Philippines’ logistics market is set for surging growth if reform agenda is pushed through

The Philippines is poised to become a major growth market for logistics service providers over the next year, according to a new report by Transport Intelligence. But this will only happen if its political rulers take steps to improve trade flows, not least by investing heavily in the archipelago’s outdated infrastructure.

The Philippines currently lags behind its regional competitors in South East Asia in terms of its logistics performance. However, Ti’s latest report – Philippines Transport & Logistics 2015 – argues that if policy changes can be made that encourage inward investment by manufacturers, and if this is supported by more investment – especially from the private sector – in infrastructure, then contract logistics and forwarding demand will surge.

“Ti believes that if the Philippines can overcome many of the infrastructure difficulties it currently endures at its ports and airports and, especially, on Luzon’s blocked highways, then it has every chance of becoming a major growth region for manufacturers to migrate towards,” said Michael King, Ti’s Head of Operations in Asia.

“It boasts a fast growing economy and a thriving consumer market driven by its growing middle class, remittances and the off-shoring of back office functions by many knowledge and financial institutions. As such, by removing existing logistics performance issues and the many obstacles to doing business in the country, Ti believes it is well placed to become a growing market across the various logistics sectors.

“A lot will depend on the determination of whichever candidate wins the looming Presidential elections to drive through policy reform.”

Ti’s market sizing analysis looks at each key logistics sector using three growth scenarios over 2013-20. The realisation of a scenario (low, medium or high) is dependent on the Philippines’ Logistics Performance Indicator reaching a certain threshold. Vast differences in growth rates are predicted when LPI scores differ.

At the upper range of LPI improvement, we believe the size of the Philippines’ contract logistics market increase from €478m in 2013 to €1,412 by 2020. The latter sizing would represent a CAGR of 16.7% over 2013-2020. However, should its political leaders fail to pursue business-friendly reforms, instead this would see its CAGR over the period increase by 10.5% to total €962m.

Many of the same drivers of contract logistics market expansion will determine growth rates for forwarding. Ti concludes that the total freight forwarding market can grow by a CAGR of 15.1% over 2013-2020 under our ‘high’ LPI increase scenario, but only by 9% under our ‘low’ forecast.

“Ti believe that if the next Philippines’ government embraces policy change to address is current LPI performance, then it will become a major regional growth engine for both contract logistics and forwarding,” said King.

“The trend could be further enhanced by the free trade options that will become possible as the ASEAN Economic Community takes shape and current trade and population movement restrictions are removed or reduced.

“All of this should boost economic growth and transport demand. But the Philippines will only see the benefits of this if it takes steps to improve trade flows.”

About ‘Philippines Transport & Logistics 2015’

Ti’s latest report offers unprecedented insight into the competitive environment for forwarders and logistics service providers operating in one of South East Asia’s largest and fastest growing economies. It includes analysis of which companies are already major players and what barriers market entrants face. In addition, the report features in-depth analysis of the road, rail, sea and air sectors including Ti’s exclusive market sizing and demand forecasts.

Key Contacts

Sophie Brady, Head of Sales, Asia

+61 (0)2 8003 7208 or email: [email protected]

Michael King: [email protected]

Head of Operations & Senior Analyst, Asia