TO better address the issues on port inefficiencies and high shipping rates, President Duterte will issue an executive order (EO) granting one government body the power to control fees and charges imposed by shipping lines on importers.
In a speech on Monday, Trade Secretary Ramon M. Lopez said he ordered the reconstitution of the joint administrative order (JAO) to resolve port congestion and regulate shipping rates into an EO. He argued that turning the JAO into an EO will make its provisions stronger, as the President himself will appoint a single authority mandated to deal with port problems.
Once the EO is in place, the government can tinker with fees and charges applied by shipping lines on imports with the objective of lowering the country’s logistics cost.
“May I report that the other day, I…instructed [Trade] Undersecretary Rowel [S.] Barba to reconvene the technical working group to reconstitute the JAO into an executive order. This will address the institutional arrangements required to regulate high shipping costs and address the problem of port congestion, but [the] legal basis must be clearly established,” Lopez said at the Second Logistics Services Philippines Conference and Exhibition in Pasay City.
Aside from more comprehensive provisions, the EO will assign one government body tasked to manage shipping rates and remove arbitrary fees and charges, according to Lopez.
Asked what agency will most likely take on the mandate, Lopez disclosed it could either be the Maritime Industry Authority (Marina) or the Philippine Ports Authority (PPA), both of which are under the Department of Transportation (DOTr). However, he said the government is consulting with its lawyers to make sure such move is within the charters of the Marina or the PPA.
“That is what the technical working group is working on right now. Most likely, that task will be delegated to the DOTr—probably the Marina or the PPA—we are not yet sure, but that is what we are determining. We have to consult also with our lawyers,” the trade chief said.
Lopez explained the authority can enforce a price range for specific shipping fees and charges, but it cannot impose a price cap that could restrict the operations of shipping lines. The EO, he added, will slap penalties on violators of the price range.
Once crafted, Lopez, Finance Secretary Carlos G. Dominguez III and Transportation Secretary Arthur P. Tugade will jointly endorse the draft EO to Duterte for his signing.
While the EO has yet to be completed, the government will issue the JAO, which is only lacking Dominguez’s signature, and utilize it in settling port inefficiencies and regulating shipping rates. However, it will be superseded once the President approves the EO.
“It [JAO] will be superseded by that time. For now, our immediate response would be the JAO and then followed by the EO. The EO, of course, will set the tone from then on,” Lopez said.
The Philippines has the highest logistics cost among manufacturing rivals in Southeast Asia, as businesses here allocate over one fourth of their sales on logistics services. A study by the Department of Trade and Industry (DTI) and the World Bank titled “An Assessment of Logistics Services Performance of Manufacturing Firms in the Philippines,” said firms operating in the country reportedly spend 27.16 percent of their sales on logistics.
When pitted against Southeast Asian competitors, businesses in Thailand spend 11.11 percent of their sales on logistics services, 16.3 percent in Vietnam and 21.4 percent in Indonesia.
Some shipping lines allegedly developed a mechanism to make shipping rates less transparent to benefit exporters overseas at the expense of importers here, according to an earlier study by the DTI’s Export Development Council and the now defunct National Competitiveness Council. This scheme, the study read, is costing the economy between $2 billion and $5 billion yearly.
In the end, consumers bear the brunt of higher commodity prices, as the additional costs of imported goods are passed on to them.