EDC endorses draft EO removing PPA’s cargo-handling revenue

The Export Development Council (EDC) has endorsed the draft Executive Order (EO) that seeks to repeal a 41-year-old regulation giving the Philippine Ports Authority (PPA) a share in cargo-handling revenues.

The October 26 letter endorsing the draft EO was addressed to Transportation Secretary Arthur P. Tugade, who is also chair of the PPA Board, and PPA general manager Jay Daniel Santiago, and was signed by Oscar Barrera, chair of the EDC’s Networking Committee on Legislative Advocacy and Monitoring (EDC-NCLAM).

The draft EO will amend Letter of Instructions (LOI) 1005-A by eliminating instructions 3 and 4, a move that will take away the PPA’s share in cargo-handling revenues generated by cargo-handling contractors and port-related service operators. Instruction No. 3 of the LOI states that “the government share for all cargo-handling contractors and port-related service operators shall be at a rate not less than 10% taken from their gross income earned from such services.”

Instruction No. 4 states that in order to ensure the collection of the government’s share, the PPA is directed to “conduct spot audit either on its own or in coordination with such other government agencies under the visitorial power of the state.”

In 2017,the EDC had also issued EDC Resolution No. 3, signed by the council’s chair, Trade Secretary Ramon Lopez, pushing for the repeal of LOI 1005-A, which was issued in 1980 by the Marcos administration. In seeking the repeal of the LOI, the resolution said both instructions “constitute a ‘conflict of interest’” as the PPA, being the regulator, also benefits from its own regulation, giving the agency “the incentive to increase the rate to improve its financial health.”

EDC Resolution No. 3 also said the Department of Transportation, Department of Trade and Industry, Joint Foreign Chambers of Commerce and National Competitiveness Council have stressed the need for policy reform to lower the cost of port services for shippers to eventually benefit the consumers.

Said Barrera in his letter to Tugade: “It is a time of acute suffering for exporters whose operations have been most heavily affected by the COVID-19 Pandemic. However, the Philippine Ports Authority has regularly and reliably increased the cargo-handling charges that it permits to be imposed.

“Further, it touts its collections as an achievement, ignoring the impact that its regulatory [policy might have] on local industry. The passage of this Executive Order is a small step in the direction of supporting our local manufacturers.”

The EDC and the Philippine Exporters Confederation, Inc. (PHILEXPORT) have been strongly opposing any cargo-handling rate increases at Philippine ports.

Last July, PHILEXPORT and EDC had asked PPA to defer the approval of the proposed cargo-handling rate increase at Manila North Port. In their July 28 petition letter, PHILEXPORT and the EDC urged Santiago to suspend the approval of the cargo-handling rate increase “considering the state of the Philippine economy in these trying times.”

They also suggested that PPA waive its share in the cargo handling fee to resolve the conflict of interest issue around PPA and enhance the competitiveness of the economy. Earlier in the same month, PHILEXPORT president Sergio Ortiz-Luis Jr. also wrote that the group was “strongly opposed” to the petition for tariff adjustment, adding that it would be an added burden for struggling MSMEs.

“We must anticipate that the rate increase will further diminish the country’s competitiveness, drive away investors and discard the efforts of government agencies and stakeholders to bolster ease of doing business in the country. Moreover, the added cost will ultimately be borne by the end consumers—the ordinary Filipino people, and our foreign buyers,” he added.

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