Interisland Infra Upgrades Crucial for Unlocking Domestic Trade

Improving domestic trade hinges on upgrading inter-island infrastructure and lowering transport costs, analysts said. "We cannot build an efficient domestic market if moving goods between our islands remains expensive, unreliable or constrained by inadequate logistics infrastructure," Management Association of the Philippines President Donald Patrick L. Lim said via Viber. In the second quarter, the value of total domestic trade dropped 21.9% to P745.7 billion. Volume plunged 37.9% to 10.57 million tons, according to the Philippine Statistics Authority (PSA). Waterborne commodity transport across the archipelago posted the steepest decline during the period due to infrastructure gaps, Mr. Lim said. The value of waterborne commodities dropped 56% to P202.42 billion in the three months to June, with volume also down 56.7% to 3.77 million tons, the PSA reported. Commodities transported by road rose 9.8% by value to P542.73 billion, but volume fell 18.1% to 6.79 million tons. Goods transported by air dropped 16.9% by value to P560 million, with volume rising 18.3% to 10,000 tons. Mr. Lim said the "friction" accompanying the movement of goods needs to be reduced via improvements to ports and inter-island shipping. He also called for logistics bottlenecks to be addressed, for logistics and trade processes to be digitalized, and for more investment to be poured into linking production areas to markets. "The 21.9% decline in the value of domestic trade in the second quarter is significant and should not simply be dismissed as a temporary fluctuation," Mr. Lim said. Public works investments have remained sluggish since last year after a corruption scandal led to stricter validation of project disbursements. At the end of June, infrastructure spending fell 34.1% to P98 billion, according to the Department of Budget and Management. "Improving domestic connectivity is not merely a transportation issue; it is a competitiveness and nation-building issue," Mr. Lim said. Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said domestic trade could improve in the coming months but external risks remain. "Recovery may remain uneven given still-elevated costs, weather-related disruptions, and broader uncertainty," he said via Viber.