The danger behind free trade ports

While it is true that efficient ports are vital to the economic development of the country, they can also cause negative environmental impacts. A checklist of adverse effects of port development have been compiled by several organizations including the World Bank, the Asian Development Bank and the International Association of Ports and Harbors. Major sources of these adverse effects have been categorized into three types: a) location of port; b) construction; c) port operation which includes ship traffic and discharges, cargo handling and storage, and land transport. Attention DENR!

Ports can also be used to conduct illegal activities such as smuggling, drugs and human trafficking, counterfeiting and money laundering among others. In the Philippines the port activities are handled by the Philippine Ports Authority (PPA). The history of the PPA shows that before its creation, port administration in the Philippines was part of the main function of revenue collection of the Bureau of Customs (BOC). Port and harbor maintenance was the responsibility of the Bureau of Public Works (BPW).

Records show that in the early 1970’s, there were already 591 national and municipal ports plus 200 private ports all over the country. The government then saw the need to integrate and coordinate port planning, development, operations and regulation at the national level.

The Bureau of Customs proposed to the Reorganization Committee and to Congress the creation of a separate government agency to integrate the functions of port operations, cargo handling and port development and maintenance. In doing this the Bureau can concentrate on tax and customs duties collection. The creation of a port authority to oversee the implementation of projects was also one of the conditions of the World Bank in granting a port development loan in 1973.

The Philippine Ports Authority was created under Presidential Decree No. 505. This was later amended by P.D. No. 857 in December 1975 which broadened the scope and functions of the PPA to facilitate the implementation of an integrated program for the planning, development, financing, operation and maintenance of ports or port districts for the whole country.

In 1978, the charter was further amended by Executive Order No. 513 which granted police authority to the PPA and created the National Port Advisory Council (NPAC) to strengthen cooperation between the government and the private sector. The agency was also given the power to impose reasonable administrative fines for specific violations of its rules and regulations.

The PPA was attached to what was then the Ministry of Public Works and Highways (MPWH) which also served as the executing agency for all port construction projects. Under this arrangement, the PPA prepared the general plans, programs and project priorities while the MPWH was responsible for engineering, actual construction and/or supervision of port construction projects. The PPA was later removed from under the jurisdiction of the MPWH (DPWH) and attached to what is now the Department of Transportation and Communications (DOTC) for policy and program coordination.

In 1987, Executive Order No. 159 was issued giving the PPA the function of undertaking all port construction projects under its port system, thus, relieving DPWH of this responsibility. The executive order also granted PPA financial autonomy.

The Philippine Ports Authority (PPA) now dominates the Philippine port system as the main developer, operator and regulator of ports in the country. The Philippine port system has four categories: a) the PPA port system consisting of public and private ports; b) ports under the jurisdiction of independent port authorities (IPA); c) municipal ports devolved to the local government units (LGUs) and the recently established Road RORO terminal system (RRTS).

Republic Act No. 7916, also known as the “Special Economic Zone Act” of 1995 is an act providing for the legal framework and mechanisms for the creation, operation, administration, and coordination of special economic zones in the Philippines, creating for this purpose, the Philippine Economic Zone Authority (PEZA). An ECOZONE may contain any or all of the ff: Industrial Estates (IEs), Export Processing Zones (EPZs), Free Trade Zones, and Tourist/ Recreational Centers.

An inventory of free ports in the country reveal the existence of the following: Aurora Pacific Economic Zone and Freeport, Casiguran, Aurora; Cagayan Special Economic Zone, Lal-lo Cagayan; Freeport Area of Bataan, Mariveles, Bataan; Cavite Economic Zone, Rosario, Cavite and General Trias, Cavite; Clark Freeport Zone, Angeles City, Pampanga; Subic Freeport Zone, Olongapo City, Subic, Zambales; Poro Point Freeport Zone, San Fernando City, La Union; Baguio City Economic Zone, Baguio City; Mactan Export Processing Zone, Mactan Island; Zamboanga City Special Economic Zone Authority, Zamboanga City; and Polloc Free Port and Economic Zone, ARMM, Mindanao. The Philippine Economic Zone Authority (PEZA) operates about 326 ecozones, primarily in manufacturing, IT, tourism, medical tourism, logistics/ warehousing and agro-industrial sectors.

As free economic zones grow in size and number in the country, they have become easy venues for illegal trade and illicit programs. Counterfeiting, money laundering, smuggling, (goods and human) and financing terrorism are some of these activities that have flourished in these zones. Clearly, they have attracted not only foreign investment but also criminals.

Remember the incident of a Chinese businessman who smuggled in Chinese nationals to work for his online gaming/ BPO company inside Clark Airbase complex? How did these people come in? Why didn’t the authorities stop it? How much money did he have to pay the officials? By the way, I don’t think there is even a law against human smuggling which is different from human trafficking.

What makes the zones popular with smugglers? Asia Sentinel in 2012 reported that business processes are streamlined to attract foreign direct investment and ideally have modern infrastructure so that goods can be moved efficiently. Incentives for the operators include zero duty on capital equipment, spare parts and accessories, and exemption from all taxes. They are required to pay 5 percent of their gross income to the national government.

The report identified Subic as the biggest of these zones, which featured US$1.3 billion worth of airport and ship repair facilities – and 4 billion barrels of potential oil storage, the largest such storage facility in the country. It also stated that the problems at Subic and Clark began almost immediately after the bases were handed back to the Philippine government. According to a report by the Manila-based country-risk firm Pacific Strategies and Investments, “For operators in the Clark and Subic free port zones a duty free license is seen by many as a ‘license to smuggle.’ These smuggling activities have been investigated but it seems that authorities have been rendered powerless in their fight against smuggling for obvious reasons – corruption! So, the saga continues, from chocolates, cigarettes, drugs to human and vehicle smuggling.

Yes, there may be a positive outcome for the economy but in hindsight the lack of controls, protocols, and security has posed danger to the country’s natural resources and to the citizens (i.e. human smuggling, human trafficking and drugs) not to mention to the economy (smuggling of goods).

Vulnerabilities abound in the free trade zones and free ports: lack of transparency, weak law enforcement and corruption. Today, many economic zones, ports and even jetty-ports (acting as international maritime commercial facilities) are sprouting all over the country. Shouldn’t the President send his team to also check all of them and close those that clearly don’t comply with maritime and port standards? If he limits these ports to the minimum I am pretty sure he would have won at least half his battle against drugs and illegal trade.