The domestic shipping sector is crafting a 20-year maritime roadmap to help guide Philippine policy makers, according to Doris Magsaysay-Ho, chief executive officer and president of the Magsaysay Group of Companies.
“We’re working together on a roadmap for the overall maritime industry,” Ho said in a chance interview at Lorenzo Shipping Corp.’s annual shareholders’ meeting. Lorenzo is under the Magsaysay Group.
The private sector-led initiative is a joint project of the Philippine Inter-Island Shipping Association (PISA), the umbrella organization of the country’s domestic associations; Filipino Shipowners Association; shipbuilding and ship repair operators; and the seafaring sector and labor unions, Ho said.
Asian Institute of Management has been tapped to draft the roadmap that Ho said is expected to be completed by November right before the Asia-Pacific Economic Cooperation (APEC) meetings in the country are concluded. Ho is chair of the APEC Business Advisory Council.
The roadmap would include suggestions on “what we think is needed to really become a very, very successful maritime nation,” Ho said.
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Port development
She added that with the passing of the co-loading bill in both houses of Congress, the government shows it is committed to improving shipping efficiency and lowering costs. But Ho believes this goal will be achieved in tandem with developing port infrastructure and changing trade patterns, from the current small production volumes to clustering production areas near ports to create economies of scale, while instituting decentralization policies.
Ho said the sector is happy government now realizes that lowering costs in shipping is really “about the government working on infrastructure because (Philippine) ports are teeny-weeny.”
She said the situation is very different for foreign shipping and domestic shipping because foreign liners “don’t have the same issues as we do, they don’t go to our domestic port.”
Domestic shipping lines, for instance, need to acquire self-sufficient vessels with cranes because many outports in the country don’t have cranes and other necessary cargo-handling equipment; many outports also have shallow drafts.
International lines likewise enjoy some tax and duty incentives not available to domestic lines.
Clustering for economies of scale
Aside from port infrastructure, the shipping executive said clustering of manufacturing and economic zones near ports, airports, and road networks would be a good move.
Ho explained that the biggest impact on costs is economies of scale. “You have to increase the per capita of people so that you can increase economies of scale.”
She further explained that “the economies of scale can only be built up if you have the trade, and the trade can only be built up with the determination to cluster, and therefore you can now have bigger ships.”
PISA, in an earlier position paper on cabotage, said a larger ship is cheaper per unit than a small one, the kind that domestic shipping lines have. PISA added that achieving economies of scale in Philippine domestic shipping is hard because ports don’t have sufficient trade to support a larger ship.
Ho noted that production areas “are all over the place” and far from ports. She said she has heard of plans to transfer Cebu’s port to a new location. “If you do, don’t just make it a port. Really create a huge production hub,” Ho said.
She noted that when she visited Cebu to look for exporters, she was able to visit only one company due to heavy traffic and the distance between export warehouses.
Ho noted that moving the facilities to only one area will “cut all their land costs.”
She said clustering is the key “that will really make an impact on the costs and the efficiency of shipping, but we need to start first with trade and then shipping always responds to trade.”
Opportunities in integration
Aside from making suggestions on infrastructure development and changing trade patterns, the roadmap will also outline emerging opportunities for the Philippines in an integrated region.
Ho said the country’s advantage with the integration of the region is its maritime sector, which boasts a strong seafaring force and robust shipbuilding and ship repair industry. She added that the country’s mindset should not be fear of integration, but planning what to offer.
“We should be thinking, ‘What am I going to sell?’” Ho said, adding the industry should only be afraid “when you’re not ready to sell something.” – Roumina Pablo
Image courtesy of renjith krishnan at FreeDigitalPhotos.net
