‘Opening more RORO ports to boost income of farmers’

‘Opening more RORO ports to boost income of farmers’
JOVEE MARIE DE LA CRUZ CAI ORDINARIO December 13, 2021 https://businessmirror.com.ph/2021/12/13/opening-more-roro-ports-to-boos...

A leader of the House of Representatives is proposing the creation of more roll-on, roll-off (RORO) ports in the country to boost farmers’ incomes and lower food transportation costs.

An economist from the Asian Development Bank (ADB) said farmers will see an increase in their earnings if the country will be able to maximize the use of the RORO systems.

In a statement over the weekend, House Committee on Ways and Means Chairman Joey Sarte Salceda said creating a “denser” interzonal nautical highway system or RORO ports between “food baskets and food markets” are crucial interventions as the country is bound to see “moderate inflation” over the near-term.

“The new normal when it comes to prices, as the economy reopens, will probably be 4 to 5 percent food inflation. I can particularly see some medium-term supply constraints on corn, which would also then contribute to inflation in meat and poultry supply,” Salceda said.

“Part of what’s wrong isn’t the volume of supply. The problem is also with distribution chains. Yellow corn, for example, is down just 3 percent year-on-year, but inflation is at 15 percent for corn. The distribution chains of yellow corn, particularly from Mindanao to the rest of the country, appear to be suffering from certain chokeholds.”

The lawmaker said more RORO ports will bypass the country’s natural geographical challenge as an elongated area.

“That means lower food prices and fewer opportunities for middlemen to farmers.”

According to Salceda, there are only three landings for the Nautical Highway System in Mindanao. “That’s not dense enough. You probably need another one in Iligan and another one in the Zambasulta area,” said Salceda, adding, “Bicol is effectively an island.”

He also noted that, “in terms of transport, functionally Bicol is an island, because of the vast emptiness between Calauag and Sipocot, so we need alternative points of entry to Bicol.”

“One RORO port just before Bondoc Peninsula, along the Ragay Gulf, another one in Albay’s west coast, probably in Pantao, would effectively create an entirely new Quezon-Bicol nautical highway.”

The lawmaker noted the importance of alternative routes, especially for food and cargo in Bicol, as the region was among the regions with the highest inflation rates this year.

“Along with Cagayan Valley, which itself is partly isolated, Bicol suffered some of the highest inflation rates this year.”

Trade costs

IN an Asian Development Blog, ADB Economic Research and Regional Cooperation Department Economics Officer Eugenia Co Go said the RORO will eliminate middlemen and will allow farmers to bring their products to the market.

Go said RORO has already helped bring down trade costs to a peak of 180 percent from 240 percent at the time prior to the creation of the system in 2003.

“A quarter of the Philippine labor force rely on farming as livelihood, and agricultural products account for over 20 percent of the total volume and value of domestic maritime trade in 2019,” she said.

“From this perspective, the RORO transport program can be a powerful tool for spurring rural development.”

Go said rigorous analyses showed control for factors that may affect prices in supplier and demand provinces.

These include product seasonality and province characteristics which would translate to a difference between farm and retail prices that is on average 28 percent lower for provinces with short-distance RORO connections.

A recent study showed that on average prices in the sample, farmer revenues can increase by 9 percent during these times of scarcity.

However, the price increase is up to three times larger in producer provinces with RORO services, by an additional 10 to 19 percentage points.

Meanwhile, the increases in retail prices by RORO connection are consistently lower than the farm price rise, in line with a squeezing of intermediary markups.

“The use of RORO systems improves the welfare of farmers. Farmers receive higher revenues without raising consumer prices. During episodes of typhoons, the higher passthrough of positive price shocks to farmers without the corresponding price increase in retail markets indicates greater competition and lower markups for go-betweens,” she said.

Earlier, Go said the RORO system 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.

She 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.