A BILL recently introduced in the House of Representatives and backed by several key business groups would correct the problematic status of the Philippine Ports Authority (PPA) as both a port regulator and operator. The measure is, to use a popular phrase, a "no brainer," and should be passed as quickly as prudence allows by both houses of Congress.
Under House Bill (HB) 1400, or the proposed "Philippine Ports Corp. Act" filed by Bagong Henerasyon party-list Rep. Bernadette Herrera-Dy, the regulatory functions of the PPA would be "decoupled" from the agency and transferred to the Maritime Industry Authority (Marina). The PPA would thus be converted into the Philippine Ports Corp. (Philports), a government-owned and -controlled corporation under the Department of Transportation.
The new Philports would own, develop, manage and operate public ports within the old PPA system, as well as collect port fees and dues approved by Marina, which already has responsibility for regulating shipping enterprises.
HB 1400 received a strong endorsement last week from the Philippine Chamber of Commerce and Industry (PCCI), Philippine Exporters Confederation Inc. (Philexport), and Supply Chain Management Association of the Philippines (SCMAP). In a joint statement, the business groups welcomed the proposed changes, saying that the "problematic mandate" of the current PPA has led to a steady rise in cargo-handling rates and harmed the country's competitiveness.
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The statement, signed by PCCI President George Barcelon, Philexport President Sergio Ortiz-Luis Jr. and SCMAP President Pierre Carlo Curay, stressed that "the Philippines is said to have the highest cargo handling cost in Asean (Association of Southeast Asian Nations), which undermines its global competitiveness."
The business groups also pointed out that divorcing the regulatory and operating functions of the PPA was part of the 2017-2022 Philippine Development Plan.
"This policy reform will address not only the conflict of interest, but more importantly, the competitive neutrality issue hounding the port authority. Competitive neutrality recognizes that significant government business activities in competition with the private sector should not have a competitive advantage or disadvantage simply by virtue of government ownership and control," the group's statement said.
"In PPA's case, the competitive neutrality issue centers on its power to regulate against competition to protect its commercial interest, sometimes at the expense of public interest," it added.
Higher port charges are reflected in higher cargo handling costs passed on to customers in the form of higher shipping rates. Over the past six months, shipping rates into or from Philippine ports have increased by about 25 percent. This is not entirely due to PPA fees, of course, but they are an aggravating factor, particularly since the PPA is permitted to collect 10 to 20 percent of cargo handling charges. The business groups also called for the revocation of the Letter of Instruction 1005-A that permits this, as it is not explicitly included in HB 1400.
Irrational and counterproductive
We fully agree with the position of the business groups. No matter what sector is involved, it is irrational and counterproductive for a government agency to serve as both a regulator and service provider, as it puts the agency in the position of regulating itself, often to the detriment of legitimate private sector competition, and ultimately harming consumers. Another example of such an arrangement is the Philippine Amusement and Gaming Corp. (Pagcor), which both regulates casinos and operates them. Similar to the call of HB 1400 to separate regulatory and operational functions of the PPA, we have recently urged the same be done with Pagcor; only in the latter's case, we believe the government should remove itself from operating casinos entirely. Ports, being important public infrastructure, are of course a different matter.
The changes proposed by HB 1400 are not just matters of good administrative housekeeping, they are important for the country's economic recovery and growth, particularly with the prospects of increased trade as a result of the Regional Comprehensive Economic Partnership (RCEP). We urge Congress to treat the measure with some urgency, and move quickly to pass it.