The Economic Coordinating Council (ECC) has decided to allow only one integrated operator to take over North Harbor when it is privatized through public bidding later this year.
With this decision, the ECC also junked the unsolicited proposal submitted by the consortium led by the International Container Terminal Services Inc. (ICTSI) and Asian Terminals Inc. (ATI), to allow all interested parties to bid on equal footing.
In its meeting last week, Trade and Industry Secretary Manuel Roxas II told reporters that the council decided to support the original proposal of the Philippine Ports Authority (PPA) to open the port to only one operator which would provide all the services required by the facility.
The decision was made despite the clamor of the private sector, particularly local shipowners and commodities distributors to open the port to competition between two or more port operators to ensure that no single operator monopolizes the harbor.
According to Roxas, however, data provided by the PPA showed that North Harbor did not have the geography to support more than one operator. "Land is the biggest constraint to allowing two or more operators," he said. "There simply isn't enough even with land reclamation in the proposal."
Roxas said the government's default policy favored open competition but he said the North Harbor was a "specific case" and the numbers submitted by the policy research advisory group of the PPA "did now show that the two operator model was any better than the single operator model."
"There is no economies of scale to support two operators in view of the fact that there is very limited land," he said. "In the case of the North Harbor, a natural monopoly will emerge."
Roxas explained that this decision would require the PPA to strengthen its regulatory powers because it would have to protect consumers against the unregulated increases in port charges and fees that the virtual monopoly would be charging.
When the North Harbor is opened for bidding, Roxas said all interisland against the unregulated be starting with a clean slate, including the ICTSI/ATI-led consortium.
Two other groups have expressed interest in bidding for the facility, namely the group led by United Dockhandlers and a group led by Solid Shipping Lines and North Star Development and Arrastre Co. which had officially submitted a letter of intent to the PPA.
The decision to open North Harbor to only one operator, however, is expected to be met with outrage by the private sector which has been lobbying for two or more operators to take over the facility.
A study conducted by the US-funded think tank Accelerating Growth Investment and Liberalization with Equity (Agile) indicated that the PPA and other government agencies would have to play a much more interventionist role in regulating the market to prescribe and enforce operating service and safety standards," the study said. "But the past performance of the regulatory agency in ensuring minimum service standards to protect public interest cannot be assumed.
The US-funded think tank also said that the monopolistic environment being proposed would reduce the likelihood that international financial agencies would participate in the port development projects since it goes against the grain of free market forces.