Self-inflicted failure

Self-inflicted failure
Andrew J. Masigan - May 24, 2023 https://www.philstar.com/opinion/2023/05/24/2268548/self-inflicted-failure

We Filipinos often get frustrated over how the country has lagged behind our neighbors in terms of national wealth, industrial capabilities and overall economic output. Even Vietnam, a country that 30 years ago had nothing except the ruins of war and basic agriculture, emerged to become wealthier than the Philippines today.

The tragedy is that Filipino underachievement is self inflicted. Yes, we cause our own failures. And the people responsible for it are our political leaders. The majority of them. We’ve been dragged down by short-sighted, corrupt, self-serving and politically-motivated politicians in Congress, in the Senate and even in Malacañang. The bureaucracy is of no help either. Save for some exceptions, government agencies are characterized by lethargy and a lack of common sense. Hilariously, those in government also lament the country’s abysmal performance as if they are not responsible for it. It is ironic, disgraceful and pathetic in equal measure.

I recognize that my words are barbed but let me substantiate my assertions through a real-life example.

One of the reasons why foreign investors involved in complex manufacturing bypass the Philippines is because of expensive logistics costs. ASEAN has become one big integrated production center where stages of production are done in various countries. The Philippines is often sidestepped despite having an abundance of skilled labor and boasting favorable working conditions at PEZA.

The reason? Expensive shipping. Two reasons for this. First, the Philippines does not have its own international shipping line. Second, we are at the mercy of foreign shipping lines who levy what they call “destination charges” on imports, including those of parts and components for re-export. There are about 50 types of destination charges including bunker price adjustments, import release fees, container cleaning fees and more. None are transparent to the importer nor the authorities. Charges are unilaterally conjured and dictated by foreign shipping lines.

This matter has been brought to the attention of Maritime Industry Authority (MARINA) many times since 2013. MARINA is the government agency responsible for the development and regulation of the maritime industry. Even after 10 years of appeals, destination charges still persist today. What does this say about MARINA? Incompetent. Ineffectual. Possibly corrupt.

The last two international shipping lines that carried the Philippine flag closed in 1995 and 1996, respectively. They were the Maritime Company of the Philippines and Maritima Filipinas. Since then, there were a few attempts from local shipping lines to ply international routes but all eventually gave up. Why? Because Philippine maritime laws are so antiquated and over-regulated that they drag international shipping lines to bankruptcies.

Case in point. MARINA only registers local shipping lines as either engaged in domestic trade or international trade, never both. This is stated in MARINA circular no. OS-2019-02.

Shipping lines registered for international trade must conform to Philippine cabotage laws. As such, they are prohibited from calling on Philippine ports unless it is an onwards shipment from a foreign destination. Other than that, domestic cargo is exclusively reserved for domestic shipping companies.

The prospect of violating cabotage laws is the reason why MARINA refuses to allow local shipping lines to serve international destinations. The law is counter-productive in that prevents our local shipping lines from expanding internationally.

So while other countries offer great incentives to their shipping lines to go international, Philippine laws discourage them. Self inflicted. (Many believe that the outdated cabotage law is maintained to protect the interest of local shipping oligarchs.)

But the pandemic shook the status quo. International shipping lines calling on Philippine ports became increasingly infrequent. This choked Philippine trade with the world. Under pressure and desperate, MARINA made an exception and allowed a local shipping company, Iris Logistics Inc. (a subsidiary of logistic giant Royal Cargo) to operate international routes. In September 2021, MV Iris Paoay made its inaugural voyage to Los Angeles.

Not only did the launch of Iris bring relief to Philippine traders and manufacturing supply chains, it also meant the Philippines was finally breaking free from the iron grip of foreign shipping lines and their usurious destination charges.

Well, last week, Iris announced its termination of service. Evidently, regulations of MARINA, the DOF, POEA and port authorities are so counterproductive that it is no longer viable to operate. Another self-inflicted failure.

What are these counterproductive regulations?

• The absence of a one-stop government desk to process documentary requirements for shipping lines.

• Refusal of government offices to accept international certificates and/or documents. They have to be duplicated with locally issued equivalents.

• Newly built containers are not exempt from VAT even if used exclusively for international routes. Too, domestic suppliers of shipping lines charge VAT even if the vessels exclusively serves international routes. (This runs against the VAT exempt privilege of exporters.)

• Port authorities charge usurious fees, approximately ten times those in Vietnam.

• Philippine shipping lines are forced to over-crew their ships, thereby bloating costs.

• Filipino crew on Philippine vessels plying domestic and international routes are not recognized as local employees but foreign employees. As such, labor becomes unreasonably expensive and over-regulated.

• Scandalous red tape in the Bureau of Immigration for Filipino crew bound for abroad on Philippine vessels.

• Philippine shipping lines are prohibited from having their ships serviced by internationally accredited shipyards, even if cheaper and more efficient. They are forced to have them serviced by local shipyards which charge exorbitant rates.

• Government offers no support system to aid Filipino vessels during emergencies in open seas.

• Philippine shipping lines are still prohibited from engaging in both international and domestic trade at the same time.

These matters were brought up to the Anti Red Tape Authority (ARTA) for their intercession. Question is, will ARTA, under the baton of DG Sec. Ernest Perez, change the cycle of self-inflicted failure? We shall know soon enough.