PCCI Policy Paper onPORT CONGESTION IN A CONGESTED METROPOLIS[footnoteRef:1] [1: This position paper was a result of the Transport Forum organized by the Philippine Chamber of Commerce and Industry on June 19, 2014. The author would like to thank Messrs. Meneleo Carlos, Jr. and Jeremiah Acena for their assistance in the preparation of this paper.]

By Dr. Enrico L. BasilioChief of Party, USAID Advancing Philippine Competitiveness (COMPETE)(Former Chairman, PCCI Transport Committee)

The Big Picture

Metro Manila is congested. A major contributor to this congestion is the huge cargo traffic coming in and going out of the Port of Manila. A few years back, the cargo throughput in the Port of Manila has already exceeded its rated capacity. A new berth was constructed to decongest the port. Unfortunately, this further exacerbated the congestion in the city of Manila and the entire metropolis.

Contrast this with the highly underutilized ports in Batangas (3% utilization of its 300,000 TEU annual capacity) and Subic (6.4% utilization of its 600,000 TEU annual capacity). The government borrowed Php 17.5 billion from JBIC to finance the developments of these ports with the plan of transferring cargoes from Manila to these outer ports. Add all the investments (Php 111.1 billion) poured into the expressways that lead to these ports that are also underutilized (current 5,000 vehicular traffic/day in SCTEx vis--vis the target of 25,000 vehicular traffic/day, mostly cars not container trucks). While the government is being criticized for not investing enough on infrastructure (barely 2% of GDP), these key infrastructures already in place are hardly being used.PROJECTSCOST (in billion Pesos)

Batangas Port10

Subic Port7.5

NLEX18.5

NLEX Rehab/Widening4

SLEX9

SLEX Rehab/Widening11

NLEX-SLEX Connector18

TPLEx11.6

SCTEx34.9

STAR 1 and 21.8

STAR 2 Expansion2.3

TOTAL128.6

Creating new economic magnets outside of the National Capital Region (NCR) was the main justification used for the Subic and Batangas port expansions - Regions 3 and 4 being the fastest growing economies in Luzon outside of NCR, accounting for almost 20% of the countrys total output (GDP). Corollary to this was the objective to decongest Metro Manila. Close to a decade after the ports were developed, the vision remains just that a vision due to the governments failure to systematically shift the cargoes from Manila to these ports.

As early as 2008, the National Competitiveness Council (NCC) advocated for the development of a Subic-Batangas Logistics Corridor anchored on the efficient utilization of the ports of Subic and Batangas. According to the Philippine Economic Zone Authority (PEZA), 60% of the volume handled at the Port of Manila comes from the more than 1,000 locators in 42 industrial estates located in the Cavite-Laguna-Batangas area. Unfortunately, cargoes from South Luzon still go to the Port of Manila braving the traffic, truck ban and higher transport cost because the international shipping lines call at the Port of Manila. International shipping lines, on the other hand, call at the Port of Manila because the cargoes are in Manila (even if they come from the CALABARZON area).

Market forces alone cannot correct this. Policy intervention from the government is needed to break the impasse. In early 2011, the business sector (Philexport, Export Development Council, and NCC), with support from PEZA, made a presentation to DOTC Secretary Ping de Jesus recommending a combination of (a) substantial reduction in cargo handling fees to encourage the shippers (cargo owners) to use Subic and Batangas ports, and (b) policy issuance that will direct the systematic shift of cargoes (starting with foreign cargoes) to Subic and Batangas. Secretary de Jesus agreed to adopt the private sector recommendations but resigned from his post even before they could be implemented. The Philippine Ports Authority (PPA) responded by lowering the port berthing fee by 50%. This, however, is not the appropriate solution. Lowering the berthing fee even to nil will not encourage the shipping lines to call at the port if the cargoes are not there. Ships generally follow where the cargoes are. Therefore, it should be the flow of the cargoes that must be influenced through a market incentive.

Meanwhile, traffic in Metro Manila has worsened.

Manila Day-Time Truck Ban

Taking affirmative action, the City Government of Manila issued Ordinance No. 8336 (February 04, 2014) a policy which aims to decongest the streets of Manila from vehicular traffic by preventing trucks (with gross weight of 4.5 tons and higher) from plying the city streets from 5:00AM to 9:00PM. The local legislation also imposed a Php 5,000 penalty to those that will violate the truck ban.

More than two weeks after its implementation, the city government modified the truck ban by providing a five-hour window between 10:00AM to 3:00PM for loaded trucks for a period of six months. However, trucks carrying empty containers are not covered by the policy amendment. The policy has impacted on the transport of goods, as follows:

Shippers (domestic manufacturers and exporters/importers)

The truck ban policy triggered the congestion at the Port of Manila since the outflow of cargoes was limited to a window of eight hours. Among the stakeholders, shippers (exporters, importers, and manufacturers) have been the most adversely affected by the truck ban and port congestion. The ordinance has disrupted the operations of manufacturers especially those operating under the JIT (just in time) system since the inputs (raw materials) are held-up inside the port due to the truck ban. Exporters that missed delivery deadlines due to the truck ban and port congestion are being penalized (in millions of USD) by their principals (importers). Some exporters dealing with perishable goods experience lost sales since they cannot export their product out of Manila Port. Shippers also face increasing transport cost. The cost of trucking has more than doubled since the ordinance was implemented (from Php 18,000 to Php 34,000). Due to the port congestion, shipping lines started to levy add-on fees (container detention/demurrage fee) since they cannot deliver containers on time. The additional costs (from truckers and shipping lines) are basically absorbed by the domestic shippers and exporters/importers and undermine the competitiveness of Philippine exports and increase the domestic cost of products/commodities.

Transport-logistics Providers (foreign and domestic shipping companies, port/terminal operators, trucking operators)

Aside from shippers, the ordinance also negatively affected transport service providers particularly the shipping lines, trucking companies, and terminal operators. Since the terminals at the Port of Manila are now experiencing congestion, shipping lines (especially international shipping lines) find it difficult to off-load their cargoes resulting to unnecessary waiting time (which can be as long as five to seven days at anchorage). Some of the international shipping lines have started to decline containerized cargoes bound for Manila. For liners that still call in Manila, they began to collect add-on fees such as congestion fee, demurrage fee, and others to shippers on top of freight cost as a recovery mechanism. According to shippers, theses additional fees may range from Php 25,000 to Php 35,000 per TEU. For truckers, the congestion at the port dramatically reduced the number of turn-around per truck per week. At present, a truck can only have three trips in a single week. Prior to the imposition of the day-time truck ban, it can make five trips per week. The limited number of turn-around has forced truckers to increase their trucking rates by at least 100 percent. Like other transport and logistics service providers, the port terminal operators have also felt the negative impact of the truck ban. The high volume of container inside the terminal has also limited the space where in cargo handling equipment can operator. It has also reduced the ports operating time to 10 hours per day leaving expensive cargo handling equipment idle.

Is the City of Manila Day-Time Truck Ban good or bad?

There are two schools of thought concerning this issue.

On one hand, those adversely affected consider the Manila day-time truck ban as a bad policy with very costly implications. On the other hand, many hail it as a correct policy imbued with strong political will, one that will enhance transport-logistics competitiveness (that should have been done a long time ago).

Those who are affected by the policy call for its suspension to de-clog and facilitate the trucking of containers from the port (i.e., return to old status quo). This may be a palliative solution but will not address the long-term objectives of (a) creating new economic magnets outside of the NCR, (b) maximizing the utilization of the ports of Subic and Batangas as well as the other infrastructures (expressways) that support them, (c) generating the necessary revenues to finance the loans (ODA) contracted by the government for these infrastructures, (d) improving the efficiency of the transport-logistics sector, and (e) decongesting Metro Manila.

Below are some concrete recommendations, long-term and immediate (palliative), discussed in a recent Transport Forum organized by the Philippine Chamber of Commerce and Industry (PCCI)

LONG-TERM SOLUTIONS

1.Shift Container Traffic to Batangas and Subic PortsMaximizing the utilization of the Subic and Batangas Ports (so that they will not end up as white elephants) is not only the correct long-term solution to the congestion in Metro Manila but sends the correct signal that further port development should happen in these ports (no longer in Manila).

PPA claims that the current contracts in Manila call for the construction of additional berths. This, perhaps, is the best time for the government to renegotiate the contracts so that development of new terminals should already happen in Batangas and Subic Ports.

2.Place a cap on the volume that may be handled in the Port of ManilaThe national government to issue a policy putting a limit (cap) on the volume of containers that can be handled by Manila Port akin to the policy implemented by Port Authority of Thailand (PAT) when it developed Laem Chabang Port. Thailands growing international trade caused port congestion and serious traffic in Bangkok. To decongest the Port of Bangkok, the PAT developed the Laem Chabang Port. Established only in 1991, Laem Chabang already ranks among the top 20 major ports in the world. In terms of container capacity, the port can accommodate a container throughput of 5 million TEUs. By the end of 2006, container traffic already exceeded 4 million TEUs. The PAT issued a regulation limiting the traffic at the Port of Bangkok to around 1 million TEUs per year. In anticipation of increased volume, Phase 2 development (5.8 million TEUs) was initiated at the Laem Chabang Port as early as 2005 so that it could handle post-panamax ships (16 m draft). This practically doubles Thailands port capacity.

PALLIATIVE SOLUTIONS

3.Request the City of Manila to lift the truck ban for 1-2 months to alleviate port congestionThe lifting of truck restrictions is requested for only a limited time of 1 to 2 months to temporarily alleviate the port congestion in Manila and enable both national government and the private sector to implement the real long-term solutions outline above. This limited window is requested as a sincere gesture on the part of the business sector in support of a more long-term and permanent solution to the problem.

4.Request International Shipping Lines to Temporarily Waive Container Detention/Demurrage FeesInternational shipping lines normally charge container detention/demurrage fees if a shipper goes beyond the number of free days allotted. This cost may vary from Php 900 to Php 1,800 for each day in excess of given free time. Shipping lines impose this penalty to shippers to ensure that they would promptly return the containers back to the shipping lines container yard.

The severe congestion along the Manila Port and surrounding container yards has prolonged the process of returning empty containers by days causing shippers to exceed well beyond the free time allotted by the shipping lines. As such, shippers are unduly charged with container detention/demurrage fees despite the fact that the delay is caused by the congestion at the port and not by the exporters own doing.

Shippers to request the international shipping companies, through the Association of International Shipping Lines (AISL), to temporarily waive such fees for next two months until the situation has normalized. This will prevent shippers from incurring additional cost in their operations.

5.Transporting Containers to Subic Port using Container Barges

Container barge operationAnother solution put forward to address port congestion without lifting the day-time truck ban (hence, will not exacerbate the traffic situation in the City of Manila) is to transfer (a) all abandoned and seized containers and (b) partially move foreign container traffic to Subic Port using container barges. The Department of Transportation and Communications (DOTC) may subsidize this activity.

Abandoned and seized containers. There are approximately 2,000 TEUs of abandoned and seized containers taking up space at the Port of Manila. These containers can be loaded into a barge and transported to Subic for storage and processing. By doing this, it would free up port space and allow ships unload its cargoes. The Bureau of Customs (BOC) to assist and support this initiative.

Move foreign container traffic to Subic Port. Container barging may also be utilized to off-load containers from international vessels. At present, a ship waits at anchorage for an average of five days before they can dock at Manila Port to discharge its cargoes. Using a geared-ship container barge, international ships can off-load its cargoes onto a container barge at anchorage instead of waiting for days just to dock at Manila Port. Once filled, the barge will then proceed to Subic Port to discharge the containers, which can be withdrawn once duly processed. This allows shippers to get their shipment at a faster then having it discharged and processed in Manila.

6. Night Time DeliveryThe implementation of Ordinance No. 8336 has limited the operating time for truckers between 9:00PM to 5:00AM. This means that truckers can only withdraw laden containers from the port during this time period. Unfortunately, truckers can no longer deliver their payload to its destination since the warehouses/delivery facilities of the cargo owners are closed at night. Hence, there is a need for cargo owners to provide a night time delivery facility for truckers. In the long run, this well help ease the traffic in Metro Manila since trucks will be able to make deliveries at night instead of only having a delivery time between 10:00AM to 3:00PM in a single day. This, in effect, spreads the volume of trucks deliveries from five hours to 13 hours.

The Department of Trade and Industry (DTI), the Department of Transportation and Communications (DOTC), and Philippine Economic Zone Authority (PEZA) need to talk to large corporations to ensure that they make a night time delivery facility available for transport and logistics providers.

7.Additional Container Depot and Truck Holding AreaWhile the port terminals in Manila are congested, the container yards outside the port are likewise congested. This situation prevents shippers from returning the empty containers within the given free time causing them to incur container detention/demurrage charges. Hence, there is a need to open temporary container depots near the City of Manila where shippers can easily return/get empty containers. MCC Transport has already taken the initiative of opening a container depot in Bulacan to serve its own containers.

There is also a need for a truck holding area since the Port of Manila has not enough space to accommodate the trucks that deliver and collect cargoes from the port. Prior to the imposition of the Day Time Truck Ban, truckers make use of the roads along the port area as parking. With its implementation, trucks are looking for holding areas where they can wait before picking ups its cargo form the port. Possible locations for the truck holding area are Cavite, Bulacan, and other nearby locations.

SUMMARY

In sum, the government and private sectors can implement palliative measures to relieve the pressures caused by the day-time truck ban in the City of Manila (i.e., temporary waiver of container detention/demurrage fees charged shipping lines for delayed return of empty containers, transfer of abandoned and seized containers to Subic Port using container barges, night time delivery, and additional container depot and truck holding area). But the important, long-term solution is to systematically shift the cargoes, starting with foreign cargoes, to the ports of Subic and Batangas. This proposed solution will address the long-term objectives of (a) creating new economic magnets outside of the NCR, (b) maximizing the utilization of the ports of Subic and Batangas as well as the other infrastructures (expressways) that support them, (c) generating the necessary revenues to finance the loans (ODA) contracted by the government for these infrastructures, (d) improving the efficiency of the transport-logistics sector, and (e) decongesting Metro Manila. Complementary initiatives include the capping of the volume to be handled at the Port of Manila and the development of additional port capacity outside of Manila (i.e., ports in Batangas and Subic).