By BERNIE CAHILES-MAGKILAT
The Philippines’ logistics and warehousing market will remain robust through and beyond COVID-19, making it more even more significant than it is today, according to a real estate consultancy firm.
Photo credit: https://www.lobiengroup.com
Research and analysis made by The Lobien Realty Group (LRG), one of the fastest rising real estate consultancy companies in the Philippines, indicates that the influence and impact of logistics on a nation’s economy has never been more significant than it is today.
“But through and beyond COVID-19, LRG remains optimistic that there is a lot of room for growth in the Philippines’ Logistics and Warehousing Market,” according to the report. LRG also said that while the pandemic has altered short term growth forecasts for the Philippines’ economy and industries, it assumed that mid-term forecasts will remain unchanged once the COVID-19 pandemic is contained.
LRG studies show that the Philippine logistics market is a thriving industry forecasted to have 8.2 percent to 8.8 percent growth rate for the period 2018 - 2024 and projected to be a P970 billion to P1 trillion market by 2023.
The biggest chunk in the industry is in the area of freight forwarding. According to LRG, 21.1 percent of the transporting storage and establishments are freight forwarding companies. Composed of the biggest chunk of transporting service in the country, this is largely dominated by road freight forwarding. This sector is projected to continue to dominate the overall Logistics Market in the Philippines, freight forwarding is seen to grow further with the Government’s “Build Build Build” (BBB) Program.
The second biggest chunk for the logistics market is the warehouse market. With its strategic location, right on the edge of Pacific Ocean, the Philippines is one of the most convenient docking locations for supply routes as it essentially connects many export and import markets of different countries across the globe. Largest contributors for Warehouse Market are Industrial and Retail warehousing, as well as E-Commerce companies.
Expected to reach P68.2 Billion by 2023 or 9 percent CAGR from the period 2018 - 2023 is the express delivery market, which consists of the same day or maximum of (3) three delivery days. This Transport Method which is largely driven by the e-commerce market is dominated by international air express companies such as DHL, FedEx, UPS, and TNT Express.
The report noted that the Philippines’ e-commerce logistics market has showcased steady growth over the years. Growing awareness among consumers about global brands as well as preferences for improved and up to date fashion and technologies have heightened the demand. Use of advanced mobile applications and banking solutions for the customers has made it easier for them to shop online which further intensified the e-commerce logistics market.
The future looks promising for the country’s Logistics and Warehousing Industry given the country’s economic numbers - from its stable GDP growth; its active participation in international trade; and, the boom in specialized industries. There has also been a notable increase in consumer spending because of a rising middle class, growing outsourcing industry, and OFW remittances.
Due to the growing popularity of the e-commerce market which allows for geographical ease; eliminates travel time and cost; is available 24/7; and allows for feedback from customers, the country is seeing an increase particularly in sales of food and beverage, clothing apparel, and electronics, which is fueling the demand for warehouses and storage facilities expansion.
Another opportunity for the Logistic and Warehousing Industry is the expansion of both local and international manufacturing companies in Metro Manila’s outskirts like Cavite, Laguna, Batangas, Bulacan and Pampanga where vast sizes of land are still available and offered at reasonable prices. 2Lastly, the government’s P9.2 trillion infrastructure and transport improvement system are on the upswing.
The increasing penetration of high-speed internet and the rise in popularity towards online shopping have fueled the rapid growth of the e-commerce industry. Worldwide, the boom in the global logistics market has reached $6.6 trillion (as of 4Q 2019) which is forecasted to increase at 4.5 percent annually until 2024.
Logistics is a driver of countries’ and firms’ competitiveness which is fundamental to job creation and economic growth. Efficient logistics connects firms to domestic and international markets; it affects the competence of the manufacturing global value chains, and competitiveness of a country’s economy within these value chains.
The latest Logistics Performance Index (LPI), an interactive benchmarking tool created by the World Bank to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance, ranks the Philippines 60th out of 168 countries. The Philippines’ ranking has leaped 11 notches higher than in 2016 because of the government’s efforts to simplify government transactions with the enactment of the Ease of Doing Business Law and improve the quality of public infrastructures.