Weak link in supply chain

Categories: Business Updates

Date Posted: 25 Jul 2014

Filipino sports fans may be interested to know that the Slazenger tennis balls used in the recently concluded Wimbledon tournament were proudly made in the Philippines by a British company.

And the business community will be interested to know that the tennis balls nearly failed to make it to this year’s Wimbledon Championships in London. The shipment got stuck in the chaos at the port of Manila, and the manufacturer finally had to put the balls on a plane to London.

Of course air transport was much more costly, but the manufacturer’s reputation was at stake so it absorbed the blow. The balls made it just in time for the Wimbledon opening on June 23.

The paralysis in the Manila International Container Port and the domestic port is wreaking havoc not just on domestic business but also on the international supply chain.

In the globalized economy, manufacturers source raw materials and spare parts from different parts of the planet. A delay in any of these sources can hold up an entire product batch and mess up business plans for the year.

Our country is developing a reputation as the weak link in the global supply chain.

The Philippines exports raw materials, electronic components, and spare parts for vehicles and other products, and the horror stories now emanating from the port gridlock is scaring away investors. If we don’t do something about this ASAP, we could lose many investments to neighboring countries.

Our policy makers, used to the weakness of manufacturing and exports in our country and content with the status quo, may be unmindful of the impact of the port mess. In the past two days traffic has been more horrid than usual around Manila’s Port Area as truck haulers wait in long lines for the processing of their cargo. I’ve heard nothing but groans of exasperation from business groups.

The story about the tennis balls was narrated by Asif Ahmad, who is marking his first year next week as the UK’s ambassador to our country.

The diplomat is a big booster of the Philippines. You might recognize him as the guy holding an umbrella in a real estate ad for McKinley Hill.

He agreed to the modeling job to emphasize growing bilateral ties. The United Kingdom was the first embassy to relocate to McKinley Hill in Taguig, with its ultra-modern, eco-friendly building winning a green award. McKinley property developer Megaworld’s Andrew Tan, meanwhile, last May expanded his Emperador distillery and bought Scotch whisky maker Whyte & Mackay for a whopping 430 million pounds (about P32 billion).

Ahmad’s first year in Manila has been one of non-stop excitement (but then there’s never a dull moment in this country). He arrived just in time for the siege in Zamboanga. This was followed by the powerful earthquake in the Visayas and then Super Typhoon Yolanda. A peace agreement in which the UK has been one of the principal supporters was finally signed. Throughout there has been the turbulence over the congressional pork barrel and now the Disbursement Acceleration Program.

The ambassador has not regretted choosing the Philippines over Mexico as his next posting after Thailand.

Having been posted in Bangkok, however, he sees a lot of unrealized potential in the Philippines in terms of many areas such as foreign direct investment (FDI), tourism and agriculture.

* * *

The other day at the office of the British Chamber of Commerce – Philippines, Ahmad told a small group of guests about the potential he saw for dramatic growth in this country.

“All the ingredients are here,” he told us, adding that the challenge is “to turn potential into sustained reality.”

Unfortunately, I have heard foreigners talk about the Philippines’ unrealized potential since the 1986 people power revolt. During that period, several of our neighbors realized their potential and left us behind. China sprinted ahead of everyone, accumulating enough wealth to develop a formidable military with the muscle to claim the seas around it and threaten Uncle Sam.

Ahmad sees the weaknesses in the Philippines, with “pirateering” used to protect monopolies and oligopolies and economic growth benefiting only a small group, but he chooses to be optimistic. He stressed that his country has its own problems but saw high levels of FDI last year.

He says realizing one’s potential will depend on the effectiveness of three components: leadership, policy-making and implementation.

Tourism, for example, has much room for growth. During his posting in Bangkok, an average of 800,000 Britons visited Thailand. In contrast, the numbers in the Philippines are so low Ahmad wouldn’t cite a figure.

Foreigners at the gathering cited the numerous impressive tourist attractions in the Philippines but said the inadequacy of tourism infrastructure compounded the low awareness of the country as a travel destination for Europeans.

An industry player cited the lack of all-in packages for travelers, poor transportation and inadequate accommodations even in top tourist destinations.

* * *

The lack of supporting infrastructure compelled Emirates airlines to end its cargo operations at Clark International Airport after just six months. Qatar Airways also stopped its direct service to Cebu.

Inadequate infrastructure, expensive and unreliable electricity and now the protracted mess in the Manila port are also discouraging investments in manufacturing.

Lilia de Lima, the hardworking director general of the Philippine Economic Zone Authority (PEZA), invited more British investments in the zone.

The PEZA chief, who calls herself “the original De Lima,” emphasized that manufacturing must be strengthened if the nation is to create decent jobs and stop the exodus of Filipinos for better opportunities abroad.

Locators in the PEZA zones have grown from about 300 when she started working in the authority 19 years ago to more than 3,000, but De Lima knows there’s a wide room for improvement.

She is promising investors “no red tape, only a red carpet” and a one-stop shop with no corruption for locators in the PEZA zones.

Ahmad said the entire Philippines must be as investment-friendly as the export processing zones. Like most other foreigners, he sees bright prospects for the country with the reforms started by President Aquino.

De Lima of course shares the optimism. “I can feel that this is the time for us,” she told us. “If we don’t bungle, this is our chance.”

If we don’t bungle? With the chaos at the ports, this looks like a monumental challenge.


Written by: Ana Marie Pamintuan

Source: http://digitaledition.philstar.com/articles/2014-07-25/opinion/weak-link-in-supply-chain/64499

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