Establishing the Mindanao Intermodal Logistics Network ...

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.8, 2011

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Establishing the Mindanao Intermodal Logistics Network: Gateways and Corridors

Jun T. CASTROAssociate Professor School of Urban and Regional Planning University of the Philippines Diliman Quezon City 1101, Philippines Fax: +63-2-9262120 E-mail: [email protected]

Abstract: Mindanao, despite its considerable potential for being the principal food basket of the country, has experienced very limited growth due to inefficient logistics operations. As such, an integrated logistics program aimed specifically at increasing agricultural production as well as diversification of economic activities is needed in the form of a Mindanao intermodal logistics network development plan. The development plan is envisioned to bring positive impacts on Mindanao’s international competitiveness and inter-regional competitiveness. The realization of sustained growth will ultimately contribute to reinforce the government’s efforts at consolidating the peace initiatives for the region. Key Words: intermodal logistics, gateways, corridors, development plan, Mindanao 1. INTRODUCTION The Philippines is a vast archipelagic country composed of more than 7,100 islands. Passenger and freight transport using several modes is therefore indispensable. Lack of attention, however, is given on the planning of intermodal logistics network systems, especially in Mindanao - an island with vast natural resources and known as the “food basket” of the country. Hence, Mindanao has not yet fully reached its potential as the principal source of raw materials and processed products and has continually experienced sluggish growth due to several inefficiencies in its logistics systems. These inefficiencies have resulted in incredibly high transport and transaction costs and huge post-harvest losses. Various studies have pointed out high transport and logistics cost in the Philippines. The contributors to this high cost are post-harvest services (3.1-5.4% of the wholesale price), non-port handling (3.5-10%), port services (2.6-5.4%), shipping (8.0-12%), and trucking (7-11%). The total transport and logistics cost is about 24.2-43.8% of the wholesale price. In addition, previous studies have claimed that almost 40 percent of harvested fruits and vegetables are spoiled and 20 percent of corn produce are wasted during transport (JBIC, 2002; UNDP, 2005). Among the probable causes of these inefficiencies are: 1) lack of adequate transport and logistics infrastructure, such as farm-to-market roads, efficient port services and market outlets, 2) insufficient storage and other post-harvest facilities, 3) difficulty in accessing relevant and latest marketing information and transport and logistics services, and 4) institutional rigidities such as the presence of several intermediaries in the marketing and logistics systems (Arnold and Villareal, 2002).


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The government has started to recognize the importance of intermodalism to reduce these inefficiencies and streamline the logistics system (Castro, 2007). In fact, it has emphasized the potential benefits of intermodal transport in its Medium Term Philippine Development Plan (MTPDP) and has taken initial steps to improve logistics efficiency. A concrete example of this initiative is the Sustainable Logistics Development Program (SLDP) of the Development Bank of the Philippines and the establishment of the Strong Republic Nautical Highway (SRNH). However, additional integrated efforts are still needed for Mindanao to fully achieve its economic potential. The aim of this paper is to explore sustainable and environmental-friendly intermodal logistics infrastructure development plan in Mindanao, which will include the development of a logistics network involving air, sea and land transport, the development of international and regional airports and seaports to cater to the developmental needs of Mindanao, and the development of sustainable and efficient intra-island logistics networks, taking into consideration increased demand for motor vehicles, congestion and pollution. In general, the paper aims to formulate a sound intermodal logistics development plan that would encourage development in Mindanao and help reduce the incidence of poverty in the region. In addition, the plan would be valuable in promoting international competitiveness of the region and enhance inter-regional competitiveness in the Brunei-Indonesia-Malaysia-Philippines East Asia Growth Area (BIMP-EAGA). The development of the intermodal logistics network system would boost the capability of Mindanao to become one of the regional production areas in BIMP-EAGA and Southeast Asia, in general. 2. INTERMODAL LOGISTICS FRAMEWORK FOR MINDANAO An appropriate intermodal logistics system for Mindanao is a seamless system that effectively integrates the sea, air and road networks via logistics nodes such as seaports, airports and inland cargo terminals (Figure 1). The intermodal logistics system must be able to efficiently serve the domestic markets within and outside Mindanao, as well as the foreign markets. The improvement of the logistics system in Mindanao must be aimed at the following objectives: 1) shorten transit times, 2) minimize product losses and damages, 3) cost-effective, and 4) maximize utilization of available resources.


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Figure 1 Framework of intermodal logistics for Mindanao 3. LOGISTICS GATEWAYS IN MINDANAO 3.1 Air and Sea Cargo Hubs The top five airports in terms of cargo volume are Davao, Cagayan de Oro, Zamboanga, General Santos and Cotabato (Table 1). These airports transported more than 95 percent of the total air cargo to/from Mindanao. Davao Airport is the most important, transporting almost four times the amount of cargo as the second highest-ranking airport, Cagayan de Oro.

Table 1 Air cargo traffic at Mindanao (tons) Region Airport Name Total

XI Davao 43,772 X Cagayan de Oro 10,735 IX Zamboanga 7,561 XII General Santos (Tambler) 7,077

ARMM Cotabato 4,947 XIII Butuan 2,067 IX Dipolog 1,094

IVB Busuanga 112 XIII Surigao 84 XIII Tandag 67

ARMM Sanga-Sanga 34 IX Ipil 24

ARMM Jolo 10 X Ozamiz 6

Mindanao Total 77,590 National Total (85 airports) 709,650

Share of Mindanao (%) 11 Source: ATO and CAB data (2004)

Domestic Market (Within Mindanao)

Farm/Firm in Mindanao

Inland terminals in Mindanao

Road network in Mindanao

Seaports/airports in Mindanao

Sea/air networks

Domestic shipping

Domestic ports

Domestic Market (Outside Mindanao)

Foreign Market

Foreign shipping

Trans shipment


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The top five Philippine Ports Authority Port Management Offices (PPA PMOs) are Cagayan de Oro, Davao, Iligan, Ozamiz and Zamboanga with 87 percent of total Mindanao cargo tonnage (Table 2). Mindanao accounts for about 27 percent (41.77 million tons) of the total sea cargo traffic in the country. Cagayan de Oro is the best performing in terms of volume with 17.82 million tons followed by Davao (7.9 million tons), Iligan (4.19 million tons), Ozamiz (3.6 million tons), and Zamboanga (2.84 million tons). Cagayan de Oro has two major ports – the CDO Base Port and the Mindanao Container Terminal (MCT). Cagayan de Oro has become the gateway and hub in Mindanao because of the good connections linking it with the other major cities in the island. Goods are transported by road to Cagayan de Oro and shipped either to Cebu or Manila for final consumption or transshipment to other countries like Hong Kong or Singapore. For domestic inter-island traffic, data from the National Statistics Office (NSO, 2008) shows that agricultural commodities like food and livestock account for about 30 percent of the total volume of cargoes. Half of the production in Luzon is consumed in Luzon while the other half is exported to the Visayas and Mindanao. For the case of the Visayas region, it consumes only a third of its production while half is shipped to Luzon for final consumption. On the contrary, Mindanao consumes only 10 percent of its food and livestock production while the rest are exported to Luzon and the Visayas. This data confirms the role of Mindanao as a major supplier of agricultural commodities to other regions.

Table 2 Sea cargo traffic at Mindanao (million tons) Region

Port Mgmt Office

Domestic Cargo Throughput Foreign Cargo Throughput Total Cargo Total Inbound Outbound Total Import Export

X Cag. de Oro 5.74 3.25 2.49 12.08 5.60 6.47 17.82 XI Davao 3.68 2.51 1.16 4.22 1.11 3.12 7.90 X Iligan 2.95 1.44 1.51 1.25 0.04 1.21 4.19 X Ozamiz 2.73 1.49 1.24 0.88 0.47 0.41 3.60 IX Zamboanga 2.00 1.23 0.77 0.85 0.03 0.82 2.84 XII Gen. Santos 1.60 0.96 0.64 0.82 0.31 0.50 2.41 XIII Nasipit 1.53 0.87 0.65 0.15 0.00 0.14 1.68 XIII Surigao 1.09 0.49 0.61 0.14 0.11 0.03 1.23 XII Cotabato 0.08 0.02 0.06 0.00 0.00 0.00 0.08

Mindanao Total 21.40 12.27 9.13 20.38 7.68 12.70 41.77 National Total 82.94 42.68 40.26 74.43 51.90 22.53 157.37

Share of Mindanao (%) 26 29 23 27 15 56 27

Source: PPA data (2004) 3.2 Container Transport Containerized cargoes comprised 81 percent of the total cargo throughput of all Philippine base-ports in 2007. Containerized cargoes in Mindanao, on the other hand, accounted for 52 percent of total cargo throughput (Table 3). At present, Mindanao has a container throughput of about 0.88 million TEUs. The containerization rate for Mindanao is comparatively lower than that of the Philippines. However, this situation is expected to change as manifested by high growth rates experienced in Cagayan de Oro/Mindanao Container Terminal (CDO/MCT) and Davao/General Santos


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(DVO/GS). Containerized cargoes are centered on these areas; i.e. CDO/MCT handles about 50 percent of the total volume of containerized cargoes in Mindanao, while DVO/GS handles about 32 percent of the total (Table 4).

Table 3 Containerized rate Table 4 Share of containerized cargo Area Containerized

rate (%)

Volume of containerized cargo (Mindanao) Ports Share (%)

Philippines 81 CDO/MCT 50 Mindanao 52 Davao/General Santos 32

• CDO/MCT 75 Other Mindanao Ports 18 • Davao/General Santos 52 Total 100

Source: Calculated from PPA data (2008) Source: Calculated from PPA data (2008) The following trends in containerization were observed from 1999 to 2007 (Table 5):

• Total cargo throughput of Philippine base-ports grew by an average of 1.2 percent annually, while total non-containerized cargo traffic decreased by 6.3 percent and containerized cargo traffic increased by 4.8 percent annually.

• Total cargo throughput of Mindanao’s base-ports grew by an average of 3.5 percent annually, while total non-containerized cargo increased by 1.5 percent and containerized cargo traffic increased by 5.3 percent annually.

The increase in container transport may be due to two factors: 1) cargo increase due to economic development, and 2) improvement in containerization. In Mindanao, the containerized cargo volumes at Cagayan De Oro (CDO)/Mindanao Container Terminal (MCT) ports and Davao/General Santos ports have grown at high rates of 9.4 percent and 7.2 percent, respectively.

Table 5 Annual growth rate of cargo (%) (1997-2007) Area Non-containerized

cargo Containerized

cargo* Total cargo

Philippines -6.3 4.8 1.2 Mindanao 1.5 5.3 3.5

• CDO/MCT 0.03 9.4 6.2 • Other ports in Northern Mindanao -4.5 -5.0 -4.7 • Davao/General Santos 5.1 7.2 6.2 • Other ports in Southern Mindanao 3.3 6.3 4.3

* Excluding dry-bulk and liquid bulk cargoes carried by bulk carrier and by tankers. Source: Calculated from PPA data (2008) 3.3 Commodity Flows The most important export crops for Mindanao are fruits, specifically pineapples and bananas. The pineapples are grown on plantations managed by the large companies, while bananas are grown on small farms or on land leased to farmers by the large corporations. The fruits are processed to produce chunks, juices and fruit cocktails for both domestic shipments and exports. The large companies responsible for the export of these crops include Dole and Del Monte. Del Monte grows pineapples in Bukidnon and ships them out as fresh fruit and processed food to the US and East Asia through Cagayan de Oro. It also grows bananas in Southern Mindanao, which are shipped out of Davao to Japan and China. The major market channels and commodity flows for pineapple is shown in Figure 2.


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Figure 2 Major market channels and commodity flow for pineapple

4. LOGISTICS CORRIDORS IN MINDANAO 4.1 Road Network System According to the Department of Public Works and Highways (DPWH, 2008), Mindanao has an aggregate 7,028 kilometers of national roads. The share of national roads in Mindanao is only about 25 percent of the Philippine total. Among the five regions of Mindanao, Northern Mindanao has the highest road length of 1,603 kms, followed by Davao Region with 1,390 kms, and CARAGA with 1,327 kms. The Autonomous Region of Muslim Mindanao (ARMM) has the lowest national road total of only 444 kms. As for surface type, paved roads (concrete and asphalt) represent only 60 percent of national roads in Mindanao (i.e. 42% or 2,979 kms are concreted and 18% or 1,247 kms are asphalted). About 2,802 kms or 40 percent of national roads have a gravel surface, thereby making them highly vulnerable to bad weather conditions. Northern Mindanao has the highest amount of paved roads with 70 percent, followed by SOCCKSARGEN with 66 percent. The CARAGA region, on the other hand, has the least amount of paved roads with 48 percent. Regarding visual conditions of roads in Mindanao, about 60 percent of paved and unpaved roads are rated as fair and good, while 40 percent are rated as poor and bad (Figure 3). It can be seen that the north-south corridors from Cagayan de Oro to Davao as well as from Cagayan de Oro to Cotabato through Bukidnon have poor to bad pavement conditions, as indicated by the red lines. The Iligan-Cagayan de Oro-Butuan Road along the coastal waters of Northern Mindanao has also poor to bad pavement conditions. Highest priority should be given for the improvement of these roads.


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The national and local road networks are generally adequate in extent, but many roads are in poor condition because of deficiencies in design and construction, inadequate maintenance, and damage from large and overloaded trucks.

Figure 3 Road surface conditions 4.2 Traffic Volumes Table 6 below shows the volume counts for selected roads sections. It can be seen that the most heavily used road junctions are the Opol Junction from CDO to Iligan and vice versa, Puerto Junction from CDO to Butuan and vice versa, MCT Junction from CDO to Butuan and vice versa, as well as the access roads from/to the CDO port. These road sections have a daily traffic of about 10,000 passenger car units (PCUs).

Good Fair Poor Bad

Legend


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Table 6 Daily traffic volume at selected roads

Location Directions Daily traffic

Vehicles PCU Balingoan National Highway

Butuan to CDO 2,034 2,139 CDO to Butuan 2,447 2,405

Butuan Junction

Junction to CDO 5,986 6,819 CDO to Junction 5,383 6,514 Junction to Davao 2,483 3,106 Davao to Junction 3,246 3,743 Junction to Surigao 4,581 5,255 Surigao to Junction 4,421 4,923

Maramag Junction

Junction to Davao 2,176 2,866 Davao to Junction 2,279 2,970 Junction to Bukidnon 4,156 5,250 Bukidnon to Junction 3,686 4,838 Junction to Cotabato 2,794 3,651 Cotabato to Junction 3,161 3,960

Manolo Fortich Nat’l H’way

CDO to Bukidnon 3,403 4,429 Bukidnon to CDO 4,087 5,099

Opol Junction

CDO to Iligan 8,033 9,952 Iligan to CDO 7,613 9,388 Taboc Inbound 656 713 Taboc Outbound 516 598

Villanueva Junction

CDO to Butuan 4,254 5,285 Butuan to CDO 4,299 5,328 Villanueva to Claveria 1,029 1,142 Claveria to Villanueva 1,290 1,410

Puerto (CDO) Junction

CDO to Butuan 10,646 13,441 Butuan to CDO 9,201 11,554 CDO to Bukidnon 4,231 5,661 Bukidnon to CDO 4,244 5,557

Ororama (Port of CDO)

Inbound to Port 4,183 6,462 Outbound from Port 7,936 9,059

Velez Street (Port of CDO)

Inbound to Port 8,818 10,069 Outbound from Port 10,104 11,074

MCT Junction (Tagoloan)

CDO to Butuan 7,488 9,590 Butuan to CDO 8,182 10,531 Inbound to MCT 324 630 Outbound from MCT 290 565

Road segments that are generally utilized by 20-ft and 40-ft container trucks are: Maramag-Davao, Bukidnon-Maramag, Maramag-Cotabato, CDO-Iligan, Iligan-CDO, Puerto-Butuan, Butuan-Puerto, Puerto-Bukidnon, CDO-Butuan, Butuan-CDO, MCT inbound/outbound roads, and CDO Port inbound/outbound roads. The high amount of truck traffic in these roads should be a primary consideration in the design of their pavements.

4.3 Travel Speeds The speed-distance diagrams in Figures 4a to 4c indicate primary arterial road sections that are experiencing traffic congestion problems. Average travel speed from MCT to Butuan is 58 kph while the return trip is 42 kph (Figure 4a). As seen in the charts, travel speeds are reduced at Gingoog and Butuan. For the Butuan-MCT route, travel speed in Butuan is only at a very low 23 kph while in Gingoog, vehicles move at a mere 29 kph.


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Average travel speeds are 54 kph from MCT to Davao and 44 kph from Davao to MCT (Figure 4b). Travel speeds are reduced at Manolo Fortich and Maramag. For the MCT-Davao route, travel speeds in Manolo Fortich and Maramag are only 32 kph and 35 kph, respectively. For the Davao-MCT route, travel speed is greatly reduced at Manolo Fortich with 11 kph due to road rehabilitation activities. The average travel speed from MCT to Iligan is about 50 kph while the return trip is about 45 kph (Figure 4c). Travel speed is reduced to 30 kph at Laguindingan for the MCT-Iligan route, while travel speed at Cagayan de Oro is reduced to 30 kph for the return route due to traffic congestion brought about by local traffic in the area. The travel time charts show that traffic congestion occurs at urbanized areas. Transportation demand increases at urban areas thereby causing traffic congestion. Reduced travel speeds and local traffic congestion problems occur at the major cities of Cagayan de Oro, Butuan, and Gingoog. Interventions in the form of bypass roads and urban roads improvement projects, such as road widening and construction of interchanges at crucial intersections can improve traffic flow in urban areas and mitigate the negative effects brought about by traffic congestion. At a secondary road, the average travel time from Manolo Fortich-Libona, predominantly a gravel surfaced road, is approximately 30 km/hr (Figure 5). Upgrading of rural roads, such as farm-to-market roads, is therefore necessary to facilitate the transport of food supplies and other commodities, and to expand agricultural areas to prevent damage and spoilage of agricultural products.


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Figure 4a Sectional travel time from a primary road (MCT to Butuan and vice versa)

Figure 4b Sectional travel time from a primary road (MCT to Davao and vice versa)

Figure 4c Sectional travel time from a primary road (MCT to Iligan and vice versa)

Manolo Fortich to Libona

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4.4 Nautical Highway System The Nautical Highway System is one of the strategic attempts of the government to establish an intermodal transport corridor through the integration of highways, ports and ferry services. There are now three nautical highways, as shown in Figure 6 - the Western, Eastern and Central Nautical Highway. The Eastern Nautical Highway links the islands of Luzon, Samar, Leyte and Mindanao, the Western Nautical Highway links the islands of Luzon, Mindoro, Panay, Negros, and Mindanao, while the Central Nautical Highway connects the islands of Luzon, Masbate, Cebu, Bohol, Camiguin, and Mindanao. Ports are important components of the nautical highway system. With the development of the nautical highway system, a number of local ports strategically located along the alignments of the nautical highways are programmed to be improved in order to handle increased passenger and cargo demands. The Roll-on, Roll-off (Ro-Ro) transport system, which is suited for nautical highways, is a time- and cost-efficient way of moving passengers and cargoes. The Ro-Ro vessel serves as the floating bridge in seamless terrestrial and nautical highways. This system eliminates the inconvenience of time-consuming transfers by linking the various islands with one another. The system was initially introduced along the Pan-Philippine Highway (or the Eastern Nautical Highway) in the 1980’s, with two Ro-Ro crossings at Matnog-Allen and Liloan-Lipata. The most recent connection is the Central Nautical Highway launched in 2007.

Figure 6 Nautical Highway System

Western Nautical Hway

Central Nautical Hway

Eastern Nautical Hway

Ro-Ro Links

Legend


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5. INTERMODAL LOGISTICS ISSUES 5.1 Agriculture Logistics Cognizant of the objectives of making Mindanao the country’s agri-fishery export zone and of establishing efficient logistics systems linking Mindanao to the rest of the country; some agriculture logistics related issues affecting quality and efficiency of agricultural production are:

• Most farm-to-market roads are not suitably paved thereby constraining agriculture logistics. Paving of provincial and local roads is critical in order to expand agricultural areas and to prevent agricultural products from spoilage. All roads leading to production sites should be upgraded to all-weather status.

• There is poor linkage to other modes of transport such as ferry services and seaports. Focus should be geared towards improving connectivity in intermodal transfers. For example, roads linking to seaports should be improved to enhance the functions of the port as a gateway.

• Inadequate maintenance is a crucial issue affecting the sustainability of roads in Mindanao, particularly those providing basic access to production sites, farms, markets and trading centers. A major part of the maintenance problem has been attributed to lack of resources by local authorities.

• Road structures, such as drainage systems and traffic signage are usually not provided, thus compromising road quality and safety.

• Improvements in agricultural logistics systems must cover the whole process from pre-harvest to post-harvest and marketing, and specific requirements of particular commodities must be taken into consideration. From the farm gate, post harvest activities include drying and milling for grains, sorting and packaging for fruits and vegetables, and sorting and freezing for fishery products. The agricultural outputs are then distributed to the processors for further processing/value-adding, then to the wholesale/retail outlets through several layers of middlemen and traders, and then to the export market. At each layer of the marketing system, profits are made which represent higher transaction costs.

• An agribusiness center that would provide agricultural equipment and facilities to farmers, and integrate and centralize key functions such as procurement of raw materials, control of pre-harvest and post-harvest operations, production planning and marketing may be necessary to improve logistics efficiency in Mindanao.

5.2 Container Logistics Taking into consideration the rapid technological improvements on containerization and increase in container demand, it is necessary to upgrade and rehabilitate existing roads and/or construct new roads suitable for containers and large-sized vehicles. The following issues should be addressed:

• Current road designs are not appropriate for container and large vehicle traffic. Inadequate pavement design which does not consider the rapid growth of trucks leads to under-designed pavements causing immediate deterioration.

• Minimum required turning radius according to design specifications are insufficient in mountain areas due to spatial constraints resulting in turning radius and road gradients that are too tight and too steep causing difficulties in the maneuverability of large trucks, particularly articulated trucks used for container transport.

• There must be a focus towards developing an intermodal container logistics system


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linking Mindanao and its markets to accelerate its trade within the island, and with the rest of the country and overseas. Construction of a container highway may contribute to improve container-based intermodal logistics.

5.3 Seaport Logistics Mindanao depends on both domestic and international trade, and thus, continuous improvement of seaport logistics capacity is a vital and imperative issue for its development. Current containerization trends and increased container traffic necessitates the establishment of an effective container-based intermodal logistics system by way of Mindanao ports.

• Current domestic shipping services are not suitable to the transportation of agriculture products to Manila because of unstable service frequencies, long transit time due to slow speed of vessels assigned, and limited berth capacities. If new shipping services are developed, Mindanao could easily create and expand its markets to Luzon and Visayas, and in overseas markets.

• Both domestic and foreign trade may increase rapidly if container highways leading to CDO/MCT and Davao/General Santos are developed.

• Replacement of old and obsolete domestic fleet with brand new vessels built in the Philippines is imperative for the improvement of the total logistics capacity of the country. Ocean freight rates continue to be high because of the inefficient deployment of small and old vessels, and inefficient management of the vessel fleet.

• Limitations on cargo handling service providers, and the unconstrained ability of the PPA to raise tariffs without any improvement in service produce a relatively high cost for port services.

• Logistics services for international trade have improved with the increase in number of third party logistics providers. Local companies previously offering only transport or warehousing services have expanded their operations to more complete logistics services. Foreign logistics companies have established local offices either on their own or in joint operation with local companies to take advantage of logistics business opportunities.

6. INTERMODAL LOGISTICS DEVELOPMENT STRATEGIES Logistics involves numerous components that must be integrated into a seamless system which includes both hardware (physical infrastructure) and software (processes and systems, human resource capabilities in operation and management), complemented by enabling policies. Setting up such a seamless system cannot be done effortlessly, and will require constant cooperation and support from all stakeholders. The strategies most vital to the immediate improvement of logistics in Mindanao are described below. 1. Completion and expansion of the Nautical Highway System - The completion and

extension of vital links of the Nautical Highways must be pursued to enhance mobility and improve linkages between islands and provide access to production sites, and to expand market coverage area. Extending the Western Nautical Highway to Mindanao will include improving roads that link with Dipolog and Dapitan in Misamis Occidental, while the Central Nautical Highway will include improving roads which connect with Balingoan in Misamis Oriental, including the Cagayan de Oro-Bukidnon-Davao Road. Furthermore,


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the Eastern Nautical Highway will include road improvements in Surigao del Sur and Agusan del Norte all the way down to Davao del Norte. Road network development for logistics should be patterned after these three existing Nautical Highways.

2. Improvement of linkages between logistics nodes - In addition to the network of roads which form the nautical highways, road linkages between seaports, airports, production areas, and market and trading centers must be improved. Priorities must be given to the construction of new seaport and airport access roads; improvement of existing access roads going to seaports and airports; construction of bypass roads in regional growth centers, such as in CDO, Iligan, and Butuan; completion and upgrading of main arterial roads, such as the Iligan-CDO-Butuan Road and the CDO-Bukidnon-Davao Road; and improvement of access roads to production areas, including upgrading of rural roads such as farm-to-market roads to facilitate transport of food supplies and other commodities.

3. Development of Container Highways - Studies must be done to determine the feasibility

of establishing container highways in Mindanao to accelerate economic activities and internal trades in Mindanao. Priority must be given to existing corridors (i.e. North-South Corridor and East-West Corridor) that connect the major ports. This will assist in making Mindanao the country’s main agro-fishery export zone and in establishing an efficient logistics system linking Mindanao to the rest of country.

4. Expansion of Mindanao Container Terminal (MCT) in Northern Mindanao - Studies must be done to determine if the existing MCT must be expanded to efficiently serve domestic and foreign markets, and to improve the investment climate to attract firms to invest in Northern Mindanao.

5. Establishment of container terminal in Southern Mindanao - Similarly, studies must be done to determine the need for a full container terminal in Southern Mindanao serving both the domestic and foreign markets. A full container terminal located in Southern Mindanao will help establish a more efficient logistics system linking it to the Brunei-Indonesia-Malaysia-Philippines East Asean Growth Area (BIMP-EAGA) and other southern latitude countries like Australia and New Zealand.

6. Development of new domestic and foreign container shipping services in Mindanao - The

development of new domestic container shipping services will help accelerate economic activities and trade, establish an efficient food logistics system linking Mindanao to the rest of country, and create and expand new markets for Mindanao’s products in other regions. On the other hand, the establishment of new foreign container shipping services between Mindanao and other countries will expand the market of Mindanao’s products overseas to facilitate economic development, and will make Mindanao the country’s main agro-fishery zone.

7. Consolidation of cargo - One of the major causes for the high cost of logistics is the small

scale of agricultural production, processing, storage activities and the small consignment sizes for shipping and storage. Two options for increasing consolidation are: 1) downstream consolidation from farmers groups through the traders to the wholesalers, and 2) upstream consolidation from the food processing industries through the buying agents to the contracted farmers. The first approach is now being addressed by farmers through cargo pooling but these efforts have been limited and their effectiveness has been inconsistent. The second approach has been employed by large food processing


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companies by moving the point of consolidation back from the factory to the mills, from the mills to regional buying operations and from the buyers to direct contracts with the farmers.

7. CONCLUDING REMARKS Because of the archipelagic characteristic of the Philippines, the transport of goods and people frequently includes a multimodal journey. This is particularly true for Mindanao which depends greatly on inputs to production, and increased market opportunities, and investments from outside the region to generate economic growth. The intermodal transport system on which these goods and people move is composed of the air, sea and road transport corridors, as well as gateways usually in the form of ports or airports located in urban centers which function as vital intermodal nodes. Road corridors are the most important element of any transport system as they provide the necessary access to production and market destinations. Accessibility to production areas and markets is fundamental to its successful development. The condition of roads and bridges directly affect transport cost in terms of travel time, vehicle operating costs, and various losses in product quality and quantity. Better quality of roads result in more efficient transport in terms of cost and service quality. Farm-to-market roads are critical support infrastructure for efficient distribution of agricultural products from the farm to market centers. Gateways also serve as important points of the logistics network. Ports are indispensable transport infrastructure in Mindanao as they are not just intersections of different transportation modes but the bases for supporting socio-economic activities, including logistics. Ports act as catalysts in promoting the exchange of people and goods between wealthy urban areas and developing regional areas, which in turn benefits the national economy as a whole. Most of the economic activities including service industries concentrate mainly in urban areas while non-urban areas mainly rely on primary industries like agriculture.

REFERENCES ADB (2006) Intermodal Transport Development Project Final Report, Louis Berger Group

Phils., Inc. and Pacific Consultants International. Arnold, J. and Villareal, T. (2002) Philippine Logistics Study, World Bank, Washington D.C. ATO (2004) Air Transportation Office Database. CAB (2004) Civil Aeronautics Board Database. Castro, J. T. (2007) Intermodal transport initiatives in the Philippines: Developing the roll-on

roll-off transport network system, Efficient and Sustainable Intermodal Logistics Network in the Asia-Pacific Region, OECD and Institute of Highway Economics, Japan, pp. 157-166.

DPWH (2008) Department of Public Works and Highways Database. KEI (2002) Integrated Mindanao Development Plan Final Report, Katahira & Engineers

International. JBIC (2002) Cash Crop Distribution Systems in the Philippines: Issues and Measures to

Address Them, JBIC Research Paper No. 12, JBIC Institute. JICA (2003) Master Plan for Strategic Development of the National Port System, Department


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of Transportation and Communications and Overseas Coastal Area Development Institute of Japan.

JICA (2010) Preparatory Study on Mindanao Logistics Improvement, Japan Marine Science. NSO (2008) National Statistics Office Database. UNDP (2005) Enhancing the Capacity for the Effective Management of ODA (00032905)

From Seed to Shelf: A Logistical Evaluation of Philippine Agriculture, National Economic Development Authority.

PPA (2008) Philippine Ports Authority Database.

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