World Bank to help solve PH shipping paradox

by Jun Vallecera, BusinessMirror

Posted at May 09 2013 08:13 AM | Updated as of May 09 2013 04:13 PM

MANILA -- The International Finance Corp. (IFC), the private investment arm of the World Bank, has financed a three-year study on the impact of shipping costs on food and food products in the Philippines, Transportation Secretary Joseph Emilio Abaya said on Wednesday.

The study, which kicked off just this year and should be completed by 2016, aims to find out why it is more expensive to ship food and farm products from Mindanao to Manila, for example, than pay for the same on shipments to and from Hong Kong, Singapore and Thailand.

The project, according to Abaya, expects to identify areas where pro-competitive practices will help reduce the price on shipped food and food products.

The Department of Transportation and Communications (DOTC), he said, will work with its frontline agencies—the Maritime Industry Authority (Marina) and the Philippine Ports Authority (PPA)—in reviewing the results of the study and implement the IFC recommendations soon after.

The IFC study highlights the importance food plays in the consumer price index (CPI) where it accounts for more than 58 percent of the CPI basket.

“This partnership with the IFC is a very welcome development. It will have a major impact on our economy, especially for farmers and fisherfolk who stand to realize the most gains from our policy reforms,” Abaya said in a statement released the same day.

By reducing domestic shipping costs, he added, the price of commodities should also go down.

Abaya quoted a study prepared by the United Nations Development Program (UNDP) in 2005 that showed that 24.2 percent to 43.8 percent of the wholesale price of food products is due to transport and logistics costs.

Years earlier, the World Bank, the IFC’s parent organization, reported that Manila shippers charge the most per container van of tradable goods than neighbors in Singapore, China or Thailand.

In that report, the bank said port and terminal handling costs in the Philippines totaled $1,336 per 20-foot container versus only $335 in China, $382 in Singapore and $848 in Thailand.

The report concluded that Manila had the highest cost among the countries surveyed and that the same was a “cause of concern for the Filipino exporter or importer.”

The World Bank said the cost for shipping anything out of Manila in a 20-footer already totaled $994, which included $500 for domestic transshipment from Cebu to Manila, for example; cargo handling or arrastre of another $175; $45 for the terminal handling charge and $274 as port charges.

It added that the $994 shipment charge per 20-footer accounted for the bulk of the total cost to ship from the Philippines.

This was on top of a schedule of fees that totaled $721.21 per container van. The fee charged the exporter or importer by a foreign shipping company for transporting vans from Cebu to Manila already cost $500.

This also was on top of the $30 fee for the bill of lading, the terminal handling charge of $30, chassis rental of $9, a fuel adjustment factor of $70, even a telex release fee of $35, a loading fee of $11, cargo handling/arrastre fee of $46.02 and export wharfage of $5.19.

Except for the export wharfage, arrastre and loading fees, the World Bank said the fee structure was pocketed entirely by foreign shipping lines.