The importance of infrastructure
02/Oct/2014

What happens when infrastructure projects are delayed and logistics and transport providers have to rely on subpar infrastructure to support their expanding networks? The result may look like something that the Philippines is experiencing now – port congestion, road congestion and frustrated shippers.

Indeed, trucks are not only waiting at ports but also are sitting in road traffic to get to the ports. All of this as the country emerges from a pair of natural disasters in 2013 with surprisingly few economic scars. However, this latest may in fact scar the country’s expanding economy.

Trucking costs have jumped in some cases by 300% while port stakeholders are incurring additional costs for terminal handling, container imbalance and other fees. Industries are facing rising costs. For example, the steel industry has witnessed operational costs rising an estimated 50% because of delivery delays of materials needed for production. Meanwhile shippers appear to be getting frustrated and are looking for alternatives. In fact, Dan Lachica, President of the Semiconductor and Electronics Industries in the Philippines Inc., commented in a recent Wall Street Journal article, "There is one company which has shifted 50% of its volume outside the Philippines because of delivery delays caused by port congestion.”

According to Drewry Maritime Research, port congestion is on the rise around the world but in many cases mostly because of short term issues. However, these short term issues – strikes, adverse weather conditions, IT system issues, basic terminal repairs and upgrade etc. – could very well escalate and strain supporting infrastructure to its limits. Although not considered a short term issue, the situation in the Philippines highlights this strain and is resulting in a domino effect as costs rise for transportation providers, logistics providers, shippers and ultimately, the final customer.

Asia Pacific is undergoing numerous infrastructure projects as supply chains adapt to changing requirements. As Ti’s latest report, Asia-Pacific Transport and Logistics 2014, notes, the region is undergoing shifts in manufacturing to “frontier countries” such as Myanmar and Bangladesh and this is resulting in an intricate, intra-regional supply chain as Asian countries work to connect infrastructure networks. Meanwhile modal shifts favouring road and rail linking Asia and its neighbours to the west are creating new infrastructure challenges. All this while maintaining and expanding infrastructure to support export trade with neighbours to the east.

Infrastructure is indeed important for the movement of goods and thus the economy of a country and region. For transport and logistics providers, the understanding of these projects is key to successfully expand operations into this region.