How Philippine port congestion threatened industrial property market growth

November 12, 2014 / By

Growth projections for the Philippine economy were dampened early this year when the well-intended traffic decongestion initiative by the Manila City Government led to congestion in the Port of Manila instead. The local government of Manila implemented an expanded truck ban in February 2014 to ease the traffic volume of its thoroughfares. Unfortunately, while it lightened the daily vehicle volume on Manila’s roadways, it unexpectedly affected the volume of imports and exports at the ports, prompting the lifting of the truck ban scheme in September 2014.

The truck ban scheme and the massive traffic build-up it created had significant repercussions, especially on the burgeoning industrial property market. The Philippine Economic Zone Authority (PEZA) has expressed concern that the port congestion was putting a damper on the growth momentum of the economy by delaying the flow of trade goods and raw materials necessary for manufacturing. Notably, 75% of PEZA’s registered investors are export-oriented, with most of them located in industrial parks and facilities south of Metro Manila – a region that contributed more than 73% of the country’s manufacturing output in 2013.

Night time vehicle volume in one of Metro Manila’s major thoroughfares

Several companies heavily engaged in the supply chain and logistics industry have expressed concerns of slowdown and missed revenue targets because of operational delays due to port congestion. While the truck ban has been lifted, the flow of traffic in the port remains slow and, if left unresolved, the initial supply chain slowdown may seriously hurt the growth of the industry and affect the growth of the industrial property market.

The short-term solution of restricting trucks on the road has a noble objective of decongesting the streets, but the rippling effects on the port activity clearly illustrate the interconnectedness of the urban system and the sensitiveness of the country’s supply chain industry. The way out is through coordinated efforts and better communication and planning between local governments and local government agencies that will help foster the growth of the economy. Regional infrastructure needs to be improved as the country further gears up for intensified competition due to the imminent ASEAN economic integration. The potential growth of the supply chain and the manufacturing industry is expected to further propel the growth of the economy and bring about the revitalisation of the industrial property market.

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