Business Consulting BlogLogistics: Challenges and Opportunities in the Philippines

May 9, 2014

Trading in the Philippines, a country where amazing business opportunities mix with logistical challenges caused by its geographical location and diversity. An archipelago of 7107 islands where most of the economic activity is focused in the capital Metro Manila and in other major cities such as Cebu or Davao.

So how to supply all this islands and sell your products nationwide? Which kind of challenges arise? What is best solution? Here is an general overview of the general logistics infrastructure in the Philippines:

With regards to the airline transportation, the main airport is located in Metro manila (NAIA). With a volume of around 31 million passengers per year, NAIA offers regular transit in Asia, Middle-East and everywhere in the world. The different freight terminals are pretty well equipped and offer a large variety of services such as express delivery, refrigerated transport, secured area and many others. The airports of Clark (Luzon), Cebu (Visayas) and Davao (Mindanao). Aside from those airports, all provincial airports only offer domestic flight but with a very limited cargo capacity.

With over 33,000 KM of shore line, Metro Manila still remains the principal entry to the country as this is where we can find the main maritime terminal specialized in the transportation of passenger, row materials, consumer products as well as equipment. The port of Batangas, Subic (Luzon), Cagayan de Oro, Davao (Mindanao) also provides international freight transit. Domestic shipments are organized regularly, however, due to limitation of some equipment, this easily become limited. The entire territory can also be accessible thanks to the RoRo system (truck + boat). But again, the number of rotation can easily become limited.

Road – Land transportation

The Philippines road network permit to reach most part of the country; however the major infrastructures are still all around the capital Metro Manila. As the large majority of the bit metropolis of Southeast Asia (Jakarta, Ho Chi Minh or Bangkok) Manila has a massive traffic problem. The number of vehicles and the lack of public transportation are the biggest causes.

Customs clearance
In the Philippines, customs clearance remains a delicate process. Despite the effort noticed in the recent years with the development of an IT centralized system, the rules and regulations are far from being clear and remains difficult to predict and = calculate the accurate costs.
Additionally, due to this general improvement, the different government agencies such as the Food and Drugs Administration (FDA), the Bureau of Internal Revenue (BIR) and others are working closely together. For example, every imported product must be register with the FDA which was not clearly the case in the past. If a company does not respect this ruling, huge penalties will be imposed and in the worst case scenario the product will not be released by the bureau of customs.

Advantages and weaknesses of the Philippines logistic industry

• It is clear that the Philippines occupies a central and advantageous in the South East Asian and International logistics network.
• Clear efforts are actually being done by the government to attract foreign investor in the country. Several tax free zone (PEZA) are developed and are usually well dissevered by the logistics network (road, airport and maritime). Aside from the capital Metro Manila, many new areas are being developed: Clark, Subic, Batangas and Davao are some examples.
• A lack of consumer products and manufacture creates a need for more importation in the country, the market is here.

• The Philippines is subject to very difficult climatic condition. Every year, the rainy seasons brings several typhoons which directly impacts the logistics chain (flooding, landslide, cancellation of maritime and air flows).
• Regulations are not clearly interpreted and followed what causes non conformity and delays. This clearly creates risk of non-conformity and delays. This phenomenon is clearly amplified in the most provincial areas.

Invest and develop its general infrastructure to attract more foreign investment and reach international standards must be prioritized. The bureau of customs must also progress in term of transparency and ethics to reach International standard.

Do you want to understand the Philippines? Learn how to overcome some of the obstacles of your business? Contact us, Triple i consulting and its team can surely assist in complying with the different requirements of the various governmental agencies you will be working with.

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