Port congestion is a disease

(First of two parts)

A serious problem affecting the nation’s economy today is the ever-working congestion in the ports of Manila.

To understand the congestion problem, one has to use the analogy of an infectious disease like Ebola. One has to first study how the problem began (Ebola patient 1) and from there, trace how it affected the other parts of the problem, leading to its full epidemic proportion that may lead to a pandemic, leaving this government with staggering inflation issues and prices of prime commodities soaring through the roof and finally leading to an energy crisis.

The Philippines is vulnerable because the majority of prime commodities here are imported via sea freight through its ports, which are based in Manila.

Costly delays

Because of a series of events, these containers were not released on time, leading to congestion in the ports that has led to delays in unloading international vessels, many of which bypassed Manila in the last few weeks.

The reasons why initially there were some 78,000 containers trapped in the ports of Manila:

1) The primary cause of the port congestion problem (Ebola patient 1) was the daylight truck ban imposed by the City of Manila.

Trucks that regularly picked up containers from the port for delivery to end-users in and around Metro Manila and returned empty containers were suddenly stopped from their regular routine. Thus began the accumulation of containers at the port, as turnaround time was hindered with operations only happening at night. The factories of exporters and importers as well as the custom brokers and truckers were stunned by the situation and took a long time to react, leading to the slowing down of the logistics chain in and out of the port.

2) The Land Transportation Franchising Regulatory Board (LTFRB) issues (Ebola patient 2):

At the same time that the truck ban was affecting the industry, the LTFRB issued an order against colorum trucks operating in the port.

The new regulations of the LTFRB basically prevented all the trucks that do not have a franchise from carrying cargo and most importantly, picking up and delivering containers. A colorum truck refers to a truck with just a green plate, instead of the yellow used by public utility vehicles, which means it should not be hired to carry cargo of a third party.

The LTFRB did not stop there. It also issued regulations barring trucks at least 15 years old from securing a franchise. There are questions about the legal basis for this move.

It is safe to assume that today, even without the coming of the Asean Economic Community or free trade among the member-countries of the Association of Southeast Asian Nations, the Philippines does not have enough truck/trailers to handle its cargoes.

And now the government seeks to strictly impose the franchising requirements on all trucks and adds a proviso on the age of trucks, thus worsening the problems at the port. Note that there are only about 340,000 trucks in the Philippines and only some 27,000 have a franchise. Then there are only 12,000 to 14,000 truck/trailer units that carry containers, of which only 3,000 units have a franchise. These government initiatives knocked out 80 percent of the container trucking fleet Temporary franchise.

Recently, the LTFRB allowed the temporary franchising of trucks until Oct. 18 to alleviate port congestion. However, the government also said that the trucking firms have to sign a document stating their trucks are 15 years old and below before they can get the temporary franchise. As you can imagine, many firms have not tried to file for a franchise. Therefore, the new regulations have made the situation worse.

3) Programs of the Department of Public Works and Highways (DPWH) (Ebola patient 3)

While all these were happening, the DPHW chose this particular time to do road repairs and construction. Bad timing, to say the least. The worsening traffic situation is not due to the increase in trucks. It is probably because the country is growing by 7.3 percent a year and to feed and create development for a hundred million people, you will have more shipments, ergo more containers.

Moreover, the DPWH chooses now, of all times, to have multiple road constructions all at the same time. With the 30 percent increase in car sales and no new roads in Metro Manila, is it surprising that traffic will occur? The traffic is also causing congestion for the cargo as the containers take a long time to reach their destination. And let’s not forget the floods.

With such serious port congestion, trucking costs have increased. Port operators and shipping lines are also charging more because of delays. Market forces are coming into play.

Manpower and diesel costs have gone up to adjust to the delays in the delivery and now the truckers are raising the cost per container because of the high demand for the fewer trucks.

Trucking costs soar

The trucking price increase was followed by an increase in surcharges of the shipping lines due to port congestion and to top it off, the Philippine Port Authority (PPA) has imposed a premium charge for overstaying containers to force importers/ consignees to move out their shipments. The increase in the travel time and the costs related to traffic have brought about an increase in the trucking rates by as much as 40 percent.

A trip to Subic would usually cost you anywhere between P18,000 to P22,000. Today, you are looking at P35,000 to P50,000 a trip. The cost of port storage after an 11-day period dramatically went up to P10,000 a day for containers that stay for more than 10 days and that does not count the international shipping lines’ fee of over $600 extra per container.

A 15-container shipment will now cost the importer P650,000 per shipment, over and above an increased trucking rate and a more expensive storage charge. Thus, be ready for double-digit price increases this Christmas. Moreover, since all the prices have gone up, many regular importers have slowed down their releases from the port because their expenses have gone way over budget as they never expected the trucking rates to increase and then the outside costs of releasing goods will be so high, thereby slowing releases in Customs.

In the middle of this port crisis, the government – as part of its transparency and good governance program – has implemented a new level of regulatory documentation for all importers and customs brokers. In short, more red tape. This has seriously slowed down the customs releasing process, further aggravating the problem with the slow release of containers in the ports.

Extortion

Then once outside the ports, importers and corporations have to grapple with extortion.

Though the computerization of the Customs procedures for release of imported cargoes has indeed changed the atmosphere in the port terminals, there remains “extortion outside, extortion inside, extortion on the road … Extortion worsens port congestion”, as said by Secretary Rene Almendras.

Today, the importer is hard-pressed to find a franchised truck within his budget. And after he pays the increased fees of shipping lines and port operators, he must brave the hold orders or Customs in the port, wreckers towing trucks outside the port area, authorities charging for escort fees and others not helping the already worsening situation.

We are truly in the middle of a real nightmare.

(To be continued)

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is the president of MOF Company (Subic) Inc. Feedback at [email protected] and [email protected] or [email protected]. For previous articles, please visit www.map.org.ph.)