DTI targets drop in logistics cost to 20%

MANILA, Philippines — The Department of Trade and Industry (DTI) wants to bring down logistics costs to 20 percent or below as a percentage of sales of firms by yearend with the government’s issuance of a joint administrative order (JAO) and an executive order (EO) which will address high shipping costs.

As the JAO is awaiting the signature of the Department of Finance (DOF),  the DTI is set to reconvene with the agency and the Department of Transportation (DOTr) to recommend to the Office of the President the issuance of an EO to specify which agency would be responsible for regulation of shipping charges.

Trade Secretary Ramon Lopez told reporters during the 2nd Logistics Services Philippines Conference and Exhibition, the DTI would want to bring down the logistics costs in the country to 20 percent or lower as a percentage of sales of firms.

A study conducted by the DTI and the World Bank released in December last year showed the Philippines had the highest logistics cost in Southeast Asia at 27 percent.

Other Southeast Asian countries such as Indonesia had a logistics cost over sales of 21.4 percent, while Vietnam had 16.3 percent and Thailand had 11.11 percent.

Lopez said the lower logistics cost rate should be seen “maybe year-end or a few months after that.”

He said the JAO to be released with other government agencies such as DOF, DOTr,  Bureau of Customs, Bureau of Internal Revenue, Maritime Industry Authority, Philippine Ports Authority and the Subic Bay Metropolitan Authority to address concerns of the private sector on high shipping costs and congestion at the ports due to unreturned empty containers and overstaying imports at the ports, is just waiting for the signature of the Finance secretary.

While awaiting completion of signatories of the JAO, he said he has instructed Trade Undersecretary Rowel Barba to reconvene the DOTr, DTI, DOF technical working group to reconstitute the JAO into an EO.

 “We believe it will address the institutional arrangements required to regulate high shipping costs, and address the problem of port inefficiencies, but legal basis must be clearly established. Maybe the JAO would need teeth. Therefore, it must really be an EO that will spell the difference. That is our latest decision,” he said.

While the JAO will cover the cooperation of different agencies in addressing concerns raised on high shipping costs and congestion at ports, he said the EO would specify which agency would be accountable for setting or having control over the allowable shipping rates.

“We have to be more determined and forceful on it, that’s why the EO would be the recommended mechanism,” he said.

He said the technical working group should be able to come up with a draft EO in a month’s time.

Data received and validated by the DTI showed additional shipping charges were reaching up to around $1,000 per container.

In addressing the high shipping charges, he said the government is looking at coming up with a cap or range, as well as the number of allowable fees to be charged.

Roberto Martin Galang, senior private sector specialist at the World Bank’s International Finance Corp. said in the same event, a logistics observatory which will serve as a single online portal for information from the port authority, container yard association, port operator, Land Transportation Office, and Land Transportation Franchising Regulatory Board is also in the works.

The online portal would be linked with the DTI website.