Logistic costs in Philippines highest among some countries in ASEAN

By: Roy Stephen C. Canivel, Inquirer Business, Dec 06, 2018

Logistic costs ate up around 27 percent of sales among manufacturing firms in the Philippines last year, the highest among selected Southeast Asian countries, a new survey showed.

This is according to a policy brief made by the International Finance Corp., a member of the World Bank Group.

It surveyed around 159 companies in major cities such as Clark, Cebu, General Santos, and those in Metro Manila. Majority of these are small and medium-sized enterprises.

The document, which was submitted to the Department of Trade and Industry (DTI), gave for the first time ever an initial baseline assessment of the local logistics landscape.

Due to limited data, the Philippines was only compared to Indonesia, Vietnam, and Thailand — countries in Southeast Asia where a similar methodology was applied.

But even then, the cost-sales ratio varies across sectors, with companies whose products are considered “low value” feeling the pain of expensive logistic costs.

For example, the food sector, which accounted for 42 percent of the surveyed respondents, was more likely to be affected by high logistics costs.

“When you’re in electronics, you don’t really care about the logistics costs because the value of your goods is already very high,” said Ruth Banomyong, consultant for the IFC-World Bank in a press briefing on Thursday.

“If you’re having like rice, cassava, fruits, and vegetable, even one cent increase is a very big issue,” he added.

Moreover, the cost-sales ratio also varies across major islands in the country, with Mindanao’s logistics cost eating up 30.32 percent of its sales, much higher when compared to that of Luzon (17.48 percent) and Visayas (25.08 percent).

According to the document, the cost of logistics in the Philippines took up 27.16 percent of sales on average, the largest cost to sales ratio when compared to the three other countries.

Indonesia followed with 21.4 percent, a figure that DTI Secretary Ramon Lopez said the Philippines should eventually match, although he did not provide a timeline for the target.

Vietnam ranked third with 16.3 percent. Thailand, for its part, had the lowest cost with 11.11 percent.

The brief noted the Philippines was similar to Indonesia in the sense that both countries are archipelagos, which “most likely” contributed to the high logistics cost.

“On another note, the high transport and inventory costs likewise reflect the unreliability of the logistics system in the Philippines,” the brief said.

Furthermore, the data did not cover the impact of the fuel excise tax under the Tax Reform for Acceleration and Inclusion (TRAIN) law, which increased prices starting 2018 and would continue to do so until 2020. /kga