Maritime infrastructure system is critical to the Philippines economy

From the country’s humble origins as fishermen and traders, the Philippines has developed a multitude of modern ports spread across the country today. With no direct land ties to any nation, and a population spread out over thousands of islands large and small, developing and maintaining an efficient marine transport network is crucial to every sector of the economy. In recent years continued population growth, and growing demand for imported goods, along with increased industrial output and tourism visits, have pushed demand for port services progressively higher, to the point where many facilities are hard pressed to keep up with this growing strain.

Transport Hub

Total cargo throughput has increased from 193.71m tonnes in 2012 to 202.06m tonnes in 2013, 210.56m tonnes in 2014 and 205.9m tonnes in 2015, according to data from the Philippines Port Authority (PPA). Foreign shipments account for the overall majority of cargo trafficked, and continue to take up an increasing share of cargo as a whole. In 2014 a total of 117.91m tonnes of foreign cargo was moved compared to 75.81m tonnes of domestic cargo. The country has also continued to export slightly more than it imported in terms of overall tonnage, with outbound shipments totalling 66.37m tonnes while imports tallied 66.11m tonnes in 2014.

The Northern Mindanao area is the most active in the country, with privately-operated facilities in five port management offices (PMO) moving a combined 40.39m tonnes of cargo in 2014 (excluding containers). This was followed closely by four PMOs in the Manila/North Luzon area, with 34.74m tonnes of cargo, and Southern Luzon with 32.06m tonnes. Visayas registered 18.82m tonnes, while Southern Mindanao moved 9.48m tonnes in 2014. Container activity has likewise continued to expand, driven by increased output in the industrial and agricultural sectors, as well as growing demand for foreign goods. The number of twenty-foot equivalent units (TEU) movements expanded from 5.24m in 2013 to 5.53m in 2014, and 5.69m in 2015, well above the 4.5m TEUs moved in 2010. Imported container goods continue to grow in numbers compared to their export counterparts as evidenced by the number of empty containers loaded for export in 2014 (905,722) compared with the 159,740 empty containers imported. Thus, in spite of many facilities coming close to their capacities in taking on imported goods, outbound containerised cargo still maintains some leeway.

Port Expansion

In response to these accelerating trends, a multitude of port improvement projects are being rolled out to improve capacity and efficiency, and the government has committed to a number of short-term projects. These are mainly based around the Manila area, including P6bn ($133.2m) and P1bn ($22.2m) for projects in the city’s North and South Harbours, respectively, as well as P4bn ($88.8m) for the Manila International Container Terminal (MICT). Another P75m ($1.7m) has been earmarked for a feasibility study of North Harbour re-development, with another P1.01bn ($22.4m) proposed for other significant ports located around the country.

The country’s primary container port of MICT has received significant investment funds in recent years by operator International Container Terminal Services Inc. (ICTSI) in order to boost capacity. These include the delivery of four new rubber-tired gantry cranes (RTGs) in November 2015 and the completion of the first expansion of Yard 7 at the end of 2015, which should increase import capacity by 18%.

These improvements are just part of a $330m, 10-year capital expenditure programme announced by ICTSI in 2014 to expand and improve the Port of Manila. The construction of berth 7 is a priority for the operator, although further expansion of berths 8 and 9 are on hold pending improved road access to the port. With the nearby ports in Batangas and Subic Bay operating at nearly full capacity, the expansion of the MICT is critical for keeping pace with trade in the National Capital Region.

Further to the south, Sasa Port in Davao City is also set to be transformed into a modern, international-standard container terminal projected, set to improve trade access to Mindanao and the greater Philippines by providing a dedicated containerised port in the region. This will in turn support the region’s growing agro-industrial sector and support continued economic growth in Mindanao. The P19.9bn ($442m) project is being implemented by the Department of Transportation and Communications (DOTC) and the PPA on a 30-year concession to construct and operate the new port, with bids finalising in early 2016. Specifications for the new facility include a quay with a minimum depth of 14 metres and an initial length of 500 metres to be extended to 750 metres; at least 1900 ground slots, increased to 2700; a minimum of four ship-to-shore cranes; eight RTGs; and other necessary support equipment.

Central Network

The public-private partnership project is in the early stages of finding consultants to conduct pre-investment studies for the Central Spine Roll-on/Roll-off project to be implemented by the DOTC. Still in the early exploratory development phase, the project has faced some delays due to political concerns. The ferry service is planned to connect the major islands, linking the different ports and terminal facilities of selected islands and acting as an extension of a national highway with road and ramp facilities leading to the water that will complement existing conventional ports already in the ferry network. The proposed route will pass through the following ports: Batangas Port, Calapan Port, Roxas Port (Oriental Mindoro), Caticlan Port, Dumangas Port, BREDCO Port (Bacolod City), San Carlos Port, Toledo Port, San Fernando Port, Tubigon Port, Jagna Port, Balbagon Port (Camiguin), Benoni Port, Balingoan Port (in Misamis Oriental) and Cagayan de Oro.

Roadblocks

While ongoing upgrades will increase the capacity of the port network to handle larger amounts of cargo and passenger traffic, deficiencies outside the port gates could render many of these improvements moot if other logistical bottlenecks remain unaddressed. For the busiest ports serving the greater Metro Manila area, these shortcomings are the result of constricted access to and from the port in the midst of a rapidly expanding urban population. These facilities suffer from a problem common to many capital city ports constructed many decades ago – the sites have become victims of their own success. Originally optimally placed to bring goods in and out of the markets, and later factories, of the bustling capital city, the conveniently-placed port has now outgrown its confines as the surrounding population and infrastructure have grown around it. As a result, fully-laden tractor-trailer rigs now vie with commuters and pedestrians for space along the increasingly clogged motorways, creating massive inefficiencies in the movement of goods to and from ships.

Concerned with the increasing gridlock threatening to paralyse the city’s motorways, the government has put in place a number of measures designed to alleviate commuter traffic by targeting heavy transport. The most pertinent of these is a truck ban scheme first enacted in 1978 for Metro Manila along major thoroughfares during peak traffic, whereby cargo trucks with a gross vehicle weight (GVW) of more than 4000 kg were banned in the morning and in the afternoon. Although these restrictions have been modified over the ensuing years in terms of prohibited thoroughfares, alternative routes, GVWs and hours, the net effect was the reduction in efficiency and an increase in the cost of cargo transportation.

Additionally, in October 2015 the new Terminal Appointment Booking System was introduced in response to the limited road networks. The web-based system allows port stakeholders to choose the time slot for delivery and withdrawal of their shipments, and increases the efficiency of the truck turnaround time to and from Manila Ports.

These policies over time have also spurred freight forwarders to keep more trucks in reserve than are necessary to haul the amount of cargo in order to move goods more quickly out of the port area during the limited time windows, as truck trips are slashed from a possible three round trips per day to just one. Most recently these restrictions were increased in February 2014 when a city-wide truck ban was implemented in the capital, resulting in substantial backups at the port. The ban was eventually lifted in September 2014 only to be reinstituted in September 2015.

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The Report: The Philippines 2016

Transport & Infrastructure chapter from The Report: The Philippines 2016

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