Report: port inefficiency continues to inflate shipping costs, erode PH competitiveness

October 04, 2018 News

Improving efficiency of Philippine ports and enabling them to handle bigger ships and more volumes can help address high costs of shipping and improve the country's competitiveness, according to a policy brief sponsored by local port stakeholders, business groups, and foreign chambers of commerce. 

Policy Brief No. 8 titled, "Seaports and Shipping," which was published by the Joint Foreign Chambers of Commerce and sponsored by local business and port industry groups, noted that "since a high percentage of Philippine domestic and international commerce is by sea, efficiency of maritime transportation is increasingly essential to national competitiveness." 

It added that "the high cost of both domestic and international marine transport for Philippine trade has been a contentious issue and is influenced by the efficiency of ports."

The policy brief noted that despite being in an archipelago, the Philippines ranks lowest in container port traffic among the ASEAN +6 group, which includes the 10 Association of Southeast Asian Nations (ASEAN) member countries plus Australia, China, India, Japan, New Zealand, and South Korea. 

The policy brief noted that in a United Nations Conference on Trade and Development report in 2017, Philippine ports registered around 7 million TEUs received in 2016, while other major ASEAN +6 competitors handled higher container port traffic, including Thailand (8 million TEUs), and Indonesia (12 million TEUs). Singapore, as a regional transshipment hub, ranked highest in container port traffic with 25 million.

Further, according to the World Economic Forum, the Philippines has the lowest quality of Ports ranking among the ASEAN +6s. The port infrastructure ranking is based on perceptions of business executives of their country's port facilities. In 2017-2018 the Philippines was ranked 113th of 137 countries, down from 100th a decade before and far behind Vietnam, Indonesia, and Thailand. By contrast, Indonesia's ranking in the same decade improved by 50%. 

In terms of World Port Rankings by the American Association of Port Authorities, which is determined by total cargo volume (both container and non-container), the port of Manila ranked 72nd out of 100 ports and evaluated sixth out of eight among major ASEAN +6 ports. 

Most expensive

"Given the country's low ranking in terms of quality of ports, the Philippines' rank in the cost to export a container among the ASEAN +6 is the most expensive," the policy brief stated. 

It noted that one reason for this is lack of proper port infrastructure.

"If economically viable regional ports do not have gantry cranes, shipping companies must utilize reasons for high domestic shipping cost in the Philippines," as it pointed out. 

Port capacity, turnaround time, productivity, proper dredging, and availability of ship-to-shore gantry cranes are necessary to port development so as to lower the cost of shipping, it added. 

The issues above all relate to port efficiency. Operations of a seaport span various aspects such as container and cargo turnaround time, port infrastructure, port access roads, and other transport connectors.

According to research by Kennedy, Lin, Yang and Ruth (2011) on the importance of port efficiency: "Sea-port operational efficiency is a critical factor for handling of goods in the international supply chains, and is viewed to impact transportation and logistics which play an important role in trade exchange with other countries. It is important to evaluate operational efficiency of sea-ports to reflect their status and reveal their position in this competitive environment. Moreover, knowing impacts of efficiency of sea-ports on the supply chain is vital for business survival.'

To improve maritime efficiency in the Philippines, the policy brief said port development is essential for economically viable regional ports (Cebu, Davao, Cagayan de Oro, General Santos and Zamboanga) to sustain an efficient national port network. 

Don’t neglect small ports

To facilitate an efficient hub-and-spoke system, smaller regional ports should also be equipped with adequate facilities to handle roll-on/roll-off (Ro-Ro) as well as brage systems between selected ports such as, Bacolod to Iloilo and Cebu to Bohol, to improve inter-island connectivity.

The policy brief also recommends that the draft of all ports (driven by demand) should be dredged to the needed capacity to accommodate larger vessels.

Main ports should also be provided with ship-to-shore cranes by their operators to avoid the use of ships equipped with cranes and to reduce cost. While other main ports are already equipped, the policy brief suggests they be provided with more ship-to-shore cranes.

Ship-to-shore cranes should be shared between international and domestic vessels where available.

Lastly, the policy brief recommends refraining from implementing truck bans, as it leads to further inefficiencies and increases transportation costs.

The policy brief was authored by A. Magsaysay president and chief executive officer Doris Magsaysay-Ho; European Innovation, Technology, and Science Centre president and European Chamber of Commerce of the Philippines pioneer Henry Schumacher; and Arangkada advocacy and research specialist Bettina Bautista, with Royal Cargo president and CEO Michael Raeuber as technical adviser. A roundtable discussion was also conducted with different business groups and port industry stakeholders. - Roumina Pablo

This article was originally published in PortCalls Asia last October 4, 2018