Digital Payments and Logistics Services: A catalyst for the growth of e-Commerce in the Philippines

Logistics

According to the World Bank’s Philippine Digital Economy Report 2020, low logistics performance and high costs are the primary supply chain issues that beset the country. The DTI/WB study on logistics cost reflects the Philippines’ logistics cost as highest among ASEAN neighbors, with these accounting for about 27% of the cost of sales among manufacturing firms.

The logistics services sector is actively engaged with the public sector. It envisions that:

By 2030, logistics services in the Philippines shall be the most efficient, fastest, and the cost of which shall be one of the lowest in Southeast Asia.

Reducing logistics cost and increasing efficiency of logistics performance is a crucial aspect of e-Commerce growth. While the pandemic accelerated the adoption of e-Commerce, there is a need for a cohesive response to address the inefficiencies and increase competitiveness in the logistics sector. Cognizant of this need, the Philippine government and the Logistics service providers developed a roadmap dubbed “The Ten Commitments” designed to focus on specific action agenda that should be pursued. These involve streamlining, standards development, investments in logistics infrastructure, and skills upgrade.

The e-Commerce Philippines 2022 Roadmap zeroes in on resolving issues related to e-fulfillment and last-mile delivery services which are faced with several challenges in fulfilling its commitments to clients, such as lack of motorcycle couriers, worsening traffic congestion, as well as heightened risks on the part of the courier due to the cash-on-delivery payment system.

• Ease of doing business
  Difficulties in compliance with various regulatory requirements and procedures of government agencies remain a top-of-mind concern among logistics providers. Varying business registration policies on the local level, burdensome requirements, and obsolete policies and procedures increase the cost of doing business. The industry also mentions the need for government to determine the appropriate regulator. In the case of riders, the current draft of the Private Express and/or Messengerial Delivery Service (PEMEDES) Guidelines, requires each messenger to have an individual accreditation license from DICT.
• Promotion of the gig economy
  Lack of government support for gig workers remains a primary concern in the logistics sector. The deficiency of benefits, training, and social safety nets such as life and accident insurance for riders hinder growth and security within the sector. Stakeholders from the logistics industry have also raised issues on unclear regulatory requirements, penalties, and taxation which affect the onboarding for most gig workers.
• Availability of digitally skilled workers
  The development of any sector is driven by intellectual capital, or the ability to foster the appropriate skills and training from technological to linguistic to entrepreneurship according to the APEC Digital Prosperity Checklist (2010). The upskilling and reskilling of workers not only foster industrial growth but also provide security for our workforce. With the rise of new technology, continuous learning and new skill sets are needed to adapt.
• Fast-tracking of national ID system
  The need to ensure digital identities, as well as, a fully traceable and standardized address is of primary concern across various sectors and is not limited to the logistics industry. Government is therefore in the process of fast-tracking the roll-out of the National ID system to improve security and promote trust in e-Commerce.

Logistics Convergence Program

Convergence program with DTI, DPWH, DA, DICT, DILG, DOF, PHILPOST, LGUs to reduce cost, and improve logistics performance in terms of (i) Speed, simplicity, and predictability of customs procedures, (ii) Quality of trade and transport-related infrastructure, (iii) Competence and quality of logistics services, (iv) Ability to track and trace shipments, (v) Timeliness of shipments in reaching the destination and (vi) avoidance of port congestion.

Modernization of PHLPost

PHLPost is integral for small parcel delivery, especially for remote and isolated communities. As such, greater partnerships with third-party logistics providers are needed to revitalize the system which would ultimately improve logistics performance and reliability.

Private sector investments in logistics infrastructure

Promote investments in e-Commerce hubs/townships, especially for logistics and innovation centers.

Revisit the Regulatory framework

The World Bank report on the digital economy cites the need to achieve policy and regulatory clarity to help attract private investments and innovation. Related to this is the need to review the regulatory requirements for small parcel delivery providers to support e-Commerce, pursue the Public Service Act pending in Congress expected to have a positive impact in the logistics services sector, and push for the issuance and implementation of e-Commerce provisions in the CMTA.

Business Matching between e-Commerce entrepreneurs and logistics services providers (LSPs)

The DTI espouses the practice of MSMEs tapping LSPs for logistical requirements allowing the professionals to handle warehousing, inventory, trucking, shipping, packing, and delivery services more efficiently so the MSMEs can focus on their own businesses. Linking MSMEs with LSPH will be a key intervention under the e-Commerce roadmap.