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Domestic shipping group bucks entry of foreign players

The organization of Philippine shipping firms is bucking proposed amendments to the Cabotage Law, citing foregone government revenues and the possible death of the domestic industry.

Pedro Aguilar, executive director of the Philippine Interisland Shipping Association (PISA) told reporters that domestic shippers are concerned about pending legislation in the Senate and House aimed at allowing foreign-owned ships to engage in inter-island trade.

Aguilar said allowing foreign operators would require amending the Constitution, which limits ownership and control over public utilities such as shipping to Filipino citizens or corporations that are 60 percent Filipino-owned.

"The proposed laws could kill the local industry," Aguilar said, referring to House Bill Nos. 1789 and 2563 as well as Senate Bill No. 1359.

The Aquino administration is pushing for amendments to the Cabotage Law to reduce shipping costs.
In a position paper, PISA said pursuing such changes may result in domestic companies moving their company registries to Hong Kong or Singapore to minimize income taxes and the excise tax on fuel.

PISA said foreign ships enjoy benefits not accorded to local counterparts.

"Not leveling the playing field will result to complete decimation of the Philippine flag carrier as domestic shipowners would prefer to register their ships under a foreign flag then come back to enjoy the same benefits as foreign ships," the group said.

PISA said amending the Cabotage Law will likely result in foreign domination of coastwise trade and could compromise public safety, making it difficult to control smuggling of fuel, drugs, arms and poaching of the country's marine resources.

The group said attaining economies of scale is key to bringing down the cost of shipping.

"A larger ship would be cheaper per unit than a small one. However, economies of scale is hard to achieve in Philippine domestic shipping because of lack of trade in a particular port to support a larger ship. In most cases, the shipping cost is only part of the whole chain, which includes trucking, warehousing, materials handling, agents, and other additional processes, delays and other costs to bring products to market," PISA said.

"Each segment in the logistics chain should be looked into: how to make the whole supply chain more efficient," it added.

The group also blamed the underdeveloped Philippine ports.

PISA said the long-term solution to lowering freight and logistics costs is to have a national development plan to cluster manufacturing and production centers around port and airport infrastructure.

"Many PEZAs and Agricultural Zones are spread all over the country, making it very challenging to bring goods to market. For Batangas to become a viable international and domestic port, the land area around it should be developed and promoted for manufacturing," PISA said.

"There is also an opportunity for the Luisita-Clark and Clark-Subic Corridor to promote light industry because of its proximity to the airport and Subic Port," the group said.

Sought for comment, Maritime Industry Authority administrator Maximo Mejia said the agency is supporting amendments to liberalize domestic shipping.

"We are trying to address the specific call of the President in relation to lowering the cost of shipping and one of the problems is the restriction on foreign vessels. It’s a Constitutional provision that protects cabotage," Mejia said.

"To lift it means to open up the Constitutional amendment. I don’t think that’s part of the agenda of the administration. So, what we are pushing for is allowing foreign flag vessels to call at more than one port in the Philippines, only for the purpose of carrying import or export cargoes," he added.
Source: InterAksyon