“Mindanao’s business community has long been clamoring for the amendment of the cabotage law, which the President has cited as a key legislative item in his recent SONA (State of the Nation Address),” Mindanao Development Authority chair Luwalhati Antonino said.
In his address, the president said the move would “foster greater competition and to lower the cost of transportation for our agricultural sector and other industries.”
Antonino said international trading prospects in the region are very promising especially with the rising popularity of its agri-based products, such as cacao, coco sugar, and coco water, which are beginning to penetrate markets abroad.
“Mindanao remains as the country’s premier food source and agri-business producer, generating more than US$3 billion worth of agricultural exports and accounting for 60 percent of the country’s total agricultural exports in 2012,” Antonino said.
Detrimental, wait and see
The call for the amendment of the cabotage law received mixed reviews from other members of the domestic shipping industry.
A PortCalls source said its abolition would be “detrimental” to domestic shipping lines. The source cited the Indonesian experience, in which that country’s domestic shipping all but died after the industry was opened to foreign lines.
On the other hand, the Association of International Shipping Lines (AISL) and port operator Manila North Harbour Ports Inc. (MNHPI) both said it was “premature” to comment.
In an email to PortCalls, AISL president Edgar Milla said: “In reference to the President’s last SONA and the point regarding the Cabotage Law, the AISL takes it from the context of the President’s desire to have a viable and sustainable pipeline for the delivery of goods within the Philippines.
“We believe that any comment from the AISL now is premature and would only serve to pre-empt the intentions of the Philippine government. The AISL can give meaningful feedback once the intentions of the proposed amendment are made known.”
When PortCalls contacted MNHPI chief executive Richard Barclay for a comment, he replied via email: “We have not had the opportunity to discuss this topic with PLSA (Philippine Liner Shipping Association). As such, at this stage it is a little premature to comment.”
The Philippine Inter-Island Shipping Association and the PLSA also had no comment.
As the issue heated up, Cagayan de Oro Representative Rufus B. Rodriguez on July 24 filed House Bill 1789, or “An Act Allowing Foreign Vessels to Engage in Coastwise Trade in the Country and for Other Purposes.” The bill, otherwise known as the “Coastwise Trade Act of 2013” that aims to repeal the Cabotage Law, is a resurrected version of House Bill 2562 first filed during the 15th Congress.
In his explanatory note, Rodriguez said the “cabotage policy limits competition and encourages inefficiency among local vessel operators since foreign vessels are not allowed to pick up local cargo for delivery to another port within the Philippines.”
He added “local vessel operators are not forced to compete in terms of freight coast and service quality with international vessel operators” and “this barrier must be eliminated”.
He cited Section 902 of Republic Act No. 1937, otherwise known as the Tariff and Customs Code of the Philippines, which states: “Vessels Eligible For Coastwise Trade. – The right to engage in the Philippines coastwise trade is limited to vessels carrying a certificate of Philippine Registry.”
In earlier reports, PISA said relaxing cabotage does not guarantee lower shipping costs in the country.
PISA executive director Col. Leonardo Odoño said instead of lifting cabotage, the group encourages its clients to change trading practices and urges a restructuring of the maritime industry’s legal framework. He suggested changing the mode of shipping grains in bulk instead of containers to lower costs.
“For example, from P0.43 per kilo (the cost of shipping grains in containers) may be decreased to P0.30 per kilo when shipped in bulk,” Odoño said.”As well, shipping fruits and vegetables in reefer containers lessens spoilage and increases profits.”
Earlier, Maritime Industry Authority administrator Maximo Q. Mejia Jr. said “if we’re really seriously looking at taking away cabotage, first we need to make sure we can compete with the Thais and the Vietnamese and others.”
Port manager Dante Clarito of the government-owned Phividec Industrial Authority said the Philippines has to really think over the issue of the Cabotage Law. He said if the law was to be amended, both domestic and international shipping lines should benefit. “It has to be balanced to protect the domestic shipping industry,” he said.
Clarito said to prepare for the removal of cabotage, local shipping lines should “upgrade” themselves, especially their vessels. He also suggested that international shipping lines partner with domestic carriers.
Cabotage is practiced in Association of Southeast Asian Nations members like Indonesia, Malaysia, Myanmar, Thailand and Vietnam. Elsewhere, countries like China, Japan, the US, Canada and Australia also enforce cabotage.
Indonesia once relaxed its cabotage policy in the early 1980s because of the oil crisis, but its domestic fleet drastically fell as foreign lines took 97% of foreign trade and 53% of the domestic trade. The country has reintroduced cabotage in a bid to build up its national fleet and cure the trade imbalance.
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