The cost of logistics to sales remains high in the Philippines compared to other Asean countries, reports from the Organization for Economic Co-operation and Development (OECD) and the Philippine Competition Commission (PCC) showed.
The OECD, in the reports Competition Assessment Reviews: Logistics Sector in the Philippines and Competitive Neutrality Reviews: Small-Package Delivery Services in the Philippines, said the cost of logistics to sales in the Philippines is approximately 27 percent higher compared to other Asean countries.
It also showed that the country ranks 60th in the World Bank’s Logistics Performance Index in 2018, with timeliness and customs considered as the two most challenging areas and low scores for infrastructure and logistics competence.
The reports insvolved 96 relevant laws and regulations and presented 99 specific pro-competition recommendations to support efforts in boosting the country’s logistics sector and leveling the playing field between private and state-owned firms.
The review recognized the logistics sector’s crucial role in the Philippine economic development with a market size of $11 billion, which accounts for approximately 4 percent of the country’s gross domestic product.
But the reports noted three anti-competition issues in the industry. These include rules that may limit market entry, exemptions from competition law, and rules granting preferential treatment only to certain companies resulting in uneven competition in the market.
The OECD noted the need for a clear separation between the regulatory and operational functions within the Philippine regulatory environment. “Regulatory bodies should avoid being operators themselves that compete with private firms in a sector they regulate,” it said.
The OECD also recommended concentrating in a single ministry the responsibilities for the regulation of freight forwarders, regardless of their mode of transport, to decrease business costs.
It said the Public Services Act should be amended to clarify freight transportation and logistics are not public utilities to remove barriers to entry and encourage more firms in the market.
For the second study which focused on small-package delivery services , OECD said adequate compensation should be ensured to state-owned Philippine Postal Corporation (PHLPost) for the execution of its public service obligations, including delivering letters to all parts of the country.
“Ultimately, the policy recommendations in the reviews are about investment, jobs and growth. There is a need to reduce unnecessary legal and regulatory restrictions to competition, thus bringing prices down, and improving the quality of goods and services and increasing innovation,” said Antonio Gomes, OECD deputy director for Financial and Enterprise Affairs.
The reports are part of a region-wide project to foster competition under the Asean Competition Action Plan 2016-2025. The assessments were conducted in partnership with Asean and the UK government.