This issue is mostly
about industry expectations. PortCalls reporter Maritess
Mesias asked industry captains what they see happening
to their respective sectors in 2004.
Their answers did not
surprise. Most said they were happy to say goodbye
to 2003, a year that will forever be remembered for
the SARS outbreak and the Iraq war. Many mentioned
security, and the costs that come with ensuring it,
as their utmost concern. Others expressed concern
over the outcome of the coming May elections, though
at least one cited its benefits through increased
employment and its trickle-down effects. It seems
the Filipino's sense of optimism could just not be
supressed.
Against many odds - some
age-old and seemingly insurmountable - most industry
captains said they were certain of a recovery this
year. They expect the economy to perk up, bringing
with it benefits for all sectors of the logistics
and transport industry.
Among the reasons cited
for this optimistic scenario are increased government
support and, more commonly, the fact that 2003 was
such a bad year that a repeat is highly unlikely.
FREIGHT forwarders moved
into 2004 with much optimism, seeing only recovery
on the horizon. Angelito Colona, chairman of the ASEAN
Freight Forwarders Association (AFFA) and president
of the Federation of Forwarders Associations in the
Philippines (FEDFAP), said the sector is more confident
of a bounce this year, especially with more support
from the government. "2004 looks very promising with
increased attention and support we have been getting
from the government," Colona said.
Erich Lingad, president
of the Philippine International Seafreight Forwarders
Association (PISFA), agrees. "I am optimistic
volumes will get better. In 2004, we see an improvement
in the freight forwarding business, especially
now that we have Ateneo as our partner. We at
least can professionalize the business through
training." The association, together with other
industry groups, recently put up the Institute
for Transportation and Logistics Management with
the Ateneo Center for Continuing Education.
Last
year, volume was low, Lingad noted. "We don't have
exact figures yet. But the decline was brought about
by the war in Iraq, SARS in Asia and less foreign
investors coming into the country." Profitability
also suffered because of stiff competition, he said.
"A lot of businesses went to China," Lingad added.
"For us to compete, we need to produce items with
more value-added because if we manufacture the same
products as China and they have lower costs, it follows
that we cannot compete." For the airfreight sector,
Colona said businesses are expected to soar with improvements
in the aviation industry. "Airlines are more cooperative
especially in terms of rates, allowing forwarders
to be more flexible.
Furthermore, there have
been additional flights and value-added services from
pick-and-pack to door-to-door services, which have
made transport a lot simpler than before," he pointed
out. The seafreight sector also holds promise. Colona
said cargo volume is expected to increase. "This may
not be double-digit but by a percentage better than
in recent years." Security will be a key concern for
both the air and sea freight sectors this year. Lingad
said the 24-hour automated manifest system initiated
by the US may yet become a global procedure. As it
is, some countries have already followed the US lead,
requiring the electronic submission of manifests 24
hours before cargo arrival at the final port of destination.
In the area of freight
rates, Lingad said carriers may not be as aggressive
in filing rates this year because of tight space due
to increases in volume. "Why bring down rates if you
lack space?" he asked. As for the general rate increase
(GRI) for 2004, Lingad said there are no indications
of how much this will be, "but last year's GRI was
substantial." Local charges, including the terminal
handling charge, will continue to be a major point
of contention in 2004. Lingad predicts that some charges
may be eliminated or at least cut, such as the cleaning
charges and container deposit.
This year, seafreight
forwarders will also have to wrestle with the issue
of whether the sector would like to be regulated by
the Philippine Shippers Bureau (PSB) under the Department
of Trade and Industry (DTI), as is the present setup,
or transfer to the Department of Transportation and
Communications. "We want PSB to regulate but this
goes against their agenda. DTI's mandate is to promote
small- and medium-size businesses. In our case, we
want to be regulated to professionalize the business.
Those are contradicting
goals," the PISFA president said.
THE Philippine Ports
Authority (PPA) and the Maritime Industry Authority
(MARINA) both expect a livelier maritime industry
this year. Against the backdrop of a volatile local
political and economic landscape and a projected modest
world trade growth, Philippine cargo traffic will
grow between 3% and 5% this year to 134 million to
138 million metric tons.
There will be a flurry
of port activities, with many directed at port
construction in support of the administration's
flagship project, the Strong Republic Nautical
Highway (SRNH). The SRNH aims to interconnect
all islands of the archipelago through intermodal
transport. Launched in April last year, the highway
now consists of 22 links in more than 41 ports
nationwide. This year, up to 40% of PPA's capital
expenditures will be allotted for Mindanao, according
to PPA general manager Alfonso Cusi. "We want
ports developed in Mindanao to help improve business
activities there and lower transportation costs
and promote port efficiencies," he noted.
Port projects. There
are six port projects for implementation this year.
Three are undergoing post qualification - the Pagadian
reclamation and extension of the reinforced concrete
(RC) wharf, Caticlan port development, and Pola-Pola
port development - and the other three - General Santos
reefer rack structure and power house, Cagayan de
Oro RC wharf extension and the Port of Abra de Ilog
development project - pre-qualification bidding. Other
projects this year include bidding for the North Harbor,
expected to start by the second quarter upon completion
of the bidding terms of reference; and continuing
work on the second phase of the Batangas Port Development
(BPD) project. For completion in 2005, the BPD is
expected to considerably help decongest cargo traffic
at the port of Manila. As of December 2003, the project
had a completion rate of 29%. MARINA in 2004 MARINA,
too, expects more shipping activities this year with
around 60 vessels from small- and big-time shipping
operators coming in.
MARINA administrator
Oscar Sevilla said this is partly due to the relaxation
of the bareboat chartering policy. The approval
of the Domestic Shipping Development Act (DSDA)
of 2002 is also seen to bode well for the local
shipping industry Awaiting bicameral committee
approval, the Act aims to modernize the dilapidated
domestic shipping industry through policy reforms.
In particular, it seeks to level the playing field
between local and international shipping industry
players. The Act also provides a package of incentives
to assist local shippers. In addition to approval
of the DSDA, MARINA is working for the gradual
phase out of wooden-hulled vessels, the traditional
cause of maritime accidents.
Sevilla concedes it may, however, take at least ten
years to implement a phaseout. "It's just a matter
of determining the duration and the particular type
of vessels to be phased out. But definitely, we will
give ample time for shipping operators to prepare
in time for the PPA to upgrade ports that could accommodate
the large steel-hulled vessels," he said. MARINA is
also optimistic about the future of the SRNH. "We
are continuously encouraging shipping operators to
invest and participate in the project. With the way
things are going, it appears that the ro-ro highway
will grow further, especially when new ships were
brought in," Sevilla said. Bilateral agreements with
other countries, meanwhile, appears to offer more
promise this year. Sevilla disclosed the Philippines
recently signed a memorandum of agreement with the
Japanese government allowing Filipino seafarers to
train onboard Japanese vessels.
The agency was also
able to secure long-term education and training for
seafarers with Dutch government assistance.
MUCH of the challenge
confronting the shipping industry this year will revolve
around security.
International Container
Terminal Services, Inc. (ICTSI) senior vice president
and Manila International Container Terminal (MICT)
general manager Francis M. Andrews expects more
security measures to be adopted, especially with
the International Ship and Port Facility Security
(ISPS) Code's implementation in July. Under the
International Maritime Organization's ISPS Code,
all ships and ports involved in international
trade must develop comprehensive security plans.
With four months to go
before the Code's implementation, Andrews said ICTSI
has achieved 90% compliance and is positive about
attaining full compliance by April. "We have already
covered up to the tiniest detail every preparation
to ensure safety within the terminal at all times,"
he noted.
In support of its security
plans, ICTSI will acquire within the year four x-ray
machines at P514 million to be stationed at MICT's
entrance and exit points. The company is also establishing
a hazardous cargo area. Andrews said putting a premium
on safety and security is key to promoting ICTSI's
services. "We must provide a safe and efficient working
environment for vessels to turn around and maintain
their schedules… so that we, in turn, can maintain
or increase our volumes," he said.
Hand in hand with ensuring
safety, ICTSI will further improve operations by deepening
the MICT berth to 14 meters from the present 12, allowing
it to accept even bigger container vessels. ICTSI
expects an 8% volume growth this year even as it anticipates
lesser vessel turnaround with bigger newbuildings
that offer more capacity. "We don't mind that as long
as volumes go up," Andrews said. Last year, the North
Harbor operator handled 1,104,780 twenty-foot equivalent
units, up 5.8% from 2002. "We were pretty bullish
last year. This year, we don't see any reason to assume
that we cannot reach our targets. January started
out pretty well considering it is traditionally a
slow month. We will start building our year through
that," Andrews noted.
Productivity this year
is seen at 35 moves an hour compared to last year's
32 to 33 moves per hour.
THE Philippine aviation
industry is gearing up for recovery this year after
a dismal 2003.
Civil Aeronautics Board
(CAB) Economic Planning and Research chief Porvenir
Porciuncula said the start of the year has already
yielded positive signals. "There are issues like the
bird flu but overall I think this is the best time
to recoup last year's losses. This is also the perfect
opportunity to start expanding and reviving suspended
operations," he said.
Last year, the industry
went through a particularly rough patch, with airlines
canceling services as a result of depressed travel
figures due to the Severe Acute Respiratory Syndrome
and effects of the US-Iraq war. This year, Porciuncula
said some airline companies are already showing interest
in setting up shop in the Philippines - a clear indication
of expected growth. He said the recent opening up
of Clark and Subic to foreign air cargo carriers via
the open skies cargo policy can only help boost the
industry. "We already have UPS in Clark. As more carriers
come in, Clark's operation will be more attractive
to investors," he explained. However, he admitted
little benefit will accrue to the local aviation industry
as few Philippine-flagged carriers can compete with
international carriers to begin with.
One issue weighing heavily
on the industry's head is the result of the coming
national elections. "If the elections turn out well,
the next half of the year will show positive improvement.
Otherwise, it will be just another 2003," Porciuncula
said.
Also expected to affect
industry performance are security costs and fuel price.
The CAB official said oil prices are starting to shoot
up again because of the peso fluctuation "when in
fact, it should have stabilized since the war in the
Middle East has long been discounted by the business
community." This year, the aviation industry is also
expecting more security policies from the US and eventually
from other countries not only in the area of cargo
but also of passage.
For 2004, CAB will prioritize
the computerization of its database, and "the interest
of our carriers during air talks. We will target countries
which are sure to offer benefits to our carriers,"
Porciuncula said.
Lined up for the first
half of the year are negotiations with China, India,
Japan, Italy and some countries in Europe.
THE Philippine economy
is headed for better times ahead.
"With the way things
are going and from our perspective, it will be a good
year," said Philippine Chamber of Commerce and Industries
(PCCI) president Noemi Saludo. Saludo is also former
president of the Port Users Confederation (PUC), the
umbrella organization of transport industry associations.
Even the short term offers opportunities, Saludo said.
She expects employment figures to rise during the
election season. This would boost the manufacturing
sector, in turn improving the import and export regime,
and in turn pushing the logistics business.
Last year, PUC noted
substantial improvements in the air freight sector.
This year, more air cargo carriers are exhibiting
interest about investing in the country, Saludo said,
especially with the recent approval of an open skies
air cargo policy for Clark and Subic. For other sectors
of the logistics industry, much needs to be done particularly
land transport, Saludo said, noting the few government
initiatives in infrastructure development. "For instance,
a lot of export processing zones in the Alabang viaduct
area are being established.
However, there is no
proper infrastructure for delivery and pick up so
there were a lot of difficulties," she said. Pressing
logistics concerns The most pressing logistics problems,
according to Saludo, are the truck ban, growing incidence
of hijacking, and the P500 fee imposed by some municipalities
on every truck that passes through their area of jurisdiction.
The PCCI president also
complained about unilateral charges, such as the container
deposit fee, being imposed by ocean carriers. "Sometimes
they charge as high as P15,000. It is not justifiable
to impose these costs because usually it is the forwarding
company that will put up with such amount," she explianed.
On top of this, carriers
sometimes slap shippers with "unknown" charges such
as those for insurance and container cleaning. "Shippers
only find out about these things when refunds are
returned," she said.
Distribution
managers anticipate modest growth for 2004
MEMBERS of the Distribution
Management Association of the Philippines (DMAP),
the association of logistics and distribution managers
in the Philippines, project conservative growth for
the distribution sector this year.
"Recovery does not happen
overnight. It takes time... and it seems that it's
going to take longer than expected. So in the meantime,
we have to make good use of what we have," newly inducted
DMAP president Ana Rose Ochoa said. Freight rate increases,
especially in seafreight, will remain the biggest
issue for the distribution sector in 2004. "Again,
we are left with no other choice but to stretch our
capabilities in terms of costs and service efficiencies,"
she said. Distribution managers, she noted, will just
have to keep looking for ways to reduce costs while
enhancing service efficiencies - all this in the face
of more powerful and demanding customers and more
competitive suppliers.
A key survival strategy
among DMAP members is collaboration. "We often hear
about how rapid oil and fuel prices increase. Collaboration
with service providers can help players come up with
cost-reduction opportunities," Ochoa noted. For 2004,
DMAP will focus on the professionalization of the
distribution management field through training, seminars
and an annual conference held every September; achieving
cost efficiency; and fostering innovation.
The 90-member DMAP is
eyeing the 100-membership mark this year. "We are
hoping to get the 10% from the manufacturing sector…
majority of our members already come from this sector,"
said Ochoa.
LAST
year saw flat growth in the domestic shipping
industry. This year, the business seems headed
in the same direction.
For the industry to prosper,
Philippine Interisland
Shipping Association (PISA) vice president for
Liners Josephine Uranza said production issues
must first be resolved, and port infrastructure
improved. As a result, recovery of the domestic
shipping may not be realized this year or even
in the next three years.
In the meantime, shippers
must continue to look for more innovative and efficient
ways of transporting goods. The growth of the domestic
shipping industry depends on the growth of the country's
production, said Uranza. "If there is no movement
in production, the domestic shipping business will
likewise remain stagnant," she noted. To help increase
production and lower the cost of doing business, PISA
together with groups such as the Mindanao Business
Council, actively participates in the Corn Board,
the Swine Group, and the Vegetable Group. The participation
of PISA in such groups reflect the priority given
to food products, the bulk of cargo shipped by domestic
operators.
With the Corn Board,
the shipping association is lobbying for the shipping
of corn in bulk rather than in the more expensive
transport mode of containers. The shipping of swine
as carcass is PISA's main issue with the Swine Group.
"It is unsanitary shipping them alive plus most shipping
lines refuse to ship live weight because they are
highly corrosive," Uranza said.
Finally, PISA is one
with the Vegetable Group's main objective to reduce
spoilage which eats up about 40% of total production.
DOMESTIC shipping industry
players expressed enthusiasm with the nearing approval
of the Domestic Shipping Development Act of 2002.
Presently at the bicameral committee, the bill seeks
to grant tax perks and incentives to shipping operators
and ship builders; help accelerate investments in
the shipping sector; and increase and improve the
aging domestic fleet.
Solid Shipping Lines
general manager Quirimon Tan said the DSDA will put
struggling shipping operators in a better position
to modernize their fleet at a "friendly" cost. "It
will definitely be good for the business and for the
industry in general," he said. Despite the many revisions
the bill has undergone, Tan said the proposed legislation's
ultimate objective remains the same - to level the
playing field. "Some incentives in the original draft
are no longer there. But… that's better than nothing,"
he said.
Lorenzo Shipping vice
president for Logistics Felicisimo Saldaña cited the
tremendous savings ship owners will enjoy once the
tax exemptions take effect. Under the bill, ship operators
will no longer have to pay for the transfer tax, documentary
stamp tax, compensating tax, duties, charges, royalties,
registration fees, licenses and other fees in the
transfer of vessel ownership to another domestic ship
operator. "Importation of vessels, even second-hand
ones, is very expensive. With these tax perks, ship
owners will be encouraged to invest in much-needed
new vessels, replacing the old ones which are often
the cause of maritime accidents," he noted. Ship builders
and repairers will also get tax incentives and may
avail of credit financing through MARINA. Ban on imports
In addition, the bill
ensures continued business for the shipbuilding and
ship repair industry as it bans vessel importation
within ten years from effectivity of the Act provided
domestic shipyards can sufficiently cater to local
needs. Metro Manila Shipyards Association, Inc. president
Lambert Sianghio said shipbuilders and repairers at
present bear the high cost of importation of capital
equipment, machinery, spare parts, life-saving and
navigational equipment and other materials used in
the construction, repair, renovation and alteration
of merchant marine vessels in the domestic trade.
"Imported materials roughly constitute 80% of the
total.
We have no one to turn
to... even the government cannot give us any subsidy,"
he said.
THE Maritime Industry
Authority (MARINA) will come up with a database for
the domestic shipping industry in June, following
the conduct of a one-time registration for vessels
serving the domestic trade.
MARINA administrator
Oscar M. Sevilla said the registration will enable
the agency to establish a Philippine Ship Registry
that will help maximize economic opportunities that
may be obtained from the maritime industry. Sevilla
said the existing ship registry is outdated and incomplete,
making it difficult for the maritime authority to
properly monitor the local water transport sector.
THE Philippine government
has backed out of an open skies air cargo agreement
with Asian countries following Philippine Airlines'
explicit opposition to the agreement.
The agreement, which
would give foreign air cargo carriers in Singapore,
Thailand and Brunei unlimited cargo capacity rights
to and from the Philippines as well as fifth freedom
rights between any points here and any third country,
was supposed to be inked last week in Singapore. Transportation
and Communications Undersecretary Edward Harun V.
Pagunsan, however, said the agreement was never reviewed
by the Philippine air panel and the matter was not
properly brought to the attention of the Department
of Foreign Affairs (DFA). Flag carrier PAL said only
Singapore would benefit from the treaty as it would
allow Singapore Airlines to fly to Manila and bring
PAL to the United States.
PAL president Avelino
Zapanta said transportation officials should have
discussed the matter with the Philippine air panel,
which includes representatives from the DFA, Department
of Tourism, Department of Trade and the Civil Aeronautics
Board. Last
October, President Gloria
Macapagal-Arroyo committed to take part in the initiative
for cargo open skies in the ASEAN region.
THE Philippine Ports
Authority (PPA) recently signed a memorandum of agreement
with Pacific Consultants International Phils., Inc.
for the conduct of a feasibility study on the rehabilitation
and modernization of 10 roll-on/roll-off (ro-ro) terminals.
The terminals link the Maharlika Highway which connects
Luzon to Visayas and Mindanao. PPA said Pacific Consultants
will undertake the study and prepare the project proposal
using its own funds. It will also endorse the project
for possible availment of official development assistance
funds.
Pacific Consultants
has earlier been involved in port development projects
undertaken by PPA. The proposed master plan and preliminary
study will cover the improvement of existing port
facilities, including additional ro-ro berths and
modernization of the terminal building in Matnog port
in Sorsogon. It will also include a study on the alternative
use or re-development of existing port facilities
for different purposes as fishery port, municipality
port, oil and other bulk terminals in San Isidro port
in Northern Samar and Liloan port in Southern Leyte.
PPA said it is strongly
considering the development of a new port in Lipata,
Surigao del Norte and the improvement of port facilities
in Pulawan port in Zamboanga del Norte to cater to
ro-ro vessels. The port agency said it will also work
on the development of new public ports in Allen in
Northern Samar, San Ricardo in Southern Leyte, Bonbonon
and Sibulan in Negros Oriental and Santander in Cebu.
FIRE on board the SuperFerry
14, which broke out at 12:50 am last Friday, killed
two passengers and injured countless others. The fire
occurred while the ship was in the vicinity of El
Fraille island near Corregidor.
The vessel, owned by
the Aboitiz Transport Group (formerly WG&A), left
the Port of Manila on schedule at 11 pm with 702 passengers
and 155 crew. It was bound for Bacolod and Cagayan
de Oro. As of 11:30 am Friday, the Philippine Coast
Guard has accounted for a total of 633 rescued passengers.
Also accounted for were 41 technical crew, and 114
hotel crew. Most of the passengers and crew jumped
ship or fell overboard when the fire began to spread.
They were picked up by at least eight responding Coast
Guard and Navy ships as well as commercial vessels
in the area. SuperFerry 19 will be fielded to service
the routes of SF14 by March 4.
Meanwhile, two administration
senators called for a review of maritime laws in the
wake of the SuperFerry 14 mishap.
Re-electionist Sen. Rodolfo G. Biazon said sea accidents
would continue to occur unless overlapping authorities
and responsibilities of government regulatory agencies
were ironed out. Sen. Manuel B. Villar Jr., meanwhile,
noted that "there is no mandatory reporting or marine
casualties to determine the loss of lives and properties
resulting from such accidents, which would be the
basis of the victims in their claim for damages."
