By: Benjamin E. Diokno
WITH ASEAN integration just around the corner, there is pressure for each member country to be globally competitive. Much has been written about the Philippines’ huge deficiencies in public infrastructure and what needs to be done to catch up with its ASEAN-5 neighbors. That is not the subject of this article, however. Rather, it is the country’s logistics performance which, according to a recent World Bank study, is “at the core of the economic growth and competitive agenda.”
The report states that any policy maker “globally recognizes the logistics sector as one of the key pillars for development.” It adds: “inefficient logistics raises the costs of trading and reduces the potential for global integration.”
According to the World Bank, the “Logistics Performance Index overall score reflects perceptions of a country’s logistics based on efficiency of customs clearance process, quality of trade- and transport-related infrastructure, ease of arranging competitively priced shipments, quality of logistics services, ability to track and trace consignments, and frequency with which shipments reach the consignee within the scheduled time. The index ranges from 1 to 5, with a higher score representing better performance.”
What’s the importance of logistics performance? “Logistics performance is strongly associated with the reliability of supply chains and the predictability of service delivery for producers and exporters. Supply chains — only as strong as their weakest links — are becoming more and more complex, often spanning many countries while remaining critical to national competitiveness,” adds the World Bank report.
The results of the study should jolt policymakers into more realism, perhaps even humility, even as they keep boasting of the strong GDP growth in 2012 and 2013, as if all that matters are GDP numbers. The numbers show that the Philippines ranked the poorest in logistics performance index among the ASEAN-6 countries.
Among 160 countries covered in the study, Germany ranked first with a logistics performance index (LPI) of 4.12. Somalia ranked 160 with a score of 1.77.
Among the ASEAN-6 bloc, Singapore ranked first (5 overall) with an LPI of 4.0, while the Philippines ranked sixth (57 overall) with an LPI of 3.0. Singapore’s best rank was 2 and its worst rank was 7. On the other hand, the Philippines’ best rank was 44 (in 2010) and its worst rank was 78.
A comparison with Indonesia and Vietnam, our closest competitors among ASEAN-6 countries (there’s no point comparing the Philippines with Singapore) is shown in the second table. In 2010, the Philippines had the highest LPI among the three countries (Vietnam, Indonesia and the Philippines). After four years, the Philippines had the lowest. What a difference four years makes!
In 2010, the Philippines ranked 44 in LPI with a score of 3.14. Vietnam ranked 53 with a score of 2.96, while Indonesia ranked 75 with a score of 2.76. In 2014, Indonesia had a quantum improvement (to 53 from 75), while the Philippines had a tragic collapse (from 44 to 57).
Among ASEAN-6 countries, the Philippines rated miserably in two aspects of the logistics performance index — infrastructure and timeliness of delivery.
On public infrastructure, Singapore was first among ASEAN-6 countries with an overall ranking of 2 among 160 countries, while the Philippines was the worst among its ASEAN-6 neighbors, with an overall ranking of 75.
On timeliness of delivery, Singapore ranked first among ASEAN-6 countries (ranked 9 overall). The Philippines, on the other hand, ranked 6 among ASEAN-6 countries (ranked 90 overall).
The unmistakable conclusion is that the Philippines’ LPI has deteriorated during President Aquino III’s watch.
In the short and medium term, the Philippines’ ability to grow robustly may depend on the domestic economy and the government’s ability to mobilize and implement an ambitious public infrastructure program.
However, the Philippines’ long-term, much stronger and sustainable growth would depend on its ability to link up with the rest of the world. Obviously, that won’t happen unless the problem of inefficient and costly logistics is addressed. But solving it requires recognizing that such a problem exists, designing a comprehensive reform program to address it, and having the political will and long-term commitment from policymakers to push through such a program.