THE Philippines could be a new low-cost source of shipping volumes if its manufacturing sector picks up, according to a container shipping industry expert.
“There is economic potential for the Philippines to be a new a low-cost source, a new China,” said Alan Murphy, chief operating officer of SeaIntel Maritime Analysis, in a presentation to the Philippines Ports Development Summit 2013 held recently in Manila.
He said manufacturing wages in the country have remained stable for the past decade whereas in China, labor prices have increased significantly.
Murphy said the new reality in China is that it has a rapidly expanding middle class, its coast is full and congested, prompting Beijing to exhort industries to “go west” and set up inland. Besides, its supply chains are expensive.
A revived manufacturing sector in the Philippines can service the needs of the Chinese middle class.
Murphy noted that foreign direct investments in the country increased 185% in 2012, a boost to local manufacturing in the country, which boasts of a workforce 80% of whom speak English.
The trade imbalance where imports are twice the volume of exports means exports can double, Murphy said. That could attract foreign shipping lines, which now consider the Philippines as “too far away and small” to be serviced on their Asia-Europe or transpacific slings.
In 2012, the Philippines’ imports rose to 1.43 million foreign full containers from 1.33 million in 2011, while exports dropped to 690,550 from 699,269 in the year earlier, SeaIntel said.
The import imbalance, as opposed to the rest of Asia, means an opportunity to optimize equipment usage.
However, Murphy also highlighted some “cons” for the Philippines.
He said the country is not as well-connected as other ASEAN members. The United Nations Conference on Trade and Development liner shipping connectivity index of 2012 shows that the Philippines ranked lowest among its ASEAN counterparts.
In terms of ease of doing business, the country ranked 6th in the ASEAN.
Geographical location is also a negative, as shipments to Europe or across the Pacific require transshipment in Singapore, Hong Kong or Taiwan.
The country’s customs procedure ranked lowest in the ASEAN. According to a World Bank report updated on July 12, on a scale of 1-7 with 7 as the most efficient, the Philippines had a 3.2 rating while Singapore had 6.2, Malaysia 5, Indonesia 4 and Thailand and Vietnam 3.8.
The quality of the country’s port infrastructure also ranked lowest in another World Bank report. The Philippines had a 3.3 rating while the most developed country in terms of port infrastructure was Singapore with 6.8.
Murphy said there is a need for a systemic change in the Philippines’ road infrastructure, customs procedures and port infrastructure.