Problems relating to Trade and Investment on The Philippines
26. Others |
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| (1) Inadequate Infrastructure for Traffic and Transportation | - Due to the inadequate maintenance of traffic lights, etc. on the general road, heavy traffic congestions are frequent and so are the traffic accidents. The driving manner is poor. Many roads are submerged in water by small rainfalls. The roads in the periphery of the airports are especially in bad or poor state of repair. - Near-sighted truck ban to ease traffic congestions gave rise to huge congestions at Manila port so that the congestions continued even after the lift of the truck ban. The alternative ports (Batangas and Subic) do not function well, due to the capacity shortage. - Due to the mismatching traffic volume and the truck lanes capacity in the harbour vicinity, during certain periods in 2014, it took 3-4 weeks for the cargo to reach the destination from its arrival at port. - Due to the shortage of the cargo handling capacity at ports, cargoes got piled up at ports, so that exporter/importer incurred additional costs from having to switch to air shipment. - As a result of the expanded growth by large margin in trade of the Philippines, the shortage in the handling capacity at ports has occurred. The container steamers have met with unprecedented serious delays (maximum one month at the yearend). Because of this Japanese affiliated enterprise in the Philippines experienced a series of problems from production delays, stock shortage, to increased cases of airfreight, jeopardising the position of the Philippines as their production foothold. |
- It is requested that GOP takes steps to improve the road infrastructure, especially in the area surrounding the airports. - It is requested that GOP takes step to: -- ease the chronic traffic congestions, and -- enhances the cargo handling capacity at ports, including the alternative ports. - It is requested that GOP overhauls the infrastructure at ports and roads so that cargoes reach the destination within a few days from the steamers' arrival at ports. - It is requested that GOP overhauls the cargo handling capacity at ports. - Status quo of Manila ports are loaded with problems, not simply shortage of port handling capacity, but overland transport (traffic congestions)/environment also. It is requested that GOP expands the container handling capacity at Batangas port, accompanied by increased shipping companies to resolve all these problems. |
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| (Action) - On June 28, 2001, in order to resolve the power supply shortage and to lower the electric power charge, "Electric Power Industry Reform Act of 2001" was enforced. As a result: (1) the electric industry has been divided into four (4) sectors, namely: generation; transmission; distribution and supply. (2) privatization of the National Power Corporations (Napocor) and (3) a nation-wide supply of electricity power has come into effect. - In 2005, GOP concluded Agreement with World Bank on extension of credit in the mount of US$60 million and US$13 million equivalent grant from global environment facility for the Metro Manila Urban Transport Integration Project. - Ninoy Aquino Manila International Airport Terminal 3 (NAIA3) due for opening in 2002 was taken over by GOP in 2005. As of the end of June 2006, the opening schedule remained undecided. - In May 2007, President Arroyo issued order to prioritize several development services and large-scale projects in order to achieve economic expansion, creation of job opportunities, and reinforcement of security. Prioritized projects include among others repair of Ninoy Aquino Manila International Airport Terminal 3 (NAIA3), connection of Manila Light Rail Transit System (LRT) and Manila Metro Rail Transit System (MRT), and construction of Subic-Clark-Tarlac Expressway Project that concerns acceleration in completing large-scale infrastructure projects. - The Philippines was ranked in the 56th position out of the 58 countries in the World Competitiveness Yearbook 2010 in the category of the Basic Infrastructure. The fragile infrastructure of the Philippines (especially, port system, water/land transportation system, distribution network) is pushing up distribution cost by and among the islands. It is quite possible that next Aquino Administration will be confronted by improvement of infrastructure and modernisation of the Philippines. - Since February 2014, Large Truck Driving Regulation within the Manila Metropolitan Area has been implemented, which has been considered as causing the cargo throughput at the Manila Port. On 13 September, Mayor's Executive Order No. 67, repealing the Regulation was promulgated. - The Philippines 2015 Budget shows GOP's policy to boost the expenditure on infrastructure from 4% in 2014 to 5% in 2015 relative to GDP. |
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| (Improvement) - In newly established industrial estates and economic zones, a certain degree of infrastructure has been secured, such as quality road networks, sufficient water supply system, sewage and draining systems, and underground piping facilities (for electric power cables and telephone lines). - Traffic jams are also getting alleviated somewhat, by the openings of the light weight elevated railroad, and the skyway (express railroad). - President Arroyo's State of the Nation Address on July 23, 2007, includes among others reference to "The Subic-Clark-Tarlac Express Way" funded under the Japanese ODA loan being in its final stages of construction, inauguration of Subic container port, and extension and widening of the South Luzon Expressway. - In April 2008, the Expressway that spans between Clark and Subic SEZs was opened. |
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| (2) Unstable Supply and Relative High Price of Electric Power | - The electric power bill in the Philippines is equal to or higher than that in Japan, Singapore, etc. Due to instability of power supply, enterprises must protect themselves against power failures by installing power generator at factories and UPS (uninterruptible power system) at offices. - Special power price contract for PEZA enterprises expired in December 2012 so that the price reduction rate has dropped. The prospect is nebulous for liberalisation in sales and purchases of electric power as to its mechanism and introduction timing. |
- It is requested that GOP takes positive steps for the stable power supply and its cost reduction. - It is requested that GOP: -- identifies the timing of implementing its policy to liberalise power supply, -- explains the substance of the policy in detail, and -- introduces the policy as soon as possible. |
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| (Action) - In April 2002, Energy Regulatory Commission ordered the counselor of The Manila Electric Company (Meralco) to remove inter-class cross-subsidies for electricity. In May 2002, President Arroyo ordered the National Power Corporation (Napocor) to suspend remove inter-class cross-subsidies. The Supreme Court found that Meralco should refund the amount overly charged during the period of 1994 through 1998. Meralco opposed this judgment. - On 24 October 2004, GOP authorized the counselor of Meralco removal of inter-class cross-subsidies on electricity charge. - In June 2006, commercial operation of the wholesale electricity spot market began. - Department of Energy (DOE) released "Philippine Energy Plan 2008-2030" that envisages doubling of power generation capacity to 10,835mw by 2020, through exploitation of renewable energy such as geothermal, hydro, wind, solar, biomass, ocean energies. - In December 2008, Renewable Energy Act of 2008 (RA 9513) entered into force. - On 22 April 2009, the Philippines Senate passed the Senate Bill No.2121 to amend Republic Act 9136, or the Electric Power Industry Reform Act of 2001 (EPIRA). The Bill No.2121, seeks, among others, to: (1) authorise enterprises' open access to power producers, (2) remove stranded debts (of the National Power Corp. to independent power producers) from charges being passed on to consumers, and (3) put a cap on the amount of loss being passed on to consumers. In addition, the Senate deliberates on the following Bills: The Senate Bill 3282 Electricity Rate Reduction Act of 2009 (to reduce royalty on natural gas) and the Senate Bill 392 An Act Imposing a Uniform Franchise Tax on Distribution Utilities Enjoying Legislative Franchise in lieu of any and all Taxes Collected by The Government with the end in view of Reducing the Cost of Electricity borne by Consumers. - On 4 May 2009, BOI approved duty free import of generators to Mindanao Island to cope with the power shortage in that Island. This measure forms a part of Implementing Regulations of "2010 Priority Investment Plan" for risk management. BOI exempts import duty for all enterprises on the Mindanao Island, duly established under the Philippines laws, with the exception of retailers and retailing enterprises. This measure is intended to cope with the power shortage problem on the Mindanao Island that has ailed the Island over many years. According to the National Grid Corporation of the Philippines (NGCP) (http://www.ngcp.ph), the total demand in March 2010 was 1,400mw, against the total Mindanao power generation capacity of 578mw. The reason for the power shortage is accounted for by the limited capacity of the hydropower generation. The power shortage has negatively impacted upon construction, hospitality industry, tourism, etc. - The Priority Activity List (that enjoy preferential tax measures) under "2010 Investment Priority Plan" includes newly added infrastructure projects, namely, environment, and project for prevention, alleviation, and recovery of the natural calamity. The infrastructure business sectors listed in the Autonomous Region in Muslim Mindanao (ARMM) includes infrastructure businesses such as refurbishing the existing power generation plant and import of power generation equipment, for use in the Mindanao Island, with the purpose of ameliorating the power shortage in the Muslim region of Mindanao. Import duty is exempted on importers of the power generation equipment taxes are exempted also on reconstruction projects of roads and bridges after the natural disaster. - In June 2013, GOP started power retail market liberalization, reducing the power unit cost. |
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| (3) Shortage of Information on Power Supply Review | - Power supply has not caught up with the economic growth in the Philippines, while the rumor on the power shortage risk reaches the ears. Japanese affiliated manufacturing enterprises are under severe anxiety over the step to take to meet the problems, what with the shortage of pertinent information on the subject. - According to the news media report, power shortage, at maximum 1 million KW, will arise in summer (March-July) 2015. Nevertheless, FFEs are unable to take adequate responsive measures, due to the shortage of accurate information, such as the prospective balance between demand and supply, and the available counter-measures to combat the power shortage. |
- It is requested that GOP: -- discloses accurate information, and -- expedites its deliberation on the substantive measures to avoid scheduled suspension of power supply. - It is requested that GOP: -- first of all secures sufficient power supply, and upon occurrence of actual shortage, -- both GOP and power supply companies discloses integrated accurate information by grasping the actual state of affairs. |
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| (4) Abrupt Establishment or Changes of National Holidays | - Abrupt changes of national holidays by presidential order are not infrequent. Business days are suddenly made national holidays or vice versa. In the worst case, such changes become effective only with a few days notice. Consequently, factories incur unbudgeted payment of holiday allowance, each time the business days are turned into national holidays. | - It is requested that GOP affixes national holidays before the end of each preceding year. | |
| (5) Non or Delayed Payment | - MFS, having experienced nonpayment/delayed payment of accounts receivables, due in part to differences in traditions in commerce, business ethics, balance of power, etc., has switched to advance payment in its terms of sale. However, on products with short life expectancy cycles (such as manufacturing equipment for smartphone parts), the delivery terms and the prices claim the top priority, so that even if collection is completed successfully, the delay in payment severely affects the profitability of the MFS operation. | - It is requested that GOI: -- extends its helping hands to the less powerful SMEs by provision of information, and -- facilitates collection of accounts receivables. |
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