PH lags behind ASEAN peers in logistics – JLL

Published December 18, 2020, 7:30 AM

by Bernie Cahiles-Magkilat

The Philippines lagged behind ASEAN countries in logistics development and investments as it concentrated in the services sector, but the country is expected to catch up as opportunities for investors abound.

During a virtual webinar on Freeports to Free Shipping: The Evolution of Manufacturing, Logistics & e-Commerce in Luzon, Tom Over, JLL Philippines director for Industrial and Logistics tackled the country’s logistics sector and prospects despite being behind its neighbors.

JLL Philippines estimates that demand for logistics space in the Philippines to grow by approximately 160,000 sqm per annum in the next 10 years. Their estimates showed lower take-up by end-2020, reflective of the impact of the COVID-19 pandemic.

Nevertheless, a possible rebound may take place in 2021 given the pipeline build-up due to deferred transactions. The overall growth in logistics take-up is anticipated to outpace the current pipeline of identified stock, suggesting a possible supply gap in the market in the coming years.

Global macro situation is challenging in these times, but Over stressed that everybody is looking at Southeast Asia and in Asia Pacific as a whole.

 For the past several years though, Over noted that large corporation have focused on retail, commercial and residential development. Thus, logistics is a different type of product in property development in the country. With that, he said, this product type is still trying to get scale. market. “There is an opportunity for first movers,” Over said adding the development of the critical supply chain.

Over said the country’s logistics industry has not yet attained the international standards. This means, there are opportunities for individuals with huge landbanks along junctions and expressways, and for investors for joint venture partners to build facilities that are of international. This will pave the way for more international investments in logistics.

To further attract investors in the logistics sector, Stuart Ross, JLL SEA head of industrial, presented a study showing that 81 percent of investors planned to increase their exposure to logistics by end 2021 as the sector continued to be undervalued. “More groups are trying to get in the logistics sector,” he added.

Ross stressed that without a doubt, major foreign logistics investors are looking at Southeast Asia, including the Philippines.

He suggested that the Philippines improve its infrastructure, roads and ports, stressing these are critical components to bring efficiency and competitiveness in the logistics sector.

In addition, he cited tax incentives and free trade agreements as important add-ons to bring in key to

bring in foreign investments.

In addition, Over cited a World Bank study that should explain the Philippines stature behind its ASEAN neighbors in the logistics sector.

 The study indicated that the Philippines is behind its peers as it posted significant declines in output structure (2007 vs. 1980) in terms of percentage of GDP in the manufacturing, industry, and agriculture sectors. It showed that the Philippines declined the biggest in agriculture (-12.4%), industry (-7.2%), and, manufacturing (-3.8%).

But, the Philippines shone brightly in the services sector with 18.1 percent increase the services. The Philippines is one of the world leading business process management or outsourcing destinations.

Other countries though performed better in industry and manufacturing sectors. In the industry sector, Thailand posted a positive 16 percent, Indonesia 5.1 percent, and Malaysia 6.7 percent.

In manufacturing, Thailand posted a positive 14.1 percent, Malaysia with 6.4 percent and Thailand with 14.1 percent. In services, Indonesia posted a positive 5.1 percent, Malaysia 5.7 percent, and Thailand with negative 3.4 percent.

 In terms of employment, the Philippines scored negative in agriculture (-15.7%), industry (-0.3%) and manufacturing (-1.7%). In contrast, Malaysia, Indonesia and Thailand posted positive mostly positive in three sectors, except for agriculture where Indonesia posted -5.2 percent, Malaysia -22.4 percent, and Thailand -29.1 percent.