Development of the Philippine merchant fleet takes the backseat

Development of the Philippine merchant fleet takes the backseat
Brenda V. Pimentel November 25, 2020 https://www.manilatimes.net/2020/11/25/business/maritime-business/develo...

First of two parts

A careful reading of Presidential Decree (PD) 474 gives one a different perspective on the rationale for reorganizing the country’s maritime functions and the creation of the Maritime Industry Authority (Marina). The integration of the maritime industry was identified as the most logical approach by which the government’s national policy and objectives of increasing productivity of this archipelago’s islands, providing adequate, economical, and safe water transport for people and cargo, enhance the competitive edge of Philippine-flagged ships in the carriage of foreign trade, improve the balance of payment by minimizing the outflow of foreign currency and create job opportunities for the Filipino. One of the preambular clauses of PD 474 succinctly states as the reason for the promulgation of the law: “the imperative need to modernize and expand the Philippine merchant fleet, and to rationalize and improve their operation to make them effective instruments in promoting domestic production, interisland and overseas trade, price stabilization, and employment generation;”.

After the lapse of more than forty years, it is appalling to hear domestic shippers and cargo owners that shipping costs in the interisland routes are staggeringly high compared with those in short-sea international trades. Domestic productivity is much affected by the shipping costs of raw materials such as fertilizers as it is expensive for agricultural produce to reach the market. These are areas that need to be addressed.

The country’s domestic fleet achieved some level of modernization with the advent of containerized ships and roll-on/roll-off vessels; and maritime safety considerably improved too. These are attributes that PD 474 identified as crucial to promote rural productivity; nonetheless more needs to be done.

The distinct and obvious mandate of PD 474 which seems to have been overlooked is the development of the Philippine merchant fleet both in domestic and overseas trade. While the number of modern fast crafts and RORO ships may have increased in inter-island routes, yet there are still islands that need better shipping services. Too, provision of clean and functioning basic passenger facilities onboard remain unsatisfactory.

The Philippine fleet in international trade is not better. PD 474 and subsequent decrees promulgated thereafter had intended to expand the number of Philippine-flagged ships which could participate in the carriage of the country’s foreign trade to help temper the balance of payment as well as conserve foreign currency paid on freight to foreign-flagged ships.

Over time, the objective of developing a Philippine merchant that will cater to the country’s foreign trade was thrust aside. There were practical reasons for these one of which is the highly capitalized nature of shipping coupled with the challenge in obtaining access to ship financing. Nonetheless, the expansion of the Philippine fleet remained as a target, this time primarily to create employment opportunities for Filipino seafarers. It matters not that the Philippine-flagged ships under the bareboat scheme were not carrying Philippine cargoes nor were not calling on Philippine ports.

Globalization introduced wide-ranging changes in international shipping. International ship registers mushroomed as many countries which do not have the basic features for running huge merchant fleet became top-ranking flag registries. Meanwhile, the Philippines which forty years ago envisioned a respectable merchant fleet plying domestic and international waters could not approximate the benefits obtained by these new flag states.

It is not that the Philippines abandoned the vision of developing a Philippine merchant fleet as envisaged under PD 474. As before, the rationale may have changed which now appears to be putting up a Philippine Ship Register that is not solely based on the bareboat charter scheme but through real flag transfer by foreign shipowners of their ships to the Philippine flag.

It helps to remember the three essential features that sustain the relevance of the Philippines as a shipping country: its merchant fleet, its maritime domain, and its dependence on maritime transport. The rest of the maritime undertakings like shipbuilding and ship repair, seafaring, manning, maritime education, etc.. are but support sectors. The latter endeavors could develop as huge economic activities and may even be considered as stand-alone industries, but these remain ancillary to the country’s merchant fleet and the demand for water transport.

After all, a country without a seafaring sector or a shipbuilding facility may still put up a ship registry; hardly though can one find a seafaring nation without a ship registry or more specifically its own merchant fleet.

The wisdom of PD 474 lies in such realization.

To be concluded next Wednesday