The congestion at the Port of Manila in 2014 sharply demonstrated the extent of damage that poorly planned and badly coordinated policymaking can inflict on the Philippine economy, according to a government think tank.
The Philippine Institute for Development Studies (PIDS), in its latest economic policy monitor report titled “Effective Regulations for Sustainable Growth”, said the congestion problem last year escalated “due to lack of rigorous analysis of policy options and lack of proper coordination with stakeholders” and that it would likely recur due to growing cargo volume.
Although the truck ban in the City of Manila was imposed by the local government in an attempt to ease road traffic, the move backfired and even aggravated the problem.
“In the end, this local ordinance did more harm than good, resulting in unnecessary regulatory burden,” PIDS stated.
It noted that the truck ban led to economic damage valued at P43.85 million, arising from customs’ revenue losses, output and productivity losses, and increase in vehicle operating costs.
“This is a clear example of the negative impacts of the lack of regulatory quality and coherence in the country,” the think tank said.
The cargo truck ban had triggered a host of complaints from transport and logistics operators, importers, exporters, and foreign chambers of commerce lamenting its economic consequences, PIDS noted. “It seems that proper coordination with various stakeholders was not done prior to the issuance of the local regulation,” the report said.
PIDS said the poor coordination springs from having no strong central oversight body or institutional mechanism to systematically coordinate, check for consistency, and review regulations or amendments proposed by regulators against existing ones followed by agencies such as the Metropolitan Manila Development Authority, Energy Regulatory Commission, Toll Regulatory Board, and Land Transportation Office. Reviewing the relevance, coherence, and quality of regulations is a task diffused among as many as 60 different regulators, it said.
“In effect, regulatory bodies function as regulatory silos that focus only on their particular sectors to regulate,” the report said.
PIDS said the national government or a local government does create ad-hoc task forces from time to time that do require coordination among concerned government agencies in order to tackle specific regulatory issues or problems.
For instance, to alleviate congestion at the Port of Manila in the wake of the truck ban, the Cabinet Cluster on Port Decongestion (CCPD) was set up to implement remedial measures, which included, among others, imposing fines on cargoes that were not pulled out within five days. The New Container Terminal 2 at the Subic Port was also opened as an extension of the Port of Manila. (No implementing rules on the latter have so far been issued- ed.)
However, PIDS noted that the measures were “band-aid” solutions and that more lasting ones were needed to “solve this problem once and for all.”
Seven months after imposing the ban, the Manila City government indefinitely lifted it and in March 2015, Cabinet Secretary and CCPD chairman Jose Rene Almendras announced that operations at Manila ports were normal and congestion had eased.
Port congestion likely to recur
“Still, it is very likely that the congestion problem in the Port of Manila will recur given the growing volume of cargo being handled,” PIDS said.
“More lasting solutions must be taken by the government and stakeholders to ensure the optimum utilization of ports,” the report added.
The PIDS study took note of the effect of last year’s congestion on the country’s export sector.
It pointed out that the growth of net exports is expected to be moderate in 2015 “given that there are residual concerns over the backlogs caused by the Manila port congestion during the most part of 2014.”
The continuing high cost and unreliability of electricity supply in areas affected by tight reserve margins add more downward pressure on exports. But expectations of continued lower oil prices will dampen the impact on operating cost of the electricity shortfall, the think tank noted.
In addition, the country’s overstretched physical infrastructure (aging power plants and tight power supply margin, port congestion, airport congestion, and urban transport congestion) “may also result in problems in the logistics supply chain and add costs to production in case major breakdowns occur.”
“At the same time, exports could also be lower than expected if the country’s competitiveness is further outpaced by its ASEAN neighbors’ growing competitiveness and responsiveness to GVCs (global value chains),” PIDS said. — Roumina Pablo