The Philippines posts its best performance in the latest Logistics Performance Index—and the next challenge is keeping up the pace.
Written by Henrik Batallones
There was cause for celebration among policy makers when this year’s edition of the World Bank’s Logistics Performance Index was released: the Philippines ranked 43rd—its best performance since the survey began in 2007.
It was seen as the most visible result of the government’s intensified focus on improving our supply chain networks. It was no mean feat considering the survey reflects the upheaval caused by the COVID-19 pandemic—indeed, it was the cause for the long gap between surveys, which is supposed to be held every two years but was last released in 2018. That year the Philippines ranked 60th, an improvement from our all time low of 71st in 2016. It reflected the beginnings of the government’s increased investment in infrastructure, as well as the private sector’s focus on improving logistics capacity and capability.
These efforts were stepped up when the COVID-19 pandemic led to restrictions on mobility and certain activities. The government was forced to implement measures to ensure the continued movement of goods, particularly products deemed “essential”. Businesses also stepped up efforts towards digitalization, particularly as their customers shifted to online retail formats and developed new preferences that had to be responded to.
The World Bank notes that, despite the disruption caused by the pandemic, logistics performance remained consistent among surveyed countries. However, countries that were in a better position to deal with these disruptions performed better. With that in mind, it’s clear the Philippines still has a lot of work to do.
Breaking down the numbers
The Logistics Performance Index assesses the competitiveness of a country’s supply chain ecosystem by looking at six areas: efficiency of customs processes, quality of transport infrastructure, ease of arranging competitively-priced shipments, competence of logistics services, ability to track shipments, and timeliness of shipments.
Critically, the score is collated from feedback from respondents from outside our country, meaning our LPI score reflects foreign impressions of our logistics networks. This is as opposed to the Department of Trade and Industry’s own Logistics Efficiency Indicators survey, which takes into account feedback from stakeholders in the Philippines.
When breaking down our headline ranking, the big picture becomes more complex. Our performance in international shipments was worse compared to the last survey, dropping from joint 37th to joint 53rd. This reflects our vulnerability to global disruptions, best illustrated by the so-called “supply chain crisis” which led to less ships being available and higher congestion in major global ports. This also resulted in higher shipping costs, which businesses inevitably passed on to consumers.
This year’s survey saw a new set of data, illustrating supply chain lead times in surveyed countries, as aggregated from global trade trackers. In the Philippines, port turnaround averaged 1.3 days; consolidated dwell time for imports averaged 5.0 days; while exports averaged 3.3 days. Imports shipped via air saw an average dwell time of 2.4 days.
We saw improvement in other areas, however. Of particular note is our leap in the timeliness rankings, jumping from joint 100th in 2018 to joint 46th this year. One could attribute this to continued investment both in technologies and logistics infrastructure such as warehouses, that allowed businesses to be more responsive and timely in its deliveries—a particular demand as Filipinos embraced e-commerce at the height of the pandemic.
Digitalization is perhaps also key in our improvement in the customs facilitation score, jumping from joint 84th to joint 59th. However, we have yet to reach the heights we saw in this front in the 2014 survey, when we placed joint 45th.
Our infrastructure score also saw a modest jump, going from joint 66th to joint 47th. This reflects the government’s continued push towards developing transport infrastructure, from new roads and highways to airports and seaports. This is notable considering most construction was halted during the height of the pandemic—and one expects it to further improve in future surveys, as more of these projects go online, and even more move along the pipeline.
Continued expansion of training programs in logistics, particularly in the technical and vocation level, likely also contributed to our improvement in the logistics competitiveness score, from joint 69th to joint 47th. Our tracking and tracing score also saw a modest jump, from 57th to joint 49th.
Are we moving fast enough?
Worth noting is that the 2023 Logistics Performance Index reflects a world still reeling from the disruptions caused by COVID-19. While logistics performance has remained consistent, some countries suffered more setbacks than others, and it is in this light in which we should view the Philippines’ performance in the latest survey.
The World Bank notes that richer countries—major trading economies that saw more disruption especially in the beginning of the pandemic—made bigger steps in embracing digitalization across the supply chain and implementing measures targeting improved port productivity.
There is a good chance that our ranking in the next survey—which should be out in 2025—would drop, although it wouldn’t necessarily mean our logistics competitiveness has deteriorated. Instead, it could mean that other countries have recovered from their setbacks and improved their logistics performance. While our headline ranking has gone up, does it actually mean we have truly moved up, or were we instead stagnant (or consistent, take your pick) while other countries struggled dramatically, or surged significantly, between surveys?
The challenge, then, is to further intensify efforts to improve the competitiveness of our supply chain ecosystem so we can continue to be at par with our neighbors and major trading partners. We have seen many initiatives in the last few years, both from government and the private sector, designed to address longstanding logistics challenges—and more importantly, there has been a greater level of collaboration between stakeholders, meaning a better exchange of perspectives and ideas. The government’s continuing support for these initiatives—seen at the highest levels—also bodes well for our competitiveness moving forward.
Three things will prove critical. One is the country’s continued investment in transport infrastructure. While the focus decidedly remains on roads, continuing modernization of ports and consideration of rail as a viable mode of cargo transport is also in the cards.
Also important is support for digitalization. The private sector is ahead in this regard, and the pace will continue to pick up as technologies continue to go down in price and be further democratized. Government support for both adoption of technologies and development of innovative solutions—especially from start-ups—should also continue. Efforts to further digitalize government functions should be intensified.
Finally, regulatory support remains critical. Several proposed pieces of legislation seeks to provide clarity as we move along in the journey towards better logistics performance. The International Maritime Competitiveness Act seeks to reduce shipping costs, while the 30-Year National Infrastructure Program Act seeks to ensure continuity as the government sets up development of critical transport networks. Efforts to clearly define policies and streamline regulations should continue as well.
Logistics competitiveness remains key as the world continues to recover from the disruption of recent years. In the end, these rankings are just benchmarks to allow us to assess how well we are performing—and what we have to do to better serve our economy.
The Philippines’ 2023 LPI scores
Customs: 59th
Infrastructure: 47th
International shipments: 53rd
Logistics competence: 47th
Track and trace: 49th
Timeliness: 46th
The world’s 2023 LPI best performers
1st: Singapore
2nd: Finland
3rd: Denmark, Germany, Netherlands, Switzerland
7th: Austria, Belgium, Canada, Hong Kong, Sweden, United Arab Emirates
ASEAN countries ranked by 2023 LPI performance
1st: Singapore
26th: Malaysia
34th: Thailand
43rd: Philippines, Vietnam
61st: Indonesia
115th: Cambodia, Laos
Brunei and Myanmar did not participate