Port privatization

For a country with more than 7,100 islands, one would expect a developed interisland shipping sector. Yet that is not the case with the Philippines. Aside from the lack of political will on the part of previous administrations, the unusual role played by the Philippine Ports Authority (PPA) as regulator of the industry, developer of ports and competitor of the private sector in maritime trade and port services has been blamed for the poor state of interisland transportation.

Government ownership of some 100 ports across the country has also led to the eventual degradation of many of them due to the perennial lack of public funds to sustain and modernize these facilities. Yet every administration knew that privatization is the answer to having a developed port network. Just recently, the chambers of commerce of south Luzon reiterated the call to modernize and develop the various ports across the country. But first, they said the government had to level the playing field in the ports sector by ending the multiple and conflicting roles of the PPA.

Members of the Philippine Chamber of Commerce and Industry (PCCI) from Regions IV-A (Cavite, Laguna, Batangas, Rizal and Quezon), IV-B (Mindoro, Marinduque, Romblon and Palawan) and Bicol have asked the Department of Transportation and Communications to amend the PPA charter and leave the agency only with its regulatory function. “An amended PPA charter will signal to investors that they can expect fair competition in developing and operating ports,” said PCCI president Miguel Varela. “A level playing field will be an incentive for large infrastructure projects because investors will feel predictability in their operations if the government regulator is not a competing developer of ports at the same time.”

They also asked the DOTC to privatize the ports under the PPA. In 2010, the PPA said it would privatize at least five state-controlled ports as part of the Aquino administration’s public-private partnership (PPP) program. The first targets included the ports in Iloilo, Cagayan de Oro, Zamboanga, Ozamiz and General Santos as well as the roll-on, roll-off (Ro-Ro) ports covered by the so-called nautical highway that connects Luzon to several islands in the Visayas all the way down to Mindanao.

While some of the ports are now run by private cargo-handling operators, the privatization effort for many other facilities remains delayed. The government can do some catching up if it can fast-track the privatization of the major port of Davao. Earlier considered as one of the possible links in the Ro-Ro shipping network of the Association of Southeast Asian Nations, the Davao port failed to make the cut because of its dilapidated condition. This moved the government to draft last year a modernization program costing anywhere from P3 billion to P5 billion through the PPP program. Two local private sector firms—global player International Container Terminal Services Inc. and Asian Terminals Inc.—have expressed interest in the project. Bidding was earlier scheduled for the middle of 2013, but no official word has yet been announced on when the actual bidding will be held.

An efficient network of ports is very crucial. Being an archipelago, maritime transport plays a very vital role in developing the regions, where poverty remains high. Ports are very important as these serve as gateways to towns and cities in transporting people and in trading goods and services.

The country has a creditable record in the privatization of essential services, with the water distribution previously handled by the state-owned Metropolitan Waterworks and Sewerage System the most successful example. Over the past years, the government’s track record in port privatization has been limited to a few major facilities, among them the Batangas Port, the Manila North Harbor, the Manila International Container Terminal and the Manila South Harbor.

It is time to speed up the privatization of as many ports nationwide as possible. There is no doubt that these facilities can be better handled by private investors with the money and expertise to operate them efficiently. In 2010, PPA General Manager Juan Sta. Ana said: “We subscribe to the basic notion that the private sector is the engine of growth. For this reason, we should continue to encourage more private-sector participation in the management, operation and development of ports.” Time to follow these words with action.