Freeman Cebu Business

Where is ‘Blue Philippines’?

INTEGRITY BEAT - Henry J. Schumacher - The Freeman

At the beginning of November, I wrote about the ‘Blue Economy’ and explained what Blue Denmark and Blue Singapore stand for, and asked the big question: Where is Blue Philippines?

I am glad that this exciting topic has been picked up by other writers, agreeing with me that ‘the Philippines is in a prime position to be a key player in the Blue Economy.’ They added: ‘Although the Maritime Industry Authority (MARINA) and NEDA have been talking about the Blue Economy for some time now, the Philippines remain bereft of an overarching development plan to fully maximize its maritime potential’ and added ‘our next leaders (in 2022) will do well by aggressively developing our Blue Economy’.

But I am firmly of the opinion that the Philippines cannot wait until 2022; the development of the Blue Economy is an endeavor that the Philippine government and MARINA need to implement NOW, for the following reasons:

1. Through the years, the Philippines has been the world’s largest supplier of maritime services. The maritime service sector is composed of four subsectors:

• Crew supply and management: need to retain and expand the Philippines as the leading maritime country in the world;

• Ship management: need to promote the Philippines as the next maritime services center of Asia and the world;

• Business process management services including education and training: need to deepen this part of the BPO industry with the opportunity to develop business outsourcing services for ship managers, marine insurance, legal services, and others;

• Shipbuilding and repair: the Philippines is one of the large players in this subsector.

2. Shipping in ASEAN becomes more critically crucial after global trade is affected by theUS policies. Europe is looking at ASEAN and ASIA as a focus for trade and investments. Luckily, the fifteen Asia-Pacific nations, including China, agreed mid-November to clinch the world’s largest free-trade agreement with priority. The Regional Comprehensive Economic Partnership (RCEP), which includes countries stretching from Japan to Australia and New Zealand, aims to reduce tariffs and strengthen supply chains. The Philippines is part of RCEP, and Philippine shipping lines should be part of aneeded regional shipping.  As DTI Secretary Lopez said on 15 November: the Philippines joining the RCEP will bring local exporters opportunities to double their shipment while protecting sensitive products such as agricultural goods. Please take note that the RCEP covers 30% of global economic production.

In other words, despite the impact of the Corona2019 pandemic, which has affected the ‘blue economies’ around the world substantially, the time is now for MARINA to establish a world-recognized Blue Philippines: creating anInternational Shipping Fleet, carrying the National Flag.

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

* 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.

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 the case of destination charges/services, none as they incorrectly don’t declare these as local income. Their freight income generated abroad is correctly 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.

Paving the way for all domestic carriers to consider going international, MARINA will ‘harvest’ the above advantages for the Philippine economy!

 Additionally, MARINA will give work to displaced seafarers for as long as the local vessels comply with international maritime safety standards. And once domestic companies start to engage in international trade, foreign-flagged carriers will have competition from Philippine flag carriers

In conclusion, in partnership with the private sector, MARINA should attract shipping investments that will uplift our flag registry, 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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