PPA already splitting regulatory and operation roles, says GM

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PPA already splitting regulatory and operation roles, says GM
  • The Philippine Ports Authority had begun splitting up its regulatory and operational functions by privatizing port operations when it implemented the Port Terminal Management Regulatory Framework, says the agency’s head
  • PPA general manager Jay Santiago said PPA under PTMRF “no longer participates in any tariff increase” activity and “merely gets a flat fee on an annual basis for the duration of the concession term”
  • He said PPA has so far privatized 19 ports that are major gateways and is in the process of privatizing more ports
  • HB 1400 author Bagong Henerasyon Party List representative Bernadette Herrera-Dy had requested another hearing of the bill with stakeholders attending so they can share their inputs

The Philippine Ports Authority is already splitting its regulatory and operational functions by privatizing port operation via the Port Terminal Management Regulatory Framework (PTMRF), according to PPA general manager Jay Daniel Santiago.

The PPA chief gave this statement during the recent joint virtual hearing by the Committees on Transportation, and Government Enterprises and Privatization on House Bill (HB) No. 1400. The measure seeks to separate the regulatory and commercial functions of PPA by converting the agency into a Philippine Ports Corporation (Philports) and transferring its regulatory functions to the Maritime Industry Authority (MARINA).

READ: House bill seeks to strip PPA’s regulatory power

The bill noted that “under no circumstance should a regulatory agency benefit from its own regulation and/or use its regulatory powers to protect itself from competition at the expense of public interest.”

While PPA’s mother agency, the Department of Transportation (DOTr), expressed full support for HB 1400, noting the separation of regulatory functions from the power to operate public facilities is in line with global best practices to minimize conflict of interest – it deferred comments on the bill “with due deference” to PPA’s expertise on the subject.

During the joint hearing, Santiago said: “PPA has already embarked on a process by which we are already segregating the operations and the regulatory functions of the agency” by implementing PTMRF.

Embodied under PPA Administrative Order 03-2016 issued in 2016, PTMRF outlines guidelines for awarding terminal management contracts. Under AO 03-2016, investments in ports are to be categorized into six tiers, ranging from a fully private concession to a fully PPA-managed port.

The framework has among its objectives promoting private sector participation in port operations to provide higher-quality service.

Under this framework, Santiago explained that PPA has been bidding out private concessions to ports so they may be operated by private firms and PPA will “merely be owning the land, owning the facilities” and regulating operations.

He further said that, contrary to the previous regime where PPA derived a percentage from the revenue of private operators – which “solicited criticism” that the ports authority took advantage of tariff increases – PPA under PTMRF “no longer participates in any tariff increase” activity and “merely gets a flat fee on an annual basis for the duration of the concession term.”

Under AO 03-2016, the contactor should remit to PPA a periodic concession and/or management fee and a variable fee as specified in the agreement between the ports authority and the contractor. The concession and/or management fee will be increased periodically, subject to a pre-established formula to be determined by PPA.

Should actual traffic volumes exceed certain pre-determined amounts in any given period during the life of the agreement, the contractor should also remit a variable fee to PPA.

In 2019, PPA issued AO 10-2019, which provides the uniform port tariff for use as base tariff by operators of ports categorized as Tier 3 under PTMRF. Upward rate adjustments are to be implemented every three years, subject to PPA’s conditions.

Currently, operators of other ports not under PTMRF may apply for a cargo-handling tariff adjustment if the consumer price index has increased by at least 5% within a three-year period.

Santiago earlier said PPA estimates an increase of around 600% in government revenues under the PTMRF compared to revenues earned by the government from cargo-handling contracts awarded in PPA terminals during past administrations.

READ: PPA sees 600% more revenues under new port contract scheme

Santiago said the purpose of privatizing more ports through PTMRF is “to migrate [PPA] from its regulatory operator function into a purely regulatory regime.”

He said PPA has so far privatized 19 ports that are major gateways and is in the process of privatizing others.

Santiago said proponents recommend studying the situation of PPA and the port industry so “Congress can better appreciate nuances” in the country’s port administration. He said this will also avoid the situation where there will be requirements for funding future developments which new ports entity won’t have the ability to fund.

Under HB 1400, Philports will not be a revenue-generating entity as opposed to PPA, which has fiscal autonomy.

“We support the intention and the observation that there has to be a separation between the regulatory function and the operations functions of any particular government agency. However, as I stated earlier, the situation or the position of PPA is unique, if not peculiar, in the sense that PPA generates its own revenue,” Santiago said.

Bagong Henerasyon Party List representative Bernadette Herrera-Dy, who authored HB 1400, requested another hearing on the bill with stakeholders attending so they can share their inputs. She said she is also open to other options suggested during the hearing but noted that “what’s important is that the separation [of functions] should be present.”

Several industry stakeholders and business groups have for years been requesting and recommending the separation of PPA’s functions, citing conflict of interest and saying exercising both functions “unnecessarily increases logistics costs.”

Various industry roadmaps and studies have also recommended the separation of PPA’s regulatory and commercial functions, especially removing PPA’s share in cargo-handling revenues. – Roumina Pablo