11th National Convention on Statistics (NCS) EDSA Shangri-La Hotel

October 4-5, 2010

NATIONAL STATISTICS ON ICT, SHIPPING INDUSTRY AND THE MARITIME PROFESSION: ITS APPLICATIONS IN BUSINESS & INDUSTRY AND

PHILIPPINE SOCIETY

by

Adriano A. Arcelo

For additional information, please contact:

Author’s name

Adriano A. Arcelo

Designation Founding President and Chief Operating Officer Affiliation ALG & Associates Research & Development Corporation Address Tel. no. E-mail

NATIONAL STATISTICS ON ICT, SHIPPING INDUSTRY AND THE MARITIME PROFESSION: ITS APPLICATIONS IN BUSINESS & INDUSTRY AND

PHILIPPINE SOCIETY1

by

Adriano A. Arcelo2

ABSTRACT

Statistics on ICT, the domestic shipping industry and the maritime profession are important for an effective decision making processes that will enhance productivity in business and industry and the Philippine society. For business and industry, statistics are the bases in making strategic decision that will enhance corporate productivity. These are also useful for all sectors in society consisting of the government, people that composed our society, most especially the college-bound students who will be properly guided by the data on ICT and maritime profession for them to have data as bases for course choice and career decision. The statistics on ICT and maritime profession generated will present the extent of monetary contribution of ICT and the maritime profession to the economy, most especially in terms of foreign exchange that can sustain the monetary stability of the Philippine peso. With the statistics on ICT and the maritime profession, the government and policy makers can provide supportive policies and project for an accelerated development of ICT and shipping industry as well as the maritime profession. With this relationship, there will be strengthening of the linkages between ICT manpower and the maritime profession on one hand and the members of society, business and industry and the government.

Within the above-mentioned framework, this paper delves into the following:

1. Present the trend in revenues and employment generation of ICT and maritime profession in terms of revenue and employment generation from 2004 to 2008.

2. Investigate the ability of the ICT and maritime educational institutions to provide quality manpower to sustain the growth of ICT and domestic and world shipping.

3. Identify the appropriate statistics on ICT and the maritime profession that are applicable in ICT industry and the enhancement of the maritime profession that redound to a more effective and cost-efficient domestic and world-class shipping industry.

4. Explore the possibility for some strategic intervention that would enhance the development of ICT industry and the maritime profession.

5. Suggest some policies, programs and projects that the stakeholders of ICT and the maritime profession, most especially the government and regulatory agencies may take for the convergence of unified support for the ICT industry and the maritime profession.

The production of accurate and timely statistics on ICT and the maritime profession is not an end in itself. The most important is the application of statistics on ICT and the maritime profession for the enhancement of productivity of ICT industry and in the practice of the maritime profession including the domestic and world shipping industry. It is on this aspect that the salient application of the data generated from survey of IT manpower in Iloilo conducted by the present author is cited in this paper. This study was under the sponsorship of the Iloilo

1 Paper for presentation at the 11th National Convention on Statistics, October 4-5, 2010, EDSA Shangri-la Hotel, Ortigas Center, Mandaluyong City, Philippines

2 Founding President and Chief Operating Officer, ALG & Associates Research & Development Corporation (ALG). The author acknowledges the assistance of Prof. Marjorie Liboon of the John B. Lacson Foundation Maritime University(JbLFMU) for the editing work and to Mr. Rowen Quimba of ALG for layout and data processing.

Page 1 of 34

Federation for IT with funding from Provincial Government of Iloilo and the Department of Trade and Industry.

The thrusts of this paper are: (1) the identification of relevant statistics in ICT and the maritime profession, (2) the usefulness of the data presented from the point of view of stakeholders, and (3) as a result of the application of the statistics by the various stakeholders, there would be an improvement in the economy and Philippine society. Lastly, the paper also provides some suggestions for the enhancement of the generation of relevant statistics as well as pinpoint opportunities for formulation of policies, design of programs and projects that will further contribute to the development of IT industry, the maritime profession and domestic and world shipping.

1. Introduction

Statistics on ICT, the domestic shipping industry, and the maritime profession are important as bases for an effective decision making processes that will enhance productivity in business and industry and the Philippine society. For business and industry, statistics are the important supporting variables in making strategic decision that that will enhance corporate productivity. These are also useful for all the sectors in society consisting of the government, the people , most especially the college-bound students who could be properly guided by the data on ICT and maritime profession for them to possess data as bases for course choice and career decision. The statistics on ICT and maritime profession generated will present the extent of monetary contribution of ICT and the maritime profession to the economy, most especially in terms of foreign exchange inflow that can sustain the monetary stability of the Philippine peso. With the statistics on ICT and the maritime profession, the government and policy makers can provide supportive policies and project for an accelerated development of ICT industry, the shipping industry and the maritime profession. With this relationship, there will be strengthening of the linkages between ICT manpower and the maritime professionals on one hand and the members of society, business and industry and the government.

With the above-mentioned framework, the objectives of this paper are as follows:

1. to present relevant statistics on ICT, shipping industry and the maritime profession;

2. to analyze the applicability of such statistics in terms of the needs of the stakeholders, the respective industry, the economy and Philippine society to effect an accelerated and comprehensive development of the country;

3. to evaluate the capability of the country to supply qualified manpower for the ICT industry, the shipping industry and the maritime profession to enhance the development of the country and the world economy;

4. to suggest some programs, policies and projects that will strengthen the linkages of all stakeholders in the economy in order to sustain the path towards higher level of development.

2. Statistics in ICT and Relevance for the Development of ICT and the Country

2.1 Growth in Employment and Foreign Exchange

Just as the ICT industry is the fastest growing sector in the world, the country’s ICT industry has been growing in such a dramatic proportion. As shown in Table 1, employment went up from 101,000 in 2004 to 163,000 in 2005, or a growth rate of 61.39%. In 2006, employment went up further to 236,000, or a growth rate 44.78%. Then, in 2007 it went further to 372,000, 57.62%. In 2008, employment continued to increase to 435,000, or

Page 2 of 34

16.94%. The growth of employment in 2009 is approximately 18% to 513,300. In 2010, the projection is a growth in employment to 900,000, or 75.34% growth.

The growth in foreign exchange inflow followed the growth in employment. As shown in Table 1, foreign exchange inflow was at U.S.$ 1.3 billion in 2004. In 2005, it almost double to U.S. $ 2.2 billion, or 69.31% growth. In 2006, growth rate went up by 50% with U.S.$3.3 billion in revenues and in 2007, revenues went up to U.S.$4.9 billion or 48.48% growth. In 2008, the growth rate was at 24.49% with revenues of U.S.$6.1 billion. In 2009, the preliminary figure is a growth rate of 18.03%, or revenues of U.S.$. 7.2 to U.S.$ 7.5 billion. With the new government in 2010, employment in ICT will surge further to approximately 900,000, or 52.78% growth and revenues of record high amounting to U. S. $11 to U.S.$13 billion.

Table 1: Total Number of Employees and Revenues of the IT Industry, 2004-2008

Total Employees Revenues in U.S. $

F Growth Amount Growth Rate

2004 101,000 1.3 billion

2005 163,000 61.39% 2.2 billion 69.31%

2006 236,000 44.78% 3.3 billion 50%

2007 372,000 57.62% 4.9 billion 48.48%

2008 435,000 16.94% 6.1 billion 24.49%

2009 513,000 18%% 7.2 to 7.5 billion 18.03%

2010 900,000 75.34% 11 to 13 billion 52.78%

Source: Business Process Outsourcing Association of the Philippines (BPAP) & Board of Investment

2.2 Areas of Employment

The areas of employment are in contact center with 61% share of employment and 68% of revenues as shown in Table 2. In high value-added areas such as back office operation had 19% of employment and 14% share in revenues, software development 9% in employment and 10% in revenues, transcription 5% in employment and 3% in revenues, engineering 3% in employment and 4% in revenues and animation 2% in both employment and revenues.

The ICT industry should veer towards the high value-added sector where the country has tremendous manpower of acceptable quality such as back office operation in accounting and other financial operation in bookkeeping, account maintenance, accounts receivable collection, accounts payable administration, payroll processing, asset management, financial analysis and auditing, financial reporting, tax reporting, credit card administration, factoring and stock brokering, logistics management and cargo shipment management.

In a survey conducted by the Meta Group based in the United States, the Philippines ranked first as far as the availability of knowledge-based jobs and workers in the world and 4th among Asian nations in terms of labor quality. India, Singapore, Hong Kong, Taiwan, and Thailand are still ahead of the Philippines in labor productivity. According to A. Shameen in an article written in 2006, the Philippines rank high “in higher-end outsourcing services such as Web design, software development and animation.”

Page 3 of 34

With medical and legal education in the country pattered after the U. S. system, medical and legal transcription is an area of great competitive advantage of the country. However, improvement in quality of medical and legal transcription workers is a necessity, or else there may be legal suit for any inaccuracy. The standard is for a 98% accuracy in transcription.

Table 2: Breakdown of Employment and Share of Revenues, 2008 Breakdown of Employees Revenues Share Contact Center 61% 68% Back Office Operation

19% 14%

Software Development

9% 10%

Transcription 5% 3% Engineering 3% 4% Animation 2% 2% Total

100% 100%

Source: BPAP, Center for Information Communications Technology (CICT) and Department of Trade and Industry (DTI)

Breakdown of Employment and Share of Revenues, 2008

61%

19%

9%

5%3% 2%

0%

10%

20%

30%

40%

50%

60%

70%

Contact Center Back Office Operation SoftwareDevelopment

Transcription Engineering Animation

Areas of Employment

Scal

e

Source: BPAP, Center for Information Communications Technology (CICT) and Department of Trade and Industry (DTI)

s

2.3 Philippine Share in World ICT Industry

At present, the country’s share in the world’s business process outsourcing (BPO) industry is 15% with India ranking first with 37% share and Canada with 27% share as shown in Table 3. McKinsey and Company projected that in 2010, the world’s BPO business will reach U.S.$180 billion. If the Philippines will be able to maintain its share of 15% in world’s BPO business worth U.S.$180 billion, then the country’s foreign exchange revenues potential from BPO could reach U.S.$27 billion and not the earlier projection of U.S.$11 to U.S.$13 billion in 2010. In short, there is much more opportunity for the country in enlarging the business from BPO mainly from clientele in United States, Europe and other first world countries.

In the light of the opportunities presented by the world’s BPO industry, there has been a national and regional initiatives for an accelerated development in cyberservices with the establishment of what is called the Philippine Cyber Corridor. The premier center of the

Page 4 of 34

cyber corridor is the identification of Metro Manila and Metro Cebu as the centers of excellence and the 10 other cities as the next wave cities, namely (1) Bacolod with the Bacolod Negros Occidental Federation for IT, (2) Bulacan Central and Bulacan South with the Bulacan ICT Council, (3) Cagayan de Oro with the Cagayan De Oro ICT Business Council, (4) Davao City with ICT Davao, (5) Iloilo with the Iloilo Federation for IT, (6) Lipa with the Lipa ICT Council, (7) Metro Cavite, (8) Metro Laguna with Laguna Industry Network for Knowledge, Innovation and Technological Foundation, (9) Pampanga Central with Metro Clark ICT Council, and (10) Quezon City with the Quezon City ICT Council. While there are 10 cities identified as the next wave cities, there are 16 ICT councils in various parts of the Philippines. It is envisioned that there will ICT councils in 80 provinces in the whole country to take the lead role in accelerating the ICT industry. Of all the councils, only Iloilo Federation for IT (IFIT) produced the IT manpower survey with a report entitled, “IT Manpower in Iloilo and the Global Crisis.”

On the part of the government, in 2003 through Executive Order 269 the Commission on Information and Communications Technology(CICT) was created with 4 commissioners and a Chairman. According to its charter, the CICT shall “the primary policy, planning, coordinating, implementing, regulating and administrative entity of the executive branch of Government that will promote, develop, and regulate integrated and strategic ICT system and reliable and cost efficient communication facilities and services.”

Table 3: Global BPO Market Share Country % Share India 37% Canada 27% Philippines 15% Ireland 5% Mexico 5% Central and Eastern Europe 4% China 2% Others 2% Total 100% Source: Everest Group, 2008

Global BPO Market Share

37%

27%

15%

5%5%

4% 2% 2%

India

Canada

Philippines

Ireland

Mexico

Central and Eastern Europe

China

Others

Source: Everest Group, 2008

Page 5 of 34

2.4 Multiplier Effect of ICT Industry

The ICT Industry has such tremendous multiplier effects on various industries and the economy. For one, it altered the work habits and the hour of operation of so many businesses. Many businesses have followed the 24/7 operation like the restaurants and the transportation business in view of the night shift of those employed in BPO. Educational institutions experienced significant increase in enrolment in IT-related degree and non-degree courses. In addition, there many continuing education and non-degree program like the call center academy in the country, technical-vocational education courses to supplement the degree of those applying in BPO and ICT industries.

With the BPO industry in Cebu and Metro Manila approaching peak in its growth, there is the spread in many cities all over the country with significant level of changing nature of the environment. The massive infrastructure development of intelligent buildings in many cities is a changing architecture in the provinces. In Iloilo City, for example, Ayala Corporation has two buildings going up to meet the demand of the BPO industry. In Bacolod, the Bacolod Convention Center is now the hub of a major call center company. Many hotels with unutilized rooms are being converted into IT hubs. This is happening in other cities in the country. Even some entertainment and places have adjusted their hours of operation to meet the needs of the night workers who desire some entertainment during the day.

With the expansion in ICT industry of such proportion as shown above, ITC provided great employment opportunities. Even a world-renown ICT company with international headquarter in Germany and Malta decided to locate their Asian based operation in Tigbauan, Iloilo to provide employment to local community but also for the returning Filipino workers in its company abroad a chance to be easily integrated into the domestic economy. In addition, since a college degree is not mandatory requirement in call center employment, even those with only a high school certificates are provided employment opportunities.

2.5 Capability of the Country in Providing ICT Manpower

As shown in Table 4, the almost half a million graduates in various degree programs including information technology and engineering will not get employment in a job commensurate to academic preparation. While awaiting for a job related to their academic preparation, they go into BPO for temporary employment. Many nurses who are awaiting for placement abroad or waiting for the passing of the board examination seek temporary employment in BPO industry. With college degree holders being employed in BPO-IT industry, Avinash Vashistha, Chief Executive Officer of THOLONS Advisory, Investments and Research identified the following factors that made the Philippines the Center for Excellence for voice-based English language BPO in the world:

1. Accent neutrality being close to the client nations, especially the United States where the Filipinos speaking in English are close to mid-Western accent in the United States.

2. There is the close cultural affinity to people of the United States and other countries in the world.

3. Excellence values and work ethic among the Filipino youth.

Page 6 of 34

In addition, the following features of the country are major reasons that made as an excellent outsourcing site:

1. Socio-political similarity of the country and the client countries like the United States.

2. Educational and legal system closely linked to the United States and other English-speaking countries.

3. Quality of life and the well appreciated non-work culture.

4. Adequate infrastructure and optimal connectivity both in terms of bandwidth and international airports.

5. Availability and cost of office space.

In spite of the above-mentioned positive factors supportive of the development of the BPO-IT industry in the country, there are still some challenges that have to be resolved(Arcelo, 2009: 18). These are (1) the inadequate knowledge of the application of IT on the job and (2) the knowledge of the theoretical aspects of IT. It is quite common for newly hired to undergo training of, at least, six months for them to fit on the job. In a highly sophisticated IT job, the extent of continuing training goes as far as a year or more.

The reason for experiencing these inadequacies is mainly due to the extent of industry experienc of the faculty members in many colleges and universities. In more than ten universities and colleges in Iloilo offering IT program (Arcelo, 2009: 33-37), only three higher education institutions have faculty with industry experience. In addition, the students are being taught by 61% with a bachelor’s degree in spite of the requirement of the Commission on Higher Education that all faculty of colleges and universities that faculty members should possess a master’s degree(Arcelo, 2009:30).

The graduates of higher education institutions are of uneven quality. Commissioner Monchito Ibrahim suggested that there should be a national competency assessment program to select those who have the competencies to benefit in an excellent IT academic program, the streamlining of the recruitment process. In addition, there should be a quality assurance program based on international standards to improve marketability of IT manpower in the global market. The author has designed a comprehensive program along this line entitled, “Enhancing Excellence in IT Educational Programs Through Continuing Assessment System.” This is going to be a joint project of ALG and the Asian Psychological Services and Assessment Corporation(APSA) together with the IT educational institutions in the country.

Table 4: Graduates Across Disciplines, 2008

Number of Graduates % Share

Medicine and Health 105,569 21.49% Education 76,190 15.50% Engineering 53,384 10.87% Information Technology 46,076 9.38% Agriculture 13,773 2.80% Maritime 13,318 2.71% Sciences 4,100 0.83% Architecture 3,051 0.62% Mathematics 2,198 0.45% Others 173,662 35.35% Total 491,320 100.00% Source: Commission on Higher Education, 2008

Page 7 of 34

Graduates Across Disciplines, 2008

105,569; 21.49%

76,190; 15.51%

53,384; 10.87%46,076; 9.38%

13,773; 2.80%

13,318; 2.71%

4,100; 0.83%

3,051; 0.62%

2,198; 0.45%

173,662; 35.35%

Medicine and Health

Education

Engineering

Information Technology

Agriculture

Maritime

Sciences

Architecture

Mathematics

Others

3. Statistics on the Domestic Shipping Industry and the Maritime Professionals and Its Relevance in Accelerating the Country’s Development

3.1 Philippine Shipping Industry

The shipping industry in the Philippines accounted for 0.5% of gross domestic product(GDP) which has remained in such constant rate for the last ten years (Austria, 2003:4). The reasons for the small share of the shipping industry in the national economy is shown by the following factors:

3.1.1 The Domestic Merchant Fleet

The domestic shipping market segments consist of three major segments, viz. bulk transport, specialized transport and liner transport. However, the bulk and specialized transport can be categorized as tramp shipping where the operation of freight vessels is not regular but depends more on the agreement between the client and the shipping company or ship management company as to the schedule and place of shipment and other terms and conditions. On the other hand, the liner transport operates on regular schedule between ports and offers their services to the public without discrimination. In the Philippines, only liner shipping is being regulated by the government. (Austria, 2003:3).

As to the country’s merchant fleet, the largest component is goods and passenger transport that accounted for 76.3% followed by fishing with 14.4% and others that accounted for 9.3% as shown in Table 1. Within the goods and passenger transport, general cargo accounted for 34.8%, followed by roll on passenger ships (ROPAX) with 31.7% and tanker with 12.1%. Container ships are still quite small with 7.1% share and dry bulk with 6.3%. All other ships within the goods and passenger transport, wooden hull accounted for 3.5%, passenger and cargo ship with 2.3% and passenger ferry 2.1% as shown in Table 3.1.1.

Page 8 of 34

3.1.1 Registered Domestic Merchant Fleet

Kind of Ship Unit % GRT %

1. Goods and Passenger Transport 4,183 14.2% 1,525,908 76.26%

1.1 General Cargo 854 20.4% 531,381 26.56%

1.2 ROPAX 149 3.6% 484,251 24.20%

1.3 Tanker 205 4.9% 184,445 9.22%

1.4 Container 28 0.7% 108,974 5.45%

1.5 Dry Bulk 178 4.3% 96,715 4.83%

1.6 Wooden Hull 2,503 59.8% 52,741 2.64%

1.7 Passenger Cargo 116 2.8% 67,401 3.36%

2. Fishing 23,307 70.0% 288,306 14.41%

3. Others 2,028 6.8% 186,678 9.33%

4. Total 29,518 100.00 2,000,892 100.00

Source: 2003 MARINA Data Base

Philippine Domestic Merchant Fleet, Number of Units

4,183; 12.47%

854; 2.55%

149; 0.44%

205; 0.61%

28; 0.08%

178; 0.53%

2,503; 7.46%

116; 0.35%

23,307; 69.47%

2,028; 6.04% 1. Goods and Passenger Transport1.1 General Cargo1.2 ROPAX1.3 Tanker1.4 Container1.5 Dry Bulk1.6 Wooden Hull1.7 Passenger Cargo2. Fishing3. Others

Source: 2003 MARINA Data Base

Philippine Domestic Merchant Fleet, GRT

1,525,908, 43.27%

531,381, 15.07%484,251, 13.73%

184,445, 5.23%

108,974, 3.09%

96,715, 2.74%

52,741, 1.50%

67,401, 1.91%

288,306, 8.17%

186,678, 5.29%

1. Goods and Passenger Transport1.1 General Cargo1.2 ROPAX1.3 Tanker1.4 Container1.5 Dry Bulk1.6 Wooden Hull1.7 Passenger Cargo2. Fishing3. Others

Source: 2003 MARINA Data Base

Page 9 of 34

3.1.2 Top Ten Domestic Shipping Companies, 2003

The top ten domestic shipping companies as listed in Table 3.1.2. The top ten accounted for 35% GRT of the whole domestic fleet. In terms of capitalization, Negros Navigation established in 1932 ranked first with paid-up capital of PhP3.637 billion, followed by WG & A established in 1948 with PhP1.497 billion ranking 2nd, Lorenzo Shipping Corporation established in 1973 with PhP300.752 million capital ranked in the 3rd place, Herma Shipping and Transport Corporation established in 1975 with PhP151.7 million paid-up capital in the 4th rank, Sulpicio Lines established in 1973 with PhP213.252 million paid-up capital in the 5th rank. In the 6th rank is PNOC Shipping and Transport Corporation established in 1973 with PhP213.252 million, in the 7th rank is Solid Shipping lines established in 1980 with PhP125 million paid-up capital, and in the 8th rank is Philippine Fast Ferry Corporation with a paid-up capital of PhP105.116 million. MIS Maritime Corporation ranked 9th with paid-capital of PhP100 million and in the 10th place is NMC Container Lines, Inc. with the least paid-up capital of PhP86.5 million as shown in Table 3.1.2.

In terms of GRT, WG & A had the largest capacity with 173,900 GRT and 28 ships followed by Sulpicio Shipping with 147,300 GRT and 31 ships which is the largest number of ships in the Philippine shipping industry . In the 3rd rank in terms of GRT is Negros Navigation with 65,500 GRT and 21 ships which ranked 3rd in terms of number of ships. In the 4th rank is Lorenzo Shipping Corporation with 44,700 GRT and 7 ships and in the 5th rank is Solid Shipping Lines, Inc. with 37,300 GRT and 10 ships. The other five have much lower capacity as shown in Table 3.1.2.

Table 3.1.2 The Top Ten Shipping Companies in the Philippines, 2003

No. of Vessel Total GRT Paid-up Capital

In 000 tons in PhP000

1. Negros Navigation, 1932 21 65,500 3,637,735

2. WG & A, 1948 28 173,900 1,496.599

3. Lorenzo Shipping Corp., 1973 7 44,700 300,752

4. Herma Shipping & Transport

Corporation, 1975 15 9,300 251,700

5. Sulpicio Lines, 1973 31 147,300 213,252

6. PNOC Shipping & Transport

Corporation, 1975 9 18,150 190,000

7. Solid Shipping Lines, 1980 10 37,350 125,000

8. Philippine Fast Ferry

Corporation 1 480 105,116

9. MIS Maritime Corporation 6 13,000 100,000

10. NMC Container Lines, Inc. 2 5,700 86,500

Source: MARINA-JICA, 2005:S-12

Page 10 of 34

The Top Ten Shipping Companies in the Philippines, 2003

21

28

7

15

31

910

1

6

2

0

5

10

15

20

25

30

35

1. NegrosNavigation,

1932

2. WG & A,1948

3. LorenzoShipping

Corp., 1973

4. HermaShipping &Transport

Corporation,1975

5. SulpicioLines, 1973

6. PNOCShipping &Transport

Corporation,1975

7. SolidShipping

Lines, 1980

8. PhilippineFast Ferry

Corporation

9. MISMaritime

Corporation

10. NMCContainerLines, Inc.

Shipping Companies

Scal

e

Source: MARINA-JICA, 2005:S-12

The Top Ten Shipping Companies in the Philippines, 2003 (GRT)

65,500

173,900

44,7009,300

147,300

18,15037,350

480

13,000

5,7001. Negros Navigation, 1932

2. WG & A, 1948

3. Lorenzo Shipping Corp., 1973

4. Herma Shipping & Transport Corporation,19755. Sulpicio Lines, 1973

6. PNOC Shipping & Transport Corporation,19757. Solid Shipping Lines, 1980

8. Philippine Fast Ferry Corporation

9. MIS Maritime Corporation

10. NMC Container Lines, Inc.

Source: MARINA-JICA, 2005:S-12

The Top Ten Shipping Companies in the Philippines, 2003

(Paid-up Capital in PhP000)

3,637,735

1,496.60

300,752

251,700

213,252

190,000

125,000

105,116

100,000

86,500

1. Negros Navigation, 1932

2. WG & A, 1948

3. Lorenzo Shipping Corp., 1973

4. Herma Shipping & Transport Corporation,19755. Sulpicio Lines, 1973

6. PNOC Shipping & Transport Corporation,19757. Solid Shipping Lines, 1980

8. Philippine Fast Ferry Corporation

9. MIS Maritime Corporation

10. NMC Container Lines, Inc.

Source: MARINA-JICA, 2005:S-12

Page 11 of 34

3.1.3 Rate of Return and Competition in Domestic Shipping

As shown in Table 3.1.3, the rate of return on equity has not been very attractive investment. The average industry return is only 1.51% in 2003 and 1.12% in 2004 which is not even comparable to bank time deposit rate of over 5% depending on the amount of time deposits.

Across companies with available data from the Securities and Exchange Commission (SEC) showed that NMC Container Line had the highest rate of return on equity with 19.48% in 2003. But, in 2004, the return plunged to 5.33% with the increase in capital and declining net income from PhP19.935 million to PhP5.276 million and an increase in equity from PhP99.933 million in 2003 and PhP98.933 million in 2004. On the other hand Herma Shipping had an increasing rate of return from 8.47% in 2003 to 9.79% in 2004. Aboitiz Transport experienced a decline in rate of return from 9.25% in 2003 to 7.41% in 2004. The same is true with MIS Maritime Corporation with 7.84% in 2003 and down to 6.29% in 2004.

Sulpico Lines had the worst experience with negative rate of return in both years. In 2003, the negative return was as high as 33.84% and in 2004, the negative rate of return went down to 5.98%. The capital increased from PhP1.003 billion in 2003 to PhP3.911 billion in 2004. Net loss went down from PhP389.417 million to PhP233.81 million in 2003. It is expected that the increase in capital, income will increase to bring about a positive return on equity.

The reasons for the low rates of return on investment in domestic shipping are the (1) higher fuel costs, (2) limited increase in volume of cargo and passenger and (3) the competitiveness of domestic shipping and the airline as shown in Table 4. With the increasing costs of fuel oil coupled with the inefficiency of ships being quite old as shown by the fact that the container ships in the country have an average age of 31.3 years old, tankers 20.5 years old, passenger ferry 16.2 years old, ROPAX/RORO 29,2 years, general cargo 22.2 years old and wooden hull ship 10.4 years old. (MARINA-JICA, 2005: S-8). In the view of uneven growth of the country, the magnitude of cargo and number of passengers across the islands in the country are not expanding sufficient enough for the shipping companies to operate at economies of scale in primary routes; and this is more pronounced in many tertiary routes where the local economy is more depressed than in the primary routes.

The competition among airlines that have several promotional fares during off-peak season posed a significant competition to the domestic shipping. The domestic shipping must improve its internal efficiency to make the shipping operation attractive to investors with the ship modernization program.

Page 12 of 34

Table 3.1.3: Income and Rate of Return on Equity

Income Equity Return on Equity

2003 2004 2003 2004 2003 2004

(in 000) (in 000)

1. Aboitiz Transport 358,711 310,064 3,878,507 4,186,077 9.25% 7.41%

2. Carlos Gothong 544 86,379 0.63%

3. Cokaliong Shipping 2,626 384,326 0.68%

3. Herma Shipping 31,935 45,031 376,985 460,427 8.47% 9.79%

4. MIS Maritime Corp 9,421 8,856 120,097 140,883 7.84% 6.29%

5. NMC Container Lines 19,935 5,276 99,933 98,933 19.48% 5.33%

6. Sulpicio Lines (339,417)(233,810) 1,003,000 3,911,641 (33.84%) (5.98%)

Industry Average 104,473 127,353 6,939,642 11,323,473 1.51% 1.12%

Source: Top 12000 Corporations in the Philippines. Pasig City. Philippine Business Profiles and Perspectives, Inc.

3.1.4 Domestic Shipyard Players

The Philippines used to be second to Japan in shipbuilding in the 50’s and the 60’s(Pia, 2005:52).While Japan surged ahead in shipbuilding, South Korea followed and overshadowed the Philippines that is way behind in the shipbuilding industry. The industry profile of the country as of 1999 to 2003 is shown by Table 3.1.1, while the location of the shipbuilders, ship repair and ship breaking companies as of 2003 is shown in Table 3.1.2. Between 1999 to 2003, the number of shipbuilders increased from 100 to 113 in 2001, 102 in 2002 and 102 in 2003. The largest number is among the small shipbuilder with 68 in 2003, 22 medium-size shipbuilder and only 11 large shipbuilders.

Of the 11 shipbuilders in 2003, 9 of them accounted for 83.98% in terms of DWT as shown in Tables 3.1.2 and 3.1.4. The largest shipbuilder is Sub Shipyard and Engineering, Inc. with 65.54% share in terms of DWT. Kepphil Shipyard in Batangas had 6.93%, Tsunishi Shipyard, Inc. in Cebu with 4.23% share. Keppel Cebu Shipyard, Inc. with 3.04%. Herma Shipyard in Mariveles with 1.05% share, Sandoval Shipyard, Inc. in Cebu with 1.07%, Philippine Iron Construction and Marine Works, Inc. in Cagayan de Oro qith 0.87%, FMB Aboitiz Shipbuilder in Cebu with 0.75% share and finally FF. Cruz & Co. in Iloilo with 0.57% share.

After 2003, there are other ship building companies like Hanjin Shipbuilding Co. of South Korea in Subic. This company had accelerated a comprehensive development that includes real property development is the source of present controversy that Hanjin’s plan to have another shipbuilding site in Cagayan de Oro has been cancelled. In Iloilo, the Lopez Group of Companies announced the shipbuilding company in Iloilo.

As to ship repaid on land and ship repair afloat, there are 21 and 223, respectively as of 2003 as shown in Table 8. The boat building companies accounted for 128 and shipbreaker with 5 companies in 2003.

Page 13 of 34

Table 3.1.4: Shipyard Players

Name of the Company Location Kind of Facility % Share in terms

of DWT

1. Subic Shipyard & Building/Repair Engineering, Inc. Zambales berth & Graving dock 65.54%

2. KEPPHIL Shipyard, Inc. Batangas Building/repair berth floating dock/lift dock 6.93%

3, Tsuneishi Shipyard, Inc. Cebu slipway/floating dock 4.24%

4. Keppel Cebu

Shipyard, Inc. Cebu slipway/shipbuilding way

Graving dock 3.04%

5. Herma Shipyard Mariveles slipway/graving dock 1.07%

6. Sandoval Shipyard, Inc. Cebu slipway/graving dock 1.07%

7. Phil. Iron Construction

& Marine Works, Inc. Cagayan de Oro slipway/liftdock 0.87%

8. FBM Aboitiz

Shipbuilders Cebu shipbuilding way 0.65%

9. F.F. Cruz & Co. Iloilo slipway/launching/

Floating dock 0.57%

Sub-Total 83.98%

Others 16.02%

Total 100.00

Shipyard Players (% Share in terms of DWT)

65.54%6.93%

4.24%

3.04%

1.07%

1.07%

0.87%

0.65%

0.57%

16.02% Subic Shipyard and Engineering Inc.KEPPHIL Shipyard, Inc. Batangas Tsuneishi Shipyard, Inc. Cebu Keppel Cebu Shipyard, Inc., CebuHerma Shipyard, MarivelesSandoval Shipyard, Inc., CebuPhil. Iron Construction and Marine WorksFBM Aboitiz Shipbuilders, CebuF.F. Cruz & Co., IloiloOthers

Page 14 of 34

3.1.5 Philippine Share in International Containerized Cargo

As to the containerized cargo, the country’s share is only 0.90% as shown in Table 3.1.5 with China having the largest share of 37.4%, followed by Japan with 6.01%, Taiwan and Hong Kong with 3.9% each, South Korea with 3.82%, Germany with 2.82%, Brazil with 2.37%, Italy with 2.14%, Thailand with 2.01% and India with 1.82%. The rest of the world had 33.81% and the Philippines should aim for a bigger share in containerized cargo for more generation of foreign exchange for the country.

Table 3.1.5: U. S. Waterborne Foreign Containerized Cargo, 2006

(in thousands of TEU)

Rank Country Total % Share

1 China 10,275 37.40

2 Japan 1,651 6.01

3 Taiwan 1,072 3.90

4 Hong Kong 1,071 3.90

5 South Korea 1,049 3.82

6 Germany 775 2.82

7 Brazil 652 2.37

8 Italy 587 2.14

9 Thailand 553 2.01

10 India 500 1.82

Sub-Total 18,185 66.19%

Other Countries 9,288 33.81%

(Philippines 247 0.90%)

Total 27,473 100.00

Source: USDOT/Maritime Administration http://www.marad.dot.gov/MARAD_statistics/2005%STATISTICS/Container%2OTrading%Partners,%201997- 2006.cls)

Page 15 of 34

3.1.6 Top Ten in World Fleet and Shipbuilders by Country Ownership

The ownership of world shipping companies has been fluid with the sales and changes in ownership. In 1979, the largest shipping company in the world was the World Wide Shipping Co. owned by Sir Yoe-Kong Pao (or Sir Y.K. Pao of Kowloon Wharf based in Hong Kong with 204 ships totalling 20.5 million metric tons (DWT). With the declining shipping industry, Sir Y.K. Pao had an excellent reading of the industry and slowly sold out his ships. What was left, Sir Pao transferred his shipping business to his eldest daughter Anna Sohmen-Pao in 1989 just two years before his death in 1991. In 2004, World Wide Shipping still ranked 6th in the world under the Chairmanship of Helmut Sohmen, the Norwegian husband of Anna Sohmen-Pao. In 2003, World Wide Shipping and the Bergesen, Norway’s shipping company and world’s largest gas carrier in the world merged that led to the formation of Bergesen World Wide Ltd. Registered in Bermuda. This company was renamed into BW Group Ltd. Presently, the company is generally referred to as BW Group and considered the largest in the world.

Teekay Tankers Ltd. is among the largest. This further expanded when Teekay acquired Johan Benad Ugland shares in Ugland Nordic Shipping in 2001. However, in 2007 Teekay Tankers further expanded, when it acquired, in consortium with D/S Torm A/S of Denmark, OMI which is the second largest oil tanker in the U.S. for U.S.$ 2.2 billion.

The Ugland brothers (Johan Jargen and Andreas) whose family had more than two hundred years of tradition in shipping based in Grimstad, Norway used to be very large shipping company in the world. However, in 1995, Johan Jargen and Andreas decided to split into two the A/S Ugland Rederi. Furthermore, in 2000, Andreas Ugland and his three sons (Johan Benad, Andreas Ove, and Knut Axel) decided to split further. Since Johan Benad and Andreas Ove have interest in shipping, Johan Benad got the shuttle tankers and Andreas Ove the car carriers. In addition, the J.B. Ugland Holding A/S based in Norway got the wooden and real estate business. In 2003, J. B. Ugland started the new shipping company based in Oslo. With acquisition of more ships being built in the pipeline, J. B. Ugland Shipping A/S is bound to reckon with in world shipping.

Maersk Line of Denmark is a multi-awarded company in the whole world with 470 vessels. Lloyd List gave to Maersk Line the “Container Shipping Line of the Year” in 2007. Also in June, 2007, the International Freighting Weekly awarded Maersk Line the “Shipping Line of the Year. The 21st Asian Freight and Supply Chain Award was given to Maersk Line in April, 2007 as the ”Best Global Shipping Line.” The flagship of Maersk Line, “Emma Maersk” was named the “Ship of the Year” by Lloyd List in March, 2007.

In Japan, NYK Line, “K” Line and Mitsui O. S. K. Line are the top three shipping companies in Japan. In 2008, NYK had 777 vessels which represent an increase of 24 ships over the previous year with 50,530,403 DWT. By type of vessels, bulk carriers accounted the most number with 280 vessels weighing 324,944,401 DWT. Of these 286 vessels, 113 are capsize bulk carriers, while 173 are Panamax and handysize. Container ship accounted for 133 vessels with 5,785,780 DWT, followed by 113 car carrier ships with 1,762,234 DWT. Tankers comprised 79 vessels with 12,587,615 DWT. Wood chip carriers had 55 vessels with 2,633,777 DWT, while LNG carriers accounted for 30 vessels with 2,183,377 DT. The number of reefer ship had a decline from 26 in 2007 to 21 in 2008 with 204,502 DWT. Cruise ships accounted for the least in number with 3 ships with 32,577 DWT. The other miscellaneous ships accounted for 35 ships with 406,600 DWT.

Kawasaki Kishan Kaisha often referred to as “K” Line of Japan has a full range of shipping services. As of 2005, there were 74 container ships with 3,060,870 DWT. On the other hand, dry bulk carrier ships transport iron ore, coal for steel production, grain and raw

Page 16 of 34

materials for paper both chips and pulp and thermal coal for power plants. “K” Line was a pioneer as far back as 1970 in car carrier ships and pure car carriers (PPC) and this business is expanding. LNG carrier services started in 1983 and modernization of this kind of service is continuing and expanding. Tanker services accounted for a total of 20 ships with 2,053,349 DWT as of 2007. Of the 20 ships, 10 are crude oil tankers, 5 product tankers and 5 LPG carriers. Management and support services are provided to maintain an effective and efficient operation of the “K” Line fleet in the world.

Mitsui O.S.K. Lines is a merger of Osaka Shosen Kaisha (OSK) and Mitsui Steamship Co., Ltd in l964. With the merger, Mitsui O.S.K. Lines became the largest shipping company in Japan with 83 vessels and 1,237 thousand metric tons (DWT). In 1991, there were 54 directly owned vessels and 415 million DWT. In addition, there were 296 operating vessels and 13.43 million DWT.

Mitsui O. S. K. Lines has 100% owned subsidiaries, viz. MOL International SA, Eumol B .V. and Orange Finance Ltd. There are 11 other majority-owned subsidiaries. In addition to the majority-owned subsidiaries, Mitsui O. S. K. Lines has International Energy Transport Co., Ltd. with 49.5 minority ownership and Blue Highway Line with 25% minority ownership.

In the light of the above-mentioned conglomerate organizations, Mitsui O. S.K. can certainly be considered as among the largest shipping company in the world.

In Greece, the shipping industry has been dominated by Aristotle Onassis, George and Peter Livanos, and a few others. However, there has been so many changes in ownership and the shipping companies had downsized. The Onassis-owned ship is under Onassis Foundation’s Springfield with 18 ships as shown in the 2005 study conducted by Marine Information Services. On the other hand, George Livanos had 16, Peter Livanos 11 and Markos and Eleni Livanos 9 ships. Many shipping companies have been under international flag of convenience. Regardless of flag and in addition to Onassis and Livanos group, the other leading companies are Victor Restis’ Enerprises with 74 ships, Laskarides Shipping with 47, OSG Ship Management and Thenamaras with 44 ships, Marmaras Navigation and Ceres Hellenic both had 43 ships each, Chrtworld with 40o ships, George Economou’s Cardiff with 39 ships, Costamare with 38 ships, Dynacom with 36 ships, and Capital Shipping with 35 ships.

Shipbuilding goes back to 2400 to 1900 BC at Lothal Dockyards locaged along the Sabarmati river in Gujarat, India. Up to the present, the tradition of shipbuilding in Gujarat is still dominant and the state is the site of the largest shipbreaking yard in the world servicing 50% of the world’s need for shipbreaking.

In spite of early beginning in shipbuilding industry, it was only in the 16th century that its growth became noticeable when King Henry VIII established the shipyard in Woolwich in 1512 and Deptford in 1513. The discovery of North America by Columbus in 1495 was a great factor for the decision of King Henry VIII to start shipbuilding industry. Ship building sites were later established on the banks in the famous river of Mersey, Tyne, Wear and Clyde in England. Another famous shipyard was in Belfast, Northern Ireland with the company of Harland and Wolff shipyard that built the famous ship Titanic. In the 17th to the 19th century, ships became so important for world dominance that famous shipyards such as Blackwall Yard started in 1614, then in 1837 the Thames Ironworks and Shipbuilding, and John Brown in 1851. The British Crown being so concern with its territorial dominion in Asia, Australia, New Zealand, Canada and Africa, the Royal Naval Dock Yards gained pre-eminence most especially the Devonport Dockyard in the city of Plymouth, England which is the largest naval base in Western Europe up to the present. Other Naval Dock Yards are in Chatham and Medway in North Kent, England.

Page 17 of 34

With the shipbuilding industry in the United Kingdom, the economy flourished that made the United Kingdom and U.S. such a great power that made them victorious over Germany and Japan in World War II, although such victory was with the support of other countries in Europe and Russia. After World War II, shipbuilding industry expanded. However, the Aircraft and Shipbuilding Industries Act of 1977, all major shipbuilding companies were nationalized under the public corporation - the British Shipbuilders Corporation. The nationalization did not last long. The realignment in politics in United Kingdom, the British Shipbuilders Act of 1983 was passed, and the privatization of the industry followed. With the industry privatization, he following were the changes in the shipbuilding industry in United Kingdom:

1. Cammell Laird has been the subsidiary of Vickers Limited Shipbuilding Group (VSEL) from 1986 to 1993. What was left of Commell Laird after 1993 became part of North Western Ship Repairers and Shipbuilding Ltd. (NSL) of Merseyside.

2. Ferguson Shipbuilders of Glasgow merged with Ailsa in 1981 and became Ferguson-Ailsa. In 1986, there was a split of the corporation that Ailsa became Ailsa Perth Shipbuilders while Ferguson merged with Appledore and formed Appledore Ferguson.

3. Govan Shipbuilders was sold to Kvaerner in 1988, then to GEC Marconi in 1999 as part of Marconi Marine. Eventually, it became part of the BAE System Marine and now called BAE Systems Naval Ships.

4. Scott Lithgow was sold to Trafalgar House in 1984 which eventually closed in 2003.

5. Swan hunter Shipbuilders Ltd. of Wallsend encountered financial problem and sold to Jaap Kroese.

6. Vosper Thornycroft of Woolston and Portsmouth became VT Group as a result of the management buyout in 1985.

7. VSEL in 1986 acquired Cammell Laird. Then in 1995, it was acquired by GEC-Marconi and eventually form a part of BAE Systems Submarines.

8. Yarrow Shipbuilders (YSL) of Scotstown was sold to Marconi Marine just like Govan Shipbuilders, and became part of BAE Systems Naval Ships.

Across the Atlantic, the U.S. Government had such famous shipyards at Charleston Navy Yard,

Boston, New York, Norfolk in Virginia, Philadelphia, Portsmouth in Maine, Puget Sound, San Francisco and Baltimore. In the private sector in the U. S., there such a chain of shipyards in all States of the United States. The notable ones are Bethlehem Shipbuilding Corporation with a number of branches, Kaiser Shipyards, Todd Pacific Shipyards, United Engineering, and the Northrop Grumman Ship System and Cascade General Ship Repair which up to the present is the largest ship repair facility in the U. S.

The shipping industry suffered a decline after World War II when the United States focused in the construction of U. S. highways all around the country. With other factors detrimental to the growth of shipbuilding, the share of the U. S. in shipbuilding world went down to 0.2%, while Japan, Jorea and China has 90% share starting in 1992. In spite though of small share, Grumman is still among the largest in shipbuilding in the U. S. However, its activities are not only in shipbuilding but also in nuclear-powered aircraft with shipbuilding

Page 18 of 34

more concentrated in the production of nuclear-powered ships and other ship-related requirement of the U. S. Navy.

Canada had a tradition in shipbuilding that dates back to early 19th century. Ships produced in the Navy Island in Ontario has been identified as an important factor in the war of 1812. The shipbuilding in Canada flourished that in 1870, Canada became the largest producer of shipbs because of the availability of forest products for the production of wooden sailing ship. But, with the steam engine and the need for stell hull, the industry declined since Canada did not have the steel industry.

After World War II, Canada continued to meet the world demand for merchant ship. This magnitude of business was stunted when the new technology in shipbuilding and the huge capital requirement have endangered the state of shipbuilding in Canada. In addition, the high cost of labor and the subsidies provided by other countries in shipbuilding such as Japan, Korea and China led to the decline of shipbuilding industry. In spite, there is still a ship building industry in Canada concentrated in East Coast with Halifax Shipyards, Ltd., while in the Great Lakes Region, there is Port Weller Dry Docks which is a division of Canadian Shipbuilding and Engineering Ltd., and in the West Coasts, there is the Allied Shipbuilder and Vancouver Shipyards Co., Ltd.

With the decline in the shipbuilding industry, the involvement of some Canadian companies is more ship management. The Seaspan Management Services, Ltd. based in Canada and owned by the family of Dennis Washington, Gerry Wang and Graham Porter, acquired 10 container vessels and 13 ships. In 2006, it expanded with four second-hand ships acquired from A. P. Moller-Maersk A/S and 2006 there were 14 additional vessels acquired from China and Korea shipbuilders. Between 2008 to 2011, there will be 37 more ships to be delivered from shipbuilders in China and Korea. With highly innovative management and financial resources in their command, Seaspan management Services Ltd. will surely grow to be a dominant ship management company in the world.

Shipbuilding industry in Japan started with the Nagasaki Shipyard and Machinery Workd established in 1857 as the first warship repair outfit with Dutch engineers. Later on in 1970, Yataro Iwasaki, the founder of Mitsubishi got a lease of the government-owned Nagasaki Shipyard. There evolved full operation of the shipbuilding business. This was renamed into Mitsubishi Shipbuilding Co., Ltd. and finally called Mitsubishi Heavy Industries Ltd. in 1934. With the orders for ship and other military equipment from the government sector and the private industry, Mitsubishi Heavy Industries, Ltd. became the largest private company in Japan with the concentration in shipbuilding and expansion into heavy machinery, airplanes, railroad cars.

In spite of the takeover after the World War II by the Allied Power that lasted until 1964, Mitsubishi Heavy Industries remained to be the largest in Japan producing specialized commercial vessels such as oil tankers, passenger cruise ships, freighters, offshore marine structure and LNG carriers. One of its big clients is Mitsui O. S. K. Lines Ltd. that has acquired the 300th ship from Mitsubishi in July, 2008.

Kawasaki Shipbuilding Corporation has a century old of experience in shipbuilding. This is a wholly owned subsidiary of Kawasaki Heavy Industries with world-wide network of branches. The products consist of LNG and LPG carriers, container ships, bulk carriers, high-speed vessels submarines, very large crude carriers (VLCC), car carriers, RORO, offshore marine structures, and other marine machinery and equipment.

The much younger company than Mitsubishi and Kawasaki is Tsuneishi Holdings Corporation which was founded by its first president Shotaro Kambara. While it is much younger ship-building company, it is the 6th largest producer of ships in terms of tonnage. In 1994, it established a shipbuilding site in Cebu and in 2003 in China. It is highly diversified

Page 19 of 34

company with branches all arond the world. The company is divided into four clusters of businesses with shipbuilding group and shipping group. The shipbuilding group is concentrating in ship repair, metal processing and construction and repair of ships, while the shipping group has freighter services, crew management, and ferry services.

In Korea, the top five in shipbuilding industry are Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding and Marine Engineering, Hanjin Heavy Industries and STX Shipbuilding.

Of the five, Hyundai Heaver Industries is the largest shipbuilder in the world. Its major product is floating production of storage and offloading (FPSO) and pure, car and truck carrier (PCTCs) vessels. The other products are tankers, bulk carriers, containerships, gas and chemical carriers.

Established in 1973 is Daewoo Shipbuilding and Marine Engineering. It 1993, it was ranked number 1 and 2001 number 1 in world for LNG ship orders. Lloyd’s List Maritime Asia recognized Daewoo as the “World Best Shipbuilder.” The product lines of Daewoo are chemical carrier which was first built in 1979, LNV, very large crude carrier (VLCC), submarines and destroyers for the Korean Navy.

A year after the establishment of Daewoo is the establishment of Samsung Heavy Industries. It specializes in the production of high value added vessels, special purpose vessels, such as LNG carriers, off-shore related vessels, oil drilling, ultra large container ships, and Arctic shuttle tankers.

Hanjin Heavy Industries started as a government-owned corporation. In 1968 it was privatized and started exporting ships in 1969. In 1996, it built the fastest 5,000 TEU class containership. In the same year, it also built the first cable-laying ship. With its linkages world-wide, Hanjin was able to secure bulk orders from China and Germany. It is expanding its business with ship construction site in Subic Bay in the Philippines. In 2007, it got the award as one of the top ten outstanding shipbuilder in the world.

The last major shipbuilding company in Korea is STX Shipbuilding. It was established in 1962 as Daehan Shipbuilding Ironworks. In 1973, it built the first container ship in Korea. The company won so many awards. The more prestigious awards were (1) the “Korean World-Class Products Award,” (2) the “Best Prize Global Company Award” and (3) the “Grand Prize of Global Products, and (4) the “Grand rize of global CEO.” For STX awards, Aker Yards of Norway which is the largest shipbuilding company in Europe agreed to sell 39.2% of its shares to STX in 2007.

China is destined to be the world’s shipbuilding country. With its cheap labor, huge capital base with the second largest U. S. dollar reserve in the world next to Japan and the available technology, it is envisioned that by 2015, China will be number 1 shipbuilder in the world. The largest shipbuilding companies in China are Guangzhou Shipyard International, Luda Naval Facility in Dailian and Shanghai Jiangnan Shipyard. These three companies, just like all other shipping companies in the Peoples’ Republic of China are under the China State Shipbuilding Corporation. The products are categorized as civiul ships, offshore facilities, ship repair and shipboard equipment. Under the civil ships are To-Pax vessels, LNG carriers, semi-pressurized LPG carrier, containership ethylene gas carrier, reefer-container ship, oil tanker, chemical tanker, double-hull Panamax tanker, and others.

With the above-mentioned discussion on shipping operation and ship-building industry in major countries in the world, the ranking of ownership of world fleet by country is shown by Table 3.1.6 with Greece leading the group with 19.2% share, followed by Japan with 13.5%, Norway 8.3%, United States with 5.6% share. In the next 6 countries, China is leading the group with 5.5% share, followed by Germany with 5%, Hong Kong with 4.9%,

Page 20 of 34

Korea with 3.4%, Taiwan with 2.9% and United Kingdom with 2.5%. All other countries accounted for 29.52%. Of the six countries, China will lead the group as shown by its high economic growth where shipping will play a crucial role on the shipment of exports to the United States and many other countries. The resurgence of shipping business in Germany is something to reckon with, while Republic of Korea will continue to expand most especially in the ship construction in various parts of the world. For example, STX of Korea has already 39.2% share of the largest shipbuilding company in the Europe that is based in Norway – the Aker Yards. In the world, Aker the 4th largest with 18 shipyards located in Norway, Finland, Germany, Romania, Brazil, France, Ukraine and Vietnam.

Table 3.1.6: World Fleet by Owner Country

Deadweight Tons Percentage Share

1. Greece 145,792,364 19.2

2. Japan 102,748,279 13.5

3. Norway 62,621,346 8.3

4. United States 42,179,685 5.6

5. China 41,024,489 5.5

6. Germany 37,919,467 5.0

7. Hong Kong 36,361,344 4.9

8. Republic of Korea 25,689,007 3.4

9. Taiwan 21,689,216 2.9a

10. United Kingdom 19,197,296 2.5

Sub-Total 535.222,493 70.49

11. Other Countries 224,076,212 29.51

12. World’s Total 759,298,705 100.00

Source: UNCTAD Yearbook 2002 Table 16, p. 31

World Fleet by Owner Country in Deadweight Tons

145,792,364; 19.20%

102,748,279; 13.53%

62,621,346; 8.25%

42,179,685; 5.56%

41,024,489; 5.40%

37,919,467; 4.99%

36,361,344; 4.79%

25,689,007; 3.38%

21,689,216; 2.86%

19,197,296; 2.53%

224,076,212; 29.51%

1. Greece

2. Japan

3. Norway

4. United States

5. China

6. Germany

7. Hong Kong

8. Republic of Korea

9. Taiwan

10. United Kingdom

11. Other Countries

Source: UNCTAD Yearbook 2002 Table 16, p. 31

Page 21 of 34

3.1.7 Sea Accidents in the Philippines, 1980 to 2009

For more than two decades the country has been in the Guinness Work Records for having the worst sea disaster. In terms of the number of death and missing persons in sea accidents from 1980 to 2009, there were 6,072 deaths and missing persons that accounted for 38.04% of total death and missing persons in sea accident in the world with a total of 15,964. In the sea accident of Doña Paz in the Philippines that collided with M/T Vector, this accident alone accounted for 4,341 death and missing persons which is the world’s largest. Ranking second in the world is Indonesia with 3,408 death and missing persons that accounted for 21.35% share, followed by Bangladesh with 2,237 death and missing persons accounting for 14.01% share. All other countries as shown in Table 3.1.7 had lesser number of deaths and missing persons accounting for 26.6%.

Most of these sea accidents occurred during typhoon or some detrimental weather condition. However, in the worst sea disaster – the Doña Paz, the weather was fine although the sea was a little choppy. Doña Paz collided with M/T Vector that was loaded with 8,800 barrels of gasoline and other petroleum products owned by Caltex Philippines. The Board of Marine Inquiry cleared Sulpicio Lines of fault and the Supreme Court of the Philippines ruled that the owners of M/T Vector were liable. M/T Vector was operating without a license and no qualified master was in charge of the operation . On the other hand, Doña Paz was a 40-year ship. Before it was sold in 1975 to Sulpicio Lines, it had a passenger capacity of 608. But, the official manifest of Sulpicio Lines aboard Doña Paz was 1,424 passengers and 58 crew when it disembarked on December 20, 1987 from Tacloban City, Leyte with a stopover in Catbalogan, Samar and was bound for Manila. Later on, this estimate was revised to 1,583 with 675 who boarded in Tacloban and 908 in Catbalogan. On the final figure, the Philippine Supreme Court in its decision in 1999 (Supreme Court, 1999:325) estimated that Doña Paz carried 4,000 passengers, while CNN and 2008 edition of the World Almanac record the estimated lost lives at 4,341.

The findings of the Philippine Coast Guard revealed that when the accident happened, only the apprentice crew was in the bridge. The other officers were either drinking beer or watching television. The Captain was in his room watching a movie on his Betamax. When the collision occurred, the fire engulfed Doña Paz and sank in two hours, while Vector sank within four hours. No one was managing the rescue operation. There were no life vests readily available that the passengers just jumped into the shark-infested water. The life jacket lockers were locked. Det Norske Veritas reported that it was only after 8 hours that the Philippine maritime authorities learned of the incident and the search and rescue operation took another 8 hours to be operational.

When the ship was acquired, it has been used with a maximum capacity of 608. Yet, as accepted by Sulpicio Lines there were 1,583 which showed that there was overloading. Such report of the passengers by Sulpicio Lines was grossly understated because in the Supreme Court decision, it was clear that there were 4,000 passengers. So, there must have been tremendous overcrowding in the ship which is the responsibility of management of Sulpicio Lines. In spite of the above-mentioned findings, the Board of Marine Inquiry cleared Sulpicio Lines.

In another incident involving the MV Princess of the Stars also owned by Sulpicio Lines, the ship Captain Florencio Marimon decided with the sailing of the ship in spite of increment weather due to typhoon Fengshen. Instead of veering away from the typhoon, the ship was sailing towards the typhoon path. Thus, the ship capsized on June 21, 2008 in Sibuyan Island. The Sulpicio Lines claimed that Capt. Marimon is the most senior and most experienced officer in their company. In spite of the captain’s experience, the accident happened that claimed 832 lives including Capt. Marimon. During the investigation by the Board of Marine Inquiry, it was revealed that the ship did not have a sea route plan. The Executive Vice President of Sulpicio Lines reasoned that the preparation of sea route plan is

Page 22 of 34

the duty of the Philippines Coast Guard. On the contrary, the Board of Marine Inquiry reminded the officer of Sulpicio Lines that such duty was transferred to the ship owner and the captain the preparation of the sea route plan as per circular issued in 1998. This sea accident is due to the error of Capt. Marimon for sailing at risk in the light of the prevailing typhoon Fengshen. The ship without a sea route plan was moving towards the direction of the typhoon instead of veering away from the typhoon. It is possible that the ship was overloaded with the shipment of super-toxic pesticide, Endosulfan.

In another accident, it was a clear day yet Superferry 9 a ship owned by the Aboitiz Transport System sank on September 6, 2009 off the water of Siocon, Zamboanga del Norte. According to Adm. Wilfredo Tamayo, Coast Guard commandant, the ship “started tilting 35 degrees to the starboard side . . . It tilted and tilted to the starboard side and based on the report, . . ., it subsequently sank . . .” Superferry 9 was supposed to be in good condition. Since its operation in 1996, the performance of the ship has been quite good that it earned the distinction of being the first Philippine ship to be recipient of the “International Ship Management Award.” With 968 people on board, 931 were rescued including all the officers and ship crew who were the last to depart the ship at 8:42 in the morning.

As shown by the three cases cited, the reasons for the sea accident are of various nature. There was the mismanagement on the part of the shipowner as in the case of the collision with M/T Vector with Doña Paz. M/T Vector did not have a license officer on board while Doña Paz had only an apprentice crew on board with other officers drinking beer and the captain watching Betamax in his room. It is also the management responsibility to have the number of passengers commensurate to the capacity which was grossly violated in the case of Doña Paz. This was also a case of the lapses in the management by the maritime authorities in the enforcement of regulations and the public dissemination and implementation of circulars and directives. Human error is quite clear in the case of MV Princess of the Stars for sailing in spite of the raging typhoon while in the case of Superferry 9 it was the failure of the captain of the ship in detecting the reason for the tilting of the ship which should have been remedied before the sailing of the ship.

There ought to be lessons learned from the various sea accidents that led to the death of 6,072 in the country from 1980 to 2009. Measures should have been in place for the country to be removed from the status of have the worst sea disasters and consequently to save lives and enhance the development of domestic shipping to contribute a greater share of national income of the country.

Table 3.1.7: Number of Death/Missing Persons in Sea Accidents, 1980-2009

Number % Share 1. Philippines 6,072 38.04% 2. Indonesia 3,408 21.35% 3. Bangladesh 2,237 14.01% 4. Baltic Sea 906 5.67% 5. China 749 4.69% 6. Brazil 678 4.25% 7. Nigeria 630 3.95% 8. Yemen 457 2.86% 9. Sierra Leone 306 1.92% 10. Peru 284 1.78% 11. United Kingdom 237 1.48% Total 15,964 100%

Page 23 of 34

Number of Death/Missing Persons in Sea Accidents, 1980-2009

6,072; 38.04%

3,408; 21.35%

2,237; 14.01%

906; 5.68%

749; 4.69%

678; 4.25%

630; 3.95%

457; 2.86%

306; 1.92%

284; 1.78%

237; 1.48%

1. Philippines2. Indonesia3. Bangladesh4. Baltic Sea5. China6. Brazil7. Nigeria8. Yemen9. Sierra Leone10. Peru11. United Kingdom

3.2 Filipino Seafarers

3.2.1 Annual Deployment of Filipino Seafarers

In 1991, sea-based workers accounted for 125,759 or 21.45% of 615,019 overseas Filipino workers (OFWs). The total of OFWs went up to 841,628 in 2000 while sea-based workers went up to 198,324, or 23.56% of the total OFWs. In 2005 as shown in Table 3.2.1 , OFWs increased further to 988,615 with sea-based workers accounting for 25.08%, or 247,983 of the total. In 2006, the record level of OFWs stood at 1,062,567 with 274,497, or 25.83% sea-based workers as shown in Table 3.2.1.

Table 3.2.1: Land-Based and Sea-based Workers, 2005 and 2006

2005 2006 % Change %Share of Total OFW

2005 2006

Land-Based 740,632 788,070 6.41 74.92 74.17

Sea-Based 247,983 274,497 10.69 25.08 25.83

Total 988,615 1,062,567

The trend of sea-based workers has been on the rise from 1991 to 2006 as shown in Table 3.2.2. The growth was at its highest in 1991 with 13.08% growth. Even with the decline in growth from 13.08% in 1991 to 7.14% in 1995, its share went up to 25.29% with 198,324 seafarers. The growth rate was at its lowest in 2000 with 0.83%. While the total number of seafarers went up to 198,324, its share went down slightly to 23.56%. Then in 2005, growth went up by 3.87% for a total in that year of 247,983. In 2006, the growth rate went up to 10. 69%; and total sea-based workers went up to its highest of 274,497 which accounted for the highest share in total OFWs with 25.83%.

Page 24 of 34

Table 3.2.2 : Trend of Sea-Based Overseas Filipino Workers

Total Growth Rate % Share % Share of

Sea-Based Remittances

1991 125,759 13.08% 20.45% 1995 165,401 7.14% 25.29% 2000 198,324 0.83% 23.56% 2005 247,983 3.87% 25.08% 15.61% 2006 274,497 10.69% 25.83% 15.27% Source: Philippine Overseas Employment Administration (2007): Overseas Global Presence: A Compendium of Overseas Employment Statistics

3.2.2 Countries of Deployment by Flag of Registry

The country of deployment of Filipino seafarers is categorized by the flag registry of ship where the seafarers are working. The major countries of the flag of registry in 2006 is shown in Table 3.2.3 where the top ten countries are listed. Leading the list is Panama, Bahamas, and Liberia with the share of 23.92%, 12.81% and 9.66%, respectively. However, these countries are not where there is a concentration of ship owner as shown in Table 3.1.6.

As to the top ten in world shipping fleet by country of ownership consists of Greece that accounted for 19.2%, followed by Japan with 13.5%, Norway with 8.3%, United States with 5.6%, China with 5.5%, Germany with 5%, Hong Kong with 4.9%, Republic of Korea with 3.4%, Taiwan with 2.9% and United Kingdom with 2.5%. These top ten countries comprised 70.49% of the world total fleet. Note the share of Asian countries like Japan with 13.5%, China with 5.5%, Hong Kong with 4.9%, Republic of Korea with 3.4% and Taiwan with 2.9% for a total of 30.2% which almost match the share of countries in Europe. Among the European countries, there is the historical dominance of Greece with 19.2% share, Norway 8.3%, Germany with 5% and United Kingdom with 2.5%, or total share of 35%. As to shipbuilding, there is the dominance of Japan and Republic of Korea which will propel the share of Asian countries in terms of ship ownership, including the possible impact on the Philippines.

In view of labor cost advantage in the Philippines, the Japanese shipbuilding (Tsuneishi Holdings Corporation) has a ship building site in Talamban, Cebu with 5,000 workers and it is expanding its work force to 10,000 soon. Hanjin of the Republic of Korea has a shipbuilding operation in Subic Bay and it is going to have another ship building site in Cagayan de Oro.

With the above-mentioned countries where there has been a concentration of ship owners and flag of registry and where the Filipino seafarers are employed, it is desirable that the Philippines, including the manning companies and maritime higher education institutions in the country, must have a strong ties and linkages with the shipowners of the top ten countries as well as in countries where there is a concentration of ships under its flag of registry. Doing this would improve the services that may be made available to the advantage of Filipino seafarers.

Page 25 of 34

Table 3.2.3 : Deployment of Seafarers by Flag of Registry, 2006

Number % Share

Panama 55,016 23.92

Bahamas 39,457 12.81

Liberia 22,210 9.66

Marshall Island 9,993 4.34

Singapore 9,362 4.07

United Kingdom 7,824 3.40

Malta 7,803 3.39

Norway 7,260 3.16

Cyprus 7,255 3.15

Netherlands 6,653 2.89

Other Flag of Registry 67,189 29.21

Total 230,022 100.00

Source: Philippine Overseas Employment Administration (2007): Overseas Global Presence: A Compendium of Employment Statistics

3.2.3 Top Ten Positions of Seafarers Deployed

For the period 2000 to 2005, total seafarers deployed reached 277,045. Of the total, 98,868, or 35.69% comprised the officers and the balance of 178,177, or 64.31% are ratings and non-marine positions. (Fernandez, 2008:4). The officers consist of Master Mariner, Chief Mate, Second Mate, Third Mare and/or OIC in the Deck Department and Chief Engineer, First Assistant Engineer or Second Engineer, Second Assistant Engineer or Third Engineer and Third Assistant Engineer or Fourth Engineer and/or OIC in the Engine Department. The ratings are those below such position. In the non-marine positions are the cooks, stewards, pumpmen, fitters, machinist, wipers, and the crews in the cruise shipping lines, passenger ships, and ship liner personnel.

Page 26 of 34

The 2006 deployment showed that the officer positions are on the lower level officers instead of Master Mariner, Chief Engineer, Chief Mate, and Chief Officer positions. The lower level positions accounted for 12.71% in 2006, while the ratings accounted for 87.49%% as shown in Table 3.2.4. In 2007, of those deployed 12.29% were of the lover level officers and 87.71% ratings. For the interest of the country and for better benefits for Filipino seafarers, the country should shift its deployment from ratings to officer level. This will entail a scheme of accelerating the promotion of ratings to lower officer level and from lower officer level to the highest position as Master Mariner or Chief Engineer. Pursuing this scheme is a way to meet the demand for more officers where is a current shortage. Doing this will consequently shift the kind of seafarers from ratings which have much lower salary level to officer level where the salary is significantly higher.

Table3.2.4: Top Ten Positions of Seafarers Deployed in 2006 and 2007

2006 2007

Number % Share Number % Share

1. Officer Position 1.1 Second Mate 7,859 3.41% 7,873 3.46% 1.2 Third Mate 6,917 3.01% 6,559 2.89%

1.3 Second Engineer 7,235 3.15% 6,388 2.82%

1.4 Third Engineer 7,216 3.14% 7,056 3.11%

Sub-Total 29,227 12.71% 27,876 12.29%

2. Ratings

2.1 Able Seaman 32,483 14.12% 31,818 14.02%

2.2 Oiler 20,205 8.78% 19,491 8.59%

2.3 Ordinary Seaman 17,422 7.57% 17,355 7.65%

2.4 Bosun 7,882 3.43% 7,737 3.43%

2.5 Chief Cook 7,765 3.38% 7,778 3.43%

2.6 Messman 7,743 3.37% 7,810 3.44%

2.7 Other Skills 107,295 46.64% 107,035 47.17%

2.8 Total Ratings 200,795 87.29% 199,024 87.71%

3. Total 230,022 100.00 226,900 100.00

Top Ten Positions of Seafarers Deployed in 2006

7,859 , 3.42%

6,917 , 3.01%

7,235 , 3.15%

7,216 , 3.14%

32,483 , 14.12%

20,205 , 8.78%

17,422 , 7.57%

7,882 , 3.43%

7,765 , 3.38%

7,743 , 3.37%

107,295 , 46.65%

Second Mate Third MateSecond EngineerThird EngineerAble SeamanOilerOrdinary SeamanBosunChief CookMessmanOther Skills

Page 27 of 34

Top Ten Positions of Seafarers Deployed in 2007

7,873 ; 3.47%

6,559 ; 2.89%

6,388 ; 2.82%

7,056 ; 3.11%

31,818 ; 14.02%

19,491 ; 8.59%

17,355 ; 7.65%

7,737 ; 3.41%

7,778 ; 3.43%

7,810 ; 3.44%

107,035 ; 47.17%

Second Mate Third MateSecond EngineerThird EngineerAble SeamanOilerOrdinary SeamanBosunChief CookMessmanOther Skills

3.2.4 Monthly Salary Package of Seafarers By Officer Position, 2006

Current salary of Filipino seafarers differ across companies and kind of ship they are in. Usually, those working aboard tankers receive higher salary package than those on roll on, roll off ship (RORO), containers, and reefer vessels. As shown in Table 3.2.5, the total monthly salary package includes overtime pay, leave pay, bonus, tanker allowance, and long service bonus. The total package may vary depending on the experience, analysis of performance, and company policies.

As shown in Table 3.2.5, the total monthly salary package of Master Mariners in tankers ranges from U.S.$6,000 to U.S.$8,500 while those in RORO, container and reefer vessels, it ranges from U.S.$5,800 to U.S.$6,200. For Chief Engineer, it ranges from U.S.$5,700 to U.S.$8,200 in tankers and in RORO, container, reefer vessels from U.S.$5,800 to U.S.$6,000 as shown in Table 3.2.5. For Third Officer or Fourth Engineer, the salary ranges is U.S.$2,000 to U.S.$3,500 in tankers and in RORO, container and reefer vessels from U.S.$2,200 to U.S.$2,800.

The total salary package of the ratings is much lower and it ranges from the lowest category of deck boy, messboy, messman to fitter, ordinary seaman (OS) wiper, oiler, able bodied seaman (AB), bosun, pumpman, etc. amounting to U.S.$442 to U.S.$1,823 depending on the company and the experience of the person concerned.

Table 3.2.5: Total Monthly Salary Package

Tankers RORO, Container and Reefer Vessels

1. Master Mariner from U.S.$6,000 to .$8,500 U.S.$5,800 to $6,200

2. Chief Engineer from U.S.$5,700 to 8,200 $5,800 to $6,000

3. Chief Officer from U.S.$4,200 to 6,100 $3,800 to $4,000

4. Second Officer from U.S.$2,500 to 3,541 $2,200 to 3.100

5. Second Engineer from U.S.$2,500 to 6,100 $3,800 to $4,000

6. Third Officer or

Fourth Engineer from U.S.$2,000 to 3,500 $2,200 to $2,800

7. Ratings from US$442 to $1,823

Page 28 of 34

The salary of ratings is generally subject to collective bargaining agreement. For example, the contract between AMOSUP and the Danish Shipowners Association showed that total salary package ranges from the lowest of U.S.$937 among OS/wiper/messman to U.S.$1,404 for boatswain/pumpman/fitter/machinists as shown in Table 3.2.6. Total monthly package consist of basic plus gross overtime, additional leave and Danish annual leave.

Table 3.2.6: Negotiated Wage with Danish Shipowners’ Association, 2002

Total Monthly Salary Package

1. Boatswain/pumpman/fitter/machinist U.S.$1,404

2. Chief Cook/Steward 1,404

3. Able Seaman/motorman 1,265

4. Second Cook 1,201

5. OS/wiper/messman 937

Source: Cited in Leggate and McConville, 2002: 59.

3.2.5 Total Remittances of Seafarers, 2007

The OFWs are called as modern heroes of the country in view of the magnitude of annual foreign exchange remittances to the country that greatly enhanced the stability of the Philippine peso. In 2003, total remittances of OFWs reached U.S.$7.589. Of which, U.S.$1.298 came from Filipino seafarers which accounted to 17.13% of total remittances of OFWs as shown in Table 3.2.7. In 2004, OFWs remittances went up to U.S.$8.55 billion of which US$1.565 billion, or 18.3% came from the seafarers. OFWs remittances went up further to U.S$10.689 and the corresponding share of seafarers amounted to US$1.669, or 15.61%. In the succeeding years in 2006 and as shown in Table 2.6.7, it reached record level of U.S.$12.761 billion. In 2007, OFW remittances reached U.S.$14.4 billion with the share of seafarers amounting to U.S.$2.26 billion. OFW remittances further increased to U.S.$16.426 billion in 2008, U.S.$17.34 in 2009, and the Central Bank estimate in 2010 is U.S.$18.901. The corresponding share of the seafarers from OFW remittances amounted to U.S.$ 2.578 billion, U. S. $ 2.77 and 3.186 in 2008, 2009 and 2010, respectively. The share of the seafarers will continue to increase in view of the 7.4% growth in the remittances of the seafarers compared to 6.5% growth of the land-based workers.

The above-mentioned share of seafarers in foreign exchange remittances of 15.27% in 2006 is not commensurate to the share of seafarers to total number of OFWS with 25.83%. What can be inferred from this is that the seafarers are not as well-paid as the land-based OFWs, although it is possible that the remittances of seafarers are grossly understated. It is quite a common practice of seafarers to remit funds through their friends who are going home for vacation. Since vacation aboard the ship is on staggered basis, there is a great possibility for each seafarer having a friend to remit to the members of their family almost every month.

With the above-mentioned remittances of OFWs, the Philippines ranked 4th in the world in terms of remittances of workers abroad. Ranking first is India with U.S. $24.5 billion, followed by Mexico with U.S.$24.2 billion, China with U.S.$21 billion and fourth is the Philippines with an estimate of U.S.$13.8 billion as per study of the United Nations International Food for Agricultural Development (IFAD) and the Inter-American Development

Page 29 of 34

Bank (ADB) released last October, 2007. Even with the 2010 estimate amounting to U.S.$18.901 billion is not enough to outrank China in the 3rd rank with U.S.$21 billion as shown in Table 3.2.7.

Table 3.2.7: Remittances of Seafarers in Relation to Total Remittance of OFWs

Total OFWs Remittances Seafarer’s Remittances Share of Seafarers

2003 U.S. $7.598 billion U.S.$1.298 billion 17.13%

2004 8.550 billion 1.565 billion 18.30%

2005 10.689 billion 1.669 billion 15.61%

2006 12.761 billion 1.949 billion 15.27%

2007 14.4 billion 2.260 billion 15.69%

2008 16.426 2.578 billion 15.7%

2009 17.340 2.77 billion 16.0%

2010 18.901* 3.186** billion 16.85%**

Source: Philippine Overseas Employment Administration (2007): Overseas Global Presence: A Compendium of Overseas Employment Statistics.

*based on the latest report of Central of the Philippine on OFWs Remittances

**Author’s Estimate

Remittances of Seafarers in Relation to Total Remittance of OFWs in US $billion

7.598

8.55

10.689

12.761

14.4

16.42617.34

18.901

1.298 1.565 1.669 1.949 2.26 2.578 2.773.186

0

2

4

6

8

10

12

14

16

18

20

2003* 2004* 2005* 2006* 2007* 2008* 2009* 2010*

Year

Scal

e Total OFWs Remittances

Seafarer’s Remittances

Source: Philippine Overseas Employment Administration (2007): Overseas Global Presence: A Compendium of Overseas Employment Statistics

3.2.6 The Country’s Capability to Supply Quality Seafarers

The country is known for having a huge number of students enrolled in maritime education. This partly is an explanation of the dominance of the Philippine in the number of seafarers in the world. However, what is needed for world shipping is the quality of seafarers. In response to this need, the STCW Convention ’95 demands that maritime educational institutions have to respond to the need for world shipping for quality. Thus,

Page 30 of 34

from more than a hundred maritime institutions, the Commission on Higher Education reduced the number of maritime higher education institutions to the select group of 11 who complied with the stringent requirement for world-class quality in maritime education and training. With such compliance the Philippine qualified to be in the White List as a source of seafarers for world shipping. The select 11, the number went up to 55 higher education institutions allowed to offer Bachelor of Science in Marine Transportation(BSMT) and 50 Bachelor of Science in Marine Engineering (BSMarE) which is a significant reduction from over a hundred maritime higher education institutions offering maritime education.

With such reduction, enrolment went down from 98,678 in 2000 to 77,850 in 2004 as shown in Table 3.2.8. Graduates, likewise, went down from 16,417 in 2000 to 11,303 in 2004. With such number of graduates and if all these graduates are of world-class quality, it may seem easy to supply the world shortage as projected the University of Warwick for approximately 10,000 officers. Unfortunately, it is quite hard to produce officers because of the highly demanding rigors in the career path in the maritime profession. After completion of the academic requirements for BSMT or BSMarE, they have to undergo on-the-job training for a year then they will qualify for graduation in BSMT or BSMarE. After graduation they have to complete a year of sea time for them to qualify to take the first professional examination for Officer-in-Charge which is the lowest level in both the Deck and Engine Department. After passing the OIC level, they have to serve as OIC and upon completion of sea time, they qualify to take the second professional board examination. After passing they have perform the expected function as third engineer or second mate aboard the ship. With the satisfactory sea duty, they are to take the second engineer examination or chief mate examination. With the successful passing of such examination, they have to serve said license. Upon completion of the required duties aboard the ship, they qualify for the final Master Mariner or Chief Engineer licensure examination. In many shipping companies, one is required to several contracts as First Officer before they are finally given the privilege to assume the coveted position as Master Mariner or Chief Engineer.

In almost all instances, the candidate is interviewed by the ship owner before one is appointed to the final position in the maritime profession. It is only when the candidate earn the confidence of the candidate as Master Mariner or Chief Engineer that the ship owner will turn over the total management of highly valuable ship to the Master Mariner or Chief.

In spite of the rigor of pursuing to be in the apex of the profession, with the excellent graduate of world-class quality, the country has the potential to sustain the supply of quality seafarers with more than a hundred higher education institutions offering maritime education of heterogeneous quality. What is important is to enhance excellence in maritime education of world-class standard. Attaining world-class standards is highly dependent to an adherence to a continuing quality assessment in maritime education as suggested by the present author entitled, “Enhancing Excellence in Maritime Education Through a Continuing Assessment System.”

Table 3.2.8: Enrolment and Graduates of Maritime Higher Education, 2004

Enrolment Graduates

2000 2004 % Share 2000 2004 % Share

1. Region 1 8,064 6,298 8.09% 2,034 200 1.77%

2. Region II 135 635 0.82% 174 35 0.31%

3. Region III 2,446 5,006 6.43% 671 885 7.83%

4. Region IV A 3,791 2,734 3.51% 674 143 1.26%

5. Region IV B 382 0.49% 75 0.66%

Page 31 of 34

6. Region V 3,392 2,806 3.60% 830 801 7.09%

7. Region VI 19,090 16,970 21.80% 3,943 2,062 18.24%

8. Region VII 18,780 11,353 14.58% 1,139 1,428 12.63%

9. Region VIII 3,722 2,635 3.39% 627 128 1.13%

10. Region IX 2,341 1,790 2.30% 552 81 0.72%

11. Region X 3,521 3,199 4.11% 792 342 3.03%

12. Region XI 5,975 348 4.48% 1,402 488 4.32%

13. Region XII 944 1,830 2.35% 170 1,875 16.59%

14. NCR 26,477 18,724 24.05% 3,409 2,760 24.42%

Total 98,678 77,850 100.00 16,417 11,303 100.00

Source: Commission on Higher Education Statistical Bulletin.

4.Application of ICT Statistics in Business and Industry and Philippine Society

ICT statistics are sufficient bases for the concentrated efforts of all sectors in society to enhance the development of ICT industry. With the two centers of excellence, i.e. NCR and Metro Cebu and the 10 next web cities already identified that form the nucleus in the ICT cyber corridor, one is quite certain of the solid foundation as bases for accelerated development. However, there is a need for further development in the 80 provinces for all provinces in the country for them to have its share in the benefit of the development of ICT industry.

As demonstrated in various IT council, there should be a sustained and collaborative efforts of the academe, business and industry, the government sector and the citizenry for each one to contribute their best for the greater good of the ICT industry. One should not be compromising in excellence because it is only when all are total adherence to world-class quality that the country will have a greater role in world development.

Business and industry should be in adherence to world office standards, procedures and processes to create a business environment where excellence will thrive with great success. It is only then that one can feel quite confident with the sustained development in the ICT industry.

5. Application of the Statistics in Shipping and Maritime Profession in the Shipping Industry, the Maritime Profession and Philippine Society

The statistics cited on the present situation of the shipping industry and the government and regulation agencies managing the industry indicate that there is a need for a quantum leap for the industry to move forward. A better management system in the shipping industry is in order for its internal efficiency to improve and thus generate respectable return on investment. With the country’s record of sea accidents and the low rate of returns seem to discourage any entry into the industry where there is a not much competition. There has to be a break in the cycle to bring about a ray of some silver linings into domestic shipping industry.

With the improvement in internal efficiency in the operation of domestic shipping lines, there may be possibility to attract highly qualified professional officers with competitive pay scale as in world shipping that could enhance the effectiveness and efficiency in operation for the professionalization of the operation of domestic shipping lines.

Page 32 of 34

There is greater reason for optimism in ship construction and ship repair business with the participation of foreign investors and the commitment to excellence in ship construction already demonstrated by Tsunishi Shipyard in Cebu and Hanjin Shipyard in Subic Bay.

There has been ample demonstration of excellent Filipino seafarers in world shipping. That is the very reason for the significant contribution of seafarers in the generation of foreign exchange into the country. It is a matter of sustaining such efforts and other maritime higher education institutions to initiate bold initiatives for the enhancement of excellence in maritime education through a continuing assessment system.

What is critical to date is the inadequate documentation of the contribution of the seafaring profession to the economy and Philippine society. The rich documentation of the contribution of seafarers will create positive image of the profession for lasting impact of the profession in all facets of Philippine life.

6.Conclusions and Recommendations

6.1 ITC Statistics and ICT Industry

In spite of the ICT industry being young in relation to existing industries in the country, its contribution to the economy is significant as shown by ICT statistics that the country’s ICT industry is already the 3rd in the world. What is quite crucial is to sustain the present effort with the collaboration of business and industry, the academe and the government. However, the contribution and the response of each sector need some more improvement and need an infusion of on-going dynamism for the programs and projects in each region to reach its peak in excellence.

It is an imperative for the ICT higher education in institutions to possess capabilities to produce graduates of world-class quality. In pursuance to this imperative is the need for a continuing assessment system in IT education for a quality assurance system being in place in all facets of ITC education. Involvement of faculty in ICT industry is also desirable. This will come about if there is a purposive collaborative arrangement for faculty to be exposed in ICT industry experience.

6.2 Statistics on Shipping Industry and Maritime Professionals and the Economy

While world shipping is contributing to the growth and development of the industry their own respective country, domestic shipping remains to have a 0.5% share of gross domestic product (GDP). The reasons are quite obvious as shown in the fact that the industry while among the pioneering in the country did not develop unlike the development of shipping in Korean and Japan. Second, the rate of return is not attractive to attract investors. Third, the possible reason for the low rate of return is the internal inefficiency as demonstrated by the sea accidents that can be traced to poor management aboard the ship and in the whole institution. Fourth, the state of competition prevailing in the industry does not attract big player. The move towards greater competition will possibly bring about greater efficiency just as the liberalization in telecommunication industry brought about such dramatic growth that paved the way for the ICT industry which formed the solid foundation of the growth of ICT industry.

Filipino seafarers demonstrated to the world their contribution in world shipping. Without the Filipino seafarers shipping industry of many countries will be in jeopardy. It is, therefore, in the mutual interest of the shipping countries in the world and for the Philippines to sustain the supply of highly qualified seafarers through a continuing assessment system that will assure the consistency of offering in maritime education of world-class quality. With the uneven offering of maritime education in many maritime higher education institutions,

Page 33 of 34

shipping companies are establishing tie-up with existing institutions or even initiating its own program to assure a continuing supply of highly qualified seafarer.

The use of ICT statistics and the statistics in domestic shipping and the maritime profession in rationalizing all facets of the industry and the practice of the profession will surely bring about a developmental impact in the whole country of greater dimension. The dimensions will be multi-faceted in almost all aspects of Philippine society – the economy, business and industry, the community, the education sector and the stature of the country in the world economy.

References:

Arcelo, Adriano A. 2009. IT Manpower in Iloilo and the Global Crisis. Iloilo Federation for IT and ALG & Associates Research and Development Corporation.

Arcelo, Adriano A. and Leticia M. Asuzano, 2010. Enhancing Excellence in IT Programs Through Continuing Assessment System, joint project of ALG & Associates Research and Development Corporation and the Asian Psychological Services and Assessment Corporation.

Arcelo, Adriano A. and Leticia M. Asuzano, 2010. Enhancing Excellence in Maritime Education Through Continuing Assessment System, a joint project of ALG & Associates Research and Development Corporation and the Asian Psychological Services and Assessment Corporation.

Austria, Myrna S. 2003. Philippine domestic shipping Transportation Industry: State of Competition and Market Structure. Manila: Philippine Institute for Development Studies.

Det Norske Veritas, “Annex 1: Passenger Vessel Evacuatin Descriptions (http://research.dnv.com/skj/Fsahla/Annex1.pdf.

Ibrahim, Monchito. 2009. Cyberservices, paper presented during the Convergence 2009 Conference held in 11 cities around the country in 2009.

National Statistical Coordination Board.2007. Statistical Yearbook Makati: national Statistical Coordination Board (NSCB) and the National Economic and Development Authority (NEDA).

Roxas Chua, Antonio. 2009. Empowering the Filipino Through ICT. Paper presented during the Convergence 2009 Conference held in 11 cities around the country in 2009.

Shameen, A. 2006: The Philippines’ awesome outsourcing opportunity, Business Week Online viewed on February 11, 2007.

Supreme Court of the Philippines: Caltex Philippines v. Supicio Lines. Sept. 30, 1999.

Vashitha, Avinash. The Economic Resiliency Through ICT: Challenges and Opportunities for the Philippines. Paper presented during the Convergence 2009 Conference.

Page 34 of 34