Industrial policy is making a comeback. Around the world, governments are rediscovering the importance of strategic state support to drive economic development, build competitive industries, and ensure long-term resilience. In the Philippines, the renewed focus on industrialization—shown in legislation like the Tatak Pinoy Act and the updated Philippine Development Plan (PDP)—indicates a significant shift away from relying too much on consumption-based growth.
The PDP 2023–2028 links logistics with economic, infrastructure, trade, innovation, and disaster preparedness strategies. It views logistics not just as support but as a key driver of inclusive industrial growth, regional connectivity, and trade competitiveness. The plan’s emphasis on logistics as a policy priority marks an important shift toward systemic thinking in Philippine development planning.
To build a globally competitive manufacturing base, logistics must be regarded not only as a downstream service or cost center but also as a strategic pillar of industrial policy. Efficient, reliable, and integrated logistics systems are essential for transporting raw materials, connecting suppliers, serving markets, and linking Philippine industries to global value chains.
The Cost of Inefficiency
The World Bank estimates that logistics costs in the Philippines make up 27% of sales for manufacturing companies, more than double the global average of 11%. This burden hits micro, small, and medium enterprises (MSMEs) the hardest, as they often lack scale, negotiating power, and access to warehousing or cold chain facilities. The inefficiencies come from various issues, such as poor infrastructure, fragmented transportation systems, port congestion, complex customs procedures, and limited multimodal connectivity.
These logistical bottlenecks increase the cost of doing business, discourage investment, and weaken the competitiveness of Philippine-made goods. In contrast, our neighbors—Vietnam, Thailand, and Malaysia—have consistently invested in integrated logistics platforms to attract foreign direct investment and enhance domestic manufacturing capabilities.
Lessons from Southeast Asia
Consider Vietnam as a case study. The Vietnamese government invested significantly in industrial parks near ports and airports, established special economic zones with simplified logistics and customs procedures, and supported third-party logistics (3PL) providers. This coordinated effort allowed Vietnam to position itself as a compelling alternative to China in the global supply chain, especially in the electronics and textiles industries.
Thailand, meanwhile, created the Eastern Economic Corridor (EEC) to connect high-tech manufacturing centers with upgraded ports, high-speed rail, and digital infrastructure. Importantly, logistics was not an afterthought—it was embedded in the EEC’s core from the beginning.
The Philippines can draw important lessons from these success stories. It is not enough to expand industrial output in isolation. We must develop the logistical infrastructure that supports it—physically, institutionally, and digitally.
Logistics as a Development Lever
A logistics-oriented industrial policy would rest on three pillars:
- Integrated Infrastructure Planning
Industrial zones, economic corridors, and logistics hubs should be developed in a way that supports each other. Positioning manufacturing clusters near ports and intermodal transport centers reduces handling costs and speeds up delivery. Government investment should focus on logistics corridors with potential for industrial growth, such as the Luzon Economic Corridor (LEC), which improves connectivity between Subic Bay, Clark, Manila, and Batangas. LEC is a trilateral effort (between the Philippines, the US, and Japan) aiming to accelerate joint investments in impactful projects, including rail, port upgrades, clean energy, semiconductor supply chains and deployments, and agribusiness. Emerging nodes in Visayas and Mindanao should also be prioritized. - Digitalization and Trade Facilitation
The movement of goods is not just physical—it is also bureaucratic. Customs clearance, permits, inspections, and shipping documentation all create friction that can be reduced through digital tools. The National Single Window, once fully implemented, can simplify cross-border trade. Technologies like e-invoicing, digital bills of lading, and blockchain can make logistics more transparent and efficient. These innovations should be actively adopted as part of the government’s digital transformation strategy. - Public-Private Coordination
The private sector mainly handles logistics but relies on public goods like roads, regulations, port access, and cross-agency cooperation. The government must establish a comprehensive approach involving the entire government and society for logistics policy. This includes strengthening logistics governance, possibly through a dedicated logistics agency or an empowered task force, and enhancing cooperation among the Department of Trade and Industry (DTI), the Department of Transportation (DOTr), the Department of Public Works and Highways (DPWH), the Bureau of Customs, and local governments.
Supporting MSMEs and Inclusive Growth
Beyond the needs of large manufacturers, logistics modernization is vital for MSMEs, which make up 99.5% of Philippine enterprises. MSMEs often struggle to reach broader markets due to high transport costs, limited warehousing options, and inadequate delivery networks.
A targeted logistics strategy can empower them. The government can support shared warehousing facilities, logistics cooperatives, and public-private partnerships for last-mile delivery in rural areas. Access to affordable logistics services is critical for inclusive industrialization, enabling small firms to grow, compete, and participate in value chains.
Beyond the needs of large manufacturers, modernizing logistics is essential for MSMEs, which account for 99.5% of Philippine business enterprises. MSMEs often struggle to access larger markets because of high transportation costs, limited warehousing options, and insufficient delivery networks.
A National Logistics Vision
Ultimately, we need to align logistics reform with our broader vision for economic transformation. This means integrating logistics within the framework of industrial policy, and vice versa. The National Logistics Master Plan, developed in collaboration with DTI leadership, offers a starting point; however, it must be more than just a technical document — it must also guide implementation, budgeting, and political commitment.
We should consider: What kind of economy are we aiming to build over the next decade? If the answer involves increased self-reliance, higher-value manufacturing, and deeper integration into regional supply chains, then logistics is essential.
By investing in logistics as a vital part of industrial strategy, the Philippines can boost productivity, cut costs, and generate quality jobs. It’s time to move beyond viewing logistics as just a support service and start seeing it as essential infrastructure for nation-building.
Alfredo E. Pascual is an Independent Director on the board of BDO Unibank Inc. He served as Secretary of the Department of Trade and Industry (DTI), President of the University of the Philippines (UP), Director of Private Sector Operations at the Asian Development Bank (ADB), President of the Management Association of the Philippines (MAP), CEO of the Institute of Corporate Directors (ICD), and Finance Professor at the Asian Institute of Management (AIM).
