Freeman Cebu Business

The economic potential of the Maritime Blue Philippines

INTEGRITY BEAT - Henry J. Schumacher - The Freeman

We started looking at ‘The Role of Shipping in Economic Growth’ already in 2018. Now, being focused on creating economic opportunities for 2021 and beyond, it makes sense to see the shipping sector as part of the Maritime Blue Philippines’economic potential.

Why now? Shipping in ASEAN becomes more critically important after global trade is affected by the policies of the man in Washington, and Europe is looking at ASEAN and ASIA as a focus for trade and investments.

What needs to be done to achieve the potential?

* attract investments in shipping that will allow foreign shipping companies to register their ships in the Philippines

* enhance a Philippine Ship Registry which will set the regulations that will encourage and facilitate the registration of safe and environmentally friendly ships

* allow Philippine flag vessels to operate domestically and internationally in one registration to enhance their competitiveness

* establish a tonnage tax regime in place of income tax, bareboat tax, common carrier’s tax, and all other taxes to be at par with the ship registries of other countries

* promote access to foreign financing in the purchase of ships by amending the ship mortgage law

* encourage and allow the participation of Philippine flag vessels in the carriage of government cargo to and from the Philippines

* government imports should be secured on FOB (freight costs are separate from the cargo value of imports)  to enable Philippine flagged ships to participate in the carriage of government cargo and thereby earn foreign exchange for the country, and have the profits of these transactions made taxable in the Philippines

* simplify port clearance requirements in the entry and exit of ships

* allow voluntary pilotage services and impose liabilities for ship damage resulting from pilot errors.

What will the Philippines / the Philippine government gain from this?

* Philippine registered companies pay income tax to the government for businesses done here and abroad.

Foreign registered companies supposedly pay income tax on their businesses done locally, but in case of destination charges/services, none as they incorrectly don’t declare these as local income.Their freight income generatedabroad iscorrectly not being taxed by the Philippine government as well.

* Freight revenues stay in the country instead of being remitted abroad

* Importers will be protected from abuse of foreign shipping lines through the imposition of excessive surcharges. Importers will now have alternative options to bring in goods at lower costs in a real market environment

* Local consumers will buy imported products at a reduced landed cost as unnecessary surcharges are eradicated.

* This project will pave the way for all domestic carriers to consider going international, thereby giving work to displaced seafarers for as long as the local vessels comply with international maritime safety standards.

* Once domestic companies start to engage in international trade, foreign-flagged carriers will have competition from Philippine flag carriers

* Government imports such as rice, sugar, G to G projects can and will be carried by Philippine flags as the flag law requires

Per research done by the United Nations Comtrade, Thailand, and Vietnam, exports to the Philippines 2019 were  USD 6.47B and USD 3.46B, respectively.

Based on data gathered, for 2019, the Philippines imported USD 112.9B and exported USD 70.3B worth of goods worldwide.

By value, the Philippines exported 67.7% to Asian countries and imported 78.8% from their fellow Asian countries. Imagine all the possible benefits if at least some of these trading activities will be carried by Philippine flag shipping lines servicing Intra-Asia routes.

Intra ASEAN cooperation will be strengthened as well.

Of course, there are other advantages of the Maritime Blue Philippines:

1. Given the fact that Filipino seafarers are the largest single nationality comprising 30 percent of one million seafarers in the world, contributing about US$ 5 billion in annual OFW remittances (before the pandemic), and that seafarers are professionals have a career path into shipping services, which include: ship management, technical superintendents, port management, trainers and teachers and many others it is essential to enhance the potential of the Filipino Global Maritime Professionals.

2. The Philippines is the fourth largest shipbuilding country globally, although the size is much smaller than the three countries ahead of us - China, Japan, Korea. Blue Philippines should attract more shipbuilders and the eco-system of subcontractors to locate in the Philippines to explore the full potential of the Ship Building & Repair Sector.

3. The government in partnership with the private sector should aim to transform the Philippines into becoming a leading Maritime Services Center Cluster, composed of

- Crew management, to retain and expand the Philippines as the leadingmaritime country in the world

- Ship management, to promote the Philippines as the next maritime services center of the region and eventually of the world

- Business process management services, including education and training, to deepen this sector of the BPO industry of the Philippines

- Ship finance and insurance and maritime law and maritime arbitration, through the development of a professional cadre of maritime lawyers, bankers, and insurance professionals.

In conclusion, in partnership with the private sector the government shouldaim to study the best way to attract investments in shipping that will uplift our flag registry and thereby be truly considered as a national flag with the Philippines becoming a leading maritime services center in the region. The time do this is now; I am aware of investors that are willing to invest in a Philippine Flag Container Shipping Line.

Feedback is welcome; contact me at [email protected]


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