Foreign players boon to logistics

The Philippines should implement reforms aimed at introducing more foreign competition into the transport and logistics industry in a bid to boost export competitiveness, according to a study by state think-tank Philippine Institute for Development Studies (PIDS).

Authored by PIDS Senior Research Fellow Ramonette Serafica and Consultants Lai-Lynn Barcenas, Glenda Reyes and Jose Tongzon, the study said improving access to the most efficient transport and logistics service providers is crucial.

“Export of services is also an important component of our country's international trade objective. Enhancing its export of logistics services through liberalization should, therefore, have beneficial effects on our country's overall trade performance and economic growth,” they said.

The study noted that the key to improve market access for foreign investors and foreign talents into transport and logistics industry is the amendment of the Public Service Act.

Under the proposed amendment to the Public Service Act (HB 5828), which has already been approved by the House of Representatives, transport and telecommunications will no longer be in the list of what is considered “public service" or "utility”.
“Having this amendment will also address PPP (public-private partnership) issues, especially in attracting foreign investment on transport infrastructure projects. Any future amendments must lead to lower transaction costs, non-discriminatory and advantageous to the public,” the authors said.
The study also underscored the need to assess the impacts of removing restrictive regulations in transport and logistics industry, including the adjustment costs for small and medium enterprises (SMEs) in retail trade for low-skilled workers and in transport and freight forwarding services.
“SMEs which do not have the economies of scale and more advanced technology, and low-skilled workers would be directly hurt in a more liberalized environment, with increasing foreign competition from larger and more established enterprises and foreign workers form labor-abundant countries,” it said.
The authors further said the government should therefore come up with ways to mitigate the possible adverse impacts of deregulation, based on previous liberalization experiences.
It can provide economic incentives for companies to introduce sufficient redundancy packages and skill retraining programs useful in alternative industries that would thrive as a result of structural adjustments brought about by deregulation, they added.