- The Philippines jumped three places to 18th spot in the Agility Emerging Markets Logistics Index 2022
- The index grades 50 of the world’s most promising emerging logistics markets
- The Philippines performed strongest in the area of digital readiness, partly due to the rapid pace of investment in Filipino start-ups in 2021
- The country’s ranking in international logistics opportunities improved but it is the only country in ASEAN-5 still outside the top 10 list
- In the areas of domestic logistics opportunities and business fundamentals, the Philippines saw its ranking slip
- Around two-thirds of respondents expect record freight rates to return closer to historical levels during 2022, while 80% see supply chain congestion unwinding.
The Philippines improved three places to 18th spot in the Agility-Emerging-Markets-Logistics-Index-2022, scoring 5.16 from 5.04 in 2021 when it ranked 21st.
The index, published by transport and logistics analyst Transport Intelligence (Ti) and supply chain service provider and investor Agility, ranks the world’s top 50 emerging markets in key areas for logistics market development, namely, domestic logistics opportunities, international logistics opportunities, business fundamentals, and its newest addition for 2022, digital readiness.
The index “provides a snapshot of each country’s current performance and future potential as a globally significant logistics market and investment destination.”
Ahead of the Philippines in ranking are Association of Southeast Asian Nations (ASEAN)-member countries Malaysia (4th), Indonesia (5th), Thailand (8th) and Vietnam (11th).
The top three markets overall are China, India and UAE.
READ: China, India ranked top emerging logistics markets
Digital readiness
The Philippines performed strongest in the area of digital readiness, which measures the potential and progress of an emerging market in becoming a digitally led, skills-rich, innovation-oriented and sustainable economy for the future.
With a 5.99 index in 2022, the country landed in 10th place partly due to the “rapid pace of investment in Filipino start-ups in 2021, the numbers of which rose to more than 700 during the year,” according to the report.
It cited Gobi Partners and Core Capital which said start-up funding in Filipino tech start-ups hit US$858 million from January to October 2021, “meaning the 10-month period saw more value in equity fundraising than the previous four years combined.”
The Philippines’ digital economy, however, “remains underdeveloped and lags other emerging markets in value terms,” the report noted.
“While Google, Temasek and Bain research shows the country’s digital economy is the region’s fastest growing GMV (gross merchandise value) of $17 billion in 2021, a 93% rise year-on-year, it remains some way behind the $70 billion recorded in Indonesia, for example.”
The Google, Temasek and Bain research forecasts rapid growth of GMV of $335 billion by 2025 from $160 billion in 2021.
International logistics opportunities
In the area of international logistics opportunities, the Philippines also improved its ranking, climbing one spot to 13th with an index of 5.25.
The international logistics opportunities index measures internal and external demand for trade intensive logistics services and the capacity of individual emerging markets to facilitate cross-border logistics operations.
Still, the report noted, the Philippines is the only ASEAN-5 country outside the top 10 ranking for this key area where Vietnam, Thailand, Indonesia and Malaysia placed fourth, fifth, sixth and seventh, respectively.
The report sees “more optimistic signs for the development of Southeast Asia’s international logistics markets”, one of which is the Regional Comprehensive Economic Partnership agreement that took effect in January 2022, paving the way for the creation of the world’s largest free trade area. RCEP will eliminate tariffs on 91% of goods as well as introduce rules on investment and intellectual property to promote free trade.
READ: RCEP participation to raise PH GDP by 2.02%
The implementation of RCEP is in limbo in the Philippines, however, with the Senate already in recess ahead of the campaign period for the May 2022 national elections. The RCEP requires ratification from individual countries.
READ: Calls mount for Senate to ratify RCEP
Domestic logistics opportunities
A key area where the Philippines saw its ranking drop two places—to 19th place with an index of 5.00 from 17th in 2021—is domestic logistics opportunities, which measures performance of each emerging market and its potential to sustain and develop domestic demand that requires competitive logistics markets.
The study cited two COVID-19 infection waves in 2021, in April and September, which restricted mobility in the country’s economic powerhouse, Metro Manila.
“The restrictions contributed to job losses and business closures, although the Philippines weathered the worst of the storm and saw GDP expansion of 4.9% over the first nine months of 2021, markedly above the 10.1% contraction it experienced in the same period of 2020,” the report said.
The economy for the full-year 2021 contracted by 9.6%, the worst ever since after the Second World War.
“Higher services activity, notably in transportation and the retail and wholesale trade, is expected to underpin faster growth in 2022,” the research said.
The Philippines dropped the most in the area of business fundamentals, from 29th place to 37th place with a score of 4.38. Business fundamentals measure openness, robustness, fairness and strength of each emerging market’s business environment, rule of law and market independence.
Among the report’s key findings are:
- The COVID-19 pandemic continues to shape prospects for emerging markets and global supply chains in 2022;
- An accelerated shift to online retail, digitalization and sustainability will be the legacy of the Covid-19 pandemic;
- Global economic prospects in 2022 are good, but supply chain challenges will remain;
- Digital readiness requires connectedness, compatibility and culture; and
- Asia Pacific and Gulf states dominate.
The report said Asia Pacific’s emerging markets offer the strongest domestic and international logistics opportunities, although results in the 2022 index see the region’s domestic logistics markets leadership erode.
The Gulf states, meanwhile, have built dynamic and robust business environments which not only lead emerging markets but increasingly chase global best practices. Online retail, the adoption of technology digital business practices and investment in sustainable energy resources see both regions’ emerging markets share digital readiness leadership.
The industry professionals surveyed for the 2022 index also offered a broadly positive outlook for the year ahead, despite the challenges.
Around two-thirds of respondents expect record freight rates to return closer to historical levels during 2022, while 80% see supply chain congestion unwinding.
Uncertainty over the strength of the global recovery remains, with more than one-third of respondents saying a global recession in 2022 is “likely” or “certain,” while the Middle East and North Africa, Central Asia, South America and Sub-Saharan Africa regions are all unlikely to see growth in 2022.
Adoption of technology, meanwhile, is the most important factor in emerging market growth over the next 10 years, according to survey respondents, but half say cost or access to services is holding back their ability to operate more sustainability in developing economies.
The survey was participated in by 756 logistics industry professionals from August to November 2021. – Roumina Pablo
