A few years back, at the Asian Logistics and Maritime Conference, Hong Kong’s chief executive C.Y. Leung described his city as a “natural connector” connecting China to Asia and the rest of the world. Hong Kong’s efforts to position itself as an international logistics hubs have primed it as an important part of China’s Belt and Road Initiative, which were just plans by then.
I remember pondering about what the Philippines’ position can be in the global supply chain. Much has been made about how we’re in a prime location in the region, although I will concede that those assertions are often made by those who are exceedingly optimistic about our prospects. But Hong Kong and Singapore have the “logistics hub” position sewn up, and, let’s face it, our ports aren’t quite ready for massive international traffic, whether it be shallow drafts or insufficient infrastructure supporting it.
So, I thought, could the Philippines play another role? Various efforts across decades have led us to be home to companies whose products may not be sexy, for lack of a better term, but are essential to the products that we do call sexy. We don’t assemble iPhones here, for example, but companies here create parts of it, to be shipped to China for final assembly. We have become attractive to such companies, thanks to successive efforts from the government, especially the Philippine Economic Zone Authority. The Philippines is now a quiet but essential part of many global supply chains, particularly in electronics, garments and automotives.
These efforts do not stop, however, and now another option has opened for the Philippines. Next month the first route in the ASEAN RORO project will formally open, connecting Davao and General Santos to Bitung, Indonesia. The new route is expected to dramatically decrease travel time for goods between Mindanao and Sulawesi, with shipments no longer needed to stop in Jakarta. This opens up our products—particularly produce from Mindanao—to a wider market.
China’s Belt and Road Initiative is very much underway now, with the country investing considerably in connectivity projects not just in its shores but among its neighbors, too. In 2015 the Philippines joined the Asian Infrastructure Investment Bank, a China-led financial institution supporting infrastructure development—an important plank of the initiative. Several of the projects the Duterte administration has lined up as part of its so-called “Golden Age of Infrastructure” are expected to be funded, at least in part, by the AIIB, notably the Bus Rapid Transit system along EDSA.
Addressing the gap is this administration’s fresh focus on rail. Already rail projects in Luzon—the rehabilitation of the old north-south route, the construction of a rail link between Subic and Clark – and Mindanao are taking hold. If the government’s promise of these projects being finished (or close to it) by 2022 is realized, and if enough locators take advantage of the system, our logistics capabilities would have gotten a considerable boost.
From this vantage point, it’s clear that the Philippines is finally attempting to play catch-up with its neighbors, and perhaps realize its untapped potential. We are enhancing our connections with our neighbors. We are expanding existing ports, and developing new sea routes to decongest Manila. (It wouldn’t surprise me if Chinese entities start looking at our ports, again as part of Belt and Road.) We are addressing the capital’s perennial congestion problem by encouraging the growth of new economic hubs, both through new infrastructure and government policies. We’re also looking at our airports, although our direction on air travel to and from Manila remains muddled. Maybe we won’t be a logistics hub like Hong Kong or Singapore, but we can be a more viable option for international trade than we are now.
During the 9th Philippine Ports and Shipping Conference at the Peninsula Manila a few weeks back, MCC Transport CEO Tim Wickmann expressed his belief that the Philippines can be a transshipment hub for the region, connecting our ASEAN neighbors to China, Japan and South Korea, and perhaps to the United States as well. To quote C.Y. Leung, the Philippines could be another “natural connector” between the region and the rest of the world.
However, Wickmann has one important caveat: transshipment costs in Manila are more expensive than the rest of the region. Only Yokohama is more expensive. There’s still quite a distance left to run.
Henrik Batallones is the marketing and communications executive of SCMAP. A former board director, he is also editor-in-chief of the organization’s official publication, Supply Chain Philippines.