FILIPINO consumers already reeling from higher inflation could again be at the receiving end of the proposed increase in port storage fees, according to local economists.
Former Tariff Commissioner George Manzano told BusinessMirror the increase in port storage fees could be inflationary, given the country’s dependence on imported goods.
Manzano noted that the Consumer Price Index (CPI) has a number of imported goods. Any increase in the price of these commodities, he said, will lead to an “incremental cost push price pressure.”
“The increase in storage fee of PPA affects the foreign container cargo, and will therefore affect the international trade cost in the Philippines,” Manzano said.
“What exactly is the magnitude, whether it is significant or not, I cannot say. The proposed increase in storage fee will put international traders to be caught between a rock and a hard place,” he added.
The proposed move may lead international traders to be “caught between a rock and a hard place” as higher fees will increase the cost of leaving container vans in the port beyond a certain point, Manzano also said.
However, he said moving container vans faster out of the port may be difficult given congestion and traffic. Manzano only hoped that improvements in infrastructure will alleviate this.
“The increase in trade cost will also place the Philippines in an unfavorable light relative to other Asean countries in attracting foreign investments,” Manzano said.
“I think PPA wants to alleviate the ‘congestion’ in the port area when container vans are not moved right away by penalizing through higher storage fees,” he added.
Meanwhile, Ateneo de Manila University (ADMU) economist Leonardo Lanzona told BusinessMirror the PPA proposal could negate recent government efforts to curb inflation.
In a way, Lanzona said, the Bangko Sentral ng Pilipinas (BSP) tight monetary policy has “succeeded in restraining inflation” by reducing aggregate demand.
However, Lanzona said this was not enough, given the country’s supply side problems. The PPA proposal actually highlights that these constraints remain a concern.
“Along with the huge government expenditures and the recent increases in minimum wages, these fee hikes constitute the government factors that unintentionally lead to inflation,” Lanzona said.
“Regardless of the government’s sugarcoating of the economy, its inability to control inflation reveals its incapacity to raise social welfare,” he added.
Given this, Lanzona said the government must ensure major ports are better managed and are free of “corruption and other forms of inefficiencies.”
This is crucial, he said, given that ports facilitate trade, boosting the economy’s growth. Given this, there is a sense that “ports, or infrastructure elements of ports, are public goods.”
“I would consider the PPA services as public goods and any costs be covered by taxes. By privatizing these services, it effectively excludes those who cannot pay the fees,” Lanzona said.
Last October 18, PPA in a public consultation sought stakeholder feedback on a plan to raise storage charges for foreign containerized cargo at all its administered ports nationwide.
In a statement earlier this month, local exporters said PPA is proposing to increase by 32 percent the storage charges for import, export, and transshipment containers; and by 150 percent the surcharges of the corresponding storage rates with increase for reefer containers.
At a recent hearing attended by Philexport and PPA, the Supply Chain Management Association of the Philippines (SCMAP) called the proposed rate increase ill-timed, given the recent rise in transport fare, minimum wage, and prices of basic commodities.
PPA said foreign cargo are assessed for storage charges when they remain at PPA ports beyond the free storage period (FSP). Foreign containers include import cargo, export cargo and transshipments.
In justifying its proposal, the Authority “insisted” this would ensure optimal use of the container yard and encourage immediate withdrawal of containers to prevent congestion, Philexport noted.
More foreign chambers have opposed PPA’s proposal, saying it is “not the right signal” right now as inflation buffets everyone.
“I think we see that internationally right, but everybody’s trying to adjust pricing one way or the other, right. Inflation presses us all. I’m not sure whether that is the right signal right now. Right when everybody is trying to do with things more efficient, try to charge more,” German-Philippine Chamber of Commerce and Industry (GPCCI) President Stefan Schmitz told reporters on the sidelines of the recent 2023 Ease of Doing Business Convention.
Instead, the GPCCI president said, the government should look at the reasons things are delayed. “Is it because of inefficiencies? Let’s say…during clearances.”
“Or is it the importers’ mistake? I understand that the Philippine Ports Authority doesn’t make a distinction there…. but I don’t think it’s the right message,” he said.
The GPCCI president said he also discussed this issue with some ambassadors.
British Chamber of Commerce of the Philippines (BCCP) Executive Director Chris Nelson echoed other foreign chambers’ opposition to the fee hike, saying such increase would be passed on.
“And like the other chambers, I think they should be, you know, looked at I mean, I would say because the key at the moment is to actually keep bringing inflation down,” Nelson told reporters on the sidelines of a trade mission last week.
Nelson also noted that “when you put on storage fees then of course, there’s gonna be a pass-on…because of course, the importers, whoever’s distributing it…So I think along with the American Chamber, I think even the Philippine Chamber of Commerce, I believe, ask them to relook at it and we would echo that as well,” the BCCP official also noted.
Last week, the American Chamber of Commerce of the Philippines, Inc. (AmCham) also opposed the port regulator’s proposal.
“We have been lobbying against any kind of storage [fee] increases, it’s not just the right time. You know, we are coming out of this mess of the pandemic” Ebb Hinchliffe, AmCham executive director, told reporters.
The European Chamber of Commerce of the Philippines (ECCP) warned this will reduce the competitiveness of the Philippine market.
“We need to ensure the competitiveness of the Filipino market, so if you put taxes and more blocks—that makes trade more difficult. It’s not helping,” ECCP President Paulo Duarte told reporters at a recent forum.
Describing the Philippines’s current macroeconomic data as “very favorable,” the ECCP president said, “we need to continue this path, and not to create more blocks.” (Full story here: https://businessmirror.com.ph/2023/11/29/amcham-proposed-ppa-fee-hike-ill-timed-to-hurt-biz/)
Meat importers’ call
Meat importers and processors are urging President Marcos Jr. to defer any proposals to hike port storage fees, which could derail the country’s economic growth and hike food prices amid an improving market environment.
The Meat Importers and Traders Association (Mita) and the Philippine Association of Meat Processors Inc. (Pampi) expressed their opposition to PPA’s plans.
“We appeal to the President to direct government agencies, including PPA, to impose a moratorium on planned increases in all kinds of fees and on new fees as well to enable business and industry and the national economy in general to recover and grow more quickly,” Pampi said in a statement sent to BusinessMirror.
Pampi said higher storage fees could “fuel” inflation and “stall” the country’s economic growth, which has been touted as one of the fastest in the region.
“Any additional cost in doing business, such as higher PPA storage fees, is not appropriate at this time as it may fuel inflation and stall economic growth,” Pampi said.
“Instead, we urge concerned agencies to become more efficient in their operations to avoid cost overruns or need for additional funds,” it added.
Mita President Emeritus Jesus C. Cham wants PPA to first conduct a risk impact assessment prior to imposing any price increases. Cham also urged PPA to observe the Ease of Doing Business Law.
Cham argued that raising port storage fees would add to the costs of importers, which could have a ripple effect on retail prices of meat products.
“PPA should refrain from raising costs unilaterally and arbitrarily. At present importers already grapple with numerous requirements and their corresponding costs,” Cham told the BusinessMirror.
“Many of these requirements are unnecessary or superfluous. Instead of raising costs, we should be looking at how to reduce costs. In this manner we can reduce the cost of food,” Cham added.
The PPA wants to increase the storage charges for import, export, and transshipment containers by 32 percent and the surcharges of corresponding storage rates with increase for reefer containers by 150 percent. (Related story: https://businessmirror.com.ph/2023/11/29/amcham-proposed-ppa-fee-hike-ill-timed-to-hurt-biz/)
The PPA said foreign cargo are assessed for storage charges when they remain at PPA ports beyond the free storage period (FSP). Foreign containers include import cargo, export cargo and transshipments.
The Anti-Red Tape Authority (Arta) has already cautioned PPA to conduct a regulatory impact assessment regarding its proposal to hike storage fees for foreign containerized cargo. (Related story: https://businessmirror.com.ph/2023/11/30/anti-red-tape-body-says-ppa-fee-hike-proposal-must-undergo-a-ria/)
Based on the PPA website, the storage fees for containerized cargo progressively increases the longer they stay within the ports managed by the agency nationwide. The PPA levies the storage fees on a per day basis. With Andrea E. San Juan
Image credits: Oana Ungureanu | Dreamstime.com