Interview: Andrew R Hoad, Christian R Gonzalez and Jay Daniel R Santiago
What support infrastructure and traffic mitigation measures should be prioritised to bolster future trade and facilitate port operations?
ANDREW R HOAD: In terms of infrastructure, both ATI and ICTSI – the operators of the two international gateway ports into Manila – have more than enough capacity and capability to handle present and future container volumes. At present, berths, cranes and yards are more than sufficient to handle over 4m twenty-foot equivalent units (TEUs) of international container traffic per year. The ports are currently handling in excess of 2.5m TEUs annually of containerised cargo en route to the consumer-driven market of Metro Manila and its nearby urban environs. Over the course of 2016 ATI’s berth utilisation has averaged 55% and yard utilisation has averaged 62%. At no stage has there been utilisation at the above-90% levels, which, if sustained for several weeks, would be termed “congested” by the industry. The constraint on future growth comes with the relatively underdeveloped road network in the country. Major ports such as Singapore and Hong Kong both have operations in downtown areas, but they do not congest surrounding roads because of their intricate fly-over road system.
The elevated roads being built, and the connector roads that will adjoin both the north and south expressways with a direct link to the Port of Manila area, are welcome developments, but more needs to be done. For instance, an elevated connector road for the last 1.5 km or so from these roads to the port gateways. This will provide a split between commercial traffic and light vehicles. Our study on traffic volume, conducted over the course of 10 days in 2014, showed that container trucks were not the major category, but came third behind private passenger vehicles and jeepneys. Therefore, there is definitely a useful differentiation of traffic that could become the basis of a new construction plan.
The answer for Manila is not to have more port gateways, as it does not address the core problem. If there were multiple gateways, they would all use the same roads, and if road construction does not keep pace with growth, or politics restricts the use of the roads – as we saw with the truck ban extension in 2014 – then all the ports will lose efficiency, and congestion would develop if the conditions persisted over a long period. While awaiting completion, Manila’s international ports have adopted Australia’s Terminal Appointment Booking System (TABS) for the orderly pickup and delivery of shipping containers. Since TABS was fully implementing in 2015, the ports have been able to handle an increase of more than 25% in truck transactions, from a daily average of 1600, at a faster turnaround time.
Handling more transactions in the same fixed timeframe as before means an equivalent overall reduction in truck numbers on the road, as fewer vehicles are needed on the roads at any single time to keep the supply chain going.
CHRISTIAN R GONZALEZ: It is very popular nowadays to attribute road congestion to traffic and the various road networks. Although these claims are true, before one tackles this problem by adding elevated highways and widening roads, it needs to be understood that in the short to mid term, one must work with the finite resources that are at hand. These resources are four- or five-lane roads that are hindered by capacity-reducing issues borne out of regulatory oversight or lack thereof. Lack of oversight, for instance, has included the lack of implementation of any meaningful parking policies, in addition to allowing people on one-way roads, a lack of instruction for drivers to use the appropriate roads in the city, and the absence of laws and regulations for tricycles and jeepneys, all of which have served to constrain port capacity. Due to a combination of different measures – namely putting in place an appointment system, removing the truck ban, the City of Manila clearing off roads in and out of the port, allowing only authorised vehicles to pass and opening Roxas Boulevard to truck traffic – travel time to and from the container terminal has greatly decreased and truck movement has freed up.
According to our statistics, the total number of containers released and received divided by the number of trucks has improved from 1.6 containers per truck in 2015 to 2.2 containers in 2016. This has shown that we are able to use fewer trucks compared to 2015, even as we continue to break volume-handling growth records. Port operators putting the appointment system in place and the city getting involved in appropriate regulations – as opposed to a truck ban like we saw in 2014 – have played critical roles in bumping up the capacity in the Port of Manila. We expect to handle more than 2m TEUs in 2016, with average yard utilisation of between 55% and 58%, which suggests that yard capacity in the port is at the very least close to 4m TEUs. Therefore, the constraining factor nowadays is not the quay length but, from a terminal point of view, the potential usage one is getting out of it.
One can bring a 300-metre ship and deploy four cranes on it if one is moving 2000-3000 containers off that ship. However, if one is moving 200-300 containers, which is generally the case these days, one can only deploy one crane because all these containers are in a single hatch.
Given that the truck ban has been removed and roads are more free flowing, which has expanded yard capacity, we now have to tackle how to get shipping lines to bring greater tonnage and provide handling that is more in line with international standards. This would require us to deploy more cranes per ship and incentivise shipping lines to adopt more of a hub-and-spoke approach, as opposed to its traditional feeder structure.
The current problem is that there are four or five companies running feeders from Manila to the same port, and they are therefore competing for the same volume. We must be realistic, however, and acknowledge that although we have enough footprint and quay length to receive much more cargo than we do today, ship types and patterns will require rethinking of how we deploy assets, and at some point the road network will break down, which means that long-term support infrastructure must be critically addressed.
JAY DANIEL R SANTIAGO: The 2014 truck ban was an eye opener for all involved parties, from the national government and regulatory agencies to the local governments and port operators, and made everyone realise that coordination between all stakeholders is critical to prevent a negative long-term impact on the entire country’s supply chain structure.
The institutionalisation of a truck appointment system, which allows us to manage the road networks and traffic leading up to the ports, was a major component in increasing efficiency at the ports to its current levels. In 2014 a major reason for congestion was the inability of cargo to exit the ports due to a lack of coordination between port operators, regulators, local government units and traffic managers, an area that was also tackled to reduce obstructions to the gateway.
Whereas complacency played a big part in the 2014 experience, and stakeholders were limited to their own individual planning independently from each other, there is now a much more cohesive understanding and coordination between all the components of the supply chain. This has prevented disruption from happening again and made operations a lot more efficient.
Despite the passing of the Foreign Ships Co-Loading Act in 2015, the Port of Manila will remain the country’s main gateway and preferred destination for cargo. Even though co-loading leans towards a free trade direction and puts regulations in place to support foreign ships to ply secondary ports, the facilities are not yet ready to receive them, and the handling capacity to match Manila. In this case, more manual cargo handling adds to the cost structure and offsets savings on shipping that could be obtained by co-loading. In addition, while port operators and shipping agents are available at domestic ports, these would need to be appropriately marketed to increase utilisation.
How viable are Batangas and Subic as alternative ports to the Port of Manila, and in what ways can their utilisation be optimised?
HOAD: The narrative on the effectiveness and viability of Batangas and Subic ports as alternative gateways should always be placed in the context of their intended purpose, which is to facilitate trade and serve the regions where they operate, namely southern and northern Luzon, respectively. These ports are not meant to replace the Port of Manila, but rather are complementary and are identified as such in their concessions. About 80% of cargo is destined for Manila’s consumer-based market, and that is why international shipping lines and traders naturally gravitate towards Manila. As with any part of the world, ports are located where the bulk of the population resides and where the economic activity is. The remaining 20% of cargo could shift to Subic and Batangas, and is in the process of shifting.
The Batangas and Subic ports are very viable and capable of meeting the shipping needs of region-based industries, and both deliver comprehensive port services similar to the conveniences of Manila’s international ports. More importantly, high-quality road infrastructure directly links the ports to factories without the restrictive truck bans, making them more accessible to shippers.
Batangas Container Terminal, which ATI operates, has an annual capacity of over 300,000 TEUs, while the Port of Subic, operated by ICTSI, has a capacity of around 400,000 TEUs, making both sufficient to support the needs of their respective markets.
Looking at the case of Batangas, volumes have naturally grown over the past three years as more consignees and shipping lines have maximised the port’s potential. From merely 10,000 TEUs during its start-up years, Batangas Container Terminal handled over 130,000 TEUs in 2015. In September 2016 it breached 2015’s volume at over 138,000 TEUs, and by projections it will hit the 170,000 mark by the end of 2016. The truck ban and road congestion in Manila in 2014 effectively kick-started the switch to other ports, and it is now on a firm trajectory.
GONZALEZ: One cannot take volume from the Port of Manila and move it to the Batangas or Subic ports, even if they both had the capacity to sustain the shift, in part because the roads would not be able to handle it. If best practices dictate moving ports outside of the city, one would not encounter private investor willingness to spend $9bn for the Port of Melbourne, a three-container terminal port located in the middle of what has been recognised as the world’s most liveable city.
The reason for this type of investment is because Melbourne is where cargo is destined for, while the city has maintained its liveability by ensuring that these operations do not disrupt the lives of its citizens. A major way in which they achieve it is by making cargo go to a logistics centre instead of exiting the port as a container.
The most effective way for Subic to serve Metro Manila would be to strengthen its position and visibility as an economic zone and destination for investment rather than being merely a seaport, which would have a direct impact on utilisation as more locators drive up volume. Subic is well equipped for this as it lies a shorter sailing distance from northern Asia, meaning lower freight rates, and its deeper bay allows it to handle large ships.
In addition, fulfilling the vision of Clark as a capable logistics centre would unlock the potential for cargo to travel from Subic to Clark, the latter serving as the site where cargo would be distributed, not necessarily only by land with smaller vehicles or by sea with smaller boats, but potentially by air. It would not be viable to have the 1.7m TEUs destined to Metro Manila to reach it from Subic via container. Instead, an intermodal logistics distribution centre out of Clark would best accelerate the utilisation of Subic. Further investments will be decided on these types of infrastructure developments. For instance, it may be a better policy not to generate extra physical capacity at the Port of Manila and use those investments to expand Subic. However, this would only be viable with proper connections between Subic and Clark, and with the latter serving as a multimodal logistics distribution centre.
In this regard, air connectivity could be potentially crucial. For example, the US has become a successful economy not because of a great seaport system, but because it has catalysed development in its cities though a network of more than 14,000 airports, with Russia having the world’s second-largest number of airports with around 3000.
SANTIAGO: Trade volume will continue to rise as the population grows and trade barriers continue to collapse, especially within the context of ongoing ASEAN integration. At certain times it may not be viable, given existing commercial conditions, to move cargo out of Manila to Batangas or Subic. However, given the expected growth trajectory, these two facilities, and other ports outside Manila, will continue to find a greater degree of utilisation.
Traffic into Batangas or Subic will not only be dependent on volume growth, but also on trends in commerce. Whereas Batangas was originally envisioned as a container-handling port, it has now become the top gateway for the importation of completely built-up car units. As the type of commerce and utilisation changes, ports will need to adapt to these evolving demands. Once volume increases, marketing of secondary ports strengthens and shipping lines become willing to divert goods from Manila. Other domestic ports will then be able to maximise the potential of their facilities and contribute to reducing handling costs.We recognise there is a need to integrate and align all the various port developments throughout the archipelago in order to serve the decentralisation of the country. The current plan is to identify certain ports of similar trade profiles that can act as sister ports, and ensure that they are aligned in terms of standards of cargo handling. An additional important aspect that reinforces a port’s viability is safety. In addition to the ports of Batangas and Manila, we are in the process of procuring vessel traffic management solutions (VTMS) equipment to cover an additional five locations. However, the long-term intention is to install appropriate VTMS facilities in most of the major ports to ensure offshore safety is addressed. In addition to fostering safety, it is best practice to use VTMS in berthing management, environmental protection and planning for cargo-handling operations. The modernisation and development of the ports of Davao-Sasa, Iloilo, Cagayan de Oro, General Santos and Zamboanga are within the medium-term plans for the Philippine Ports Authority, and the route to their privatisation will be a public-private partnership arrangement, although different modalities are also being evaluated. These five ports have been identified as both strategic and commercially important, with Davao-Sasa being the priority target for redevelopment, although, on a more conservative and cost-efficient level than originally planned.
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