Improved transport connectivity through the Philippines’ Roll-on/Roll-off (RoRo) network is boosting business activity in port municipalities—but drawing income away from nearby towns, according to a study by state-run policy think tank Philippine Institute for Development Studies (PIDS).

In a paper titled “Can Transport Infrastructure Reduce Inequality in Archipelagic Economies? Evidence from the Philippine Roll-on/Roll-off Network,” the study found that municipalities located near RoRo ports experience a 6.5-percent decline in income after nearby ports become operational, PIDS noted in a statement on Friday, March 20.

The research, authored by PIDS senior research fellow Kris Francisco and former senior research specialist Kimberly Librero, examined municipal data spanning 2000 to 2020.

The findings suggest that firms and consumers tend to shift toward areas with direct transport access, reshaping where economic activity takes place.

At the same time, municipalities hosting RoRo ports benefit from stronger commercial activity. Business tax revenues in these areas increase by about 17 percent on average following integration into the network, reflecting higher levels of enterprise activity and investment.

The authors noted that improved connectivity creates favorable conditions for business development in port areas. “In the case of RoRo ports, improved connectivity appears to create favorable conditions for business development and commercial activity.”

However, these gains do not necessarily translate into broader income growth. The study found no statistically significant increase in total income in port municipalities, suggesting that the RoRo network may be redistributing economic activity rather than expanding it overall.

“Our findings reveal that maritime infrastructure creates clear spatial winners and losers at scale, generating concentrated economic benefits for a minority of municipalities while imposing welfare costs on the majority,” the authors noted.

Introduced in 2003, the RoRo Terminal System was designed to improve inter-island connectivity by integrating road and maritime transport. Vehicles can board ferries and continue travel across islands without unloading cargo, reducing transport costs and travel time.

These efficiency gains make port locations more attractive for businesses. Firms may relocate closer to ports to minimize logistics costs, while consumers may prefer to shop and trade in areas that are easier to access.

But this concentration effect can come at a cost to surrounding areas. As activity shifts toward ports, nearby municipalities may experience reduced business activity and declining local revenues.

The study showed that while host municipalities saw no significant change in overall income after joining the RoRo network, neighboring municipalities recorded an average income decline of about 6.5 percent, indicating a shift in economic activity toward transport hubs.

Infrastructure investments are widely viewed as a key tool for promoting economic development, particularly in countries with complex geographies such as the Philippines.

“A frequently proposed strategy for stimulating inclusive growth is strategic investment in infrastructure, particularly in lagging regions,” the authors explained.

This is especially relevant in the Philippines, where geographic fragmentation poses challenges to economic integration.

“The fragmentation of the Philippines into more than 7,000 islands creates natural barriers to economic integration,” the study noted.

By improving inter-island connectivity, the RoRo network aims to enhance the efficiency of moving goods and people across the country.

The findings highlight the need to carefully consider how infrastructure investments affect different communities.

While transport projects improve connectivity and integration, their benefits may not automatically extend to surrounding areas. Instead, improved access can create localized growth centers that attract businesses and investment.

“Infrastructure remains essential for economic integration in archipelagic economies,” the authors said.

They added that complementary policies are needed to ensure broader gains from connectivity, including support for local businesses, regional development programs, and investments that enable nearby municipalities to benefit from new transport links.