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Increased investment in maritime transport needed to prepare for future crises

By Arjay L. Balinbin, Senior Reporter

INCREASED investment in maritime supply chains, including ports, shipping fleets, and hinterland connections, is needed to boost sustainability and prepare for future global crises, the UN Conference on Trade and Development (UNCTAD) said.

The recovery of maritime trade globally is hindered by port congestion and unreliable schedules amid increased demand, according to UNCTAD’s Review of Maritime Transport 2022.

“Hinterland connections were often short of equipment, of labor, and of storage facilities,” UNCTAD said. Hence, the global average container schedule delays doubled in 2021.

The Philippines was among the many developing countries that suffered vessel delays and container shortages.

The Philippines saw increases in the number of port calls last year, primarily driven by strong growth of exports, mainly of electronic products, the report noted.

“Philippine export volume increased by 5.3%, with electronic products forming two-thirds of the total,” it said.

The main lesson from the last two years of the pandemic crisis is that ports and shipping “greatly matter for a well-functioning global economy,” said Shamika N. Sirimanne, director of UNCTAD’s technology and logistics division.

“Higher freight rates have led to surging consumer prices, especially for the most vulnerable. Interrupted supply chains led to lay-offs and food insecurity.”

The Philippine Liner Shipping Association (PLSA) agreed that there should be more investment in shipping fleets, particularly in upgrading older ones, but stressed that infrastructure needs should be prioritized to address port congestion.

“There has been on-and-off congestion at Philippine ports even before the pandemic. It only means that our ports cannot efficiently manage spikes in cargo volume. Also, it’s not just about the ports, it’s also about getting in and out of the port. If you discharge the cargo but cannot exit the port, it’s still congested,” PLSA President Mark Matthew F. Parco told BusinessWorld in a phone interview.

“Even if they build additional ship berths there but trucks have to use the same roads, you will still have congestion,” he added.

He also pointed out that the continuing policy of restricting trucks on roads during certain hours is a major cause of delays.

“Cargo flow is affected if trucks can’t efficiently enter and exit ports due to congestion and truck bans, and this means higher costs. Also, if we cannot turn around our ships due to limited port capacity and congestion, the costs will be high,” Mr. Parco added.

Shipping companies started increasing freight rates last year due to rising fuel prices. Mr. Parco said there must be a better tax regime. “Instead of taxing through fuel, there must be a better way for the government to generate revenues so that the economy is not penalized.”

He said ports must be developed nearer export zones, citing the example of Thailand’s deepwater Laem Chabang port south of Bangkok.

“Cargo doesn’t need to enter and exit Bangkok just to go on a ship and not add to the traffic in the city,” he noted.

If the Philippines insists on building more ports in the city, then it has to build more and better access roads to allow container trucks to bypass traffic in the city, he also pointed out.

For his part, Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. said the government should encourage investment in maritime transport.

“Shipping has been a challenge for us. During the pandemic, a lot of shipping lines stopped operating and not all of them resumed and they gave preference to big users like the US and some European countries and we were last in the priority,” he said in a phone interview.

“Many of our exporters could not even ship their goods, and they had to wait in line. Other than that, the rates that shipping lines charge have become so high. We could not do anything about it,” he added.

In July, the Philippine Ports Authority said it would look into reducing port costs.

But Mr. Ortiz-Luis said, “We don’t see any material efforts so far.”

PLSA’s Mr. Parco said his group intends to meet with Transportation Secretary Jaime J. Bautista before the end of the year to discuss solutions to ongoing issues.

UNCTAD said that countries should carefully “assess potential changes in shipping demand, develop and upgrade port infrastructure and hinterland connections while involving the private sector.”

“They should also bolster port connectivity, expand storage and warehousing space and capabilities, and minimize labor and equipment shortages,” it added.

At the same time, UNCTAD noted that supply chain disruptions can be eased through trade facilitation, particularly through digitalization, “which cuts waiting and clearance times in ports and speeds up documentary processes through e-documents and electronic payments.”

UNCTAD also called for increased investment in technical and operational improvements to reduce the carbon footprint of maritime transport.

“These include switching to alternative, low or zero-carbon fuels, optimizing operations, using on-shore electricity when in ports, and equipping vessels with energy-efficient technology,” it said.

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