Long-awaited reforms for a sustainable maritime sector

President Bongbong Marcos and his presidential leadership team made excellent choices in forming the Cabinet. With the exception of two appointees whom I consider professionally and ethically questionable, the others are at the top of their game in terms of credentials, integrity, and hard work. Overall, the Cabinet range exceeds expectations and that inspires confidence.

Among the excellent picks is Secretary of Transportation Jaime “Jimmy” Bautista. Jimmy is a bona fide technocrat, having served in various management roles for four decades. In 2015, he assumed the chairmanship of Philippine Airlines where he transformed it from a perennial money loser into a viable operation. It raised the flag carrier’s operational standards to a point where it achieved four-star status in 2018. PAL would have been among the top ten airlines in the world had it not been for Jimmy’s sudden retirement in 2019.

Unknown to many, Jimmy is a magna cum laude graduate and a certified public accountant. He also holds a doctorate in humanities. But more than that, he and his lovely wife Joji are God-fearing Christians and devoted grandparents. Under Jimmy’s baton, we can be assured that the DOTr will be handled gradually, efficiently and honestly.

The state of the maritime industry is one of the pressing challenges facing Secretary Bautista.

Due to high taxes and excessive regulation, the Philippines has been deprived of its own international shipping line since 1986, which has left us vulnerable in many ways. On the one hand, we have become completely dependent on foreign shipping companies for the import of food and basic necessities. In terms of national security, we are exposed to defense risks because the import of our military equipment and armaments is transported by foreign ships. In trade, our exporters are at the mercy of foreign shipping companies when it comes to shipping times and rates. Meanwhile, our importers are victims of exorbitant destination charges from foreign shippers (additional charges unilaterally imposed).

The long absence of a Philippine shipping company from international waters was temporarily interrupted last September. The pandemic has caused foreign shipping companies to prioritize more profitable long-haul and high-volume routes like Shanghai to Rotterdam over less profitable routes like Manila. The scarcity of international cargoes calling at Philippine ports forced the Maritime Industry Authority (MARINA) to issue a temporary permit to Iris Logistics, a subsidiary of Royal Cargo. Iris Logistics operates the Manila-Cebu-Davao-Los Angeles-Hong Kong-Ho Chi Minh-Manila route. This relieves our exporters who must meet delivery deadlines to avoid penalties and/or order cancellations.

Iris Logistics has invested in a fleet of three vessels with a capacity of 1,100 TEUs, the largest and most modern in the country.

The scarcity of shipping lines allowed Iris to charge premium rates for their services. This allowed them to operate viably despite excessive taxation from the Philippine government, mandatory excessive crew requirements, mandatory use of Philippine shipyards, high cost of dry docking, and of course, bureaucracy and corruption.

But the situation normalized and shipping rates fell by more than half. Today, local and international Philippine shipping companies are struggling to survive, given the many burdensome taxes and regulations imposed by MARINA.

The laws, regulations and taxes that govern our marine industry were written decades ago and they have literally strangled our marine industry to death. Not only has it killed our last remaining international shipping company, the Philippine Shipping Company, even worse, it continues to deter existing shipping companies from upgrading their fleets, the majority of which are old scrapyards and highly polluting.

As the country aspires to become a more self-sufficient nation under President Marcos, now is the time to review, modify and update our maritime laws. That said, I ask Secretary Bautista to please consider these 12 reforms:

First, establish a government one-stop shop to handle all documentary requirements of shipping companies.

Second, Philippine government offices must be made to accept international certificates and/or documents without having to duplicate them with locally issued equivalents.

Third, newly built containers should be exempt from VAT. Indeed, shipping companies that exclusively serve international routes will never be able to recover or pass on the VAT. Levying VAT on international carriers erodes competitiveness.

Fourth, domestic suppliers of shipping lines that exclusively serve international routes should not be required to charge VAT for the same reason as number three.

Fifthly, empty containers positioned in the Philippines should also not be subject to VAT.

Sixth, port fees collected by the Ports Authority of the Philippines must be made reasonable. Currently, they are ten times more expensive than in Vietnam.

Seventh, Philippine shipping lines should be aligned with international standards in terms of crew sizes. They should not be forced to overload their ships.

Eighth, Filipino crew members on Philippine vessels using domestic and international routes should be recognized as local jobs based on Philippine labor laws.

Ninth, the Philippine government should allow Philippine shipping companies to have their ships serviced by internationally accredited shipyards, without being required to have them serviced by local shipyards that usually charge exorbitant rates.

Tenth, the Philippine government must establish a support system to assist Philippine vessels in emergencies encountered in open waters, inside and outside the Philippines.

Eleventh, the Bureau of Immigration should reduce paperwork for Filipino crew bound overseas aboard a Philippine ship.

Twelfth, vessels flying the Philippine flag are prohibited from engaging in both international and domestic trade. The government should consider relaxing this law to encourage more investment in the shipping industry. It will also subject national shipping companies to competition, pushing them to be more competitive.

A thriving maritime industry is a basic need for progressive nations, especially those that are archipelagic. In line with President Marcos’ vision to build an autonomous republic, the DOTr must look beyond short-term profits and politically motivated regulations to create a truly competitive maritime industry for the country.

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E-mail: [email protected]. Follow him on Twitter @aj_masigan

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