The United Nations Conference on Trade and Development (UNCTAD) has called out the Philippines to keep in check potential power market abuse in the logistics sector, citing serious competition issues, including high freight cost and shortage in containers disrupting supply chains during this pandemic.
Already, the Philippine Competition Commission (PCC) said it has an ongoing investigation of potential ‘abusive’ behavior in the logistics sector.
PCC Chairman Arsenio M. Balisacan issued this statement following recommendations by United Nations Conference on Trade and Development (UNCTAD) that Philippines should keep its shipping industry competitive in light of high freight rates during this pandemic.
“PCC has an ongoing investigation of potentially abusive behavior in the industry, though we cannot disclose details at this time,” said Balisacan. He said PCC has been coordinating with the Department of Trade and Industry on the issue of high freight rates.
Logistics, including shipping, is one of PCC’s sector priorities, considering that this sector is vital during the pandemic and to economic recovery.
In its Policy Brief “Container Shipping in Times of COVID-19: Why Freight Rates Have Surged and Implications for Policymakers”, UNCTAD has outlined three recommendations for the Philippines.
These are trade facilitation and digitalization for resilient supply chains, tracking and tracing, and competition in maritime transport.
According to UNCTAD, many of t the trade facilitation solutions it proposed depend on the digitalization of trade procedures, including in the maritime transport. It noted that the pandemic has highlighted the importance of resilient supply chains where Customs officials, port workers and transport operators have recognized the need to reduce physical contract, while at the same time keeping ships moving, ports open and cross-border trade flowing.
“Policymakers need to proactively engage in implementing ambitious reforms to reduce the impact of disruptions in the future,” UNCTAD said.
On tracking and tracing, UNCTAD noted of the recent shortage in containers and maritime equipment that caught the industry by surprise.
It pointed out that monitoring of port calls and liner schedules, along with better tracing and port call optimization, among the issued covered by the growing field of maritime informatics.
“Policymakers need to promote transparency and encourage collaboration along the maritime supply chain, while also ensuring that potential market power abuse is kept in check or prevented,” UNCTAD said.
On competition in maritime transport, UNCTAD said it is important for policymakers to continue to strengthen national competition authorities in the area of maritime transport and ensure that they are prepared t provide the requisite regulatory oversight.
UNCTAD noted that carriers have earned high rates of return during pandemic, with double-digit operating profits for some container carriers in 2020.
But shippers have found themselves without access to empty containers for exports and face blank sailings, as well as high freight rates.
While there are reasons that may explain the shortage in containers and ship supply capacity, including the disruptive nature of the pandemic and associated restrictions, UNCTAD said it is also important to ensure that national competition authorities can monitor freight rates and market behavior.