Issues Surrounding Transportation Infrastructure
Transportation Infrastructure in the Philippines and its Effect on Investment Opportunities
December 7, 2015
Primary Article Contributor – Laura Wickware
Team Leader Following the Philippines – Cameron Torrens
Keywords: Philippines, Transportation, Investment, Roads, GDP, Urban Transport, Soft Services, PTS, Turnover
The Philippines Transport System (PTS) consists of road, water, air, and railroad transportation with road transport being by far the leading subsector, accounting for 98% of passenger traffic and 58% of cargo traffic. As of 2011, there are 215,000 km worth of roads built across the Philippines, where 15% of those roads are classified as national roads, managed under the authority of the Department of Public Works and Highways, and 85% falling under the plethora of local government units. Of the 215,000 km span of roads, in 2011, 45% (14,200 km) of the national roads (31,400 km) were considered to be in good enough condition for use, while only 20% of the remaining local roads (35,300 km of 176,300 km) were considered to be of adequate condition. Therefore, out of the 215,000 km worth of roads available in the Philippines, 165,500 km are inoperative and in need of repair. Ultimately, what is hindering the maintenance and further expansion of the transportation system is the trend towards further urbanization, inadequate financial resources to fund these projects, and insufficient institutional responsibility.
The current global trend towards urbanization has affected the Philippines, causing a substantial demographic shift from rural to urban. In Manila, there is already heavy congestion and traffic due, in part, to the sheer number of people already living in the metropolis and, in turn, it has made the movement of people, good and services increasingly difficult. By 2030, it is projected that 77% of the Philippines’ population will be living in urban areas, which only exacerbates the need for a functional transportation system, especially when it is almost entirely road based. According to the Asian Development Bank, this rapid increase is estimated to causes economic losses equivalent to about 4.6% of GDP.
One of the core issues hindering the maintenance and expansion of roads in the Philippines is the insufficient funding and financial resources available for road maintenance. Overall, the Philippines’ annual investment in roads is 0.6% of their GDP, which means efforts to maintain or expand upon the current transportation system have been limited. Although general funding has been increasing since 2007, there is still a large gap that needs to be filled in order for maintenance expenditure demands to be met.
Ultimately, transportation provides a large risk to companies invested in the Philippines because of the potential loss of economic opportunities, increased pollution, and decreased productivity due to congestion and delays from the poor transport system. However, there are a number of strategies available to companies to help mitigate this risk. One mitigation strategy is to get a conglomerate of companies to support the transportation infrastructure. Through the use of financial support, companies could have an opportunity to influence which roads are being maintained, and where new transportation infrastructure is being development within the Philippines. Also persuading companies who have similar risks to pool their resources together in order to modify the transportation system is mutually beneficial because the greater the number of companies involved, the more effective they can be.
Apart from investing in the transportation sector, a company could fund housing developments close to their headquarters for employees. By developing houses and even schools close to the company, it would give employees greater incentives to move, thereby reducing travel time. Business process turnover has always been a large concern for business process outsourcing (BPO) companies in the Philippines, especially with the hours of traffic it can take for employees to get into Manila each day. Therefore, investing in housing close to headquarters can also help to mitigate employee turnover because it eliminates the hours of travel and money employees spend each day getting to and from work.
Investing in private transportation to work for employees, like a bus service, shared carpooling incentives, or even a bike service could also help with punctuality and reliability. In Manila, a majority of road-based transport is provided by the private sector with an estimated 433 bus companies. Therefore, investing money towards a bus service for employees would be advantageous to them and would result in reduced employee turnover because the company is providing employees an extra benefit. In addition, there are advantages to funding a bike service, particularly when there are housing developments close to the company’s headquarters in which employees reside. For instance, bikes could be given as compensation for employees who move closer to the office. Aside from getting to work more efficiently through bike routes and side roads, these ideas also promote employee heath in addition to improving the company’s environmental reputation.
Ultimately, the current transportation system in the Philippines is a major risk for firms due to the unreliability of employees getting to work on time every day. Increased urbanization has increased the heavy congestion in major cities, leading to the loss of economic opportunities and productivity, like when Manila was closed down for the APEC Conference due to traffic. However, investing alongside strategic partners into relevant transportation infrastructure, developing housing close to the office, or providing a bus service are both short term and long term actions companies can take to mitigate costly transportation risks.
