Karl Kendrick T. Chua, Ph.D.
Acting Socioeconomic Planning Secretary
OECD Logistics Study Launch Event
29 January 2021
His Excellency Daniel Pruce, British Ambassador to the Philippines; Mr. Antonio Gomes, Mr. Frédéric Jenny, and our partners from the OECD; Mr. Aladdin Rillo of the ASEAN Secretariat; Chairman Arsenio M. Balisacan and our colleagues from the Philippine Competition Commission or the PCC; colleagues from the government; I also see Dir. Gen. Belgica of the ARTA, our development partners; distinguished guests; a pleasant day or night to everyone wherever you are.
On behalf of the Philippine government, I commend the OECD and the PCC for preparing the OECD Competition Assessment Review of the Logistics Sector in the Philippines and the OECD Competitive Neutrality Reviews: Small-package delivery services in the Philippines.
We extend our appreciation for the ASEAN’s commitment in implementing the ASEAN Competition Action Plan for 2016 to 2025, particularly in pushing significant reforms towards market liberalization and elimination of competition distortions. We also thank the Government of the United Kingdom, through the UK Prosperity Fund, for its assistance in making the OECD’s Fostering Competition in ASEAN Project feasible.
Essential to COVID-19 response
The OECD reports provide valuable insights in steering the Philippine economy back to its growth trajectory amid the impact of COVID-19.
Prior to the pandemic, the Philippines was going to be an upper middle-income country in 2020, ahead of our 2022 target. We also achieved our promise to reduce poverty rate by 6 million Filipinos, ahead of our 2022 target or four (4) years ahead in the year 2018.
When we imposed the strict enhanced community quarantine in the second quarter of 2020, our gross domestic product or GDP fell by 16.9 percent and the unemployment rate rose to 17.7 percent. Varying levels of community quarantine imposed across the country constrained domestic supply chains, causing uncertainty among producers and consumers.
However, improvements were seen with the gradual easing of restrictions. In the third quarter, we had a much slower GDP contraction of 11.4 percent. On a quarter-on-quarter basis, the economy even grew by 8 percent. Unemployment responded well and dropped quickly to 8.7 percent.
Yesterday, the Philippine Statistics Authority reported a smaller GDP contraction of 8.3 percent in the fourth quarter of 2020. This brings the full-year GDP contraction to 9.5 percent, which is at the low end of the Development Budget Coordination Committee’s (DBCC) estimate of -8.5 to -9.5 percent for 2020. On a quarter-on-quarter basis, the economy grew by 5.6 percent.
While we have seen significant improvements with the reopening of businesses and wider accessibility of public transport since October 2020, economic recovery cannot be achieved without relaxing and streamlining our quarantine policy and ensuring the unhampered flow of goods and services.
This study on the logistics sector is very timely as the pandemic restricted the flow of goods in the domestic and global supply chains and exacerbated the issues in the Philippine logistics industry, which was already lagging behind its ASEAN neighbors even before COVID-19.
For instance, the Philippines has the highest logistics costs in the ASEAN. According to the latest available data from the Department of Trade and Industry (DTI) and the World Bank, the logistics costs in the Philippines accounted for 27.2 percent of sales of manufacturing firms in 2017. In contrast, Indonesia was at 21.4 percent and Vietnam was at only 16.3 percent.
Moreover, the country’s protectionist policies limit foreign participation in the logistics sector. The Constitution caps foreign equity share in domestic companies at 40 percent. This limits competition and discourages investment and innovation
in the sector. Foreign direct investment (FDI) data from the Bangko Sentral ng Pilipinas shows that the share of FDI in transport and storage averaged only 0.6 percent of total FDI recorded for the period 2014-2019.
To address these issues, the government enacted the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, which streamlines the current systems and procedures of government services.
The administration also developed the national competition policy or the NCP last July 30, 2020 through a joint memorandum circular issued by the NEDA and the PCC, pending the President’s signature. The NCP aims to enhance competitiveness in the services sector by ensuring regulations promote fair competition, particularly in the transportation, energy, and telecommunication sectors.
NEDA, in particular, recently finalized the Updated Philippine Development Plan (PDP) 2017-2022. The updated PDP, which will be launched on February 4, 2021, highlights strategies to advance the country’s logistics industry as well as improve physical and digital infrastructure to support the sector’s growth.
We will also update the National Logistics Master Plan for the 2017-2022 period to further improve the efficiency of the national logistics system. The Master Plan highlights the regulations needed to boost the performance of logistics components such as customs procedures, port operations, and transportation connectivity.
Lastly, we will work with Congress on the pending measures that are immediately doable to attract more foreign direct investments and create more and better jobs. We urge our legislators to swiftly pass the amendments to the Public Service Act, the Retail Trade Liberalization Act, and the Foreign Investment Act. All these are crucial in enhancing competition and creating more and better jobs in the country, especially the logistics sector, and crcucial for the economic recovery from COVID-19.
Despite the country’s improved ranking in the World Bank Logistics Performance Index from 71st place in 2016 to 60th place in 2018, more work is needed to upgrade our logistics system to be at par with our neighbors—in particular, for instance, Hong Kong and Singapore.
Once again, I would like to thank the OECD for their efforts to help the government address the long-standing issues in our logistics sector and help accelerate the country’s economic recovery.
I invite everyone to actively participate in this virtual launch to translate insightful lessons into implementable policies, programs, and projects for an economy that is geared towards a healthy and more resilient Philippines.
I look forward to a fruitful event today with the presentation of the OECD’s recommendations and the discussion with our colleagues from the Governments of the Philippines, the United Kingdom, the ASEAN, and other distinguished guests.
Thank you and take care always.