Break port duopoly

IN RECENT weeks, Filipinos have been treated to the spectacle of businessman Reghis Romero II and his son Michael dragging out dirty linen in their very public fight for control of the firm that operates the Manila North Harbor. Paid advertisements of both camps described in detail the long-running dispute with the stakes running into the hundreds of millions of pesos—or even billions when one factors in the future business that the firm stands to generate as a third player in Manila’s tightly controlled ports industry.

But the fight between father and son for control of North Harbor is just an interesting sideshow. It is an engrossing circus act that diverts the public’s attention from the more important debate—whether the country should continue under the existing ports duopoly of the International Container Terminal Services Inc. (Ictsi) and Asian Terminals Inc. (ATI), which has a virtual stranglehold on the international trade of this country.

There is little doubt that the port operations of Ictsi and ATI are efficient and world-class (unlike the telecommunications duopoly in this country, which is the subject of numerous complaints from the long suffering consumers). That they are good at what they do, there is no question.

But that international cargo handling services in this country are prohibitively expensive is beyond doubt as well. There is also little doubt that systemic inefficiencies, caused by poor local infrastructure, help push the cost of international cargo handling high. For instance, because of poor infrastructure—and the fact that there are only two firms that handle foreign vessels in Manila at present—ships must wait at anchor in Manila Bay longer, before their precious cargo can be offloaded at the docks. Which means long turnaround time, which in turn means additional costs for them, which are in turn eventually passed on to consumers.

The good news is that several recently enacted laws have put the Philippines on the path toward solving this decades-old problem. In particular, the new anti-cabotage law (Republic Act No. 10668) has lifted cabotage restrictions around the country, allowing foreign vessels to sail internal Philippine waters and to dock at any Philippine port, whether domestic or international—something that was previously prohibited. Once implemented, RA 10668 will reduce transportation costs and, ultimately, result in lower prices for end-consumer because, for one, foreign vessels no longer have to dock at the Manila South Harbor to unload their cargo; they can go straight to ports that offer them lower handling fees or those that are closer to their markets.

Then there is the newly enacted Philippine Competition Act (Republic Act No. 10667), which is meant to safeguard the interests of consumers by breaking the stranglehold of large corporations on specific sectors of the economy. Finally, there is the new Customs Modernization and Tariff Act (Republic Act No. 10863) which empowers the head of the Bureau of Customs to, among other things, designate certain ports nationwide as authorized customs facilities, effectively allowing them to handle and process international cargo.

So when it comes to the hidebound Philippine ports industry, there is no doubt that the winds are blowing in the direction of change. Even the big players know that they will eventually have to relax their viselike grip on the sector amid the growing clamor for reforms. The question now is when change will happen.

When will government apply these laws to allow local industries to benefit from cheaper and legally imported goods and raw materials? When will these laws’ implementing rules and regulations be enforced to allow the man in the street the benefit of cheaper consumer goods? And perhaps more importantly, when will these laws be put into action to allow Filipino companies to export their products to foreign markets more cheaply?

To be sure, for the last few decades, the existing ports duopoly, has been serving the needs of this country, profiting handsomely from this near exclusive deal. But being efficient carries little weight if the consumer continues to suffer high prices at the cash register because the ports continue to make a killing in moving goods in and out of the country.

It is time government fully implemented the spirit of recently enacted laws by fostering greater competition. And the local ports industry is a good place to start. Ultimately, regulators will have to answer but one question: To whom will you direct the benefits of growing international trade—to a couple of large port operators or to the Filipino people?