Agriculture Business Week

Can the government’s roll-on/roll-off (RO-RO) transport system really answer the efficient movement of agricultural goods all over the Philippine islands?

The Philippine archipelago consists of more than 7,100 islands and islets. Endowed with beautiful sceneries and natural resources, the accessibility of the islands as well as mobility within the islands is the primary goal of infrastructure development.

Like the various pieces of a jigsaw puzzle that must be locked together, these islands need to be linked efficiently by a seamless transport infrastructure network – providing inter-modal land, air and sea transport systems that form an integrated national highway.

As the economy grows to its highest level in recent years, inter-island trade followed the same uptrend. Tourist arrivals breached the 3 million mark. Total inter-island domestic cargo and passenger traffic in 2007 shipped by sea reached 72.8 million metric tons (MT) and 44.5 million, respectively. Increasingly, RO-RO shipping has facilitated much of the traffic.

RO-RO ships as “moving bridges”
Two islands that are, distance-wise, near each other can be linked together by constructing a bridge. And in order to recover the investment made in the construction and/or maintenance of the bridge, toll gates may be put up at both ends of the bridge whereby “toll” fees may be collected. Under the “toll” system, the bridge is considered an integral part of the road network. The “toll” fee is based on the classification of the vehicle passing through, regardless of whether it is loaded with either cargos or passengers.

Assuming that the islands to be connected are farther apart such that it becomes impossible or very costly to construct a bridge similar to the San Juanico bridge, then what can be employed is a RO-RO ship which will serve as a “moving” bridge.

Various studies (JICA, USAID, Shipdeco) recommended the extensive use of RO-RO shipping as the most appropriate mode of sea transport for linking the country’s various islands. Considering the archipelagic configuration of the Philippines, any sheltered cove can be considered as a natural RO-RO terminal.

Crafting the RO-RO policy
During the various conferences held in Mindanao in 2002, one of the persistent issues raised by the shippers was the high cost of transport from Mindanao to Manila. Among others, Roll-on/roll-off (RO-RO) shipping was proposed as a solution to the transport problem.

RO-RO shipping would answer the clamor of the business community for greater efficiency and lower cost in the inter-island transport of goods. It would be consistent with the President’s lopoint Agenda to promote “decentralization of progress around the nation through the use of transportation networks”.

President Gloria Macapagal-Arroyo issued Executive Order No. 170 on January 22, 2003 defining the RC-R0 shipping policy. In a nutshell, the objectives of the RO-RO policy are:
• To reduce transport cost from Mindanao to Luzon, through the Visayas, specifically the cost of inter-island transportation through the establishment of a safe, efficient and cost-effective Road Roll-On/Roll-Off Terminal System (RRTS);
• To enhance tourism, transportation and commerce throughout the country;
•To facilitate the government’s agro-fisheries modernization and food security programs;
•To promote private sector participation in the establishment, construction and operation of RRTS facilities; and,
•To establish a new policy to promote the development of RRTS.

The SRNH is designed to complement the existing PPA port system and to offer the shippers an alternative mode of sea transport.

Hence, it was not designed to replace the lift on/lift off (LO-LO) system of port operation, as there are cargos that would still require the traditional LOLO method of handling and transport. For purposes of clarity, EO 17o defines the road-RORO terminal system (or SRNH) as the network of RO-RO ferry terminals linked all over the country by RO-RO ferry ships.

Salient features of EO 170
As an integral part of the national highway system, the nautical networks are not burdened by any costs and procedures that are not required in landbased transportation systems. Specifically, EO 17o highlights the following advantages:
• No cargo handling charges (since RO-RO shipping deals
with rolling cargoes)
• No wharfage dues
• Freight based on lane meter
• Toll fee consisting of freight, berthing, terminal and passenger fees
• Simplified documentary requirements
• Waiver of port authorities’ share in port revenues (limited
to registration/supervision fee)
• Privatization of public RO-RO ports
• Minimum permit requirements in port construction and operation
• Available financing from the Development Bank of the Philippines (DBP)

Policy enhancements
In June 2003, President Arroyo issued EO 170-A lifting the 50- nautical mile initially imposed on all RORO routes. This amendment practically declared any route within the entire country eligible for RORO operations.

Another policy refinement was introduced in September 2005 when President Arroyo issued EO 170-B allowing the conversion of private non-commercial ports into commercial ports under the RRTS. This was designed to fast-track the expansion of the RRTS through the inclusion of the private ports into the system.

For its part, the Philippine Ports Authority (PPA) issued several Memorandum Circulars (MCs) promoting the RORO service. The first circular was issued in November 2003 (PPA MC 17-2003) prescribing the applicable RORO tariff rates (terminal fees) for the initial ports/routcs covered by the Strong Republic Nautical Highway (SRNH), namely: Manila – Batangas – Mindoro (Calapan – Roxas) – Panay (Caticlan – Iloilo) – Guimaras (Jordan – San Lorenzo) – Negros (Pulupandan – Dumaguete) – Mindanao (Dapitan).

A year later, the PPA issued three circulars expanding the application of RORO Terminal Fees to include other PPA ports where RORO operations are carried out (PPA MC 23-2004) and new routes designated part of the SRNH – i.e., Batangas – Mindoro (Puerto Galera); Mindoro (Calapan – Puerto Galera); Mindoro (Roxas) – Romblon; Mindoro (Pola) – Marinduque (Balanacan); Mindoro (Apo Reef, San Jose) – Palawan (Puerto Princesa) (PPA MC 29-2004). The use of color-cbded cash tickets to simplify the processing of Terminal Fee payments was also set forth (PPA MC 25-2004).

To encourage greater private sector participation in the RRTS, Department of Transportation and Communications (DOTC) Secretary Leandro Mendoza directed the port authorities to take concrete steps to progressively privatize public-owned RO-RO ports. In December 2004, the PPA issued Administrative Order (AO) 03-2004 defining the guidelines on the development, construction, management and operation of RORO terminals under the RRTS. In December 2007, the PPA announced that the port authority is “putting on the auction block all ports under the SRNH, including Caticlan, to make them more efficient.”

Upon the recommendation of the NEDA Board – Regional Development Committee, Department of the Interior and Local Government (DILG) Secretary Ronaldo Puno issued Memorandum
Circular No. 2006-70 in June 2006.

The MC directed local government executives to refrain from enforcing any existing ordinance authorizing the levy of fees and taxes on inter-province transport of goods, regulatory fees from passengers in local ports and other additional taxes or charges in any form upon transporting goods and passengers. He likewise ordered the immediate repeal of ordinances imposing such illegal fees and taxes.

With the main RO-RO policy in place, the remaining work focuses on policy enhancements as well as further expansion of the SRNH network. The DOTC Inter-Agency RO-RO Committee approved, for endorsement to President Arroyo, the issuance of an Executive order that designates all roads that form part of the SRNH as “national roads”.

This intervention is designed to improve the development and maintenance of roads forming the national highway, eradicate illegal imposition of toll fees, as well as increase the participation of the Department of Public Works and Highways (DPWH) in the strategic development of road networks that will further expand the SRNH system.

Another policy recommendation is the inclusion of the chassis-RORO (RORO) operation as part of the RO-RO service. This intervention is designed to reduce the domestic trans-shipment of export and import cargoes. It will also dovetail existing measures – such as discounted wharfage and scanning fees – that cushion the impact of peso appreciation on exports as well as enhance the country’s competitiveness.

The DOTC and PPA are fast-tracking the development, rehabilitation and upgrading of RO-RO ports/terminals especially those that will complete the Central Nautical Highway and those that are part of the SONA (State of the Nation Address) commitments. DOTC is also coordinating with DPWH on the provision of roads that would provide inter-modal connectivity. Finally, DOTC and PPA are likewise working together in formulating the terms of reference that will govern the effective and immediate privatization of public RO-RO ports and terminals.

to be continued…

Part 2 –> The RO-RO Connection (Part 2)