Turnover of Manila North Harbor to private sector faces new hurdle

MANILA, Philippines – The turnover by the Philippine Ports Authority (PPA) of the Manila North Harbor operations to the private sector is yet facing another obstacle, even after the PPA and Manila North Harbor Port Inc. (MNHPI), have finally agreed on the terms of the imposition by MNHPI of a concession fee on third party service providers.

The concession fee is one of the unresolved issues affecting the smooth turnover of Manila North Harbor by PPA to MNHPI, the joint venture company of Metro Pacific Investments Corp. and Harbour Centre Ports Terminal

Under the contract for the development, management, operations and maintenance of Manila North Harbor entered into between PPA and MNHPI, the latter is allowed to impose a concession fee on third party services providers, provided that the fee shall be equivalent to not more than five percent of the revenue or rate that the service provider will charge the port user.

According to the joint resolution signed by PPA and MNHPI, there was a need to clarify the intent and coverage of the contract’s provision on concession fees in the light of the concerns raised by the Philippine Liner Shipping Association (PLSA), the Department of Trade and Industry, and various stakeholders that the fee will eventually be passed on by service providers to the consumers.

But PLSA questioned the joint resolution, saying that even with its attempt to limit the imposition of the concession fee, all service providers will be still be practically covered by it.

The contract between PPA and MNHPI was signed on Nov. 19, 2009 but the turnover to contractor MNHPI has been deferred twice due to issues raised against it by PLSA, particularly the concession fee provision.

The MPIC-HCPTI joint venture won the 25-year contract to develop, manage, operate, and maintain at a cost of P14.5 billion the country’s oldest and busiest port facility.

The P14.5 billion will cover the capital expenditure plan to reconfigure the existing ports, expand its operational area from 52 hectares to 70 hectares and improve operational facilities.

According to the joint venture, this will raise more than P6.8 billion in revenues for the PPA over 25 years and decrease port rates at an average of 10 to 15 percent, adding that more than 1,000 workers of the different operators of North Harbor will be absorbed and not displaced, while an additional 20,000 jobs will be generated directly and indirectly by the ambitious construction and modern operations entailed in the modernization.

The joint resolution was signed by MNHPI officials led by chief operating officer Ferdinand Inacay and PPA port manager and joint committee chair Constante Farinas, and concurred in by MNHPI president and CEO Michael Romero,.

Last Feb. 22, PPA issued an order reconstituting the joint committee for the turnover of MNH from PPA to MNHPI composed of officials from the two with the task of resuming consultations with affected parties and stakeholders and submitting a joint report on the status of compliance by MNHPI with the requirements prescribed in the contract affecting the smooth turnover.

Following consultations, it was agreed that the concession fee covers service providers that may be allowed by MNHPI to occupy and/or use the passenger terminal buildings as well as other facilities which may be put up by the company at North Harbor.

Other ancilliary service providers shall be governed by regulatory/annual fees and/or government share to be imposed and collected by PPA.

PLSA, an organization of major shipping companies operating at North Harbor, said that if left unabated, the concession fee provision would have serious economic impact on shippers, consumers and the general public.

It noted that ancillary services, which include bunkering, constitute 30 to 40 percent of a shipping company’s operating cost. “To impose a five percent concession fee on bunkering services alone could trigger higher cargo freight rates and passengers fares for vessels using the North Harbor. Higher freight and fares will ultimately be borne by consumers and the general public in the form of higher prices of goods,“ PLSA said.

However, PLSA protested the joint resolution, particularly the phrase “and/or other facilities which may be put up by MNHPI” since this covers the whole pier terminal and container yard which will be put up by the contractor as part of the North Harbor rehabilitation. –Mary Ann LL. Reyes (The Philippine Star)