Use Subic, Batangas ports

Categories: Business Updates

Date Posted: 22 Jul 2014

I have been receiving a number of very agitated e-mails from business people complaining about the problems they are now having with getting their cargo out of the Port of Manila. Here is the gripe of one foreign investor in a labor intensive factory at Bataan’s Export Processing Zone.

“First the port was virtually closed down due to Estrada’s truck ban. Then they come up with Express Lanes, then LTFRB comes up with the plate colors virtually wiping out 75 percent of the trucks that can move cargo from the port.

“It’s like each government department wants to one up the other. Unfortunately, the Port of Manila is the life blood of the country’s export zones. You can imagine if the port is working only 25 percent of capacity what will happen to GNP.

“The only ones who suffer in the long run are the workers who are furloughed due to lack of materials. We keep hearing the Philippines is a tiger economy yet it seems at every chance, government agencies want to defang it. It’s just all frustrating.”

I guess the inability of government agencies to address long festering problems will discourage all investors at some point in time. The truck ban imposed by Manila Mayor Erap Estrada, however, isn’t really to blame for the mess. Indeed, if national government agencies were doing their work, the ban need not have been imposed.

The real problem that must be addressed is simply this… the Port of Manila is just too congested and so are Metro Manila streets.  Mayor Erap ought to even be commended for doing what should have been done a long time ago. His truck ban enabled everyone to focus on the need to decongest the Port of Manila as well as our streets.

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It took an Erap to do what everyone thought couldn’t be done. Erap showed political will even at the risk of offending his own constituency of truck drivers and other port workers.

Now the national government has to do what it should have done a long time ago. But don’t hold your breath. The lack of action is not surprising. The Philippine Ports Authority is an attached agency of DOTC and just as hopeless and I hear, rather corrupt.

Some months ago I visited Subic and I noticed a huge port infrastructure with those overhead cranes that were simply rusting away idle. They told me that Japanese foreign aid built that infrastructure many years ago at a cost of about P8 billion.

There is also a similar underutilized port infrastructure in Batangas built at a cost of some P10 billion. Like Subic, it is so underutilized and a waste of scarce resources we badly need to do other things like better airports and agricultural infrastructure.

Why did government decide many years ago to build these huge infrastructure facilities if there is no plan to use them? Were our officials only looking at the kickbacks inherent in large projects? But these ones are foreign aid funded through a development loan package.

They may have had larceny in mind when they built those ports, but they must have had the best justifications on paper. Subic will take care of cargo traffic from the north and Batangas will take care of cargo from Calabarzon… decongest Manila with growth magnets. Good reasons… on paper.

Unfortunately, government did nothing to make sure these ports are used as supposedly intended after these were built. I heard they had problems with local government in Batangas so that truck drivers refused to pay some local tolls imposed on them.

Subic didn’t have much of a business case from the start because the industrial processing zone they talked about during the time of Dick Gordon didn’t materialize. A Japanese tire manufacturer at Clark that ships out its products daily sends its cargo via Port of Manila when Subic would seem a more convenient port.

The problem with Batangas and Subic is that ships don’t want to call on these ports because there isn’t much cargo being shipped from there. Shippers go to Port of Manila because there are more ships calling on that port. Classic chicken and egg situation.

Now something has to happen because the situation at the Port of Manila has become untenable. They cannot just expand port facilities there, no matter how influential the private port handlers are, because Metro Manila streets can’t take more truck traffic.

I just got a copy of a policy paper prepared by Dr. Enrico L. Basilio for the Philippine Chamber of Commerce and Industry. That paper should be must reading for our officials at PPA and DOTC.

Dr Basilio points out that the Port of Manila has exceeded its rated capacity a few years back. On the other hand, the port in Batangas has three percent utilization of its 300,000 TEU annual capacity and Subic is 6.4 percent utilization of its 600,000 TEU annual capacity.

The government borrowed P17.5 billion from JBIC to finance the development of the Batangas and Subic ports. Such an investment could have only been justified by a plan to transfer shipping cargoes from Manila to these new ports, by force of policy if needed.

Dr Basilio points out that we also made rather big investments (P111.1 billion) in building the expressways that lead to these ports that are also underutilized (current 5,000 vehicular traffic/day in SCTEx against the target of 25,000 vehicular traffic/day. The current traffic is also mostly cars, not container trucks).

 Dr Basilio cited data from the Philippine Economic Zone Authority (PEZA), showing that 60 percent of the volume handled at the Port of Manila comes from the more than 1,000 locators in 42 industrial estates located in the Calabarzon area. That’s so much truck traffic from southern Luzon that could be using Batangas.

Why would Calabarzon shippers brave traffic congestion in Manila to ship from there instead of the more convenient Batangas port? Because government has not done enough to make the international shipping lines to go to Batangas. Waiting for them to do it on their own has not worked.

According to Dr Basilio, Philexport, the Export Development Council and the National Competitiveness Council made a presentation in early 2011 to then DOTC Sec Ping de Jesus. They recommended a combination of substantial reduction in cargo handling fees and policy issuances to encourage more shippers to use Subic and Batangas.

Sec Ping reportedly agreed but unfortunately he resigned before these could be implemented. His successor, Mar Roxas might have thought those were not important.

The Philippine Ports Authority (PPA) merely lowered the port berthing fee by 50 percent. But as Dr Basilio pointed out, lowering the berthing fee even to zero will not encourage shipping lines to call on Batangas if the cargoes are not there. A government policy to force the shippers to use Batangas and Subic is needed.

Now the truck ban happened. Manufacturers working on Just In Time inventory systems are running out of materials. Exporters missed delivery deadlines. Increased costs, lost opportunities, damaged goods…

The port congestion also makes it difficult for shipping lines to unload cargoes causing longer waiting time. Some lines have started to refuse cargoes bound for the Port of Manila. Truckers also end up making less trips.

So Mayor Erap gets blamed for a policy and implementation failure of the national government. Dr Basilio said some palliative measures can be made. But it would be better if government takes this current problem as the opportunity to finally achieve the long term objective of creating new economic magnets outside of Metro Manila.

A good suggestion of Dr Basilio is to place a cap on the volume that may be handled by the Port of Manila.

He pointed out that this is the common sense policy implemented by the Port Authority of Thailand when it developed Laem Chabang Port. Thailand’s growing international trade caused port congestion and serious traffic in Bangkok.

Of course Mayor Erap can be asked to lift his truck ban but that only brings us back to the old situation which had been causing problems to more people than just those with business in the Port of Manila. Or maybe PNR can be asked to extend the rail lines to the port so the containers can be taken out by rail to handling areas outside of Metro Manila.

In any case, DOTC through PPA should act more decisively. It really seems that DOTC is so important to the country’s economic development. If it is too late for this administration, the next one should make sure whoever heads DOTC should have better managerial qualities than either Mar Roxas or Jun Abaya who are just politicians. Otherwise, hopeless na talaga.

Boo Chanco’s e-mail address isbchanco@gmail.com. Follow him on Twitter @boochanco

Source: http://www.philstar.com/business/2014/07/18/1347376/use-subic-batangas-ports

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