Philippines overhauling transport infrastructure and reducing bureaucracy

 

Benefitting from an advantageous geographic position flanking critical global trade routes between North America, ASEAN and Australia, the Philippines is well positioned to transform its transport sector into a major economic growth driver in the coming years, bolstered by rising maritime trade, air passenger volumes and commuter traffic.

There is plenty of room for improvement, however. Robust population and economic growth, combined with rapid urbanisation and decades of underinvestment in critical infrastructure, has exacerbated congestion across all segments of the sector, particularly within the Metro Manila area and Luzon, the country’s largest and most populous island.

The Philippines’ specific geographic advantages also pose a substantial challenge to new builds, with over 100m citizens spread across more than 7000 islands spanning a total area of 300,000 sq km, and many outlying regions lacking easy connectivity to major population centres.

Focus On Partnerships

Although a number of major infrastructure projects planned under the country’s expansive public-private partnership (PPP) programme have stalled in recent years, the sector is poised for a dramatic turnaround in 2017.

The 2016 election of President Rodrigo Duterte led to a resurgent political will to implement major transport PPPs. Months after taking office, Duterte’s administration revived several stalled projects, including new light rail lines in Metro Manila, port redevelopments in Clark and Subic Bay, and expansion and upgrades across a broad portfolio of international and regional airports.

Increased interest among investors and rising public spending should allow the government to deliver on its promise to reduce congestion and improve the flow of passengers and goods across all transport segments, enabling the Philippines to become a more competitive player in the global shipping industry. Despite challenges, the outlook for the years ahead appears promising.

Ministry Oversight

Transport policy and development is overseen by the Department of Transportation (DoT), which was created when outgoing President Benigno Aquino III signed the Republic Act 10844 in May 2016, splitting the functions of the Department of Transportation and Communications (DOTC) and creating a new Department of Information and Communications Technology. The DoT then became a standalone executive government department, with the same responsibility to maintain and expand national land, air, sea and communications infrastructure. Another government body tasked with national infrastructure development is the Department of Public Works and Highways (DPWH). The department’s purview extends to national roads and bridges, as well as flood control and water resource management projects.

NEDA

The National Economic and Development Authority (NEDA) also plays a critical role in transport development. Under Executive Order No. 423, signed in 2005, the NEDA is mandated with issuing guidelines regarding government joint ventures with private entities, and ensuring that they conform with Republic Act 9184, also known as the Government Procurement Act. The NEDA released these guidelines in 2008, then revised them in 2013 to give the authority’s Investment Coordination Committee (ICC) the power to act as the approving authority for joint-venture infrastructure proposals involving government contributions of P150m ($3.2m) or more. The authority’s board of directors is always led by the current president.

In a keynote message delivered to the Philippine Energy and Infrastructure Finance Forum in September 2016, Ernesto M Pernia, director-general of the NEDA and secretary of socio-economic planning, announced that the NEDA’s board of directors had approved a total of 115 projects valued at P1.64trn ($34.7bn) between 2011 and 2016. Out of these 115 project, 94 were for infrastructure, of which 57 were for transport infrastructure. Pernia also stated that out of the 94 infrastructure projects, 25 were funded through PPPs. In 2015 alone 30 new projects were approved, including Light Rail Transit (LRT) Lines 2, 4 and 6 in Manila, the commuter NorthSouth Railway, the Davao City bypass construction project, the Laguna Lakeshore Expressway, the Naga Airport development scheme in the Camarines Sur province, the Metro Manila Priority Bridges Seismic Improvement Project and the Tarlac-Pangasinan-La Union Expressway initiative.

Sector Strategy

Transport development is guided by several near-, mid- and long-term policies, including the Philippine Development Plan (PDP) 2011-16 and the recently approved PDP 2017-22. The PDP 2011-16 highlighted 10 priorities, one of which is to accelerate infrastructure development by attracting new investment via PPPs. It also targets boosting infrastructure spending to 5% of GDP, up from around 2% in recent years. President Duterte also recently released a 10-point socioeconomic agenda that targets boosting infrastructure spending to 5% of GDP. The PDP 2017-22, meanwhile, was approved in February 2017 and will accelerate annual infrastructure spending, with PPPs set to play an increasingly prominent role. The plan is the first medium-term strategy to be based on the national long-term vision AmBisyon Natin 2040. The 2017-22 plan has five main areas of focus: enhancing the social fabric, inequality-reducing transformation, increasing growth potential, enabling and supportive the economic environment, and foundations for inclusive and sustainable development.

Other strategies address specific regions and segments. For example, the Roadmap for Transport Infrastructure Development for Metro Manila and its Surrounding Areas, published in 2014, lays out short- and medium-term transport investment priorities for Metro Manila, Central Luzon and Calabarzon. The region is home to one-third of the population and stands at the heart of the country’s transport grid. The plan emphasises guidelines for the ICC as it deliberates on priorities for short- and medium-term transport programmes. A recently published multimodal development roadmap is also expected to be adopted into an upcoming National Logistics Plan under the Department of Trade and Industry (DTI) (see analysis).

PPP Prerogative

Private sector participation in the development of infrastructure under a PPP model has been an important facet of public policy since the promulgation of Republic Act 6957 of 1999, also known as the Build-Operate-Transfer (BOT) Law, which established the legal framework for the government’s PPP programme and was amended in 1994 by Republic Act 7718 to allow for a broader selection of BOT arrangements. This was the first such law enacted in Asia, and served to institutionalise private sector participation in infrastructure and development. The BOT Law established the BOT Centre, which facilitated new PPPs. Executive Order No. 8 of 2010 reorganised and re-named the BOT Centre the PPP Centre, transferring its operations from the DTI to the NEDA.

Today the PPP Centre acts as a central coordinating and monitoring agency, facilitating collaboration among implementing agencies, including the DoT, the DPWH, local government units and the NEDA, as well as supporting project preparation, providing advisory services and monitoring PPP implementation. The PPP Centre also plays a role in advocating for legal and regulatory policy reforms, and acts as the Secretariat of the PPP Governing Board, the broad policymaking body for all PPP-related matters, including development and monitoring. This board sets the strategic direction for the PPP programme. In March 2016 Andre C Palacios was appointed the centre’s new executive director, after serving as a technical adviser to the centre since January 2015.

Slow Going

Although the NEDA has approved dozens of new PPPs in recent years, implementation has been slower than anticipated, with just 12 of 53 planned projects completed, under construction or in the pre-construction phase by the end of Aquino’s term in office in mid-2016. According to the PPP Centre, as of August 2016 projects completed under the PPP programme included: the P2.3bn ($48.7m) Muntinlupa-Cavite Expressway, which has been operational since June 2015; the P9.89bn ($209.2m) PPP for School Infrastructure Project, under which 10,000 new classrooms were established; and a P1.72bn ($36.4m) Automatic Fare Collection System project, which launched in December 2015 on Manila’s three commuter rail lines.

An additional 10 projects in the construction or pre-construction stages include phase two of the Ninoy Aquino International Airport (NAIA) Expressway, the Mactan-Cebu International Airport passenger terminal building and mass transit upgrades in Manila, among others, according to the PPP Centre. The total value of completed PPP projects stood at P13.84bn ($292.8m), while four projects currently under construction are valued at a cumulative P76.74bn ($1.6bn). The six initiatives in the pre-construction phase are valued at P201.74bn ($4.3bn), including a P64.9bn ($1.4bn) upgrade to Manila’s LRT Line 1 and a P69.3bn ($1.5bn) project to build the new Metro Rail Transit (MRT) Line 7.

Accelerated Agenda

Robust economic and population growth, as well as rising levels of urbanisation, have led congestion to become one of the most pressing economic challenges facing the country. The Japan International Cooperation Agency (JICA) estimated traffic congestion cost Manila P2.4bn ($50.8m) daily in 2014, and while the city’s notoriously congested expressways stand as one of the most visible examples of infrastructure that has not kept pace with population and economic growth, the problem extends to ports and airports.

Since taking office on June 2016, President Duterte’s policy announcements have reflected that he understands the urgent need for transport upgrades, and a revival of stalled PPP projects forms the backbone of the new administration’s agenda. In August 2016, for example, Benjamin Diokno, secretary of budget and management, stated that President Duterte’s tenure would lead to a “golden age” of public spending on infrastructure. This followed the president’s first state of the nation address, in which he promised to accelerate infrastructure spending on roads and bridges, including major upgrades to multimodal connectivity in the southern Mindanao region (see analysis); improved inter-island linkage projects; implementation of new flood prevention and relief measures in Manila; upgrades to the country’s rail network including in Mindanao; and decongestion of NAIA, potentially by transferring its operations to facilities in Sangley Point or Clark.

Reforms

During a July 2016 press conference, Arthur Tugade, the new secretary of transport, announced plans to cut all processing times in various transport offices by 50% immediately after taking office (see analysis), emphasising the need to reform agencies such as the Land Transportation Office, which is responsible for vehicle inspection, registration and licensing, traffic law enforcement and toll road revenue collection. Tugade stated he plans to remove obstacles to the completion of critical urban transport projects, including upgrades to Manila’s MRT Line 3, which have long proved a challenge for the country. He also stressed plans to improve PPP delivery in the aviation and railway sectors, as well as reforming existing PPP legislation.

The new administration is currently moving forward on amendments to the existing BOT Act under Senate Act No. 951, also known as the PPP Act, which was filed on August 2016. If approved, the proposed act will institutionalise the PPP Centre’s Project Development and Monitoring Facility, as well as the PPP Governing Board and a contingent liability fund. It also mandates creating a list of projects of national significance, the development of which would be protected from local laws, that have often stalled projects, in addition to setting a fixed term for the tenure of the director of the PPP Centre, who will also become a voting member of the ICC and the NEDA cabinet committee.

Early Progress

This improves the prospect of accelerated PPP implementation in the coming six years. PPP progress is already gathering momentum, and in an August 2016 project update, the NEDA reported that 10 projects worth a combined P320bn ($6.8bn) had received board approval under the PPP programme. Major transport projects approved include the southern line of the North-South Railway Project (see analysis) and a bus rapid transit (BRT) project in Metro Manila, as well as the Plaridel Bypass Toll Road Project, Metro Manila Flood Management scheme, a passenger terminal building project for Bicol International Airport and construction of the new Bohol International Airport. Major new initiatives to address congestion in Metro Manila have also seen the government move to grant President Duterte emergency powers, allowing him to bypass common hurdles to new projects, although political resistance has thus far prevented the proposed law from passing (see analysis.) SPENDING: The importance of developing new infrastructure is reflected in rising public spending, with the Duterte administration’s 10-point socio-economic agenda, unveiled in June 2016, specifically calling for allocating 5% of GDP annually to new infrastructure projects. Months later, the new government already appears poised to exceed these targets. In August 2016 the Department of Budget and Management (DBM) announced that public infrastructure spending is forecast to reach P7trn ($148.1bn) annually between 2017 and 2022, when President Duterte’s term expires. At a public forum held by the Centre for Philippine Futuristics Studies and Management at the Asian Institute of Management, Rolando Toledo, director of the DBM’s Fiscal Planning and Reforms Bureau, said the department had submitted a P3.35trn ($70.9bn) national budget for 2017, with infrastructure comprising P860.7bn ($18.2bn), a 13.8% increase over the 2016 budget and equivalent to 5.4% of projected GDP. Transport will account for P355.7bn ($7.5bn) of total infrastructure spending, according to the DBM, including road networks, railways, ports and airports. Mass transit systems in Manila are also set for a major overhaul in the medium term.

Jammed

Manila is known for some of the world’s worst traffic congestion, with macroeconomic expansion driving new vehicle ownership and urbanisation exacerbating the problem. The new administration’s Inter-Agency Council for Traffic Management reported in October 2016 that 7500 vehicles travel the Epifanio de los Santos Avenue (EDSA) per hour in each direction; EDSA is a circular expressway connecting most of the city. This is 1500 vehicles over its maximum carrying capacity, with rising vehicles sales expected to further exacerbate the problem. Auto sales rose from 168,000 in 2010 to 310,000 in 2015. According to the Chamber of Automotive Manufacturers of the Philippines, total sales reached an estimated 350,000 units in 2016, and this figure is on track to hit 500,000 in 2020. In 2014 Manila had just 1 km of road per 424 vehicles. The government has sought to address these challenges through the construction of new expressways being developed under a PPP model.

Expressways

Progress on new expressways has been steady in recent years, with the delivery of the Muntinlupa-Cavite Expressway in mid-2015, and additions to the Northern Luzon Expressway (NLEX) and NAIA Expressway in 2016 (see analysis). Major upcoming expressway schemes include the Cavite-Laguna Expressway, which is set to connect the Manila-Cavite Expressway to the South Luzon Expressway (SLEX) in Laguna, offering faster transit between Metro Manila and the Calabarzon region. In 2015 a BOT contract for financing, design, construction and operation of the four-lane, 44.6-km highway was awarded to Metro Pacific Investments Corporation (MPIC). The closed-system toll expressway will be one of the longest PPP roadworks projects in the country to date, with a budget of P35.43bn ($749.5m). Construction is expected to begin in 2017.

The NLEX-SLEX connector road project, valued at P23.2bn ($492.2m), is also set to be tendered in the near term, according to the PPP Centre. The contract award to MPIC was delayed in August 2016, after the Department of Finance (DoF) argued it should be undertaken by a special purpose company. The project involves construction of an 8-km road linking the two expressways. In September 2016 the NEDA also approved the P9.33bn ($197.4m) Plaridel Bypass Toll Road project, which will see the existing two-lane bypass road converted into a four-lane toll road, reducing travel time by 80 minutes. The project will be developed under a 30-year concession, which includes three years of construction.

Rail Development

Rising congestion has led the DoT to partner with the JICA to formulate a long-term railway development strategy that calls for the creation of an expansive commuter rail line, in addition to passenger services running along a refurbished north-south commuter rail (see analysis). In the more immediate future, upgrades to Manila’s three existing metropolitan rail lines – MRT-3 and LRT-1 and 2 – offer a solution to some of the worst traffic problems, with plans to launch a new BRT system in both Manila and Cebu City offering a cost-effective, near-term solution. In the longer term, construction of new LRT lines should have a dramatic impact on congestion, with the country’s first subway line, the MRT-7, already under way.

MRT-3

Running a north-south line along EDSA, the MRT-3 is Manila’s busiest commuter train, carrying an estimated 600,000 passengers per day, despite a design capacity of 350,000 passengers. After a failed plan to nationalise the line’s ownership, the government is now moving to implement upgrades along the line, which include a fleet and track upgrade, as well as plans to connect it to existing and planned LRT lines through a common station. Technical problems, service interruptions and breakdowns are commonplace on the MRT Line 3, and in 2009 its private owner, Metro Rail Transit Corporation (MRTC), filed a case against the Philippine government, claiming the latter had not made equity rental payments under the line’s build-lease-transfer agreement. The Aquino administration attempted to eliminate equity rental payments and improve services along the line with an equity value buyout of the MRTC. Aquino issued Executive Order No. 126 in 2013, which authorised the implementation of the buyout by the DoF, DOTC, Land Bank of the Philippines and Development Bank of the Philippines. The deal failed to move forward, however, after MRTC filed a case against the government in a Singaporean court, while the two banks involved in the deal, which would have held a combined 80% interest in MRTC, were unable to agree on terms.

MRT Upgrades

The government has instead focused on upgrading services under a PPP. In late 2015 a joint venture comprising the Busan Transportation Corporation, Edison Development Construction, Tramat Mercantile, TMI Corporation and Castan Corporation signed a P3.81bn ($80.6m) contract to rehabilitate and maintain the MRT-3. Under a three-year concession, the joint venture will cover all maintenance requirements for the line, in addition to refurbishing the trains themselves. An additional 48 new coaches were ordered from China’s Dalian Locomotive and Rolling Stock Company, with the first coming on-line in March 2016. In August 2016 the Duterte administration announced that it is unlikely to pursue further MRT Line-3 nationalisation, opting instead to continue focusing on track, signalling and power systems upgrades.

Manila BRT

Although new rail lines offer the most significant long-term potential to reduce traffic congestion, one important mid-term solution will be development of BRT systems, which offer a cheaper and simpler alternative. In September 2016 a 48.6-km BRT system running along EDSA was approved during the first NEDA board meeting held by President Duterte. The P37.8bn ($799.7m) project will cover the Ortigas Business District, Bonifacio Global City and the Makati Business District. It is also expected to link with NAIA terminals, as well as integrated transport system hubs planned for the city’s north, south and south-west regions. The project includes construction of dedicated bus lanes, depots and up to 63 new stations, with the new system set to become operational in 2020.

Cebu BRT

Manila is not the only city that will see benefits from a BRT system, Transport authorities are close to implementing a similar system, the Cebu BRT, in Cebu City. Cebu’s BRT will run along an 11-km line connecting Bulacao to Ayala Mall on Cebu South Road, North Bacalsco Avenue and North Escario Street. The route will include 33 stations and a fleet of 176 buses, with developers announcing in March 2016 that the project was in its final design phase. According to a Japanese embassy press release, in March 2016 Rafael Yap, project manager of the Cebu BRT, met with the JICA at the Japanese embassy in Manila, where he told the Metro Cebu Development and Coordinating Board that the project is expected to begin construction in 2017, with completion scheduled for the fourth quarter of 2018. South Korea’s Kunhwa Engineering and Construction was awarded a design and build contract for the system in 2015. Cebu’s BRT system is being partially funded by a $116m facility from the World Bank, as well as $25m from the country’s Clean Technology Fund, with the government providing an additional $87.5m in counterpart financing. The system will offer capacity of 330,000 passengers daily, running on dedicated lanes and benefitting from a digital traffic management system that will improve flow. In addition, the Cebu BRT is set to reduce greenhouse gas emissions by 115,000 tonnes annually by 2020 and 192,000 tonnes annually by 2025.

New Metro Lines

In September 2016 the Senate’s Committee on Public Services announced that the government was continuing to work on 14 rail projects, 11 of which are in Luzon, under PPP contracts. The updated rail agenda is valued at P1.07trn ($22.6bn) and includes some schemes already under development, such as upgrades to the LRT-1 and MRT-3 lines. Others are still in the planning stages, but expected to be rolled out in the near term. Early 2016 saw a groundbreaking ceremony for the LRT-7, which is set to drastically improve connectivity.

LRT-5

The largest project on the government’s rail agenda is a proposed 20-km subway line, LRT-5, the largest PPP project currently under development, with an estimated budget of P374.5bn ($7.9bn). It will connect Makati, Pasay and Taguig in the National Capital Region, and although it was removed from the PPP Centre’s list of projects in the pipeline after facing multiple delays, the Duterte administration announced in August 2016 that it plans to revive this project. In accordance with the previous design, the system will include 16 km of tunnel, a 4-km elevated railway and 11 stations located in the Makati Central Business District, SM Mall of Asia in Pasay City and Bonifacio Global City in Taguig.

LRT-4

The LRT-4 is a planned 11-km link running between SM City in Taytay to Ortigas Avenue. In April 2016 the government announced it had dropped the P43bn ($909.7m) project from a list of PPP projects to be rolled out before the end of then-President Aquino’s administration, despite having secured approval from the NEDA board in 2015. However, the Senate’s Committee on Public Service plans to complete the project before 2022. Under current design plans, the line’s proposed route will run along Taytay Diversion Road and Ortigas Avenue, with six stations along EDSA, Meralco Avenue, Pasig, Bonifacio Avenue, L Wood Road and SM Taytay.

LRT-6

The LRT-6, a 19-km line running between Niyog in Bacoor and Dasmariñas in Cavite, is also scheduled to be delivered before 2022, after the DoT extended the deadline for submission of pre-qualification documents in June 2016, taking its implementation beyond the purview of the Aquino administration. The P65.1bn ($1.4bn) project’s new pre-qualification deadline was set for September 9, 2016, although the original deadline was March 4 of the same year. Once completed, the line will have a capacity of 200,000 passengers per day, and could eventually connect to the LRT-1 Cavite extension project, which will connect the existing LRT-1 line from Metro Manila to Bacoor. The LRT 1 upgrade is expected to wrap up in 2020, after Light Rail Manila Corporation, a joint venture between Ayala and Metro Pacific, was awarded a P64.9bn ($1.4bn) contract for the project in 2014.

Multimodal Boost

The LRT-7 line, meanwhile, is a P69.3bn ($1.5bn), 23-km railway system with 14 stations, running from North Avenue in Quezon City to San Jose de Monte in Bulacan. It will initially accommodate 350,000 passengers per day, shortening travel times from the current average of 3.5 hours to one hour, and expanding in phases to a total capacity of 800,000 passengers daily. A groundbreaking ceremony for the new project took place in April 2016, with construction expected to finish in 2020. The project is being developed by San Miguel Corporation, a major local player active across a host of infrastructure projects through its subsidiary Universal LRT Corporation (ULC). In 2008 ULC signed a 25-year concession for the project under a BOT model. The project is also set to include development of an integrated transport system aimed at boosting multimodal connectivity through the construction of a 22-km highway running between a planned intermodal transport terminal (ITT) located next to the San Jose del Monte Station, and the NLEX Bocaue interchange. Commuters can connect between the two lines using public utility vehicles or private cars, and use the new highway from NLEX, boarding the LRT-7 running to North Avenue in Quezon City via the ITT.

Steady Progress

Ongoing upgrades are already having an effect on congestion. In October 2016 the DoT issued a 100-day progress report highlighting its early successes in reducing traffic. In the rail and road segments, Noel Eli B Kintanar, undersecretary of transportation, reported that the MRT-3 and LRT-1 and 2 lines were benefitting from improved capacity, after track renovations and the launch of extended operating hours. Total stoppages had decreased to 38 over the period, compared to 46 during the previous 100 days.

DoT authorities are also close to finalising plans for a common station linking the LRT-1, MRT-3 and LRT-7 lines, according to Kintanar. The transit station is to be located between the SM North EDSA shopping centre and the TriNoma mall.

Ports Overview

New ports developments will further support improved multimodal connectivity, as well as reduce chronic congestion in Metro Manila. By the 1970s the Philippines was home to over 591 national and 200 private ports. The Philippines Ports Authority (PPA), originally established in 1975 and attached to the Ministry of Public Works and Highways, now the DPWH, is responsible for planning, development, financing, operations and maintaining of state-owned ports in the country. Now operating under the DoT, the PPA also undertakes port construction projects under its port system and operates as a financially autonomous agency. The Maritime Industry Authority (MARINA), meanwhile, was created in 1974 and operated under the Office of the President in order to integrate the promotion and regulation of the maritime industry in line with national policy. MARINA was moved under the umbrella of the DoT in 1979, where it is responsible for registering vessels, regulatory enforcement, and establishing and prescribing routes and areas of operation for domestic ship operators, as well as policy and programme coordination.

Challenges

The Philippines’ maritime sector is also facing a dual challenge. First, there is a lack of available finance for an anticipated upgrade of the country’s ferry network; and second there is a depressed global shipping industry, which recently saw one of the world’s largest shipping lines, South Korea’s Hanjin, file for bankruptcy, with hundreds of Filipino seafarers affected, according to a September 2016 report in local media. Although some of these challenges present new opportunities for private sector investment, particularly infrastructure and ferry upgrades, the global shipping outlook for 2017 remains mixed, and many of the planned domestic infrastructure projects will take years to roll out, dampening the near-term prospects for shippers in the country (see analysis). “The basic fundamental thrust should be to raise the domestic maritime industry standards in terms of sustainability and safety so it becomes a platform to train people to move outside,” Marcial Quirico C Amaro III, administrator of MARINA, told OBG. The Port of Manila, which includes the Manila North Harbour Port, Port of Manila South Harbour and the Manila International Container Terminal (MICT), dominates the maritime shipping industry, accounting for 75% of total container traffic in the country.

Tough 2015

According to figures from the PPA, total cargo volumes handled by Philippine ports fell by 33% from 221.2m tonnes in 2014 to 141.5m tonnes in 2015. Foreign cargoes, which accounted for 57.4% of total shipping volumes, dropped by 40% from 134.2m tonnes in 2014 to 81.2m tonnes in 2015. Meanwhile, domestic cargo volumes decreased by 21.7% to 60.3m tonnes in 2015, down from 77.1m tonnes in 2014. In 2015 imports declined by 22.9% to 50.85m tonnes, and exports dipped by 55.5% to 30.3m tonnes, with the country’s exports contracting in the nine consecutive months to December 2015 as manufacturing, agriculture and mineral sales dropped. Luzon, which accounted for 58%, or 82.5m tonnes, of throughput, saw volumes fall by 28.5% in 2015, while volumes dropped by 53.5% to 32.4m tonnes in Mindanao, which accounts for 22.9% of throughput. Ports in Visayas recorded a moderate 1.6% increase to 26.6m tonnes, comprising 18.8% of the total. However, the PPA reported that ship calls rose by 4.2% nationally in 2015 to 371,093, up from 356,157 vessels in 2014. Domestic vessels accounted for the majority of the total in 2015, at 346,540, which marked a 4.2% increase on 2014. Foreign calls rose by 2.5% from 9617 to 9860 in the same period. Sea passenger volumes, meanwhile, were up by 2.5% from 54.9m in 2014 to 56.3m in 2015.

Market Share

The MICT is the largest terminal by volume in the country. It handled 21.57m tonnes of cargo in 2015, a slight increase over 2014’s 21.43m tonnes, while Manila North Harbour Port also recorded gains in 2015, with volumes rising by 1.7% to 16.53m tonnes. Growth projections for 2016 were bright, after the harbour was designated an authorised Customs facility in late 2015, allowing it to handle international cargoes. Rounding out the top five were Cagayan de Oro, which saw volumes jump by 14.1% to 5.29m tonnes; Port of Manila South Harbour, with 5.8% growth to 5.2m tonnes; and Davao-Sasa, with a 7.8% rise to 4.18m tonnes.

In terms of containerised cargo, the PPA-owned ports saw total volumes increase by 4.3% in 2015 to hit 5.56m twenty-foot equivalent units (TEUs), up from 5.33m TEUs in 2014. Foreign containers comprised 57% of total throughput, falling by 1.6% to 3.16m TEUs, while domestic containers rose by 13.4% to 2.4m TEUs, from 2.12m TEUs in 2014. The MICT handled the most containerised traffic, at 1.96m TEUs in 2015, up 4.4% on 2014. Manila North Harbour Port saw traffic total 1.13m TEUs in 2015, up 7.8% from the previous year, followed by Port of Manila South Harbour, with 6% growth to 807,897 TEUs, and Davao-Sasa, which recorded a 27% increase to 296,255 TEUs. Cagayan de Oro was in fifth place with 14.7% growth to 236,714 TEUs.

Recovery In 2016

According to the PPA, cargo throughput rose by 11.6% from 223.67m tonnes in 2015 to 249.57m tonnes for the whole of 2016, largely driven by a 12.6% increase in foreign cargoes to 151.6m tonnes. Domestic cargo shipments rose by 10% from 89.05m tonnes to 97.96m tonnes over the same period. Mean while, containerised cargo traffic increased by 12% to reach 6.57m TEUs, compared to 5.86m TEUs in 2015. Foreign container traffic rose by 14.1% to reach 3.97m TEUs, while import traffic was up 9.3% at 2.6m TEUs. According to PPA data for the first half of 2016, the MICT was the top container cargo handler, processing 1.24m TEUs, followed by Port of Manila South Harbour at 584,598 TEUs. Manila North Harbour, meanwhile, handled 696,495 domestic TEUs. The PPA reported that the combined yard utilisation at Manila’s international ports was at 40% as of end-July 2016, with roughly 32,600 TEUs inside the terminals. Productivity remained high at 20-30 moves per hour. Yard efficiency is improving as a result of a new terminal appointment booking system, and an electronic platform for booking the pickup and delivery of containers at Manila’s two international ports. Prior to the system’s installation, the average daily gate pickup at Manila’s ports was between 4500 and 5000 TEUs; now it is between 7000 and 7500 TEUs daily, according to PPA data.

Modernisation Efforts

In line with continued growth in freight through the Port of Manila, the company that operates Manila North Harbour Port, which won the 25-year concession to develop and operate the facilities in 2009, is on track with its modernisation and investment programme.

In December 2015 the Bureau of Customs (BOC) designated the port as a Customs facility. The BOC then released two memoranda orders on June 2016 that allowed the port to render services to international vessels and cargo. These moves were supported in part by Republic Act 10668, the amendments to the country’s Cabotage Law, which was signed in 2015, as well as Republic Act 10667, which covers national competition policy.

With a capacity comparable to international port operators in Manila, at over 1.2m TEUs of domestic cargo in 2016, the 53-ha Manila North Harbour Port has positioned itself as a facility with the ability to support the country’s current and future growth. The port’s profile has been strengthened by its existing infrastructure and ongoing expansion under the operator’s P14.5bn ($306.7m) investment commitment to modernise the port over the next 25 years. The terminal expects to complete the modernisation over the next several years, aiming to increase its terminal capacity to approximately 4m TEUs.

The port currently includes a fully air-conditioned passenger terminal complex that accommodates as many as 2000 passengers, and its cargo terminal is being similarly upgraded. Given the country’s positive trade prospects, a key priority for the port has been to facilitate faster cargo turnaround times by acquiring modern equipment, with a total of eight quay cranes and 27 rubber-tyred gantry cranes to be fully operational by mid-2017. In addition, expanded 840-metre quay areas are helping to accommodate longer vessels, while the implementation of a NAVIS N4 terminal operating system is ongoing.

The terminal has also established a one-stop to optimise transaction services and provide more efficient service from source to destination. Port users have had direct effect on the port’s performance; it yielded record turnaround rates for vessels in 2016, having achieved a throughput of more than 100,000 TEUs for eight consecutive months during the year. Richard Barclay, CEO of Manila North Harbour Port, told OBG, “The modernisation has resulted in considerably higher productivity at the gate and vessel. To support these improvements and cope with growing trade, we have proposed elevated roads direct to the Port of Manila to the government.”

Outlook

Just a few months after taking office, Duterte’s administration appears positioned to reduce chronic congestion and burdensome transport costs, with a new sense of urgency adding to a sense of optimism across all segments of the sector. Manila, in particular, is set to undergo an economic transformation as the government’s multi-faceted transport agenda advances, benefitting from a series of sweeping upgrades to its mass transit systems, reduced port congestion, and expansion and construction of new airport facilities.

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The Report: The Philippines 2017

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