Where is the Life Jacket ?
The Philippine Star
April 26, 2002

THE saga of Philippine sea disasters that have claimed thousands of lives over the past 15 years are aptly described by the following news headlines:

The following day after the latest incident involving Mastabe-bound ferry Maria Carmela, media carried the following statement by authorities:

"Vice Admiral Reuben Lista, chief of the Philippine Coast Guard said that the Coast Guard and the Marina are going to inspect all vessels nationwide due to the tragedy."

"Secretary of Transportation and Communication Alvarez announced the creation of a special Board of Marine inquiry to investigate the incident."

After two days, the April 11 incident no longer merited media space.

All of the above sea disasters underwent the same cycle - a flurry of activities of high ranking government officials (including the President) visiting victims and affected families, giving comfort and consolation, and promising to look into the incident to prevent repetition of the incident; ship owners being investigated and vessels inspected; high media attention for a couple of days; and then … silence.

In the meantime, the very old ferry vessels, often times filled beyond capacity, and without sufficient safety measures and not meeting safety standards, continue their way plying Philippine waters - "floating coffins" waiting for the next batch of victims.

The Will to Act Than to React

Can the government authorities do something about this critical issue of old unsafe vessels roaming Philippine waters? I believe they can. But the more crucial question is, do they have the will (and competence) to take proactive steps rather than react after a tragedy has occurred?

Let's look again at the concerns raised in my maiden column ("An Industry in Dire Need of a Life Jacket," February 11, 2002) on the ageing domestic tanker fleet. Tankers, just like ferries, are the backbone of inter-island water mobility, with the ferries carrying people and cargo while the tankers are loaded with petroleum products such as gasoline, diesel, kerosene and fuel oil.

The Maritime Industry Authority (MARINA) is fully aware that 13 tankers operating in Philippine waters are more than twenty years old that by international and commercial standards are longer safe. Why is MARINA still allowing these old tankers to continue operating? Will MARINA only act when another disaster occurs involving again loss of lives or environment damage? Well, this time the waiting period was exactly two months after I wrote the column.

With No MARINA Action, Ship Owners Sail On

What about the ship owners? Apparently, as long as the MARINA allows the operation of these very old unsafe vessels, the ship owners will just continue doing business with charterers (who are usually oil companies) willing to use their very old tankers.

Let me extensively quote from a letter sender (who requested anonymity) on the domestic tanker business:

"This is to comment on your various articles about our ageing domestic tanker fleet. We are one of the tanker owners that have been in the domestic tanker business for over a decade.

"We agree with you fully that younger vessels need to be acquired to replace a lot of ageing domestic tankers. We actually welcome your challenge for us to invest in newer vessels because we are prepared to stay in the tanker business for the long-term.

"However, we wish to point out that there are many factors that hinder us from investing in newer vessels (either new-builds or 2nd hand vessels). A few of them are:
1. High cost of purchasing a vessel. A small 10-year old domestic tanker costs anywhere between US$2.0 to $3.0 million depending on size.
2. High taxes on vessel purchase and importation. The tax rate is 13% of the purchase price. So for us to buy a vessel costing US$3.0 million for example, we will need to pay a tax of US$390,000 or about Php20 million. Other countries do not tax vessel purchases and importation because they look at shipping as a necessity of trade.
3. Credit from banks is difficult to obtain in the absence of a long-term contract for the vessel (i.e., three or five years).
4. We pay higher interest rates because we are paid in pesos and we borrow in pesos.

"In addition, the oil majors (Petron, Shell, Caltex) give no incentives to tanker owners to upgrade their fleets. While they do encourage tanker owners to buy newer ships, the oil majors give only short-term charters (six months to one year) for the new ships. Such a short-term contract is clearly not sufficient for the ship-owner to make an investment for a new vessel nor is this feasible enough to obtain financing.

"Another sad fact is that the oil majors are only willing to give a five-year old vessel the same freight rates as a 25-year old rust-bucket. So why upgrade if we can make the same amount of money with an old ship?

"A few years ago, when the oil industry was still regulated, the government through the ERB dictated freight rates. Now that the market is deregulated, market forces (meaning the oil majors) squeeze the tanker owners to get the best rates possible. And we are left with no choice but to accept the rates dictated by the oil majors, since we do not have alternative charterers in the domestic market. It is also very difficult to offer our vessels for international trade, considering that the higher taxes and higher interest rates that we pay make local tanker operations uncompetitive in the international market.

"The bottom line is this: What's the point of investing big amounts of money for newer vessels if MARINA allows old tankers and oil companies are willing to use these? "

If Allowed, Conscience Will Not Be Bothered

What about the oil majors who continuously use these very old tankers? Well, with the heightened competitiveness in the industry, oil companies are looking for other ways to maintain or improve margins; and reducing freight cost is one of them.

I just hope that oil companies' executives realize that they may be committing the "sin of discrimination" if they continue not to ameasures and standards that are strictly observed in the shipping operations of other countries where they do business.

Ultimately, the Greater Interest Prevails

In a world of contending objectives, someone will have to take the lead for the good of the greater number. In this case, the government has to make the bold and decisive move to stop the sailing of very old (over 20 years) and unsafe tankers.

With this government action, oil companies and ship owners will have no choice but to act together to upgrade the fleet. They need each other to keep the petroleum products flowing. If the local ship owners become unreasonable and hesitate to make the necessary investments, then the government should allow foreign ship owners to provide the needed shipping service. The "Balikatan" model in action again. -

As we need to get rid of the Abu Sayaf, so we urgently desire to make our sea-lanes safe.

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