PORT AND ROAD INFRASTRUCTURE FOR GREATER LUZON TRADE SEPTEMBER 2014

COMPILED BY AND VOICING THE VIEWS OF LEADING TRANSPORATION SECTOR ORGANISATIONS

Asian Terminals Inc. (ATI), Association of International Liner Shipping Lines, Integrated North Harbor Truckers Association (INHTA), International Container Terminals Inc. (ICTSI), Manila North Harbour Ports Inc. (MNHPI), Philippine Liner Shipping Association (PLSA), Philippine Inter-Island Shipping Association (PISA), Port Users Confederation Inc. (PUC) [In Formation]

CONTENTS I. Maritime Trade and the Economy

II. Modern Logistics Disciplines

III. Impacts of Bottlenecks in the Supply Chain

IV. Ports and the Markets They Serve

V. Capacity of Ports in Greater Luzon to Meet Trade Requirements

VI. Roads to Match Port Capacity: Coordinated Action Essential

VII. Twin Track Solution: Immediate and Long Term Action Plans

VIII. Experience Shows it Can be Done

IX. Balanced Development

Appendix 1

Origin and destination data for international and domestic container traffic

Appendix 2

Details of the problems associated with the recent truck ban measures

Appendix 3

Data on port capacity and trade – the data confirms timely investment in new port capacity to

meet growing international trade

Appendix 4

Aerial shots confirm the large number of sites available that can be cleared to enhance port

activities plus the merit in studying how to improve the port network

Appendix 5

Aerial photos underline the close proximity of high end residential, retail and commercial

properties to mainstream port areas in Melbourne, Australia and Vancouver, Canada

I. MARITIME TRADE AND THE ECONOMY

The World Bank, IMF, OECD and other eminent organisations all confirm that efficient and cost-effective

shipping and port systems that function as key elements of global supply chains play a major part in

fuelling economic development and prosperity.

1. “The trade competitiveness of all countries - developed and developing alike - depends heavily

on effective access to international shipping services and port networks.” UNCTAD 2013

2. “The transportation of cargo and containers by sea underpins the world trading system and

global economic prosperity” OECD.

II. MODERN LOGISTICS DISCIPLINES

1. The modern supply chain – originating at point of production and finishing at point of

consumption – utilises a combination of transport assets and logistics services to deliver cargo

seamlessly ‘to market’ according to time, price and other criteria designed to meet specific

customer requirements.

2. Supply chain disciplines underpin Philippine international and domestic trade, especially those

based on the use of the container system. Any serious disruption of cargo flow lowers efficiency,

generates additional costs and ultimately represents a cost to the economy.

Import of Raw Materials, Supply Chain Bottlenecks

Po

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tial

Dis

rup

tio

n

of

Flo

ws

Ship Port Road Warehouse/ Container Yard

Factory

Long berthing waiting time

Bad weather

Crane downtime/stoppage

Equipment downtime/stoppage

Overstaying Containers

Strikes

Slow clearances

Shortage of manpower

Traffic

Breakdown

Truck Bans

Strikes

Floods

Security/hi-jacking

Poor inventory management

Full container yards/no space available

Shortage of manpower

Congestion of off-track facilities

Lack of space

Export of Finished Goods – Supply Chain Bottlenecks

Po

ten

tial

Dis

rup

tio

n

of

Flo

ws

Point of Production Factory Backlogs caused by

Warehouse/ Container Yard

Road Port Ship to Customer

Delay in production

Delay in releasing of releasing documents

Poor inventory management

Full container yards/no space available

Faulty equipment

Traffic

Breakdown

Truck Bans

Strikes

Floods

Security/hi-jacking

Crane downtime/stoppage

Equipment downtime/stoppage

Overstaying containers congestion

Strikes

Slow clearances

Long berthing waiting time

Delayed arrival of scheduled cargo

Bad weather

III. IMPACT OF BOTTLENECKS IN THE SUPPLY CHAIN

1. It is vital for the port and road network to be planned as a system to ensure that the supply

chain is not affected when different stakeholders in the system try to achieve their respective

goals.

2. Independent and uncoordinated actions to reduce congestion imposed by any one of the

stakeholders can create a problem where the economy pays a severe price.

3. For example, reducing congestion problems with truck bans, lead to a much greater truck

population required to meet falling truck productivity, bringing more trucks to the road.

4. The net result of bottlenecks in the supply chain means added supply line costs and in turn a

major cost to the economy as well as a black mark for the Philippines’ competitiveness.

Appendix 2: Further details of the problems associated with the recent truck ban measures.

III. PORTS AND THE MARKETS THEY SERVE

1. Shipping and logistics follow trade.

2. The major part of international and domestic trade originate from or are destined for Metro

Manila. The Metro Manila ports are therefore the logical, lowest cost path to serve this

concentrated high demand area.

Appendix 1: Shows the information of origin and destination cargo volumes for international and

domestic container trades and illustrates the dominance of Metro Manila. Many other major

metropolitan cities have container ports in the vicinity of their population.

V. CAPACITY OF PORTS IN GREATER LUZON TO MEET TRADE REQUIREMENTS

Current port and terminal capacity as identified below meets the majority of present trade

requirements.

Port/Terminal Operator Location

Asian Terminal South Harbor (ATI) ATI Manila

Manila International Container Terminal (MICT) ICTSI Manila

Manila North Harbor Inc (MNHPI) * MNHPI Manila

Batangas Port ATI Batangas

Subic Port ICTSI Subic

* Domestic Terminal only

1. Traditionally, in the international sector, new port capacity has been installed in advance of

demand as witnessed by the opening of Berth 6 at MICT in 2012 bringing the total available

capacity at MICT to 2.5 million TEU when traffic through the terminal was under the 1.8 million

TEU mark.

2. Today overall available international container terminal capacity in Manila is 3.7 million TEU/yr,

against a throughput in 2013 of just over 2.7 million TEU, highlighting that timely investment by

the private sector has kept the demand/supply ratio well in balance.

3. The development of Berth 7 at MICT, for which foundation work has already been undertaken,

will raise annual international terminal capacity to 3 million TEU/yr at MICT and to 4.2 million

TEU/yr overall for the international terminals.

4. Capacity at Batangas and Subic under normal circumstances – i.e. without the knock-on effect of

congestion in the Manila terminals – is well matched to the hinterland naturally tributary to

these ports.

5. Domestic trade is expected to go through a strong growth curve and it is recognised that Manila

North Harbor has to formulate clear plans to accommodate the forecast growth.

6. A comprehensive master-plan for the Metro Manila ports going forward is essential with this

addressing port capacity needs based on the current and forecast needs of cargo consumers and

producers.

Appendix 3: Provides further data on port capacity and trade – confirms the timely investment in new

capacity to meet growing international trade.

VI. ROADS TO MATCH PORT CAPACITY: COORDINATED ACTION ESSENTIAL

There must be investment in road infrastructure to match the modern new or future installed port capacity.

1. In order to make export, import and domestic cargoes flow efficiently from the ports to and

from consignees and shippers, the road network must be seamless and wide enough to

accommodate truck traffic. The road network must be continuously reviewed and expanded as a

whole system to ensure that growth is not compromised.

2. A direct 'Port Access Road' is essential for port efficiency, vessel berth stay time and optimum road transport. The root cause of congestion is the lack of a dedicated port access road to the Manila ports.

3. The NLEX-SLEX Connector road proposed by MPTC (MNTC) with a connection to the three ports will resolve the current issues and concerns.

4. In Metro Manila there is an urgent need to ‘catch-up’ with the delivery of the appropriate road

infrastructure and lay solid plans for the future.

5. Overall, a twin-track approach is suggested which aims to play a part in reducing congestion

problems and getting trade moving again.

VII. TWIN-TRACK SOLUTION: IMMEDIATE AND LONG TERM ACTION PLANS

The following twin-track solution is seen as holding major potential to alleviate congestion problems on

a short and long term basis and thereby getting trade moving again.

1. A Immediate Action Plan, and

2. A Long Term Action Plan

Key components of the IMMEDIATE ACTION PLAN are:

o A moratorium on truck bans.

o Operate multiple 24-hour single lanes, especially for the North, the South, and Cavite for all cargoes

[Done on selected routes. Need more to be identified]

o Operate a 24-hour free flow exemption for refrigerated/perishable/dangerous cargoes.

o Exclude truck ban rules from applying on Saturdays

o Eliminate:

o The arbitrary apprehension of trucks by government enforcement agencies.

o The Illegal parking of trucks at the roads within the port zone.

o Approve the North Harbor Link road and the Metro Pacific Port Connector Road system to be

constructed as soon as possible.

o Implement a 24-hour by 7-days vehicle booking system.

o Formulate necessary legislation to transfer long-staying boxes to inland container depots which

penalize those who use the terminals as warehousing.

o Fast track the development of yard capacity behind Berth 7 at MICT.

o Eliminate the bottlenecks of informal settlers and illegal businesses on Bonifacio Drive,

Anda Circle, and R10.

o Speed up the Manila North Harbor Port modernization program including facilities, cranes and

manpower.

o Maximize the efficiency of the port area by identifying and clearing underutilized areas including

relocating informal settlers and providing housing for port workers.

o Study how to improve the Manila Port network.

Key components of the LONG TERM ACTION PLAN are:

o Identify an agency or person with the authority and accountable for the overall planning of the

transport system to ensure that the supply chain for trade is efficient.

o Formulate a Master Plan for the whole Port Area of Manila to accommodate long-term growth

in trade.

o Formulate a Master Plan for staged expansion of the Port of Batangas to accommodate present

and future Laguna and Batangas based trade for both international and domestic cargoes.

With the rerouting of ships to Batangas, the port capacity is full.

o Formulate a Master Plan for staged expansion of the Port of Subic to accommodate present and

future Subic-Clark-Tarlac based trade for both international and domestic cargoes.

o Formulate a Master Plan for an access road system from Cavite going to the Manila Ports, which

would include an underground tunnel from Vito Cruz to the port under Roxas Blvd. with a

waterfront park above it

o Formulate a far-reaching strategy and Master Plan to incentivise businesses to relocate to other

development hubs within or outside of Luzon. (JICA Study? Etc.)

o Batangas and Subic ports are presently too small to absorb current overflows from Manila ports,

all the more since there is a thrust to promote manufacturing and agricultural production and

processing FDIs into these areas

o The overall vision would be to have five excellent ports serving international and domestic

trades so shippers, consignees, shipping lines and logistics providers have a choice that is

efficient, developed not for present trade but for the future

The combination of the Immediate and Long Term Action Plans promises to deliver workable solutions

that play a meaningful part in keeping Metro Manila moving while maintaining the integrity of

international and domestic supply chains.

Appendix 4: A visual insight into the potential that under-utilized port areas and a study of the port road

systems hold to achieve an overall improvement in port operations

VIII. EXPERIENCE SHOWS IT CAN BE DONE

o Integration not separation between city and port is the lesson to be learnt from global

experience. Together, the two entities can deliver a larger critical mass of beneficial commercial

activity – one feeds off the other. This positive coexistence, however, requires hard work and

coordinated planning to achieve it. Progressive benefits in terms of positive economic impact in

a primary and secondary context are the result. This is the conclusion of OECD which has studied

this subject in-depth

o Two notable port-city examples are Melbourne, Australia and Vancouver, Canada. Both have

embraced new technology to optimise traffic management and simultaneously are investing in

new infrastructure to ensure peaceful co-existence between port and city. In both cases, key

port areas are in close proximity to high end residential and retail properties

Appendix 5: Aerial photos underline the close proximity of high end residential, retail and commercial

properties to mainstream port areas in Melbourne, Australia and Vancouver, Canada

IX. BALANCED DEVELOPMENT THE GOAL

The template the Philippine Government drew up back in the late 1980s for the privatisation of the main

container terminals in the Metro Manila area has proved a highly successful one. It is most evident

today that the area’s container terminals under normal operating conditions offer sufficient capacity to

efficiently meet all market needs. The main Manila international container terminals are also

distinguished by the fact that they rank as international standard terminals performing in accordance

with best practice internationally.

The terminals cannot, however, operate to their full potential when the supply chain is hampered by

inadequate road infrastructure resulting in extraordinary measures such as truck bans in pre-

determined hours. These measures, in turn, lead to other problems – increased inland transport costs,

the slower delivery of goods, truck journeys reduced by half on a weekly basis, an influx of more trucks

to make up the gap in available truck capacity and so on and so on...

In the preceding pages Immediate and Long-Term Action Plans are spelt out by transport stakeholders

who believe that these Plans can build towards the ultimate goal of adding new port capacity in tandem

with supporting road system development. This BALANCED DEVELOPMENT is essential to obtain

optimum use of the new port facilities, achieve efficient supply chain operations to support the growth

in overall trade.

APPENDIX 1

Origin and Destination Data for International and Domestic Container Traffic

International Trade

Import Container Inland Destination

Export Container Inland Destination

Domestic Trade

Domestic Container Outbound Trade

*Volumes based on total moved by all members in PLSA. Percentage weightings based on average of all members in PLSA

Domestic Container Inbound Trade

*Volumes based on total moved by members in PLSA. Percentage weightings based on average of PLSA members

APPENDIX 2 Further details of the problems associated with the recent truck ban measures

During the first half of 2014, business and consumers suffered from the high cost of goods and

goods shortages. This was caused by a lack of coordinated efforts to address the concerns of:

The City of Manila to remove safety risks on citizens posed by container truck bans.

The MMDA to address increasing traffic, especially with the DPWH construction and

rehabilitation programs.

The LTFRB to crack down on colorum vehicles for hire.

Actions taken by these stakeholders were:

The City of Manila:

A one hour reduction of hours a truck could use all streets of Manila.

A complete “no-parking” policy and elimination of 24-hour dedicated freight corridors both

of which were deviations from the original MMDA ban.

A ban on empty containers during the daytime.

The LTFRB imposed:

A crackdown on trucks and chassis to comply with the nationwide requirement to apply for

franchises.

These independent actions resulted in:

Longer turn-around times and doubling of waiting times for truckers. This meant that

truckers could only do half the normal number of trips when roads were open- i.e. 5500

truck trips per 24 hours serving the port of Manila prior to the truck ban reduced to 2000

trips per 24 hours afterwards.

This resulted in a shortage of trucks and the doubling (or more) of trucking rates (prices)

because of the sudden shortage.

The bottleneck represented by the truck ban slowed down the whole supply line, congesting

terminals and holding Philippines bound cargo up as far back as Hong Kong and Singapore.

Both international and domestic containers were not able to to enter or leave the ports on a

timely basis causing a mounting backlog.

Ships waiting for berth charging exporters and importers with demurrage and other charges.

This is standard practice worldwide

Traffic bottlenecks throughout the city

Initial short term solutions taken were:

City of Manila implemented 24-hour single lanes for trucks on selected routes

LTFRB to address truck shortages allowed an extension of the deadline to August 16, 2014

for collorum trucks to enter the LTFRB system via issuance of franchises. Most of these

trucks were not suited to container traffic.

MMDA imposed 24 hour single lanes for trucks on selected roads

All this resulted in containers piled up in the Manila ports, empty containers stuck all over the City

and Calabarzon, and ships not being able to discharge.

APPENDIX 3

Data on port capacity and trade – the data confirms the timely investment in new capacity to

meet growing international trade

Prior to the implementation of the revised truck ban rules during the first half of 2014, the

international-standard rating of each terminal’s capacity was:

Rated Capacity of Metro Manila Port/Terminal Facilities

Port/Terminal Facility Capacity in Twenty Foot Equivalent (TEU)

South Harbor (ATI) 1.2 Million TEUs

Manila International Container Terminal (MICT) 2.5 Million TEUs

3.0 Million TEUs (with Berth 7)

Manila North Harbor Inc (MNHPI) * 1.8 Million TEUs

2.8 Million TEUs (after modernization)

Batangas Port (ATI) 300,000 TEUs

Subic Port (ICTSI) 600,000 TEUs

Actual capacity utilization of the facilities in 2013 was as follows:

Capacity Utilization of Metro Manila Port/Terminal Facilities 2013

Port/Terminal Facility Utilization

South Harbor (ATI) 77 %

Manila International Container Terminal (MICT) 76 %

Manila North Harbor Inc (MNHPI) * 50 %

Batangas Port (ATI) ?? %

Subic Port (ICTSI) 6%

The breakdown of international volumes by terminal/port in 2012-13 was:

2012-13 International Throughput (by TEU) for Metro Manila Port/Terminal Facilities

2012 % 2013 %

MICT 1,732,446 64.0 % 1,796,571 65.0 %

ATI 922,821 34.0 % 921,536 33.0 %

Batangas 6,754 0.3 % 11,025 0.4 %

Subic 35,216 1.0 % 34,847 1.0 %

Total 2,697,237 100.0 2,763,979 100.0

International Import Container Volume (by TEU), 2012-13

2012 % 2013 %

ICTSI 862,229 63.0 % 912,447 64.0 %

ATI 492,758 36.0 % 486,982 34.0 %

Batangas 4,039 0 % 6,002 0 %

Subic 18,924 1.0 % 17,827 1.0 %

Total 1,377,950 100.0 1,423,248 100.0

International Export Container Volume (by TEU), 2012-13 (includes Empty Containers)

2012 % 2013 %

ICTSI 870,217 66.0 % 884,124 66.0 %

ATI 430,063 33.0 % 434,554 32.0 %

Batangas 2,715 0 % 5,023 0 %

Subic 16,291 1.0 % 17,019 1.0 %

Total 1,319,286 100.0 1,340,720 100.0

Domestic Container Volume (by TEU), 2012-13

2012 % 2013 %

Inbound 255,602 35.0 % 243,534 35.0 %

Outbound 467,322 65.0 % 456,083 65.0%

Total 722,924 100.0 699,617 100.0

Foreign trade compared to the capacity of international ports was:

Available International Container Capacity Versus Demand 2012-13

2012 2013

Metro Manila, Cavite and Laguna cargoes 1,899,432 1,943,935

Metro Manila Port Capacity 3,700,000 3,700,000

Surplus Capacity 1,800,568 1,756,065

Domestic trade (excl road/ro-ro) compared to the capacity of the domestic ports was:

Available Domestic Container Capacity Versus Demand 2012-13

2012 2013

Metro Manila, Cavite and Laguna 621,164 589,111

Domestic Port Capacity 1.800,000 1.800,000

Surplus 1.180,000 1.200,000

Once the modernization of MNHPI is completed from two to five ship-to-shore cranes, the available

port capacity will increase.

APPENDIX 4 The illustrations below clearly highlight two potential areas of improvement that can be addressed

to improve port operations overall:

Figure1: Areas that can be cleared to enhance port activities

Figure 2: Highlights the merit of studying how to improve the port road network

Figure 1: Red areas are underutilized and can be cleared for better port facilities

Figure 2: There is clearly merit in studying how to improve the Manila Port network

APPENDIX 5:

Aerial photos underline the close proximity of high end residential, retail and commercial

properties to mainstream port areas in Melbourne, Australia and Vancouver, Canada