discussion paper on port congestion

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.


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 4,959 998 329 160 853 5972012 5,286 1,032 342 160 898 651

Comparative data in the Association of Southeast Asian Nations (ASEAN) show that the

Philippines has consistently been the second lowest in the number of registered trucks

from 2008 to 2012, only higher than Singapore (Table 1). Comparing the data from the LTO

and LTFRB, out of the 358,445 trucks in the country, around 44,996 have franchises; and

of the 40,145 trailers trucks, only 7,936 have franchises (LTFRB 2014). The lack of trucks

and trailers to handle cargoes obviously does not bode well especially with the coming of


the ASEAN Economic Community (AEC), which is expected to boost international trade

among ASEAN-member countries and the rest of the world.

Import Clearance Certificates. According to the World Bank (2015), the complexity of securing import clearance certificates also contributed to the crawling pace of shipment

releases at the POM. While processes in the BOC have been streamlined, processes in the

Bureau of Internal Revenue (BIR) have seen little improvement as shown in some redundant

and cumbersome processes namely tax declaration, certified true copy of BIR certificate

of registration, authenticated copy of income tax return, details of registration address,

personal profile with ID picture for individuals, standard registration requirements from

Securities and Exchange Commission (SEC) for corporations, and standard registration

requirements from the Cooperative Development Authority (CDA) for cooperatives.

Meanwhile, the Philippines slipped to 65th place in 2015 from 53rd in 2014 in Trading

Across Bordersone of the key criteria used in measuring Ease of Doing Business.

Although higher than Vietnam (75th), the Philippines is lower compared to Indonesia

(62nd), Thailand (36th) and Malaysia (11th). Based on the World Banks Ease of Doing

Business 2015, although the countrys nature of export and import procedures in terms

of documentation, and the amount of time to export and import is within the benchmark,

the cost to export and import is higher than the regional average for East Asia and Pacific

(Table 2).

taBLe 2. trading aCross Borders (ranking) and indiCators

Source: World Bank Ease of Doing Business 2015

Philippines Indonesia Malaysia Thailand VietnamEast

Asia & Pacific

Trading Across Borders (Rank) 65 62 11 36 75 --Documents to export (no.) 6 4 4 5 5 6Time to export (days) 15 17 11 14 21 20.2Cost to export (US$/container) 755 571.8 525 595 610 864Documents to Import (no.) 7 8 4 5 8 7Time to Import (days) 15 26 8 13 21 21.6Cost to Import (US$/container) 915 660 560 760 600 895

Road Repairs, Constructions and Informal Settlers. The port congestion problem came at a time when the Department of Public Works and Highways (DPWH) was

implementing major and minor roadwork projects. The traffic congestion partly explained

the slowdown in the truckers turnaround time causing delays in the delivery of cargoes


and containers. According to the Port Users Confederation (PUC), from the 3 to 5 trips

per week, truckers only made 1 to 3 trips per truck per week around Metro Manila. The

growing informal settlers at the port area especially in R10, Anda Circle and Bonifacio Drive

not only worsened traffic congestion but also hampered port operators from expanding

their container yards.

Cost of the Port Congestion

The truck ban that was supposed to address a local traffic problem in Manila triggered the port

congestion issue that had adverse effects in the countrys supply chain networks.

The problem of congestion and the resulting inefficiency of the delivery system in the POM

jacked up prices of related port services including shipping (Table 3 and 4) and trucking services

(Table 5). Local traders complained of higher demurrage and detention charges by shipping

lines that eroded their profitability and the countrys overall competitiveness. Trucking fees also

increased due to higher demand for trucking services and the general uptrend in related costs

such as fuel, spare parts and labor cost. These price increases would later drive higher prices for

imported commodities including those products with imported components at the expense of the

consuming public.

taBLe 3. standard shiPPing Line rates for 20- and 40-feet Containers(seLeCted shiPPing Lines)

Note: 1Does not include chemical washing of containers charge by some shipping lines Source: Various sources

Shipping Lines Doc Fee ($)Amount of Container

Deposit (P)Cleaning1 Terminal Charge (P)

20 40 20 40 20 40 20 40Alexandria Marine & General Shipping Agency Inc. 50 50 2,500 5,000 P300 P600 5,645 7,055Benline Agencies Philippines International 50 50 7,500 10,500 $10 $20 5,645 7,055China Shipping Manila Agency Inc. 45 45 6,000 8,000 P400 P800 5,645 7,055CMA-CGM Philippines, Inc. 45 45 7,000 12,000 P500 P800 5,645 7,055COSCO Philippines Shipping Inc. 45 45 6,000 8,000 $10 $20 5,645 7,055Evergreen Shipping Agency Philippines Corp. 45 45 10,000 15,000 P400 P800 5,645 7,055KMTC Philippines Corp. 45 45 5,000 5,000 P350 P650 5,645 7,055MCC Transport Singapore PTE. Inc. 50 50 5,000 10,000 P1,000 P1,000 5,645 7,055Orient Overseas Container Line, LTD. 35 35 7,000 12,000 $20 $20 5,645 7,055RCL Feeders Philippines Inc. 60 60 9,000 12,000 P800 P800 5,645 8,140SITC Container Lines Philippines, Inc. 50 50 7,000 14,000 P445 P883 5,645 7,055Sky International Inc. 50 50 8,000 12,000 $10 $20 5,645 7,055Uniship Inc. 50 50 2,500 5,000 P300 P600 5,645 7,055Wallem Philippines Shipping Inc. 45 45 5,000 7,000 P300 P600 5,645 7,055Wanhai Lines Philippines, Inc. 45 45 8,000 12,000 $10.50 $21 5,700 7,150


taBLe 4. new Charges from shiPPing Lines (for 20- and 40-feet Containers)due to Port Congestion, seLeCted shiPPing Lines

Source: Various sources

Shipping LinesPort Congestion

Surcharge ($)Equipment

Imbalance ($)

Emergency or Operation

Recovery Cost ($)

20 40 20 40 20 40Alexandria Marine & General Shipping Agency Inc. 150 300 200 400 150 300Benline Agencies Philippines International 150 300 200 400 100 200China Shipping Manila Agency Inc. 100 200 200 400 150 300CMA-CGM Philippines, Inc. None None 200 200 250 500COSCO Philippines Shipping Inc. 100 200 200 400 150 300Evergreen Shipping Agency Philippines Corp. 100 200 150 300 200 400KMTC Philippines Corp. None None 250 500 200 400MCC Transport Singapore PTE. Inc. 300 600 150 300 None NoneOrient Overseas Container Line, LTD. 200 400 150 300 100 200RCL Feeders Philippines Inc. 150 300 200 400 100 200SITC Container Lines Philippines, Inc. 100 200 200 200 150 200Sky International Inc. 250 500 200 400 250 500Uniship Inc. 100 200 200 400 150 300Wallem Philippines Shipping Inc. None None 250 500 200 400Wanhai Lines Philippines, Inc. 100 200 200 400 150 300

For one, the Philippine Chamber of Commerce and Industry (PCCI 2014)3 identified the so-

called port congestion surcharge, empty equipment imbalance and the associated handover and

operation recovery costs as among those new charges introduced by shipping lines at the height of

the port congestion problem. The empty equipment imbalance refers to the surcharge on ocean

freight, imposed by shipping lines, to recover costs related to removing large quantities of empty

containers from a country where there is no export use for those containers. The charge is usually

a flat rate per container, and is not necessarily applied in all trades nor at all times. It is only applied

when such trade imbalances necessitate large expenditure on shifting empty containers from one

place to another.

Based on a survey by the Export Development Council (EDC) on the impact of port congestion

to export industries, Philippine Exporters Confederation Inc. (Philexport) disclosed that food and

garment shippers suffered from losses as much as $450,000 in terms of cancelled orders and lost

opportunities since the port congestion started. Revenue losses from exports of electronics were

pegged at about $1,000 per metric ton. In order to survive in their business, shippers were forced

to send their cargoes via the more expensive air shipment, as well as continued to implement

downsizing, rotation or work stoppage due to delays in the arrival of raw materials.4

3 As cited by Campos, Othel V. in Port Congestion Shuts Down Two Firms, Manila Standard, 21 October 2014.4 As cited by Remo, Amy R. in Port Congestion Problem Sends Exporters Reeling, Philippine Daily Inquirer, 24 November 2014.


taBLe 5. PresCriBed rates for Containerized Cargoes (oLd rate vs new rate)1

Note: 1Old rate effective January 2011, new rate effective March 2014. Actual rates could be higher or lower than the prescribed rates. Source: Confederation of Truckers Association of the Philippines, Inc. (CTAP)

From MICT/South Harbor to the followingSelected Destinations

20 40Old New Old New

Metro ManilaManila

Port Area, Intramuros, Binondo and Tondo 7,000 10,500 8,300 12,450Ermita, Malate, Sta. Cruz 7,630 11,400 8,700 13,050Sta. Mesa, Sta. Ana, Sampaloc, others 8,700 13,050 9,800 14,700

Quezon CityPoint not going beyond EDSA 9,700 14,550 10,600 15,900Point beyond EDSA 10,900 16,350 12,000 18,000

Caloocan CityPoint not going beyond EDSA 8,300 12,450 9,200 13,800Point beyond EDSA 9,200 13,800 10,300 15,450Caloocan North 12,000 18,000 13,100 19,650

Navotas and Malabon 8,300 12,450 9,200 13,800Valenzuela 11,400 17,100 12,300 18,450Makati and Mandaluyong

Points not going beyond EDSA 10,500 15,750 11,300 17,250Points beyond EDSA 11,500 17,250 12,500 18,750

San Juan 10,500 15,750 11,500 17,250Marikina, Pasig, Pateros, Taguig and Paranaque 11,500 17,250 12,500 18,750Las Pinas and Muntinlupa 12,500 18,750 13,600 20,400Northern Luzon (Selected)Pampanga

Apalit 15,600 23,400 17,000 25,500Macabebe, San Fernando, Sto. Tomas, others 17,800 26,700 19,200 28,800Candaba, Bacolor, Guagua, others 19,200 28,800 20,600 30,900Sasmuan, Libao, Porac, Angeles 20,900 31,350 22,300 33,450

ZambalesOlongapo and Subic 27,500 41,250 29,200 43,800Iba 33,100 49,650 34,900 52,350

Southern Luzon (Selected)Batangas (via Tagaytay)

Laurel, Tuy, Lian, Nasugbu 23,900 35,850 24,500 36,750Balayan, Calaca, Lemery, Agoncillo, others 23,600 35,400 25,300 37,950Calatagan 24,500 36,750 26,200 39,300

Batangas (via Sto. Tomas)Sto. Tomas 16,500 24,750 18,400 27,600Batangas City and San Juan 21,800 32,700 23,600 35,400

LagunaSan Pedro and Binan 14,000 21,000 15,100 22,650Sta. Rosa and Cabuyao 14,700 22,050 15,800 23,700

CaviteBacoor, Imus, Kawit & Noveleta 13,600 20,400 14,800 22,200

Gen. Trias, Dasmarinas & Silang 15,300 22,950 16,500 24,750


Despite government reports of normalization at the POM, traders continue to lament against

shipping lines exorbitant port charges and truckers fees. A governments review and regulation

of the allowable port-related charges is therefore strongly warranted.

Source: Philippine Statistical Authority (PSA)

figure 2. exPorts and imPorts growth rate (in %)2013 and 2014

Indeed, the port congestion problem was one of the dampeners of the countrys accelerating

growth, as perceived by economists. In the third quarter of 2014, the countrys gross domestic

product (GDP) slowed down to 5.3% from 7% in the same period in 2013, the slowest since the

3.7% recorded in the fourth quarter of 2011. The National Economic Development Authority

(NEDA) had attributed the weaker economic growth partly due to the port congestion. The

disruptions in the port operations adversely affected trade as both exports and imports decelerated

to 9.9% and 5.1%, respectively from double-digit increases in 2013 (Figure 2). As a consequence

of the port congestion, the increase in the prices of commodities and services also weighed down

on household final consumption expenditure (HFCE) to 5.1% from 6.2% in 2013.

According to the Citigroup Philippines (2014), the truck ban and the ensuing transport bottleneck

could cost the country up to P320 billion in losses from disrupted trade, job losses, among others,

which could cut the countrys GDP growth by as much as five-percentage points. This could dwarf

the losses attributed to the internal traffic jam in Manila of about P30 billionpartly the reason

why the City Government of Manila issued the truck ban ordinance. The study stressed further

that the truck ban cast a dark shadow especially on non-technology exports in the Calabarzon


export processing zones. The Calabarzonwhich includes Cavite, Laguna, Batangas, Rizal and

Quezon, is the countrys second most densely populated region, an industrial hub and one of the

biggest contributor to the countrys economic growth. Meanwhile, technology producers may be

spared because they could avail themselves of airline services in shipping out their goods unlike

non-technology manufacturers such as those producing car parts that use the ports in sending

their products abroad.

short-term soLutions

As the port congestion was considered as top priority by Malacaang, the Cabinet Cluster on

Port Congestion (CCPC) was created. The CCPC is a multi-agency task force headed by Secretary

Rene Almendras and composed of the DOTC, DPWH, DTI, DoF, NEDA, MMDA, PPA, LTFRB

and BoC.

Following the lifting of the truck ban in the City of Manila, some important short-term measures

were undertaken to help make progress in decongesting the POM, as follows:

1. Shipping out of Overstaying Containers. More than 3,000 containers were shipped out approaching the peak months last year in an effort to help de-clog the POM. Together with

the PPA, private port operators namely the International Container Terminal Services Inc.

(ICTSI) and the Asian Terminals Inc. (ATI) hired chartered vessels and trucks to transport

cargoes cleared by the BOC and cargoes overstaying for 60 days at the POM to Subic,

Batangas and Laguna.

2. Higher Storage Fee. The PPA also imposed higher storage fees for overstaying BOC-cleared inbound cargoes to discourage cargo owners from using the ports as their

warehouses. As provided in PPA Memorandum Circular (MC) No. 12-2014 dated 15

September 2014, a twenty-foot container faced a fine of P5,000 per day beginning the 11th

day of storage. This was in contrast to the old rate of P481.30 per day for the 6th to 10th day

of storage, and P529.43 per day from the 11th to the 15th day (Table 6). This new regulation

effectively gave cargo owners 10 days of free storage at the ports.


taBLe 6. storage fees mC 12-2014 (new rate) vs mC 10-2013 (oLd rate)

Source: Philippine Port Authority

BoxRate Under MC No. 12-2014 (New)

Rate Under MC No. 10-2013

6th to 10thday

11th to 15th day

20 Footer 5,000 481.30 529.4335 Footer 8,750 842.20 926.4240 Footer 10,000 962.60 1,058.8645 Footer 11,250 1,082.90 1,191.19

3. Last Mile Trucking Routes Scheme. The MMDA implemented a 24-hour Last Mile Truck Route scheme for two weeks from September 8-22, 2014 to help decongest the POM

from container vans. Sticker passes were issued by MMDA to allow trucks to transport

container vans even during truck ban hours for two weeks, except for specific roads where

truck ban hours were strictly observed namely EDSA, Espana, Ortigas Avenue, Katipunan,

Recto and Taft Avenue.

4. Weekend Operations. The government and the private sector agreed to work on weekends and Monday mornings to pull out containers from the POM in a cooperative effort to

address port congestion. Terminal operators, truckers, warehouse owners, and other port

stakeholders were forced to utilize weekends even if it entailed additional cost in terms of

man-hours and energy cost.

5. Executive Order No. 172. In September 2014, the President signed Executive Order No. 172 declaring the ports of Subic and Batangas as extensions of the POM during

congestion and other emergency situations, such as strikes, lockouts and natural calamities.

Consequently, port fees were lowered in order to encourage more shipping lines to call at

these proposed alternative ports. Table 7 shows that in Subic Port, harbor and berthing

fees were down 83% and 88%, respectively, while both port-related fees were slashed by

90% at the Batangas Port.


taBLe 7. harBor fee and Berthing fee

oLd rate vs new rate (in us$)

Source: Cited in SBMA Chairman Roberto Garcias presentation during the 8th Ports and Shipping Conference

US$)

Vessel ChargesRegular Rate Discounted Rate

Subic Batangas First 6 monthsNext 6

monthsHarbor Fee (per GRT) 0.0460 0.0810 0.0080 0.0410Berthing Fee (per GRT per day) 0.0345 0.0390 0.0040 0.0200

ConCLusion and PoLiCy reCommendations

The port congestion problem in 2014 was unprecedented. In fact, the PPA had admitted, it was

their first time to experience a port congestion of such magnitude (cited by Macairan 2014).

The PPA had dealt with port congestion problems in the past but only during Christmas season

when there is substantial increase in import volume. But the port congestion last year was far more

complex and urgent triggered by the Manila truck ban ordinance. This prompted the government

to establish a cabinet cluster whose task was solely to address the port congestion. A confluence

of factorsi.e. the Manila truck ban, limited road capacity in Metro Manila and the growing trade

volume, among otherscontributed to the port congestion problem.

Notwithstanding the governments claim of normalcy in the POM, the issue of port congestion

is a much bigger problem that needs long-term solutions. During the Port Summit, various

stakeholders of the port industry have recommended the following reform measures, among

others, in order to avert another port congestion from happening in the future:

1. Upgrade and Modernize the Countrys Infrastructure. Undoubtedly, the root of the congestion problem in the country is the lack of well-planned and efficient infrastructure.

The countrys infrastructure is among those identified by multilateral companies as one of

the major weaknesses in its growing economy. Notwithstanding the Aquino administrations

commitment to boost infrastructure spending of up to 5% of GDP in 2016, infrastructure

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

demand for infrastructure services (World Bank 2015). Indeed, solving the countrys

congestion problem requires more investment in infrastructure development.


Port stakeholders have suggested the need to build a dedicated elevated expressway

connecting the POM directly with the North- and South-Luzon expressways. Some have

even proposed to revive the railways from POM to Divisoria and Tutuban to Caloocan and

connecting them with North and South Luzon (Cruz 2014). The fast and cost-effective

service by rail transport makes it a preferred mode of transporting passengers and cargoes.

Moreover, amid ongoing efforts to expand the capacity of Manila ports, there were also

proposals to construct a mega port within or outside Manila to support a growing

trade volume in the next five to six years. The countrys remarkable economic growth in

recent years as well as the expected gains from the ASEAN Economic Integration are

seen to facilitate robust international trade to support a consumption-driven economy

and a booming manufacturing industry. Relatedly, the increasing capacity of ships calling

at world ports requires port infrastructure that could accommodate post Panamax vessels5

containing more than 14,000 to 18,000 TEUs from the current 8,000 to 10,000 TEUs.

2. Consider Batangas and Subic Ports as Alternative Ports. It is imperative that the government seriously consider gradually shifting international container traffic in

Batangas and Subic ports to address the growing congestion problem in Metro Manila

as well as catalyze growth in the adjacent regions. The Joint Foreign Chambers (JFC) of

the Philippines have suggested that the local government units (LGUs) of Metro Manila

could impose higher taxes on factories and warehouses as incentives to move to hubs like

Batangas and Subic (JFC 2014).

Another proposal is to follow what Thailand did in capping the container volume in the

old Bangkok Port in favor of the Laem Chabang Port located in the southern part of

the country (Basilio 2014). The Port Authority of Thailand issued a regulation limiting

container traffic at the Port of Bangkok to around 1 million TEUs per year. The Laem

Chabang Port was built by the Thai government to encourage economic development

outside of Bangkok and take advantage of the proximity of the Gulf of Thailand. Today,

the Laem Chabang Port has overtaken the Port of Bangkok in terms of the container

volume it handles.

5 Post-Panamax or over-Panamax refer to ships larger than Panamax that do not fit in the Panama Canal, such as supertankers and the modern container and passenger ships. The first known post-Panamax ships were Japanese Yamato-class battleships.


The government, however, is encouraged to study carefully the proposal to cap volume

in the POM and consider the impact of this policy in terms of the potential additional

cost to shippers. A study by supply chain stakeholders shows that around 70% of the

imported raw materials, equipment, supplies and consumer goods go to Metro Manila and

Northern Cavite, Laguna (18%), Batangas and Quezon (6%), and Pampanga and other

areas North of Metro Manila (6%). From this, it follows that much of the exports come

from Metro Manila and Northern Cavite (73%), while the nearby provinces account for

the balancei.e. Laguna (15%), Batangas and Quezon (7%), Pampanga and areas North

of Metro Manila (5%).

Various groups have advocated for the Batangas and Subic ports as alternatives of the

POM to deliberately address the issue concerning the underutilization of these ports, albeit

improving in recent years (Figure 3). Basilio (2014) estimated that around P17.5 billion was

borrowed during the Arroyo administration to finance the development of Batangas and

Subic ports, excluding the additional investments of around P111.1 billion that funded the

expressways6 leading to these ports.

Corollary to this reform measure is to separate the regulatory and operational functions

of the PPA. While the Batangas Port is under the PPA, the Subic Port is owned by the

figure 3. ComParative suBiC and Batangas Cargo voLume (in teus), 2013 and 2014

Source: Presentations from the 8th Ports and Shipping Conference


Subic Bay Metropolitan Authority (SBMA). Thus, it may seem challenging for the PPA to

strongly promote Subic Port as a competitor to the PPA-owned ports including the POM

because of its potential to erode PPAs revenues substantially.

3. Formulate a Comprehensive National Transport Policy. One of the major shortcomings of the countrys infrastructure sector is the lack of an integrated national

transport plan. This is even compounded by the absence of a long-term policy framework

to support a national transport plan. The port congestion problem would have been

prevented had there been a national transport policy in place that guides and harmonize

the development goals of the national and local governments. It is therefore imperative

to put in place a comprehensive long-term National Transport Policy towards achieving

a well-coordinated and integrated multi-modal transport system in the country. This will

also institutionalize and insulate the countrys national transport development plan from

political interventions as the case of the Manila truck ban.

Moreover, it is vital for the transport infrastructure networki.e. port, airport, roads, rail

transportto be planned as a system to ensure the stability and sustainability of the key

industries supply chain. In other words, it should be supportive of trade and commerce

and of the countrys overall competitiveness. For instance, a Transportation and Logistics

Plan for the NCR and Central Luzon should consider that 40% of Manila traffic is linked

to port operations (JICA).7 Hence, further expansion at the port will certainly worsen

traffic problems in the absence of better road access.

The JFC further stressed that the proposed Master Plan should aim, for instance, in

transforming Manila to a financial and service centertourism, finance, education,

medical, and business process outsourcing (BPOs). This would require moving factories

and manufacturing activities to the outskirts of Metro Manila particularly Cavite, Laguna,

Bulacan, Pampanga, Batangas and Subic. Moreover, it is important to equip Batangas

and Subic ports with world-class logistics facilities including warehouses and distribution

centers.

6 These include the North Luzon and South Luzon Expressways rehabilitation and widening projects, the constructions of the Subic-Clark-Tarlac Expressway, Tarlac-Pangasinan Expressway, Star Highway, among others. 7 As cited by JFC 2014 in Arangakada Philippines Forum.


referenCes:

Almonte, Liza. Manila Ports Forum Comes Up with Old, New Solutions to Port Congestion. Port Calls. 1 December 2014.

Bayos, Kris. Sheer Volume of Backlog Keeps Port Congested. The Manila Bulletin. 21 November 2014.

Basilio, Enrico. Port Congestion in a Congested Metropolis. Philippine Chamber of Commerce and Industry (PCCI Policy Paper. 2014.

Campos, Othel V. in Port Congestion Shuts Down Two Firms, Manila Standard, 21 October 2014.

Chanco, Boo. Demand and Supply: Santa Claus Stuck in Manila Port. Philippine Star. 27 October 2014.

Cruz, Neal H. Manila Ports Not Congested but the Streets Are. Philippine Daily Inquirer. 13 August 2014.

Dumlao, Doris. Economic Loss from Truck Ban to Hit P320 billion. Philippine Daily Inquirer. 10 March 2014.

Gagni, Lito. Port Congestion: All About Trade. BusinessMirror. 1 October 2014.

Garcia, Roberto. Presentation on Subic Bay Metropolitan Authority. 8th Ports and Shipping Conference. 12 February 2015.

Habito, Cielito F. A Colossal Contradiction. No Free Lunch. Philippine Daily Inquirer. 10 September 2012.

Habito, Cielito F. Truck Ban: The Bigger Picture. No Free Lunch. Philippine Daily Inquirer. 18 March 2014.

Joint Foreign Chambers of the Philippines. More Reforms=More Jobs!. Arangakada Philippines Forum. 26 February 2014

Kritz, Ben. Port Congestion is a Global Problem. Manila Times. 21 October 2014.

Kritz, Ben and Periabras, Rosalie. Manila Port Congestion: Symptom of a Bigger Mess. Manila Times Special Report. 21 September 2014.

Macairan, Evelyn. Yearender: Port Congestion May End Next Year. Philippine Star. 29 December 2014.

National Economic Development Authority. Accelerating Infrastructure Development. Chapter 5 Philippine Development Plan 2011-2016. 2011.

Pena, Fernando Martin. Port Congestion is a Disease Part 1 and 2. Philippine Daily Inquirer. 20-21 October 2014.

Perez, Sean. Presentation entitled Supporting Growth: Sustaining Terminal Efficiencies at Manila South Harbor and Batangas Port. 8th Philippine Ports and Shipping Conference. 12 February 2015.

Pillas, Catherine. Government Mulls Over Building Mega Port. BusinessMirror. 22 February 2015.

__________. Port Congestion Surcharge Scrapped; Trucking Rates Going Down-DTI Official. BusinessMirror. 12 April 2015.


Remo, Amy. Port Congestion Problem Sends Exporters Reeling. Philippine Daily Inquirer. 24 November 2014.

World Bank. Making Growth Work for the Poor. Philippine Economic Update Report No. 93530-PH. January 2015.

World Bank. Trading Across Borders: Ease of Doing Business 2015

ASEAN-Japan Transport Partnership (www.atjpweb.org)

Confederation of Truckers Association of the Philippines (CTAP)

Philippine Ports Authority (www.ppa.gov.ph)

Philippine Statistical Authority (www.psa.gov.ph)