Beyond


Manila port logjam fans inflation as output ebbs




Posted on August 13, 2014


CONTAINERS with goods from garlic to microchips are piling up at the main ports in the Philippines six months after a truck ban took effect, causing a supply logjam that’s fanned inflation and may impair output.

A file photo of cargo vessel at a port in Manila. Manila’s ports account for about a third of the country’s inbound and outbound cargo, according to official data.
“It’s hurting production; it’s raising our costs,” said Alfredo Yao, president of the Philippine Chamber of Commerce and Industry which has 1,500 members. “Inflation has accelerated. It won’t be long before it hurts economic growth.”

Manila expanded a daytime ban on trucks in February, doubling the turnaround time for the vehicles, crowding the city’s three ports and holding up goods meant for consumption and production. The restrictions, coming amid agricultural shortages caused by typhoons, spurred food inflation to a five- year high in July, exacerbating the challenge to the central bank as there is little it can do to check supply constraints with monetary policy.

Imports fell 9.6 percent in May, the biggest decline since April 2012, according to data compiled by Bloomberg. As many as 12,000 containers at Manila’s ports have been stuck for more than two months, the Philippine Ports Authority said on Aug. 5.

“Most manufacturers that need intermediate products may be affected,” said Cayetano Paderanga, an economics professor at the University of the Philippines and former head of the planning agency. “As the saying goes, for want of a nail the kingdom was lost.”

The benchmark Philippine Stock Exchange Index was little changed as of 11:33 a.m. in Manila. The peso fell 0.3 percent to 43.970 against the dollar, prices from Tullett Prebon Plc showed.

Manila’s ports account for about a third of the country’s inbound and outbound cargo, according to official data. The nation’s trade and jobs may be affected by the truck ban, International Container Terminal Services Inc., which handles 65 percent of the volume at the city’s ports, said in February.

Trucking costs have more than tripled to as much as 40,000 pesos ($910) per trip, Yao said, and some international shipping lines have been skipping Manila to avoid the waiting time of as many as seven days to offload cargo. Those who brave the delays have imposed additional fees of as much as 35,000 pesos per cargo, the chamber of commerce said.

Port utilization, which peaked at 110 percent in June, eased to 89 percent in the first week of August, according to a statement on Aug. 5. Philippine Economic Zone Authority Director General Lilia de Lima told ABS-CBN News Channel in an interview aired Aug. 6 that the congestion is the most damaging situation she has encountered in her 19 years with the agency.

Philippine gross domestic product rose 5.7 percent in the first quarter from a year earlier, the slowest pace since 2011. Manufacturing grew 6.8 percent, compared with 12 percent in the previous three-month period, while trade gained 5.6 percent versus 6.4 percent.

In July, the central bank raised its benchmark interest rate for the first time since May 2011, and said it will take further policy action if there are risks to its inflation target. It also raised its price-gains forecast for next year.

Consumer prices rose 4.9 percent in July, the fastest pace since October 2011, according to data compiled by Bloomberg. The acceleration was caused by supply disruptions including the port congestion, Economic Planning Secretary Arsenio Balisacan said on Aug. 6.

About 2,000 metric tons of imported garlic are stuck at the Manila port, leading to a three-fold surge in price in June, Agriculture Undersecretary Emerson Palad said last week. Stores are running out of milk, and some electronics exporters are losing as much as $1 million for each day they have to halt production because of a shortage of materials, according to Dan Lachica, president of Semiconductors and Electronics Industries in the Philippines.

A meeting of government officials and mayors in the capital was held yesterday to address traffic and port congestion, Manila City said on its website, without saying what was discussed. A Senate hearing is scheduled later today.

The truck ban “created a buildup of imports in the port and a build up of empties in external depots,” said Christian Gonzalez, regional head at International Container. “This led to severe over-utilization on both sides, which slowed down operations across the supply chain. This created a backlog of ships, which then created a further backlog of empties in the country and a backlog of imports at foreign ports.”

Goods delivery is also being hampered by road repairs and about 77 projects in the capital, varying from drainage works to construction of elevated highways. The congestion may worsen next month, as September is considered the peak season for imports and exports in the run up to the holiday season, ABS-CBN reported on Aug. 11, citing port authority General Manager Juan Sta. Ana.

The Philippines isn’t alone in being at risk from port disruptions. A potential strike by 7,000 longshore workers at the ports of Los Angeles and Long Beach -- the busiest in the U.S. -- would affect American retailers ahead of the holiday season.

The ban on trucks was introduced to ease road traffic congestion in Manila. The city opened a 24-hour lane for trucks at the end of May to help ease the logjam, which threatens the government’s exports growth forecast of 8 percent to 10 percent this year, BusinessMirror reported on July 13, citing Trade Secretary Gregory Domingo. Second-quarter GDP data is scheduled to be released on Aug. 28.

President Benigno Aquino plans to increase spending to a record this year and attract more than $22 billion of investment in highways and ports to spur growth. The government borrowed 17.5 billion pesos to finance development of ports in Batangas south of Manila and Subic to its north and these are underutilized, according to the chamber of commerce.

“The silver lining here is that with this episode, the government has the chance to craft a long-term solution that will rationalize the ports and improve infrastructure,” Paderanga said. “The lesson is just a bit expensive.” -- Bloomberg