A Primer for the Maritime Industry Development Action Strategy

Who are we? The Philippine Interisland Shipping Association (PISA) is the umbrella organization of domestic shipping and shipping-related associations. Established in 1977, PISA represents a cross-section of the Philippines’ maritime industry. Its membership includes domestic shipowners and shipping support providers.

Corporate Members Associate Members 2Go Group, Inc., Cargo Marine Corporation, Golden Albatross Shipping Lines, Inc., Gothong Southern Shipping Lines Inc., Harbor Star Shipping Services, Inc., Herma Shipping Transport Corporation, Island Integrated Offshore Services, Inc., Lighterage Association of the Philippines, Lorenzo Shipping Corporation, Magsaysay Tankers Group, Meridian Cargo Forwarders, Inc., MIS Maritime Corporation, Moreta Shipping Lines, Inc., NMC Container Lines Inc., Oceanic Container Lines, Inc., Petrolift, Inc., Philharbor Ferries and Port Services, Inc., Philippine Span Asia Carrier Corp., Solid Shipping Lines, Starlite Ferries, Inc., Transbulk Carriers Corp., Via Marine Corporation Associate Members Estimated members of the Association is percent Alfa Laval Philippines, Inc., American Bureau of Shipping, Delnet International, Det Norske Veritas As, Inter-Asia Marine Transport, Inc., Interisland Deep Sea Fishing Association, Keppel Philippines Marine, Inc., Philippine Register of Shipping, Pioneer Insurance & Surety Corp., Prudential Guarantee and Assurance, Inc.

Basic Facts and Numbers 360,000 Filipino seaferers are all over the world (30 percent, POEA 2013) 86,636 Filipino Officers Overseas in 2013 (24 percent, POEA 2013) 100 Maritime Academies in the Philippines, which produce 40,000 seaferers each year (2011, UNCTAD) 421 Licensed crewing Agents in the Philippines (UNCTAD Report) 1.9 Billion Dollar Remittances 400-3000 Monthly Salary of Filipino seaferers (Institute of Labor Studies, 2011) 367,166 Sea-based Filipino workers (POEA, 2013) 69,297 Filipino seaferers working Panama-registered vessels (POEA) 107,313 Filipino seaferers working as able seaman, oiler, and ordinary positions 30th Member-state of the International Labor Organization 11 Filed bills in the Congress (Magna Carta of Filipino Seaferers, Death Benefits for Seaferers Act, Pilipinong Marino Act, and others.

ASEAN Economies’ Development Indexes: Global Ranks' Comparison Source: The ASEAN Economy in the Regional Context: Opportunities, Challenges, and Policy Options, Giovanni Capanelli, December 2014

Opportunities Prime employer of qualified Seaferers Maritime Education and Training Compliant with International Standards Training Qualification standards for Domestic Seaferers

Challenges Improving Domestic Shipping Lack of Economies of Scale Safe and Quality Shipping and Safety Records Ship Financing Shipping Infrastructure Marine Environment Protection Administrative Streamlining Improving Domestic shipping- there is an urgent need to move towards implementing and institutionalizing a framework for competitive shipping, safe ships, and clean seas for our inland, coastal, and inter-island trades. We must institute an aggressive safety regulatory framework for our domestic fleet which, because of the nature of its operations, differs in size, specifications, operations, and usage. To encourage operators to modernize their vessels, there must have an available financing There should be an integrated port infrastructure development plan. There should be a program necessary for environmental protection including the implementation of MARPOL standards on all domestic vessels. There is a need to rationalize documentary requirements and streamline government processes to avoid duplication among government agencies.

Challenges Government Regulations The incentives provision of RA 9295 or the Domestic Shipping Development Act of 2004 for both domestic shipping and shipbuilding/ ship repair sectors expired last May 2014 with no provision for extension nor substitute incentives. Taxation is not “level playing field” compared to foreign shipping lines (Income tax, VAT on Fuel, and VAT). DOF interpretation of taxes for bareboat chartered vessels. Port Infrastructure Poor port infrastructure especially at the outports. Low productivity at the ports. High Cost of Doing Business Regulatory Capture

Foreign Shipping Lines Domestic Shipping Lines Foreign ships enjoy benefits not accorded to ships in the domestic trade   Foreign Shipping Lines Domestic Shipping Lines Fuel Prices No tax Duties and VAT of 12% Philippine Income & Freight Taxes VAT on Gross Freight Corporate Income Tax Tax on Gross Philippine Billings (Outgoing) 0% 2.5% 12% 32% Operating Costs Steel Plates, Spare Parts & other supplies Duties VAT Dry-docking 10%   Vessel Acquisition Vessel Cost (in Pesos) 12% VAT and 3% duties 288,000,000.00 43,200,000.00 Drydocking No restrictions on where to dry dock Must dry dock in the Philippines (P.D. 1221)

Wishlist of the Domestic Shipping Industry: Restore the incentives for the domestic shipping industry under RA 9295 (which expired last May 2014) plus Income Tax Holiday and duty free importation of younger ships through re-instatement of shipping as a separate item in the IPP. Increase the competitiveness of domestic vessels by levelling its tax regime with their foreign counterparts. Review tax regime for bareboat charter. Provide funds intended for the modernization of the domestic fleet through soft financing. Develop a comprehensive port development plan. Review the PPA function both as regulator and commercial operator of ports. Support MARINA’s policy measures to have a modern and regionally competitive fleet in order to maintain international convention safety standards. Amend and/or repeal P.D 1221. Streamline the agencies regulating the shipping industry.

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