I don’t mean to sound pessimistic or anything, but realistically, efforts to address the issues raised across our supply chains in light of the conflict in the Middle East, and the resulting crisis in oil prices or oil supplies (or both), will not bear fruit overnight.
Not that it makes these any less worthwhile. Come to think of it, for our supply chains to be cost-effective while remaining competitive and responsive, we need greater support. Reduced fees and discounted tolls help relieve cost pressures in the current(ly volatile) environment we’re in, but to make sure we can continue to create value for our customers and partners alike, the public sector should understand the interconnected nature of our supply chains – and how a shock event on one side would inevitably lead to chaos everywhere – and act proactively.
For example, one solution being mooted to address the effects of this current crisis is for the government to effectively subsidize fuel costs for trucks and other delivery vehicles. I’m not thinking of something like the PHP 5,000 one-time subsidy currently being distributed to PUV drivers, but rather, a special discounted rate for delivery vehicles that they can avail of at the point of purchase – similar to what PUV drivers are getting at some stations, although this would be led by the government rather than by oil companies.
I don’t see any examples among our ASEAN neighbors of subsidies specific to delivery vehicles, although countries such as Malaysia and Indonesia – home to robust petrochemical industries – subsidize fuel costs for all drivers, effectively shifting exposure to volatility to the government rather than to consumers. I could be wrong; I’d love to be corrected. But in any case, lower pump prices relieves some pressures on our logistics costs and reduces the chances of price shocks, the end effects of which will be higher prices for consumers.
Another solution is to switch to electric vehicles – although considering how there’s an equal chance this current crisis would only last a few months as opposed to, say, forever, it looks like quite a knee-jerk reaction. But the benefits of adopting EVs go beyond being less vulnerable to oil shocks; of course, they help in reducing carbon emissions and mitigating the effects of climate change. This comes in handy as various forms of transportation, mostly powered by fossil fuel, are covering the last mile of the supply chain.
The government currently provides incentives for those who invest in charging stations across the country, but the Electric Vehicle Industry Development Act also encourages – that word is critical here – government institutions to provide financial assistance when it comes to acquiring EVs. Our members have talked of increased interest in acquiring EVs in light of recent events, but costs remain high: consider that EV trucks are sold as brand-new, as opposed to the current practice of acquiring second-hand (but still relatively new) diesel trucks. To accelerate this adoption, the government should provide support to the logistics sector as much as it should provide support to PUV operators.
Come to think of it, this would be a good use for the now controversial fuel excise tax. Introduced as a progressive means of collecting revenue, allocating profits from this to provide fuel discounts for logistics drivers and accelerate EV adoption would very much be in the spirit of the current tax regime. The Department of Finance estimates that, if the fuel excise tax is suspended, it could lose up to PHP 136 billion in revenue. I understand the appeal of suspending these taxes, as it could help relieve more cost pressures for everyone, but it would also mean less to no allocation for other programs, particularly more targeted subsidies like what is being done now. I suppose what is key for Filipinos is to know that their money does go somewhere – and if it is reflected in lower cost of goods and cleaner air, I bet it would be seen as worthwhile in the long run.
But I also know this would mean a longer discussion, and at this time action is needed to ease the panic and fear among Filipino consumers and businesses. So here’s something that can be done now to get things going: involve the private sector more. I am surprised to learn that the Department of Trade and Industry is not part of the UPLIFT committee formed off the back of the declaration of a National State of Energy Emergency. Shocking, considering how it’s these people who watch the prices of basic goods, the very products that might be more expensive because of an increase in logistics costs. Also, the supply chain sector’s strong relationship with the DTI would allow it to put forward suggestions that impact not just our energy supply, but our capability to transform that energy into products and services delivered across our economy. It’s not too late to give us a seat at the table.
The LSPH Conference returns: In 2018, the Logistics Services Philippines group – bringing together the DTI and various supply chain industry associations, including SCMAP – was formally launched, providing a venue to discuss and propose policy and regulatory reforms that enhance our supply chains. This has formed the backbone of our recent collaborations with the government, although most of this work has happened behind the scenes. I am happy to note that the LSPH Conference returns this year, after two installments in 2018 and 2019. It is great to reassert the logistics sector’s role in economic growth, especially during these times. SCMAP supports this event, which will be held on May 6 at the Fairmont Makati.
Henrik Batallones is the marketing and communications director of SCMAP, and editor-in-chief of its official publication, Supply Chain Philippines. More information about SCMAP is available at scmap.org.
