With a GDP growth estimated at 6% for 2015 and 6.3% for 2016, the Philippines is one of the fastest-growing economies in Asia, according to the Asian Development Bank. One of the clearest manifestations of that is the performance of the country’s logistics industry.

Christian Gonzalez, head of the Asia-Pacific region at International Container Terminal Services, Inc., a global port and terminal operator based in Manila, says that the growth experienced at the group’s Philippine facilities was mostly the result of economic growth in the country.

“In particular, we saw increased demand for services at our Subic Bay terminals as more shippers located in the north saw the advantages of shipping through there,” says Gonzalez. “There are strong indications that ease-of-doing-business policies, infrastructure, and a lower density of road congestion in the Central and Northern Luzon regions will continue to encourage major investments that will benefit Subic Bay in comparison to other areas of Luzon.  Manila will naturally continue to be the consumption centre and this growth will build throughput at our Manila International Container Terminal as well.”

The increased demand in the north has benefited the Port of Subic Bay, which recorded a 93% year-on-year increase in container volume for the first eight months of 2015. More carriers have also started using the port as an alternative to Manila.

“Last year, we only had three major shipping lines whereas right now, we have a total of seven lines regularly calling at the Port of Subic Bay,” says Roberto Garcia, chairman and administrator of the Subic Bay Metropolitan Authority. “We have also established a one-stop-shop office at New Container Terminal 1 for the processing of all containerized cargoes, enabling customers to process all customs and documentary transactions in a single place.”

Despite all this, Philippine exports dropped 4.1% year-on-year from January to July 2015, and the Philippine government has said that the country could miss its growth target for merchandise exports in 2015.

But FedEx Express says that it remains committed to this “highly important” market and is optimistic for the long-term future of its economy.

“Fundamentally, the Philippines is a growing and healthy market for the logistics industry as a whole,” says Karen Reddington, president of Asia Pacific at FedEx Express. “According to estimates, the Philippine logistics sector could grow by 15.6% per year until 2020. By that time, the market is estimated to be worth over US$6.77 billion in market size. Over the same period, the Philippine economy is projected to grow at about 6% per year.” 

Reddington says that, while the scale of the opportunity that the country represents for the logistics industry is easy to see, growth will not happen automatically. To cater to increased demand, many investments will need to be made.

As part of the government’s increased spending on infrastructure, Reddington highlights the fact that the Philippine Ports Authority has earmarked approximately P120 million (US$2.6 million) to modernize and expand major ports in Bohol, Iligan, and Butuan City, and is looking to modernize the Cagayan de Oro, Iloilo, General Santos, and Zamboanga ports.

Yard expansion at Manila International Container Terminal is ongoing and is scheduled for completion by the end of the year, according to Gonzalez.

“Once operational, MICT's import capacity will increase by 18% while further improving terminal utilization,” he says. “We have also ensured that design engineering is prepared and other sections to the north of the facility are ready for major expansion when our triggers are met. Untendered expansion plans represent more than 50% more capacity for the terminal as well as rail connectivity to our inland facility in Laguna.”

The Port of Subic Bay is preparing the terms of reference for the hiring of a consulting firm to carry out a study on the feasibility of an expansion programme.

“We expect that new investment opportunities can be translated to additional cargo volumes that might be handled here in the Port of Subic Bay, taking into consideration the fact that we are connected to the major ports in the Asia-Pacific region, specifically Hong Kong, Singapore, Japan and China,” says Garcia. “We are also looking at the possible construction of a 17km bypass road from the container road leading to Mabiga Hermosa Bataan.”

FedEx sees e-commerce continuing to gain momentum across Asia, which will provide small and medium businesses with new opportunities to sell and trade. To that end, one positive development, according to Reddington, is President Aquino’s effort to modernize customs procedures through the Customs Modernization and Tariffs Act.

“The CMTA legislation currently working through the House and Senate would provide two significant reforms to the Philippines,” says Reddington. “First, it will create transparency in the declaration process through automation, and second, the CMTA will replace the current de minimis that has not changed since 1957 and is the lowest in ASEAN.”

For both ICTSI and the SBMA, road congestion continues to be a major issue, but Gonzalez says that the maximization of ICTSI’s appointment system will form part of the solution to this problem.

“We will also be implementing more automation across the portfolio, as well as customer service tools that will really differentiate our business,” he says. “So I think project management and change management will be major challenges.”

In any case, Gonzalez says that he is looking forward to a stronger and more resilient shipping industry in the near future. “With ASEAN integration around the corner, we’re looking at a single market of 600 million people,” he says. “You can just imagine the potential for economic growth once everything is in place.”

Garcia, on the other hand, says that the cargo volume at Subic Bay will continue to increase due to expansion projects of the neighbouring commercial and industrial plants in Central and Northern Luzon, such as that of Chinese manufacturer HLD Clark Steel Pipe and the completion of the expanded Yokohama facility.

“Likewise, an increase in the number of shipping lines and routes at our port can be translated into additional volume that will be handled for containerized cargoes,” says Garcia. “In addition, if the port users in Manila continue to experience the issues regarding the implementation of truck bans and port congestion in line with the upcoming celebration of Christmas season, a new niche and opportunity for the utilization of Subic Bay Port will then be realized.”

By Jeffrey Lee

Asia Cargo News | Hong Kong