purpose of freight transportation. Table 4 lists subclasses contained withinthe freight air transport group.

TABLE 4: FREIGHT AIR TRANSPORT SUBCLASSES

PSIC code Subclass 51201 Domestic air-freight transport 51202 International air-freight transport 51203 Non-scheduled air-freight transport


Storage and Warehousing (PSIC Code: 5210). This group covers warehousing of all typesof goods, including blast freezing, but excludes operation of self-storage facilities andparking for motor vehicles. Listed in Table 5 are subclasses in this group.



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TABLE 5: STORAGE AND WAREHOUSING

PSIC code Subclass 52101 General bonded warehouses except grain warehouse 52102 Grain warehouses 52103 Customs bonded warehouses 52104 Cold Storage 52109 Storage and warehousing, nec.


Support Activities to Freight Transport (PSIC Code: 5220). Activities incidental to andsupporting freight transport, such as operation of transport infrastructure, cargo handling,and forwarding are part of this group. The sub-groups are listed in Table 6.

TABLE 6: SUPPORT ACTIVITIES TO TRANSPORTATION

PSIC code Subclass 5221 Service activities incidental to land transportation

52211 52212 55213

52219

Freight terminal facilities for trucking companies Operation of parking lots Operation of toll roads and bridges

Other supporting land transporting activities 5222 Service activities incidental to water transportation 5223 Service activities incidental to air transportation 5224 Cargo Handling

52241 52242

Containerized cargo handling Non-containerized cargo handling

5229 Other transportation support activities 52291 52292 52293

52299

Freight forwarding services Customs brokerage Logistics Services

Activities of other transport agencies, nec.




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Another sector classified under the industry is postal and courier service. This involvespick-up, transport, and delivery of letters and parcels under various arrangements. Table 7lists down activities under this sub-sector.

TABLE 7 : POSTAL AND COURIER ACTIVITIES

PSIC code Subclass 53100 Postal activities 53200 Courier activities 53201 Private postal service 53202 Messenger Service


I NDUSTRY P LAYERS

According to the final results of the 2010 Annual Survey of Philippine Business and Industry(ASPBI), the entire Transport and Storage sector (including both passenger and cargo transport)comprised 2,891 establishments. Support activities for transportation topped the sector with 1,433establishments or 49.6 percent. Majority of establishments under this industry group were engagedin freight forwarding services and customs brokerage (ship and aircraft), comprising 78.4 percentof the total establishments in the industry group. This was followed by other land transport andtransport via buses, industries with 639 establishments (22.1%) and 303 establishments (10.5%),respectively. Figure 4 shows the percent distribution of establishments by industry group in 2012.

Gross revenue earned by the whole Transport and Storage sector reached P284.1 billion in 2012.Passenger air transport industry was the top contributor with revenue of P102.9 billion or 36.2percent of the total. Support activities for transportation industry were second with P76.7 billion(27.0%), followed by sea and coastal water transport with P48.5 billion (17.1%).

The SEC’s Top 25,000 Corporations List for 2010 identified 908 players under the 12 consideredsubsectors of the logistics industry. Listed firms had consolidated revenues amounting to P141.51billion while consolidated assets hit P141.53 billion.

Among the 12 sub-industries, the Freight Forwarding Services sector stood out as the largest;estimates place the sector’s revenue share at 33.8 percent of the entire industry’s earnings. The top10 firms from the freight forwarding services sector cornered 12.1 percent of the entire industryrevenue. Four firms grabbed a lion’s share of the entire industry’s revenues, due largely to thestatus accorded to them by the government, by virtue of their respective exclusive 25-year portmanagement concessions. Figure 5 shows the revenue share by sub-industry in 2012. Table 8shows the major logistics industry players in 2012.



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FIGURE 4: PERCENT DISTRIBUTION OF ESTABLISHMENTS BY INDUSTRY GROUP,TRANSPORTATION AND STORAGE SECTOR (2012)

Source: Census of Philippine Business and Industry



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FIGURE 5: REVENUE SHARE BY SUB-INDUSTRY, 2012 (IN %)

Source: Census of Philippine Business and Industry

TABLE 8: MAJOR PLAYERS IN THE PHILIPPINE LOGISTICS INDUSTRY, 2012

FirmRevenues

(in million P)

NetIncome

(Loss), (inmillion P)

Subsector

SMC Shipping and LighterageCorp.

5,346 494Interisland water freighttransport

Oceanic Container Lines, Inc. 1,996 84Interisland water freighttransport

NMC Container Lines, Inc. 1,956 28Interisland water freighttransport

Lorenzo Shipping Corp. 1,838 62Interisland water freighttransport

Redsystems Co., Inc., The 4,047 153Storage and Warehousing,N.E.C.

International Container TerminalServices, Inc.

16,692 3,037Service activities incidental towater transportation

Philippine Ports Authority 10,482 3,158Service activities incidental towater transportation

Asian Terminals, Inc. 4,644 1,585Service activities incidental towater transportation

SMC Shipping and LighterageCorp.

5,346 494Interisland water freighttransport

Oceanic Container Lines, Inc. 1,996 84Interisland water freighttransport

NMC Container Lines, Inc. 1,956 28Interisland water freighttransport

Lorenzo Shipping Corp. 1,838 62Interisland water freighttransport

Redsystems Co., Inc., The 4,047 153Storage and Warehousing,N.E.C.

International Container TerminalServices, Inc.

16,692 3,037Service activities incidental towater transportation

Philippine Ports Authority 10,482 3,158Service activities incidental towater transportation

Asian Terminals, Inc. 4,644 1,585Service activities incidental towater transportation



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Lufthansa Technik Philippines, Inc. 5,437 (327) Service activities incidental toair transportation

DHL Express (Philippines) Corp. 2,904 (25) Freight forwarding servicesFederal Express Corp. 2,734 (1,101) Freight forwarding servicesSchenker Philippines, Inc. 2,558 61 Freight forwarding services

Panalpina World Transport(Philippines), Inc. 1,785 18 Freight forwarding services

Nippon Express Philippines Corp. 1,645 107 Freight forwarding servicesLF (Philippines), Inc. 7,717 92 Logistics servicesAnalog Devices Gen. Trias, Inc. 6,649 798 Logistics servicesToyota Tsusho Philippines Corp. 4,962 158 Logistics servicesJR & R Distributors, Inc. 4,950 9 Logistics services

SIIX Logistics Phils., Inc. 4,858 115 Logistics services

Sumitronics Phils., Inc. 3,062 2 Logistics servicesHitachi Cable Asia Pacific (HCAP)Pte. Ltd. 1,582 3 Logistics services

Mitsui Bussan Frontier(Philippines), Inc. 1,579 (112) Logistics services

Nagase Philippines InternationalServices Corp. 1,463 (12) Logistics services



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Air

Average revenues registered by this sector grew by 20.8 percent to P99.7 million in 2010 after aslump of 21.8 percent in 2009. Profits, however, experienced a slight dip of 1.9 percent to P4.4million. Average firm size in 2010 stood at P89.26 million, an increase of 7.7 percent from 2009.

According to the CAB, cargo traffic handled by air freight forwarders has been on an uptrend since2003, except for slumps in 2009 and 2011, and a slight dip in 2012. In 2013, air freight chargeableweights increased by 15.7 percent to 57.39 million kilograms. Direct shipments made up more thanhalf of the total, followed by consolidations (47.3 percent) and breakbulking (0.06 percent).

FIGURE 6: DOMESTIC AIR FREIGHT FORWARDERS CARGO TRAFFIC, 2002-2013 (IN KILOGRAMS)

Source: Civil Aeronautics Board (CAB)

Cargo traffic handled by domestic scheduled air services also registered positive growth for 2013,increasing by 9.8 percent to 226.89 million kilograms.



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FIGURE 7: DOMESTIC SCHEDULED CARGO TRAFFIC (2004-2013)

Source: Civil Aeronautics Board (CAB)

Water

Almost 100% of commodity movements are carried by water transport vessels, which conveyedP638.83 million worth of goods in 2013.

Domestic interisland shipping consists of liner, tramping, tanker, ferry/fast craft, roll on-roll off(RoRo), and barging operations, according to the Center for the Advancement of Trade Integration& Facilitation (CATIF, 2012).

Liner ships transport passenger and cargo with fixed sailing schedules.

Trampers are freight vessels that are chartered, hence they do not have a regular route or schedule,and only handle cargoes.

Tankers specialize in oil, liquefied petroleum gas, and chemicals. Ferries or fastcraft and roll on-rolloff (RoRo) vessels have fixed schedules and routes but travel short distances; the former carrypassengers while the latter carry both passengers and vehicles as rolling cargo.

Barges and tugs are used in the ship-to-shore movement of cargo while some companies ownindustrial carriers to transport their own cargo using their own ports. An inventory is shown inTable 9.



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TABLE 9: NUMBER OF VESSELS BY TYPE OF OPERATION (2012)

Service Type Operation Fishing Liner Tramper

Barges, floating docks 0 1 179 Bulk carrier 0 0 1 Cargo, LCT 34 97 1143 Cargo and passenger 44 756 40 Catcher 10 3 0 Tanker, gas carrier, liquid cargo 5 2 190 Company use, service boat 5 53 49 Container 0 2 7 Dredger, tug, towing, salvage 65 3 457

Fish carrier, vessel 4,976 18 24 Miscellaneous, special purpose 0 6 29 Yacht 0 3 1 Passenger 53 2,315 45 Private, skiff, sonar boat 6 3 15 Pilot 0 2 5 Pleasure 1 86 52 Ferry 0 10 0 RoRo 2 40 0 TOTAL 5,201 3,400 2,237

Source: Maritime Industry Authority (MARINA) cited in CATIF (2012)



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Road

Trucks are the main mode of transporting cargo from producers to ports and markets. There were341,505 trucks, 33,564 buses, and 37,458 trailers registered in 2012. A breakdown of registeredmotor vehicles is provided below.

TABLE 10: REGISTERED MOTOR VEHICLES (2007-2012)

2007 2008 2009 2010 2011 2012 Motor Vehicles 5,530,052 5,891,272 6,220,433 6,634,855 7,138,942 7,463,393 Private 4,558,727 4,908,332 5,216,646 5,631,377 6,096,423 6,417,809

Cars 700,384 713,175 732,659 759,683 788,372 808,968 Utility vehicles 1,534,634 1,535,003 1,609,698 1,707,705 1,764,865 1,821,527 Buses 6,696 6,184 7,045 7,753 8,769 5,653 Trucks 255,522 269,367 281,282 288,427 298,789 308,644 Motorcycle/ Tricycle 2,039,850 2,360,304 2,559,997 2,841,646 3,206,255 3,440,777 Trailers 21,641 24,299 25,965 26,163 29,373 32,240

For hire 887,023 899,211 931,048 934,176 970,946 969,784 Cars 37,648 35,342 39,812 41,787 33,131 36,426 Utility vehicles 215,585 215,929 217,967 217,338 229,330 220,114 Buses 23,142 23,032 25,519 26,566 25,262 27,298 Trucks 16,919 17,941 21,435 21,373 21,786 23,867 Motorcycle/ Tricycle 591,254 604,238 623,663 624,078 658,466 658,675 Trailers 2,475 2,729 2,652 3,034 2,971 3,404

Government 70,528 73,307 68,230 65,060 67,324 72,204 Cars 6,798 6,591 3,684 3,355 3,326 3,653 Utility vehicles 38,406 39,586 37,910 36,660 37,959 39,900 Buses 275 487 442 590 403 613 Trucks 8,687 8,813 8,779 7,974 8,734 8,994 Motorcycle/ Tricycle 16,159 17,754 17,301 16,415 16,728 17,230 Trailers 203 76 114 66 174 1,814

Total 11,046,330 11,772,122 12,436,357 13,265,468 14,273,635 14,923,190

Source: Land Transportation Office



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L INKAGES WITH O THER I NDUSTRIES

The logistics industry, owing to its nature, has extensive linkages with several industries.

According to the 2006 NSO Input-Output Table, primary inputs–labor, capital, taxes and surpluses–account for 38.4 percent of total inputs, while the remaining 61.6 percent come from variousindustries.

Intermediate demand–or demand from other industries where logistics services are used as inputsin producing other commodities–constitutes 48.9 percent of the total. Final demand, pertaining todemand driven by end-user consumption, accounts for the remaining 51.1 percent.

Backward linkages

The manufacturing sector has the biggest contribution with 59.5 percent share in total value of allintermediate inputs. Most come from the manufacture of materials used in vehicle maintenancesuch as leather, machines and non-electric machinery and equipment, rubber tires, and wires andcables.

The next largest source of intermediate inputs is the transportation, communication and storagesector with a 17.2 percent share (or, equivalently, nearly 11 percent of total inputs). The majority ofthese inputs come from the communications sector, such as telephone services and wireless

telecommunications.

The finance sector is the third largest source of intermediate inputs, accounting for almost 16percent of the total intermediate inputs. Contributing the largest from this sector is insurance.

Operating surplus is another important input (accounting for 16.8 percent of total inputs) tofinance investment costs and other operating expenses. All other industries share the remaining 7.3percent.

One other main input of the logistics industry is labor, accounting for 6.2 percent of the combinedvalue of all inputs. The industry relies on quality workers to operate transport vehicles and ensure

the orderly and cost-efficient movement of cargoes.

Another item that affects the industry’s backward linkages is oil. The price of oil has considerableeffect on the sector’s ability to keep its fees and charges at competitive rates.



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TABLE 11: INPUT REQUIREMENTS FOR THE LOGISTICS INDUSTRY

Percent Share per Unit

of Output Intermediate Inputs 0.616

Manufacturing 0.366 Construction 0.001 Transportation, Communication, and Storage 0.106 Trade 0.006 Finance 0.098 Ownership of Dwellings and Real Estate 0.000 Government Services 0.009 Private Services 0.029

Primary Inputs 0.384 Compensation (Wages) 0.062 Depreciation 0.117 Indirect Taxes - Subsidies 0.037 Operating Surplus 0.168

Total Inputs 1.000

Source: 2006 NSO Input-Output Table; IDEA’s computations

Forward linkages

The demand for logistics services comes mostly from two sources: (1) transactions owing topersonal consumption and (2) the manufacturing sector, accounting for the bulk of total output.

Personal consumption refers to the purchase of households and individuals of logistics services fortheir own use. Manufacturing firms, mostly those involved in radio and TV, toys, machines andother heavy equipment, purchase logistics services as an input in producing their products.

In the Philippines, the manufacturing and agricultural sectors heavily utilize containerized cargo fortheir production and trading requirements.

After manufacturing, the transport, communication and storage sector is the second largest sourceof intermediate demand. Most of this demand comes from telephone services. The transport,communication and storage sector is followed by the private service sector, with banks and hotelscornering the biggest share in demand.



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The logistics industry is expected to face stable demand since almost all industries that produce ormanufacture and consume or utilize physical goods require the sector’s services.

TABLE 12: DISTRIBUTION OF DEMAND FOR LOGISTICS SERVICES

Share in demand Intermediate demand 0.489

Agriculture, Fishery, and Forestry 0.036 Mining and Quarrying 0.004 Manufacturing 0.216 Construction 0.001 Utilities 0.028 Transportation, Communication, and Storage 0.128 Trade 0.009

Repairs 0.001 Finance 0.024 Ownership of Dwellings and Real Estate 0.000 Government Services 0.006 Private Services 0.036

Final demand 0.511 Personal Consumption Expenditure 1.325 Gross Government Consumption Expenditure 0.000 Gross Fixed Capital Formation 0.000 Changes in Stocks (0.001)

Net Exports (0.814) Total demand 1.000

Source: 2006 NSO Input-Output Table; IDEA’s computations

REGULATORY F RAMEWORK

Regulation of Port Systems

The Philippine Port System has four categories: (a) the PPA ports system consisting of public andprivate ports; (b) ports under the jurisdiction of independent port authorities (IPA); (c) municipalports under LGUs; and (d) the RORO terminal system (RRTS).



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The PPA port system is the largest and most extensive of the four categories, comprising more than100 PPA-owned ports and over 500 commercial and industrial private ports. The largest common-use ports in the country – the Manila International Container Terminal (MICT), South Harbor andthe North Harbor – are under the supervision of PPA.

Llanto, et. al. (2005) noted the conflicting roles of PPA, a government-owned and -controlledcorporation attached to the DOTC. In addition to being developer, operator and regulator of publicports, it carries out regulatory functions over private ports. It also approves cargo-handling ratesand port charges. PPA has the power to limit entry of private port operators if potential entrantscan pose a threat to the operations of PPA. Table 13 summarizes the regulatory roles of PPA.

TABLE 13: REGULATORY FUNCTIONS OF PPA

Port Functions

Public

1. PPA develops, owns, maintains and regulates its ports.2. It sets and collects port charges such as wharfage

Documents

Philippine Multimodal Transportation and Logistics Industry Roadmap_Key Recommendations_2016.04.14