The proverbial goose that could lay golden eggs for the country has yet to deliver eggs. The problem, it could not deliver without government’s strong intervention.
The local ship management business could be the goose, but could not deliver golden eggs simply because it remains a gosling for many years now.
Ship management could deliver copious foreign exchange earnings for the country, if only it matured to a level similar to Singapore and Hong Kong, the established ship management hubs in the region.
Bigger than manning industry
Its potentials to deliver dollars could easily surpass the $6 billion remitted by Filipino seafarers last year since crew cost or seafarers’ salaries is only a small share in the ship management budget.
This huge potential of the local ship management business inevitably cropped up during a forum organized by the newly-formed Ship Managers Association of the Philippines (SMAP).
“Do you know that crew cost is under the management of ship managers? It accounts for 15% (of the ship management budget) and the (Filipino) crew remitted over $6 billion last year,” Engr. Rey Eustaquio, secretary of SMAP, told forum participants.
Participants to the forum held last May 17 at the Midas Hotel and Casino on Roxas Blvd., Pasay City, included both in-house and third party ship managers and guests.
Engr. Eustaquio, who happens to be the concurrent president of the Marine and Technical Superintendents of the Philippines (MTSAP), presented to the forum the state of ship management in the domestic shipping.
“It’s only 15% of the budget for ship management. What about if we add the 2% management fee that is being given to us ship managers plus other fees in purchasing, ship chandling, et cetera?”
The revenues without doubt could be significantly higher than the seafarers’ total annual remittances.
“Pag andito ang purchasing sino pupunta rito (If the ships’ purchasing department is located here, who would come here)? Shipbuilders, ship repairers, suppliers would now hold office here and no longer in Singapore. That’s additional income for Filipinos, who would be employees of these companies.”
He identified the general lack of awareness of the ship management business and its benefits as one of the reasons that prevent it from developing fully.
Lack of appreciation
Unfortunately, this lack of appreciation of ship management permeates even among government officials including and especially those in the Maritime Industry Authority (MARINA), which local ship managers believe should be championing their cause.
“In the 10-year plan of MARINA for the development of the shipping industry in the Philippines, I have not seen the plan to improve ship management in the country.”
Still referring to MARINA’s 10-Year Maritime Industry Development Plan (MIDP), Engr. Eustaquio bewailed: “There is (only) one page that tells about ship management in the plan.”
But C/E Alex Sobrevega, director of SMAP, could not restrain himself and briefly interrupted Engr. Eustaquio. “Not one page, It’s just one line in the 10-year development plan,” C/E Sobrevega quickly butted in.
That line is found on page 52 of the MIDP, a 221-page document, which says, “Strengthening of ship management, ship brokerage, ship chandling.”
The line is part of the government’ plan to promote the country’s ship registry in the context of developing a maritime hub, which ranks No. 5 in MARINA’s top priority programs in the next 10 years, 2019-2018.
When Seaway sought MARINA’s explanation why ship management merited only a one-liner in its MIDP, the agency has taken some time to reply. Its response remains unavailable as of press time.
Definitely, ship management business in the country would not take off without strong government intervention.
Among the problems discussed during the forum, two issues were identified by the SMAP members that need immediate attention and could only be resolved by the government.
When asked by a forum participant to identify the biggest problem that when resolved could fast track the development of the business, C/E Roger Sobremonte, director of SMAP and one of the speakers at the forum, singled out taxation.
C/E Sobremonte, who spoke about international ship management or ship managers managing oceangoing vessels, said: “There’s a lot (of problems) and they’re almost equal, but the No. 1 problem (to be addressed) if we want the Philippines to become a ship management hub is tax.”
“Even though we have technical people, what shipowners are looking for is the bottom line. All businesses want good bottom line. Why are they in Singapore when the cost of living there is very high?
“It is because of the tax incentives: the taxes there are very low so they can even employ foreign nationals,” explained the president of TDG Ship Management.
Tax problem also haunts ship managers in the domestic shipping. “It is also true in the domestic shipping,” concurred Engr. Eustaquio.
“Tax holds us local third party ship managers from growing.” He mentioned the 10-15 % expanded withholding tax being charged to local ship managers.
“If we could reduce the withholding tax from 15% to say 2% only, it would be good business for us ship managers in the domestic.”
In passing it was also mentioned during the forum the 4.5% withholding tax instead of the one-time tonnage tax for Philippine-registered ships engaged in overseas shipping.
Another burden of ship managers is the problem over visa.
The Philippines has no visa problems with only 67 countries; whereas Singapore has free visa in 189 countries. “It takes a week to get a visa, malaking problema iyon (that’s a big problem).”
A Filipino superintendent could not immediately leave the country to attend to the needs of a troubled vessel in a port that requires visa from Filipinos. Delays can cause significant losses for the shipowner.
C/E Vic Pono, president of SMAP, provided additional insight on the visa problem. He said: “A resident of Hong Kong and Singapore have very smooth visa application.”
“In the Philippines, (however) some countries don’t have embassies or consulates here so Filipinos have to apply visa in other countries and that takes time.”
“That is why there’s a need for government intervention in this case. How can we invite more shipowners to go to the Philippines if we have that kind of problem,” asked C/E Pono, president of Magsaysay-MOL Shipmanagement.
He added that one of the solutions being implemented by some ship managers is to obtain in advance visas to the countries where their managed vessels are sailing regularly such as the United States and Australia, but that’s costly.
“That requires assistance from the shipowners since the budget of the ship manager (is limited). If you obtain a one-year visa entry in Australia and you don’t go to Australia or in any port in Australia, the next time you apply, you may not be given visa since you applied but you did not use the visa. Ganoon din sa ibang bansa (the same is true in other countries).”
Hence, C/E Pono stressed the need for government to intervene to address these problems.
Believing that government only heeds those with bigger voice, the recently formed ship managers’ group sees the need to rally fellow ship managers in the country to join SMAP.
Another SMAP Director, Capt. Adonis Francisco, chief operating officer of Phil-Bright Ocean Ship Management, shared with forum participants the three types of members to the association:
- Regular / Full Members are ship management companies managing any type and size of vessels either engaged in domestic or international trading. They may be in-house or third party ship managers.
- Associate Members are branch office of ship management companies where their head office is located outside of the Philippines. Also, other shipping companies located within and outside of the Philippines, engaged in business related to shipping and ancillary services, including crew managers/manning companies are eligible as associate members.
- Reciprocal Membersare normally non-profit, non-governmental associations, where SMAP and the Reciprocal Members enjoy a mutual benefit of association operated primarily on a secretariat to secretariat basis.
Towards the end of the forum, the officers of the group led by C/E Pono were inducted by their guest, Mr. Satoru Yanase, country manager for the Philippines of Nippon Kaiji Kyokai (Class NK). SMAP is set to conduct from time to time forums and seminars for the benefit of member-ship managers and collectively address their common problems