Incentives for domestic shipowners eyed under Public Service Act implementing rules

Manila North Harbor
  • Incentives for domestic shipowners eyed under Public Service Act implementing rules
  • Maritime Industry Authority Administrator Robert Empedrad said the implementing rules will allow domestic shipowners to compete with foreign players
  • Marina may require vessels of foreign players entering the domestic market to register as a Philippine-flag carrier

Incentives for domestic shipowners are being eyed under the still to-be drafted implementing rules for the amended Public Service Act (PSA), according to the Maritime Industry Authority (MARINA).

MARINA Administrator Robert Empedrad in a recent webinar assured domestic shipowners that the draft rules will allow them to compete with foreign players, now that the domestic shipping industry is open to 100% foreign investment.

No details were given on the type of incentives being eyed although Empedrad said part of the agency’s plans for the industry is to push for amendment of the Domestic Shipping Development Act of 2004 in order to restore the 12% value-added tax exemption on importation of ships, and the amendment of the Tax Reform for Acceleration and Inclusion Law to exempt domestic shipping companies on fuel excise tax.

Empedrad was more forthcoming with other proposed provisions of the draft implementing rules. He said the rules may require foreign vessels entering the domestic market to register as a Philippine-flag carrier. This should boost the local industry as Philippine flag carriers are necessarily manned by Filipino seafarers and repaired in local shipyards, he said.

Signed into law on March 2022, Republic Act No. 11659, or An Act Amending Commonwealth Act 146 otherwise known as the PSA, relaxes foreign ownership restrictions in certain industries, including domestic shipping.

READ: Duterte signs amended Public Service Act

RA 11659 identifies public utilities as follows: distribution and transmission of electricity; petroleum and petroleum products pipeline transmission systems; water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems; seaports; and public utility vehicles.

Any industry not on the list of identified public utilities will remain as public services and will be liberalized and not be bound by the 60%-40% ownership principle under the Constitution.

Domestic shipping is one of the public services no longer considered as a public utility, hence open to 100% foreign ownership.

Empedrad said the expected entry of foreign investors because of the amended PSA will provide more employment opportunities for Filipino seafarers, and increase profitability of local shipbuilding and ship repair operators. He added foreign players will also be using the services of local logistics players while they operate in the country.

The MARINA chief said the amended PSA should be seen as an opportunity rather than “put(ting) a dent on the profitability of our domestic shipowners.”

MARINA is one of a number of agencies that will help draft implementing rules for RA 11659.

Same old problems

In the same forum, Philippine Liner Shipping Association president Mark Matthew Parco noted foreign players entering the domestic shipping scene will face the same problems experienced by local players.

These include lack of economies of scale as the country’s trade volume is small; port infrastructure issues forcing shipowners to use vessels with gears, which result in slower productivity and higher costs; poor road infrastructure to and from the ports translating to higher trucking rates; and regulatory challenges such as having to deal with multiple agencies, high fuel taxes, regular tariff increases, mandatory pilotage, and various new policies that add to administrative costs. – Roumina Pablo