Foreign-flagged
lines carry most gov't foreign trade
FOREIGN-FLAGGED lines continue to
carry the bulk of the government's international trade
with local vessel operators unable to offer competitive
rates, according to a source from the Maritime Industry
Authority (Marina). "Foreign freighters can offer
very low tariff rates and can afford to give tariff
discounts during the peak season; local operators cannot
since they are subject to less competitive taxes and
duties," the source, who requested anonymity, added.
Only 5% of the 169 overseas-going Philippine-flagged
fleet participate in biddings since the government shifted
in May to Freight-On-Board (FOB) from Cost-Insurance-Freight
(CIF) when shipping government goods headed for international
shores.
Since then, only one local operator
has won the bid to ship 400,000 metric tons of rice
from Vietnam or the US, but that company was later disqualified
due to technicalities. Earlier, the Filipino Shipowners
Association (FSA) said local operators want to enjoy
the same benefits as those of their foreign counterparts
when bidding for the government's international trade.
The operators claim that not enjoying the same benefit
renders them uncompetitive in terms of the bid price
for imports. In particular, local operators want the
National Food Administration to amend, if not scrap,
tax requirements provided under the Terms of Reference
when shipping on FOB. Foreign operators are often exempt
when transporting Philippine imports via CIF. "For
instance, freight shipped in FOB is subject to the 6%
value-added tax (VAT) and 2% contractor's tax.
These taxes are inputted in the bid
price, thus, increasing its final value," FSA pointed
out. "Foreign bidders, on the other hand, are often
exempt from these taxes. So chances for Filipino overseas
operators winning the bid are very minimal," the
group added. Marina said that with the poor response
from local operators, it is now hesitating to continue
talks with other government agencies such as the National
Power Corp. and the National Food Authority to give
priority to local operators over their foreign counterparts.
The agency continues to remain optimistic there will
be enough local interest for other big government transactions.
THE Aircargo Forwarders of the Philippines,
Inc. (AFPI) sees a positive side to the implementation
of the expanded value-added tax (e-VAT) in that it could
initiate economic growth, association president Cynthia
Reyes-Tsui told PortCalls. "Good economy would
bring high confidence to both local and international
investors. Subse-quently, there would be tremendous
increase in the transfer of goods and services in the
local and international markets. If this happens, there
would be enormous growth in the logistics sector,"
Reyes-Tsui said.
In addition to the proper implementation
of the e-VAT, the AFPI chief recommended that the government
get rid of "colorum" businesses that destroy
competi-tiveness among legal businesses. "These
illegal businesses could sell their services at very
low rates because they are not paying taxes." The
freight forwarding business or company-to-company transactions
are not affected by the e-VAT. Still, Reyes-Tsui sees
a possible downside. "To mitigate the effects of
the e-VAT, there must be specific provisions to address
the peculiarity and complexity of freight forwarding
business especially on tax compliance issues.
Right now, the freight forwarding industry
has no separate Revenue Memorandum Circulars that define
items that should be subject to the corresponding taxes.
Reimbursable expenses that are paid/advanced by freight
forwarders in behalf of the customers are not well defined,"
she said. Another adverse effect of the e-VAT not only
on the logistics industry but also on all businesses
nationwide is the 70:30 threshold on the input tax credit
application against the output tax liability. The new
law limits the application of input tax credits to only
70% of output tax. This means all companies will be
remitting to the government a minimum of 30% output
tax even if the companies still have a balance of input
tax credits.
Based on the input/output tax ruling,
the remaining unapplied input tax credits can only be
refunded when a business closes its shop. "This
is against the accounting principles of going concern
which states that a business entity is established for
an indefinite period unless for very justified causes
to the contrary. No entrepreneur would ever close shop
just to avail of the input tax credit refund,"
Reyes-Tsui said. Another adverse effect of e-VAT would
be on consumers who will shoulder the additional tax,
she added. - Chris Paringit
DBP
to launch company offering loans within the quarter
THE Development Bank of the Philippines
(DBP) will launch the National Maritime Equity Corp.
(NMEC) this quarter to provide local operators enough
access to vessel financing. DBP chairman Vitaliano Na–agas
said the NMEC was formed to kick start growth in the
local shipping industry by giving affordable loans to
commercial and non-commercial vessel operators. NMEC
will use the P6-billion fund from the Japan Bank of
International Cooperation (JBIC) initially intented
for the scapped Domestic Shipping Development Program
in the late 1990s. Another P17 billion is scheduled
to come in as additional fund for the NMEC, also from
the JBIC.
"DBP lends money to the NMEC and
lease it to the operators for those commercialized and
non-fully commercialized," the DBP chief added.
Under the NMEC, the equity placement of investment is
at 90%, 80% and 70% while the lease deposit of the loan
propopent is 10%, 20% and 30%, respectively. Loan value
for classed vessels is 60%. Interest rates are at 9%
per annum for missionary routes and 10% for commercialized
routes. The NMEC was formed as provided under Republic
Act 9295 or the Domestic Shipping Development Act of
2004 aimed to modernize the country's still-berth domestic
shipping industry.
The Maritime Industry Authority (Marina)
expects the MEC will wrest the ship-financing scheme
out from banks. MEC will own, manage and lease ships
to provide ship owners full access to ship financing.
High interest rates and strict collateral requirements
of Philippine banks are hindering the country from having
a sustainable ship modernization program. Marina said
the industry needs a more relaxed financing scheme to
lure ship operators, especially small- and medium-scale
operators which are the biggest service providers in
the country's shipping industry.
CARGO carrier National Marine Corp.
(NMC) has bid for a controlling interest in another
cargo carrier, Lorenzo Shipping Corp (LSC). In a statement
to the Philippine stock exchange, NMC said it plans
to acquire 51% of the outstanding common shares in the
container ship operator for P185.22 million ($3.3 million).
The P1.20 per share offer is slightly more than the
valuation of P1.10 per share based on the stock's performance
over the last six months. The tender offer was September
26 and expected to lapse yesterday. Meanwhile, signing
of the Memorandum of Agreement on the sale is expected
to commence anytime this week.
"The aim is for National Marine
to take majority control and maintain it as a viable
opportunity in the domestic liner business," a
company source told PortCalls. The Magsaysay Maritime
subsidiary acquired 29% stakes in Lorenzo from Singapore-listed
Neptune Orient Lines for about P350 million early this
year. Founded in 1972, LSC operates a fleet of seven
container ships in the domestic trade. For the first
six months of the year, its net income rose 20% to 39.2
million from 32.7 million during the same period last
year. Net freight revenue increased 10% from P567.8
million to P622.8 million this year resulting from the
6% increase in liftings and 4% increase in revenue per
TEU.
"The 6% increase, despite the
lesser number of 13 vessel voyages this year, is credited
to the increase in foreign boxes shipments where contribution
for this year almost doubled that of last year,"
LSC said. It added the increase in revenue per TEU is
attributable to the implementation of a 9% and 5.5%
General Rate Increase in October 2004 and January 2005
respectively, as well as freight increase in foreign
shipping lines.
ABOITIZ PROJECT TRANSPORT SYSTEM CORP
(APTSC) is strengthening its grip in the logistics business
by targe-ting heavy cargoes. Jaypee Lim, APTSC sales
and marketing manager, said the company specializes
in moving items considered too heavy and bulky by some
logistics companies. Specifically, it can move and deliver
equipment weighing more than 500 tons. "We are
capable of moving ship engines, steam turbines, generators,
dynamos, gantries and cranes," he added. Since
the company's establishment, APTSC has assisted in the
construction of at least 15 power plants in the Philippines.
"By that we mean we transported the heavy generators
and dynamos on the site where the power plant is to
be constructed," Lim said.
The company also improvises solutions
whenever roads and bridges are incapable of handling
the load. Lim highlighted this capability when the company
delivered two shunt reactors, with a capacity of 50
MVA and 30 MVA, each weighing 38 tons, to the then being
constructed Talisay and Tabangao substations in Leyte.
"The problem was the bridge which we needed to
pass through has a load limit of three tons and since
the gross weight of the item we were transporting was
in excess of 60 tons our structural experts decided
to reinforce the bridge with elephant legs and steel
beams to enable it to handle the weight," he added.
