The Philippine Inter-island Shipping Association (PISA) has reiterated its opposition to removal of transportation services, including domestic shipping, from the list of public utilities.
PISA reasoned that removing transportation from the category of public utility would open up the sector to 100% foreign ownership, adversely affecting the riding public and not necessarily lowering shipping cost.
There are 10 bills—six in the Lower House and four in the Senate—seeking to amend Commonwealth Act No. 146, otherwise known as the Public Service Act (PSA), to encourage competition, and offer the public more choices and better services at lower prices.
The bills also seek to clarify “ambiguity in the definition of public utility” in the PSA.
They propose exempting eight services from being public services: transportation, electric power generation, electric power supply, petroleum supply, gas supply, telecommunications, broadcasting, and other public services. Only electric power transmission, water pipeline distribution, and sewerage pipeline system are proposed to be considered public utilities.
If passed, the bills would effectively allow 100% foreign ownership in the eight industries as these services would no longer be considered public services or be covered by the 60%-40% ownership principle under the Constitution.
PISA, in a position paper, said it welcomes any proposal to amend the decades-old PSA. But it is also asking to reconsider the removal of transportation from the coverage of public utility “in view of the adverse effect of the proposal to the riding public.”
PISA said removing transportation from the coverage of public utility “will have the effect of complete deregulation of all modes of public transport.”
Domestic shipping, like all modes of public transport, is a public utility governed by Section 11, Article XII of the 1987 Constitution, and the association said “has consistently been defined by the Supreme Court as follows:”
“‘Public use’ means the same as ‘use by the public.’ The essential feature of the public use is that it is not confined to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether a use is public, we must look not only to the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the exercise of jurisdiction of the public utility commission. There must be, in general, a right which the law compels the owner to give to the general public. It is not enough that the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge the character of the use is whether the public may enjoy it by right or only by permission.” [JG Summit Holdings, Inc. vs. Court of Appeals, Committee on Privatization; Asset Privatization Trust and Philyards Holdings, Inc., Case No. G.R. No. 124293, September 24, 2003; Iloilo Ice and Cold Storage Co. vs. Public Utility Board, 44 Phil. 551, 557 (1923)]
PISA said that based on the definition provided by the Supreme Court, all modes of public transport such as shipping, are “clearly a public utility which is partly nationalized industry as it is limited to Filipino citizens or to corporations or associations 60% of the capital of which must be Filipino owned.”
Moreover, PISA said domestic shipping “is a strategic industry considering the archipelagic nature of the country.”
More than 80% of all cargoes are transported by ships and allowing “100% foreign ownership of domestic shipping will result (in) foreign domination of the coastwise trade,” it said.
Because the Philippines is an archipelago, PISA explained that “alien control of inter-island navigation means economic control and domination of our economy by alien hands whose commitment to the trade is highly suspect.”
“In times of political instability in any country, foreigners will most likely leave and wait for better times before coming back. This happened during the 1980’s after the assassination of Ninoy Aquino, continuing in the early years of the Cory Aquino-administration, only to come back during the Ramos-administration when the political situation stabilized,” PISA pointed out.
Competition strong and lively
The group also said competition “is alive in the domestic shipping industry.”
PISA noted that several laws have allowed more players to enter the industry, such as the Public Service Act itself which encouraged investments in shipping through the award of exclusive franchises.
In 1994, the government also moved away from fixed route franchises and mandated the deregulation of the liner trade. It required that each route have at least two operators. PISA said the “original franchise holders entered each other’s traditional routes and created fierce competition.”
In 2003, The Strong Republic National Highway was inaugurated, prompting the entry of many new players in the short- and long-haul routes of the domestic trade.
In 2004, Republic Act No. 9295, or the Domestic Shipping Development Act of 2004, was enacted, which deregulated the liner sector and allowed newcomers to the trade.
“As a result, domestic shipowners fiercely compete against each other with services which require investments in ships, containers, container yards and warehouses, trucks, chassis, software, and land based equipment in some cases in ports and shore cranes and equipment,” PISA said.
Lower transport cost not assured
Moreover, PISA said foreign ownership of public transport is not a guarantee of lower transport cost.
“Opening up transportation to foreign competition will not bring down domestic transport costs so long as foreign corporations will be subjected to the same operating conditions as domestic transport operators.”
PISA explained that the high cost of public transport in the country is due to the high cost of doing business.
“High cost of operation plus higher taxes and higher regulatory fees are among the factors that contribute to the high transport cost in the domestic trade,” it said.
It further explained that in domestic shipping, the high cost of transport is due to ships being unable to attain economies of scale because of lack of trade in a particular port to support a larger ship; lack of good and efficient port infrastructure; and trade and production practices that prevent shipping in larger quantities.
PISA noted, for example, that corn is “unbelievably shipped in containers while corn elsewhere is shipped in bulk.”
“What prevents producers from comingling corn to ship in bulk is because not everyone follows the same production practices. A producer with a post harvest dryer will not co-mingle corn with one who dries corn on the road,” PISA explained.
Removing transportation from the coverage of public utility will render all modes of public transport as “private carriers” and will remove the protection given to the commuting public under existing laws, PISA added.
All modes of public transport are considered “common carriers,” governed by the common-carrier provisions of the Civil Code and thus, “are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.”
The duty to observe extraordinary diligence in the vigilance over goods and passengers renders common carriers liable under virtually all circumstances in the event of damage or loss to the goods, or injury to or death of passengers.
PISA said removing this protection by converting all modes of public transport into private carriers will enable the latter to avoid liability.
And as private carriers, the requirement of providing mandatory insurance for cargo and passengers will no longer apply to them, thereby leaving the riding public uncompensated for damages in the event of financial incapability of the transport operators. – Roumina Pablo
