THE roll-on, roll-off terminal system (RRTS or Roro) would greatly increase trade between island provinces nationwide and boost the economy, according to a research released by the Asian Development Bank (ADB).
In the Working Paper “Over Land and Over Sea: Domestic Trade Frictions in the Philippines,” ADB Economic Research and Regional Cooperation Department Economics Officer Eugenia Go said areas where RRTS was in place had 52 percent higher trade between origin and destination.
The study also found that trade flows between RRTS province pairs were 36 percent to 42 percent higher on average compared to similar unconnected province pairs.
“Roll-on, roll-off terminal systems can increase inter-island trade and economic growth in archipelagic nations,” Go said in an Asian Development Blog published on Tuesday.
Go said that while Roros existed for decades, it was only in 2003 during the term of President Gloria Macapagal-Arroyo when the RTS was instituted. Back then, there were only 34 routes but with the increase in benefits, the network grew to 113 routes by 2014.
She explained that RRTS is a transport system that integrates land highways with sea routes through Roro ships.
Through the system, cargo vehicles can directly board Roro vessels with their cargoes and skip cargo handling. Go said cargo handling is one of the most expensive and time-consuming processes in maritime trade.
Go said this transport system also makes direct deliveries to institutional buyers possible, which implies savings on inventory costs.
The study found that a typical province would trade with itself 28 times to as much as 53 times than with other provinces. This is reduced by a factor of 0.65 when a province adopts the RRTS.
The study also found that agriculture products substantially benefited from the RRTS. Serviced port pairs trade 60 percent more types of agricultural products and transact these 56 percent more frequently compared to their non-Roro counterparts.
Further, 45 percent more types of products in the highest quartile of the value distribution are traded in Roro pairs, and these are transacted 65 percent more frequently.
“The greater frequency of transactions happens because Roro reduces the ratio of trade to inventory cost, making it cheaper to ship more frequently instead of stocking up on inventories,” Go said.
“This is a beneficial feature for products that are perishable in nature, and for high-value goods for which the opportunity cost of liquidity is high,” she added.
Go said being an archipelago, internal connectivity between the country’s 7,000 islands is a major challenge and has been the cause for high domestic maritime trade costs.
In the early 2000s, moving a 20-foot container equivalent from Davao City in the south of the country to Manila costs $1.50 per nautical mile compared to 50 cents when shipped from Hong Kong, China or Bangkok, Thailand.