Discussion Paper on Port Congestion

Download Discussion Paper on Port Congestion

Post on 15-Jan-2016

83 views

Category:

Documents

0 download

Embed Size (px)

DESCRIPTION

House of Representatives Congressional Policy and Budget Research Department (CPBRD) discussion paper entitled Learning from the Manila Port Congestion.

TRANSCRIPT

  • Learning from the maniLa Port Congestion By RicaRdo P. MiRa

    Issue No. 1 - May 2015

    CPBRD Discussion PaperCongressional PoliCy and Budget researCh dePartmenthouse of rePresentatives

  • Learning from the maniLa Port Congestion

    Congressional Policy and Budget Research DepartmentHouse of Representatives

    Batasang Pambansa, Quezon City, Metro ManilaTel. Nos. 931-60-32 or 931-93-92

    Website: http:www.cpbo.gov.ph

    CPBRD

  • The views and opinions in this report do not necessarily reflect the perspectives of the House of Representatives as an institution or its individual Members.

  • One of the most pressing challenges facing the Philippines today is the congestion problem in Metro

    Manila. Infrastructure development in the country has not kept pace with rapid urbanization and the increasing

    demand for infrastructure services. Last year, the imposition of the truck ban magnified the congestion problem

    not only at the Port of Manila but also in the entire National Capital Region. This has disrupted normal

    port operations causing significant delays in sending out exports and releasing imports. Although the truck ban

    has been lifted in September 2014, various factorse.g. Christmas holiday rush, Papal visit in the country in

    January 2015, etc.have exacerbated the port congestion problem and the ensuing transport bottleneck with the

    concomitant ramifications on the whole expected to make a dent on the growth of the economy. Despite the recent

    pronouncement by government officials that Manila port operations have been back to normal, critics claimed that some

    backlogs remain and key reform challenges necessary to avert the same problem in the future are yet to be made.

    This paper seeks to draw lessons from the said port congestion. It delves into the factors leading to the

    crisis, effects on the market, as well as the proposals to mitigate the problem. At the policy front, it is important to

    highlight the need to formulate a comprehensive national transport policy, a long-term policy framework aimed at

    achieving an integrated and well-coordinated national transport plan.

    the truCk Ban and the Port Congestion

    The Port of Manila (POM) is an important node in the supply chain especially for the growing

    manufacturing sector in Luzon. More than 70% of container traffic in terms of twenty-foot

    equivalent units (TEUs) in the country is cornered by the POM (Figure 1). In 2013, about 45.4%

    of import- and 35.5% of export-cargo throughput (in metric tons) for Luzon were channeled

    through the POM.

    Vibrant ports are catalysts for progress because they hasten the flow of goods in the market.

    Hence, efficient movement of freight is essential in ensuring the sustainability of the supply chain

    of many industries necessary for economic growth. Despite the long-time implementation of the

    truck ban in major thoroughfares in Metro Manila by the Metro Manila Development Authority

    (MMDA), the problem of congestion was brought to the fore by the Manila port congestion,

    which peaked some time in the second semester of 2014.

    Learning from the maniLa Port Congestion* By RicaRdo P. MiRa

    * This paper benefited from the discussions with Director Manuel P. Aquino, Director Dina de Jesus-Pasagui and CPBRD Acting Director General Romulo E.M. Miral, Jr. Ph.D.

  • 2 Learning from the maniLa Port Congestion

    In February 2014, the City Government of Manila issued Ordinance No. 8366 which banned

    trucks from plying its city roads from 5 am to 9 pm every day, except on Sundays and holidays. The

    truck ban was Manilas answer to the internal traffic jam in the city, which was said to have caused

    businesses and the public around P30 billion in economic losses per day (Cruz 2014).

    According to critics, the Manila truck ban aggravated the situation creating even more chaos than

    order. While the truck ban eased traffic in Manila, cargoes piled up at the POM. The restricted

    road access for trucks adversely affected the natural flow of cargoes in and out of the POM.

    Delays in the unloading of international vessels increased container inventory resulted to slower

    yard production and higher vessel dwell time and caused undue strain on port resources. Truck

    turnaround worsened affecting the normal delivery of supplies and aggravated traffic along major

    roads. In short, the whole domino effect led to a breakdown in road logistics cycle, which disrupted

    the supply chain especially in Metro Manila area (Perez 2015). What was once a local traffic problem

    turned into a national economic concern of crisis proportion.

    figure 1. Container traffiC (in teus)Port of maniLa versus other Ports in the PhiLiPPines

    Source of basic data: ADB Key Indicators for Asia and the Pacific 2013

    .

    Despite the lifting of the truck ban in September 2014 through Executive Order No. 67, the port

    congestion have been exacerbated by the influx of cargoes in anticipation of the Christmas season

    and series of events including the Papal visit in January 2015. At the height of this port congestion

    problem, industry experts have devised some measures or indicators in determining the magnitude

    of the port congestion problem, as follows:

  • 3Congressional PoliCy and Budget researCh dePartment

    1 As cited by Kritz, Ben D. and Periabras, Rosalie in Manila Ports Congestion: Symptom of a Bigger Mess, Manila Times, 21 September 2014.

    1. Yard Utilization Rate. Utilization rate refers to the percentage of the terminals available space occupied by the shipping containers. According to the Philippine Ports Authority

    (PPA), container yard utilization in the POM jumped from 47% to 110% between February

    and May 2014. An ideal level of utilization is around 75% to 80% (PPA 2014). Container

    terminals, as a rule of thumb, reduce production capability when yard utilization edges up

    75%. Thus, utilization rate of 90% and above for months during the port congestion is

    unprecedented.

    2. Flow Rate of Containers and Port Productivity. Movement inside the POM became extremely difficult as the release of containers had been significantly reduced to about

    3,500 TEUs to 3,900 TEUs daily at the height of the congestion from an average of

    5,000 TEUs to 6,000 TEUs daily prior to the truck ban (Hoad 2014).1 Meanwhile, port

    productivity or the number of container movement inside the ports was likewise reduced

    from 25 moves an hour to only 15 moves in the case of the International Container

    Terminal Services, Inc. (ICTSI), and 10 moves per hour from 20 moves per hour in the

    case of the Asian Terminal Inc. or ATI (Macairan 2014).

    3. Dwell Times. According to Hoad (2014), the dwell timesthe amount of time a container remains at the port after discharge from the vessel to pick up at the gate by the

    truckis 6 to 7 days under normal operating environment. Following the truck ban, the

    dwell time stuck at 13 to 15 days because many importers have used the ports as warehouses

    rather than a transit zone. In August 2014, ATI had approximately 8,000 TEUs with dwell

    times between 7 to 29 days, and another 4,000 TEUs with dwell times above 30 days or

    those defined as overstayers by the Bureau of Customs (BOC).

    4. Number of Queuing Vessels. The number of ships waiting in anchorage at any given time for port berths to be able to unload their cargoes has reached about 30 vessels from an

    average of about 8 to 10 vessels during summer. Given the seven-month implementation

    of the truck ban, a total of 37,000 Manila-bound TEUs have reportedly piled up in the

    ports of Hong Kong, Singapore, and Kaoshiung in Taiwan. Foreign shipping lines, i.e.

  • 4 Learning from the maniLa Port Congestion

    Hapag Lloyd, Hanjin Shipping and American Presidents Line, have even temporarily

    pulled out their vessels from calling at the POM due to the long queuing for berthing as

    well as the difficulty of shipping out empty containers (Bayos 2014).

    other ContriButors

    Aside from the backlog at the POM as a result of the 7-month implementation of the truck ban

    in Manila, the following factors also contributed to the port congestion:

    Anti-Colorum Truck Campaign. In June 2014, the Land Transportation Franchising and Regulatory Board (LTFRB) and the Land Transportation Office (LTO) issued the

    joint administrative order (JAO) 2014-01 which imposed a fine of P200,000 for operators

    of unregistered or colorum trucks/trailers-for-hire.2 Relatedly, the LTFRB also issued a

    regulation barring trucks at least 15 years old from securing a franchise. Under this policy,

    about 75% of the trucks in the country would be phased out (Port Users Confederation

    2014). In effect, the new regulations have worsened the scarcity of trucks and trailers that

    could carry, pick up and deliver cargo containers from the ports to regional markets.

    2 A colorum truck/ trailer refers to those with green plate instead of the yellow plate used by public utility vehicles. This means that these trucks should not be hired to carry cargo of third party.

    taBLe 1. ComParative numBer of registered truCks, asean (in thousands)

    Source of basic data: ADB Key Indicators for Asia and the Pacific 2013

    Indonesia Malaysia Philippines Singapore Thailand Vietnam2008 4,452 909 296 156 772 3982009 4,498 936 312 158 791 4762010 4,688 966 318 158 817 5522011 4,