Truck ban: the bigger picture

Did the city government of Manila do the right thing when it started banning heavy trucks from its streets from 5 a.m. to 9 p.m. last Feb. 24? After a three-day strike by truckers, Manila Mayor Joseph Estrada allowed “window hours” from 10 a.m. to 5 p.m. for trucks with loaded containers on a two-week trial period. Last week, the two-week trial was extended to six months. Still, this leaves trucks with two hours less to ply the city streets, compared to previous rules that only banned them within 6-9 a.m. and 5-9 p.m. Now the city council also wants a share of the income from port operations, citing that Manila “continues to unduly bear the brunt of very demanding and extensive port-related activities,” while its people suffer from increased traffic congestion, pollution, structural road damage and risks of vehicular accidents.

While businessmen have been up in arms against the ban, the issue is best viewed within a wider and longer-term perspective. It is true that the move has disrupted the flow of commerce and operations of factories critically dependent on timely delivery of imported inputs and products for export. Still, I welcome the move to the extent that it sets in motion decisive actions that would finally put aright an anomalous situation brought about by contradictory moves by the previous administration on our ports system. I’ve lamented how the past leadership caused substantial capacity expansion at the Manila port, after borrowing P16.8 billion from the Japanese government to develop the Batangas and Subic ports (“A colossal contradiction,” Opinion,  9/11/12). Decongesting Metro Manila was prominent in then President Arroyo’s intended 10-point legacy. In the 2004 Master Plan for the Strategic Development of the National Port System, redirecting cargo traffic to those two ports was aimed to decongest the Port of Manila, and with it Manila streets, especially with container trucks taking an estimated 44.2 percent of road space in routes feeding the port.

As of late 2012, five years after completion of the Batangas Port Development Project Phase II and Subic Bay Port Development Project, capacity utilization in both ports was a measly 4.2 and 5.6 percent, respectively. Batangas Port only had one ship call (by MCC Transport) every week, while Subic only had Wan Hai and APL making ship calls every Wednesday and Thursday, respectively. The Batangas Port management has already decided to lease out most of its sprawling but unused container yard to an engineering company, if only to earn revenues for paying back the massive foreign loan that financed it.

Meanwhile, Port of Manila is the port-of-call of 23 container liner shipping companies, thereby getting 98 percent of the foreign container traffic in Luzon. What appalls me is that firms located near or even adjacent to the Subic and Batangas ports still ship their cargo out of the Port of Manila. New expressways to both the Batangas and Subic ports are now in place, but cargo transported on them has so far flowed in the reverse direction from what was intended!

Why do cargo owners insist on shipping in and out of Manila port, even when they are next door to either Subic or Batangas ports? It’s really basic economics: Shipping freight charges are much lower when you ship to or from Manila. For example, it costs $100 less to ship a 20-foot container from Singapore to Manila than to Batangas, and $170 less for a 40-foot container. To export out of Subic, ocean freight is $100-$150 higher than if shipped out of Manila. Even as port-related charges including trucking services and cargo-handling fees are much cheaper for Batangas and Subic compared to Manila, these could not offset the freight cost disadvantage for both Subic and Batangas relative to Manila.

Why the substantial freight cost advantage? The answer is economies of scale: Historically, much larger volumes handled make it possible to charge lower unit rates. Left alone, cargo owners will naturally prefer the Manila port, and the cost disadvantage of the Subic and Batangas ports will persist and possibly even grow over time. Besides, truckers, freight forwarders and logistics firms are mostly in Metro Manila, and thus naturally favor working with Manila port rather than Batangas and Subic ports. Developing these other ports was not enough, then. The goal of having them relieve and decongest Manila port simply will not happen unless government deliberately intervenes to make Batangas and Subic more attractive for shippers. The Manila truck ban does exactly that. A textbook solution would be to tax shipments going through Manila port at a rate high enough to wipe out its freight cost advantage over the other two. Or government can force the shift outright, perhaps by requiring freight forwarders, trucking and logistics companies to relocate nearer the Batangas and Subic ports, while halting any further growth in capacity in the Manila port.

The Department of Labor and Employment is reportedly convening a truckers’ summit to address the concerns of the workers in industrial zones affected by the truck ban. Better still, the Department of Transport and Communications should bring together all the key players and stakeholders—shipping companies, freight forwarders, logistics firms, truckers, industrialists, consumers and motorists—to a grand summit to agree on and commit to long term solutions that will decongest the Manila port, ease Manila traffic, and in the process promote further industrial development in and beyond southern and central Luzon. That way we’d get more dispersed and inclusive growth.

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