The Philippines’ global economic integration

With more than 7,000 islands and a 36,000-kilometer coastline, the Philippines is a maritime nation. Its maritime transport system is a vital link of the country’s islands, people and goods. More importantly, the Philippines is an important international partner in securing international shipping / shipping lanes, and needs the support of the leading trading nations that the Western Philippine Sea and the China Sea remain safe international shipping waters.

As a result of the Philippines’ unique geography, the nation’s socioeconomic progress has largely been affected by the maritime industry. The Philippine economy is growing rapidly and the maritime industry is among the key contributors to the country’s growth. The sector encompasses a wide range of activities from shipbuilding to shipping and ports, to fisheries and aquaculture, to recreational activities and tourism, to offshore energy exploration and extraction and to a large number of related economic services, which are all significant contributors to the national GDP and job creation.

The Philippines is currently the fourth largest shipbuilding nation in the world in capacity, following Japan, Korea, and China. Moreover, according to a 2015 study conducted by the International Chamber of Shipping and the Baltic and International Maritime Council, The Philippines ranks as the top supplier of seafarers globally, providing 27.8 percent of all seafarers. Russians are second, with 7 percent!

In 2014, the EU was declared as the largest employer of Filipino seafarers. In the same year, Filipino seafarers manning European ships were able to remit US$ 3.35 billion back to their county, making the EU the second largest source of remittances to the Philippines.

The majority of the domestic vessels are passenger (60 percent) and cargo (28 percent) ships, which are  mostly imported to the Philippines. Almost 80 percent of the shipping operators are single proprietors, while 20 percent of the ships are operated by corporations. Port services account for 6 percent of logistics costs in the Philippines and the logistics market is expected to grow 3–10 percent a year during the next decade.

As mentioned above, European shipping lines are the biggest employers of Filipino seafarers globally, preferring Filipinos for their high level of skills, capacity in the English language and work ethic. However, the competitiveness of the Filipino seafarer is being compromised due to the pro-claimant trend in NLRC rulings, which has led to substantial financial losses for ship-owners and an increased perception of risk in employing Filipino seafarers. Additionally, the employment of Filipino seafarers is subject to lengthy processes which are not aligned to the industry’s needs for fast deployment of crews. Addressing these concerns will guarantee the competitiveness of Filipino seafarers for years to come.

For the Philippines to become a truly competitive maritime nation, one of the imperatives is the development of a modernized, attractive ship registry. The Philippines has approximately only 100 ocean going ships (international fleet) with a total tonnage of 3.1million GRT registered. This is despite the country’s expansive pool of national crew, its excellent geographical location and its high level of integration in international supply chains.

Numerous countries have open registries, either as a second registry or their main registry. Open registries offer fiscal and non-fiscal incentives to shipping lines, such as flexibility in the nationality of the crew, tax exemptions (increasingly in the form of collection of tonnage tax instead of corporate income tax) and the creation of maritime hubs servicing shipping lines.  Norway, Denmark and Singapore are some of the renowned international flags of choice.

While many open registries are considered as flags of convenience, this is not the ambition for the Philippines. Rather, what is envisioned is a ship registry that will become more competitive and thus strengthen the genuine link between ships and the flag state, by using Filipino crew, Philippine management and following the Philippine rule of law, always in line with international maritime agreements, such as MLC 2006.