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RTG v2The Philippine cargo transport industry is optimistic that 2015 will bring better prospects for the growing local economy but believes that port congestion will still be a major issue this year.

This is the overall sentiment of executives from various industry organizations who shared their views with PortCalls, saying that forecasts of a robust economy this year will benefit the cargo transport industry.

The Philippine Liner Shipping Association (PLSA) said the increase in economic activity means a direct increase in shipment volume while Container Depot Alliance of the Philippines (CDAP) president Carl Fontanilla said the international shipping industry is “one of the major beneficiaries” of expected better trade in 2015.

“The GDP is still seen to take on a robust trend next year playing with 6% to 7% growth,” Arnel Gamboa, director and immediate past president of the Supply Chain Management Association of the Philippines (SCMAP), said.

Gamboa said the strong economic outlook for 2015 “may manage to overcome beleaguering issues of the transport and logistics sector such as port congestion, Manila traffic jams, colorum (without franchise) vehicles, exorbitant hustling and shipping costs (due to demurrage, port congestion surcharge and trucking rate hikes).”

Having an impact on this year’ s progress, Gamboa noted, are the upgrade in the country’s credit rating from agencies such as Standard & Poor’s, steady increase in overseas Filipino workers and business process outsourcing industries, and 2015 being a pre-election year.

The drop in crude oil prices is a bonus and “should help stabilize transport costs for both commuters and goods,” the supply chain executive said.

As it is, domestic airlines and foreign carriers with Philippine operations have lifted their fuel surcharges. Domestic shipping lines are following suit as well.

Confederation of Truckers Association of the Philippines (CTAP) president Ruperto Bayocot said truckers see 2015 as “brighter than 2014 because the national government is already awake and has realized that the trucking industry is the backbone of the economy.”

Patrick Ronas, president of the Association of International Shipping Lines (AISL), said this year also shows promise as everyone is “now aware of how fragile our logistics ecosystem can be.

“We need to work back to the flow of operations in terms of the physical aspects, (while) the pricing of services needs to go back to pre-congestion days.”

All cargo transport industry executives agree more should be done to alleviate port congestion and prevent its recurrence. Suggestions include both short- and long-term solutions, such as increasing capacity of roads and ports; expediting construction of port connector roads; making permanent 24/7 truck routes and designating eastern and western truck routes in Metro Manila; establishing truck holding areas; and putting up more container yards.

Holding a less sanguine view is Samson Gabisan, director of the Chamber of Customs Brokers, Inc. (CCBI), who said the overall outlook for 2015 is “somewhat gloomy” due to customs brokers’ experience with port congestion.

Gabisan noted that with port congestion and “the excessive charges by shipping lines” experienced in 2014, many importers opted to “cut their imports, and some even stopped.”

This means, Gabisan said, “less arrivals (of shipments), less business,” while adding that 2015 could be worse because “businessmen might adopt (a) wait-and-see attitude.”

Port congestion

The year 2014 was indeed a challenging period for the cargo transport industry, coming off from an already challenging 2013 that saw super typhoon Yolanda wreak havoc on some parts of the Visayas in November and the Metropolitan Manila Development Authority (MMDA) implement the six-day total truck ban in December, among others.

And just when the industry was starting to recover from the 2013 disturbances came the city of Manila’s daytime truck ban in February 2014 that limited truck movements, triggering massive port congestion. Delays in deliveries led to soaring costs that ultimately caused higher prices of consumer goods. When the ban was finally lifted in September, trade had been severely affected – with reduced imports reflected by lower container throughputs.

After that yard utilization improved at Manila ports, but again picked up with a series of holidays during the Christmas and New Year break, and the five-day papal visit in mid-January 2015.

As of February 2, the combined utilization at the Manila International Container Terminal (MICT) and the Manila South Harbor was 86%, according to the Philippine Ports Authority (PPA). On that day, four vessels were docked in South Harbor and 11 vessels waiting while MICT had seven docked and five waiting. Average waiting time was two days, said PPA.

A Feb 3 advisory from MCC Transport, however, said the average waiting time for South was still at 4-5 days and at MICT, 4 days.

Stakeholders see a lull in cargo movement during Chinese New Year (from Feb 19), helping ease port congestion.

SCMAP’s Gamboa and CDAP’s Fontanilla both expect congestion to abate by February or March when imports go into low gear and mostly empty containers are shipped out.

Gamboa said if everything goes as planned, port operations may return to normal by May or June. “This is another time when demand winds down toward the ghost month (August).”

CTAP’s Bayocot said port congestion may ease later than February due to the implementation of a six-month truck ban on Roxas Boulevard. The ban prolongs travel time of trucks going to and coming from the southern portion of Metro Manila, the dominant destination of shipments in and out of Manila ports.

If congestion still does not ease during the first quarter, however, “we expect congestion to be prolonged for another year’s cycle,” Fontanilla said.

PLSA, the association of domestic container lines, sees no end in sight for port congestion in “the near future as it is more a problem of connectivity” that needs long-term solutions.

Better coordination

Stakeholders agree that the best measure taken by government to ease port congestion was to facilitate coordination between stakeholders and concerned government agencies.

“We believe this action of government prevented the situation from getting worse,” Fontanilla said.

AISL’s Ronas said, “Through the process (of) collaboration between the various sectors (that) ensued and though not all were satisfied (with) the end results to date, there has been marked improvement in dialogue and relationships between the parties involved were strengthened.”

All cargo transport industry executives agree more should be done to alleviate congestion and prevent its recurrence. Suggestions include both short- and long-term solutions, such as increasing capacity of roads and ports; expediting construction of connector roads; making permanent 24/7 truck routes and designating eastern and western truck routes in Metro Manila; establishing truck holding areas; and putting up more container yards.

PLSA suggests further the adoption of a “comprehensive port modernization plan or an overall transportation master plan that would provide for an efficient, integrated intermodal transport connection.”

Perhaps an answer to this call is the Philippine Multimodal Transport and Logistics Roadmap currently being crafted by various cargo industry associations in consultation with relevant government agencies. The roadmap was solicited by the Department of Trade and Industry, and is being spearheaded by the Philippine International Seafreight Forwarders Association and the United Portusers Confederation. It should be ready by the middle of the year.

CDAP’s Fontanilla said government agencies involved in transportation such as the MMDA, Land Transportation Office, Land Transportation Franchising and Regulatory Board, and traffic management units “should get together and agree on higher standard of safety and environmental policies and regulations and a unified implementation.”

SCMAP’s Gamboa, meanwhile, pointed out two things that must be quickly set up: an extensive industrial and business development plan to cover zoning, infrastructure development, transport strategy, and capacity planning; and the office of a supply chain czar—a Cabinet position that will be spearhead planning, implementation and regulation of logistics and transport activities within mega cities, including the National Capital Region.

“Only through the above can we actually resolve port congestion as the problem revolves around several issues like infrastructure, urban planning, policies and intra-departmental regulating bodies in the executive branch,” Gamboa explained.

He added that creating an office for a supply chain czar “will help harmonize and prioritize projects according to the real needs and capabilities of the time.”

At present, no single Philippine government agency is looking over the entire supply chain and logistics industry; a number of agencies – overseen by different departments (Department of Transportation and Communications, Department of Trade and Industry, Department of Finance, Department of Public Works and Highways, among others) — handle different aspects of the chain. The apparent lack of coordination among these agencies has sometimes resulted in the adoption of policies that are good for one sector yet bad for another.

The Philippine Multimodal Transport and Logistics Roadmap is specifically proposing the creation of a Commission peopled by career officials knowledgeable in the cargo transportation and logistics business, one of whom will be appointed czar for the industry.

Traffic gridlock, ASEAN pros and cons

Port congestion is not the only major challenge for the industry in 2015.

Another, according to SCMAP’s Gamboa, is the perennial traffic jams—partly rooted in a mismatch between existing roads and vehicle volume. “With aggressive development, sound investments in infrastructure have to be made. Investors can easily be dissuaded once they experience the horrific experience of plying EDSA or C5 during rush hour,” Gamboa said.

Power is another “looming problem as businesses gear up for higher growth this year,” he said.

Gamboa noted the President’s proposed emergency powers to address the anticipated power shortage “does not bring comfort; this may mean higher cost of doing business—either through the costly output of bunker-chunking generators on barges or the downtime caused by electrical outages.”

Meanwhile, the dawn of the Association of Southeast Asian Nations (ASEAN) Economic Community this year “may bring good tidings to some and probably a dose of bad news for others,” according to Gamboa. “Not many companies and businessmen are prepared for the tougher competition coming in 2015. It will be a high-rewards-and-high-risks environment.”

CCBI’s Gabisan said customs brokers are looking closely at ASEAN integration since it’s a “new horizon” for them.

Domestic carriers, as represented by PLSA, are also keenly watching developments on this front. They are concerned about their state of preparedness and are bracing for the possibility of lowering freight rates due to “extensive internal and external competition”.

Cabotage

Beyond this, local shipping lines are looking out for the possible lifting of cabotage, which grants local carriers the exclusive right to engage in interisland transport. President Benigno Aquino in his 2013 State of the Nation Address called for the lifting of the policy to lower prices of goods. But this means having to revise part of the Philippine Constitution.

The Senate Committee on Trade, Commerce and Entrepreneurship is instead proposing (and has since approved) a bill allowing foreign shipping lines to dock at multiple Philippine ports as long as they carry import or export cargoes cleared by the Bureau of Customs (BOC). A similar measure is pending at the Lower House.

Since the Senate bill effectively leaves the transport of domestic cargo to domestic lines, local carriers take no issue with the legislation.

Meanwhile, PLSA sees the continued increase in port rates with no commensurate improvement in efficiency in port operations as another challenge this year, as well as the “conflicting interpretation of government laws, no active private sector involvement in crafting rules, laws, and regulations.”

AISL’s Ronas said liners likewise “face some inconsistencies in government policies which we hope can be ironed out sooner.”

Weeding out old trucks

Aside from port congestion and truck bans, CTAP’s Bayocot said the trucking sector is wary of government’s plan to modernize the industry by phasing out trucks more than 15 years old. This, they said, could mean a massive shortage of trucks — with many of the existing fleet aged 30 years or more — a situation that could have the same disastrous effects as the daytime truck ban.

CTAP earlier said the grant of a truck franchise should be based on a truck’s road worthiness rather than its age, since a refurbished truck is as good as, or sometimes better than, a new one. New truck heads – costing millions of pesos — are also beyond the reach of many operators.

Automation

In 2015, the industry may expect automation projects implemented by both the government and the private sector. These projects include the new BOC automation system to replace the electronic-to-mobile system and the adoption of the electronic air manifest; the Bureau of Internal Revenue’s automation of accreditation of importers and customs brokers; truck appointment system at the container terminals; and the web-based application for the return of empty containers in depots.

At the legislature, the Customs Modernization and Tariff Act has been tagged a priority bill by both Houses of the Congress. The Lower House has passed the bill at the committee level. The Senate has vowed to approve the bill by the middle of the year.

The year just past “taught us a lot of lessons”, said AISL’s Ronas.

“The country experienced the worst and the most prolonged port congestion in history.  Though things are getting better now, the momentum has to be sustained in the coming weeks for us to actually feel the positive effect of the efforts made by those involved in actually fixing it,” Ronas added.

Moving forward, the shipping line executive said they would like to see continued cooperation among stakeholders. “We would like to see the government further promote and help us in terms of trade facilitation. We should take advantage of the continued growth of the economy as this will certainly drive volumes up for this year.”

SCMAP’s Gamboa pointed out that if the industry survived 2014’s “nightmarish logistics gridlock and still delivered an impressive performance, we should be able to hurdle the challenges” of 2015 easily.” – Roumina Pablo

Photo from Manila North Harbour Port, Inc

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