The removal of limitations on truck traffic eases port congestion in the Philippines

In 2014 stifling inner-city congestion cost the Metro Manila area more than P2.4bn ($54m) per day, according to a report by the National Economic Development Authority Board of the Philippines. The congestion was a result of poor city planning, delays caused by the construction of elevated toll roads via the new Metro Manila Skyway project and the reliance of cargo-laden trucks on the city’s surrounding road infrastructure. The Port of Manila received over 900,000 containers in the first quarter of 2014, while exports and imports rose 8.3% and 5.4%, respectively, in the first half of the year, according to the Philippine Ports Authority (PPA).

The congestion, also a result of spiralling motor vehicle ownership, which is expected to hit 2.5m in 2015 in Metro Manila, led Manila Mayor Joseph Estrada to enact a blanket rush hour ban on trucks in February 2014. The ban prohibited eight-wheeled trucks and vehicles weighing more than 4500 kg from driving on Manila’s roads between 5.00am and 10.00am and 3.00pm and 9.00pm between Monday and Saturday. Despite being subsequently revised to 6.00am to 10.00am and from 5.00pm to 10.00pm following the appeals of truckers, the impact of the ban remained considerable and was adopted by neighbouring local government units.

HOLD UP: The effects of the ban were felt immediately at the Manila International Container Terminal (MICT) and Manila South Harbour port. Raoul Santos, assistant general manager of operations for the PPA told OBG, “Before the ban, the Port of Manila was receiving an average of 5000 containers daily, while also being able to exit 5000. However, during the ban we were only able to exit 3000 containers, which resulted in a significant build up within the port area and impeded efficiency.”

The 100-ha MICT facility at the Port of Manila, which is operated by International Container Terminal Services (ICTSI), handles over half of the country’s international freight. It was forced to operate at over 100% of its capacity during the period, with newly arriving containers left lingering for 20 days as opposed to the usual six. Christian Gonzalez, Asia regional head for ICTSI, told OBG, “Although there is sometimes a lack of discipline among truck drivers, which should be addressed through process improvements, a truck ban is not the solution. From an economic and social point of view, the ban affects 20,000 jobs because while truck owners charge over 60% more for their services to recover costs and maintain profitability, the drivers still get paid per move.”

The negative effects of the ban were also felt by Philippines-based franchising companies, which reportedly suffered over P3bn ($67.5m) in losses between February and September 2014 due to disruptions in their supply chains. Armando Bartolome, chairman of the Association of Filipino Franchisers, told local press, “The P3bn ($67.5m) in losses incurred were due to the rising costs of goods and brokerage fees, among other charges. Suppliers have no choice but to increase their charges.”

The domestic franchise industry is dominated by homegrown brands that employ around 135,000 people, while consumption accounts for 60% of GDP. The ban was criticised by both private and public sector parties. In the month following implementation, Citigroup estimated that the less congested city roads would save only P30bn ($675m) per year, a minimal amount when compared to the losses it would impose on the shipping and commerce industries and the national economy. The European Chamber of Commerce of the Philippines published a statement on its website that noted, “Despite the fact [that] facilities are being developed to handle substantially more cargo, this truck ban is effectively reducing the country’s growth potential and is damaging the economy.” The Bureau of Customs also saw its revenues dip within the first month of the ban.

SILVER LINING: However, in September 2014 the truck ban was finally lifted under Executive Order No. 67, issued by the city government to ease the backlog of containers and unworkable congestion around the Port of Manila. Despite the ban benefitting the lives of commuters and city residents, its removal was widely viewed as an essential action and signified the transfer of responsibility for the truck congestion issue from the city government to the Metropolitan Manila Development Authority (MMDA) and the Department of Transport and Communication (DoTC). Though the limitations of the ban were clear to see, the situation created at the Port of Manila catalysed the welcome use of the region’s alternative ports, such as at Batangas and Subic, which were designated as alternative gateways to the Port of Manila during periods of congestion or national emergency under Executive Order No. 172 from President Benigno Aquino III.

NEGATIVE IMPACT: During the second quarter of 2014, Asian Terminals (ATI), the operator of Batangas Port, which lies 110 km south of the Port of Manila, reported a 254% increase in container throughput. Though the port infrastructure initially struggled to accommodate the rise, new management and an improved IT system since November 2014 means that the port has become more established with shipping lines, while port utilisation has normalised to a steady 60%. Subic, located 140 km north-west of the Port of Manila, also saw a rise in traffic. By August 2014, the inflow of containers had surged to 8770 twenty-foot equivalent units (TEUs) at the port’s new container Terminal One, up from 2551 TEUs in August 2013.

Yet while progress has been made in exposing both ports to more traffic, thus reducing the burden on the Port of Manila, many within the transport industry maintain that Batangas is too small and Subic too far away. For example, Batangas has an annual capacity of 300,000 containers a year, compared to the Port of Manila’s 3.8m, while for manufacturers located in or near Metro Manila exporting through Subic is likely not a viable alternative due to the distance. While the process of addressing the backlog caused by the truck ban will likely extend into the first half of 2015, according to the DoTC, the truck ban has served as a wake up call for all actors and authorities to work together on the issue.

QUICK FIX: Amid the wait for construction on Berth 7 at MICT and traffic caused by the Skyway construction project, which will continue until at least 2016, there has been a collaborative effort among port operators, importers, associations and government bodies to remedy the congestion issue. The response of the central government was galvanised by the intervention of the Cabinet Cluster on Port Congestion, headed by Cabinet Secretary Jose Rene Almendras, which coordinated with the Port Users’ Confederation to improve dialogue between stakeholders and the authorities. For example, in order to address the gridlock around Manila South Harbour, port operator ATI has been working on implementing a vehicle booking system with the PPA so that delivery times can be more accurately planned.

In addition to its efforts to ease road congestion, between 2013 and 2015 ATI invested approximately $50m annually in improving its port infrastructure. Such consistent investment indicates that the problem of port congestion is largely due to road infrastructure and the poor discipline of truckers, who are not sufficiently incentivised. It is worth noting that the number of active trucks in Manila has remained at a steady 6000, with 1500 backup trucks, for nearly a decade and represents a very small contingent of actual vehicles on the road. The root of the problem is rather the general state of road infrastructure around ports in a region of almost 23m people. The population of the area is expected to reach 30m by 2025, according to Bloomberg.

Yet despite the high levels of surrounding congestion, the Port of Manila remains the port of choice for trade flowing into the Philippines. Though the truck ban has catalysed the use of alternative ports, such as Batangas and Subic, if the city’s secondary ports are to successfully share the load traditionally carried by the Port of Manila, their capacity to accept larger vessels and access economic zones will need to be upgraded. Outside of this, the answer to the congestion problem remains very much in the hands of the MMDA and DoTC with the help of private sector collaboration. While the government has increased direct spending and fast tracked relevant public-private partnership infrastructure projects, it needs to reassert its authority over national roads within Metro Manila and prioritise the expansion of useful 24-hour express lanes for trucks.

Glenn MacArtney, country manager of MCC Transport Philippines, told OBG, “While ideally Manila would see the construction of a mega-port south of the city that could accommodate 10,000- to 12, 000-TEU vessels, the realities of having a port located within an urban area will remain a challenge for both the government and for private sector participants.”

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The Report: The Philippines 2015

Transport & Infrastructure chapter from The Report: The Philippines 2015

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