Building the Philippines – How to Construct a Desirable Economy?

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In recent years, the Philippine economy ranks among the best performers in Asia. As the country looks to become an upper-middle-income country and reduce poverty rates, its ramping up infrastructure spending.

The Philippines consists of over 7500 islands and houses little over 100 million people, making it a logistical nightmare for shipping companies.

The country relies heavily on its waterway networks for logistics and to connect each island. From the ports to the city, infrastructure is inadequate due to low funding and natural disasters.

With new developments in its industries and infrastructure, the Philippines is looking to build its economy to rank as one of the strongest in the world.

Due to its geographical location, the Philippines often suffers from flooding and Typhoons throughout the summer, putting the infrastructure in the Philippines under much pressure throughout the past few years.

Yet, with recent investments, the country is developing at an incredibly fast pace.

 

The Importance of Infrastructure in the Philippines


The Philippines’ economy has grown significantly over the past 20 years, averaging a 6.4% growth rate since 2010. With declining poverty from 23.3% in 2015 to 16.6% in 2018, the country is slowly improving its quality of life.

Its strong manufacturing and agricultural industries, rely on shipping logistics to move products around the country for both domestic and international use. Thus improving infrastructure is an important key to unlocking the future of shipping logistics in the country. 

In recent years, the Philippines government has begun investing heavily in its infrastructure. In 2018 alone, the government spent 16.5 billion USD in new infrastructure projects to build roads, railroads, and bridges.

Philippines Infrastructure Internet Bull Report

With predicted growth in infrastructural spending for the next decade, the Philippines is reducing many bottlenecks seen in its logistical network, allowing for increased shipping capacity and efficiency. 

 

The Future of the “Build, Build, Build” Program


The “Build, Build, Build” infrastructure program, implemented by the Duterte administration, includes over 100 flagship programs aiming to reduce poverty, fuel economic growth, and reduce congestion in Metro Manila.

This program is increasing infrastructure spending, attributing to an expected 7% of GDP by the end of the Philippines President, Rodrigo Duterte term.

Before to Duterte’s presidency, infrastructure spending was a mere 2% of GDP, demonstrating the administration’s commitment to economic growth.

 “[The} Build, Build, Build Program” will primarily fuel our bounce back plan and will help our economy recover quickly,” – Dominguez

Prior to the pandemic, the government agreed to allocate 24% of its proposed 4.1 trillion pesos ($79.97 billion) budget for 2020 to infrastructure.

The program is currently under review to prioritize the projects that will yield the most significant impact on the economy, such as health and digital infrastructure.

 

Railroad System in the Philippines


With the improving infrastructure, some of the largest logistical companies in the Philippines will see increased growth. Dole Ocean Cargo Express, one of the largest shipping logistics companies is responsible for the transportation of agricultural goods for its parent company – Dole.

Dole is one of the largest producers of bananas and pineapples globally and has recently purchased 3000 hectares of land in the Philippines. It is estimated to produce over 250,000 metric tons of fruits annually. 

Due to the logistical bottlenecks, Dole hasn’t been able to maximize its production in the Philippines.

Increased infrastructural investments in roads and ports in the Phillippines now enable to support of higher capacity of traffic and load, enabling Dole and its shipping department to grow and optimize its production and logistics.  

 

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The Booming Agricultural Industry in the Philippines


Many shipping logistics companies will benefit from government expenditure on infrastructure. 2Go Group (PM: $2GO), another one of the largest shipping logistics companies in the Philippines, has seen unprecedented growth in recent years.

Serving both locally and internationally, 2Go Group’s customers have a wide range of business needs.

From its leading service of supply chain management to providing ferry services across the Philippines, $2Go is looking to expand its business domestically with stable net income since 2000.

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Poor management and rising oil prices in 2019 have hit the company with high costs. Analysts see the potential for growth as the company is now under new leadership and managed to cut its net costs by 70% for the first quarter of 2020.

With continual management and future support from its investors, and with the foreseeable growth in the logistics industry, the 2Go Group could regain its value in the next decade or less. 

 

Shipping logistics in the Southeast Asian country has the potential for growth. With its growing economy and industry, the Philippines can become a major shipping hub in South-east Asia.

Some of the larger existing logistical companies have already been steadily growing throughout the 21st century.

With future infrastructural upgrades and development, logistics can become more efficient and handle more capacity. 

 

Andrew Chu

Andrew is a third year student pursuing Cognition in Computing Systems at the University of British Columbia. Trading from a young age has sparked his interest in searching for value in the financial markets. Working at the largest private equity firm in Taipei, he conducted many industrial research including telecommunication, semiconductor, and aviation in Asia. With his experiences, he looks to explore how the future of computer systems can add value into finance.

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