PPA to spend P3.5 billion for upgrade of ports

MANILA, Philippines — As shippers suffer from the fallout of the Red Sea conflict, the Philippine Ports Authority (PPA) is spending P3.5 billion this year for port upgrades to minimize the impact of external disruptions on the local industry.

PPA general manager Jay Santiago told The STAR that the government would spend P3.5 billion on infrastructure projects this year, understanding the need to improve facilities and services as trade and travel activities pick up.

For this year, the PPA expects cargo and passenger traffic to grow by as much as 7.5 percent, bullish that opportunities will outweigh the risks down the line.

If achieved, this means that cargo volume will reach an all-time high of 291 million metric tons (MMT). The PPA also sees passenger footprint surpassing 78 million, nearing the pre-pandemic high of 83.72 million.

“We are looking at about seven to 7.5 percent growth (for 2024), and so far we do not anticipate any risk which would affect our growth outlook. We have allocated about P3.5 billion to improve our ports this year,” Santiago said.

However, experts warned that such a target may be challenging to attain even with the amount of spending that the government has allocated to enhance trade flow.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the global shipping industry is taking a beating from the worsening conflict in the Red Sea, one of the most critical corridors between Asia and Europe.

“Risks (for logistics this year) are higher shipping costs, delays and disruptions due to increased tensions in the Red Sea that could affect Asia-Europe shipping routes,” Ricafort told The STAR.

BMI, a unit of Fitch Solutions, believes that freight rates will stay high in the first quarter of the year, influenced by Houthi attacks on shipping vessels passing by the Red Sea. The Houthis say they only target ships owned or operated by Israel, its sworn enemy.

BMI said the Houthis are driving container boats to avoid the Red Sea, where an estimated 28 percent of shipping traffic goes through every year. As such, shippers are forced to take longer routes and spend extra costs in completing their deliveries.

The Philippine Economic Zone Authority estimates that if the Red Sea is closed off, freight costs will go up by 15 percent and deliveries between Asia and Europe will be delayed by 10 days.

The only good news, BMI said, is that there is little to no chance that shipping prices would peak to pandemic highs of $14,000 per container from Asia to Europe and $22,000 for Asia to North America.

Still, BMI cautioned governments to expect the worst in the Red Sea crisis, saying the longer the conflict lingers, the worse its impact would be on trade.

Based on PPA data, cargo volume grew by five percent to 271.97 MMT last year from 259.14 MMT in 2022. Also, passenger traffic ballooned by 24 percent to 73.61 million, marking the recovery of trade and travel now that border restrictions are lifted.

For the year, the agency plans to undertake a total of 79 projects aimed at improving ports across the archipelago. The PPA also seeks to develop cruise terminals in tourist hotspots like Boracay and Siargao to attract high-end vessels to stop by the Philippines.

The government will be helped by the private sector in its push to heighten shipping activities in the face of external – and uncontrollable – risks.