MINDANAO FEDERATION OF SHIPPERS ASSOCIATION, INC.

RESOLUTION NO. 01-2005

                WHEREAS, the Mindanao shippers are currently facing two(2) major ports issues, namely (i) request by cargo handling operators for tariff rate increase, and (ii) on-going evaluation of the incumbent cargo handling operator fro long-term contract;

                WHEREAS, Last 07 March 2005, the Philippine Chamber of Arrastre and Stevedoring Operators (PCASO) applied a 37.85 % tariff increase fro the cargo handling services of all its members nationwide. In the case of the base ports of the Philippine Ports Authority (PPA) in Mindanao, the following are the proposed tariff rate increases:

                WHEREAS, PPA Head Office instructed all Port Management Offices to conduct a public hearing on the petition of PCASO. The following are our observations on the conduct of the public hearings:

1. Late issuance of the notice of hearing.
2. Members of the hearing panel were not briefed on their role.
3. Cargo handling operators could not provide justification of their petition and just used the PCASO proposal which was incorrect because the rates have increased in 2001.
4. No audited financial statements were submitted/presented by the petitioners during the hearing.
5. Hearing done once only and PPA just requested participants to submit their position papers.
6. No presentation and discussion of position papers, and no opportunity to cross-examine the petitioner.

                WHEREAS, the cargo handling operators in North harbor have applied 18% tariff rate increase. Thus, port charges from Mindanao to Manila would increase by an average of 40%. Factoring in the 12.49% upwards adjustments of the domestic sea freight rate this year alone, the shipping cost in transporting cargoes from Mindanao to Manila would soar by about 20%.Thus, Mindanao products at the Metro Manila market, our major domestic market, will be crushed by imported products and products coming from the rest of the country;

                WHEREAS, Aside from the request for tariff rate increase, the probationary contracts of the cargo handling operators in Mindanao will soon expire. Below is the status of the cargo handling contracts of the PPA base ports in Mindanao:

                WHEREAS, The above-mentioned cargo handling operators were awarded the probationary contracts based on PPA Administrative Order No.01-2001,otherwise known as “Guidelines for the Issuance of Probationary and Long Term Contracts fro Expired/Expiring Cargo Handling Contracts” issued last July 2001 without the benefit of a competitive bidding;

                WHEREAS, Based on the said Administrative order, after a probationary contract, a long-term contracts of not more that 10 years maybe issued to the same cargo handling operator depending on the operational, financial and development needs of the port and the investment made by the operator. Non-compliance of the two-year probationary contract will cause the PPA to immediately subject the cargo handling operation in public bidding. The PPA Evaluation Committee is currently conducting evaluation as required by the Administrative Order ;

                WHEREAS, several cargo handing operators failed to comply the conditions in the probationary contracts and the business plan particularly on the deployment of cargo handling equipment which is necessary in improving the efficiency of port operations and port workers trust fund;

                WHEREAS, the cargo handling operators have been complaining that they could nit invest and deploy the required cargo handling equipment because the term of the contract is too short. Considering the huge capital investments required in purchasing cargo-handling equipment, it would be financially viable if the winning cargo handling operators would be given a longer contract by PPA;

                WHEREAS, because of the low cargo volume in each port, the Mindanao shippers agreed in granting exclusive franchise to a single cargo handling operator provided the cargo handling operator is selected in a competitive manner;

                WHEREAS, the Republic Act No. 9184, otherwise known as “Government Procurement Reform Act” spelled out the following principles on government procurement: transparency in the procurement process, and competitiveness by extending equal opportunity to enable private contracting  parties whoa re eligible and qualified to participate in public bidding. The law applies to all branches and instrumentalities of government, its departments, bureaus, offices and agencies, including local government units and government-owned and /or controlled corporations like the Philippine Ports Authority(PPA);

                WHEREAS, The PPA’s Administrative Order No.01-2001, is inconsistent with RA 9184 because it does not subject the awarding of long-term cargo handling contracts through competitive bidding. The requisites for PPA to conduct a Negotiated Procurement are absent. Thus, the said Order does not promote transparency, competition And greater private sector participation;

                WHEREAS, it is imperative fro PPA to rescind Administrative Order No.01-2001 and apply the provisions of RA 9184 and its IRR for all long-term contracts;

                NOW BE IT RESOLVED, AS IT HEREBY RESOLVED for Her Excellency President Gloria Macapagal Arroyo to immediately undertake the following measures:

1. For the President not to approve the petition for the rate increase by the cargo handling operators considering the contracts are probationary in nature.
2. For the President to cancel the long-term contracts awarded by the PPA because it is inconsistent with RA 9184 particularly on the PPA’s failure to conduct competitive bidding.
3. For the President to direct PPA to immediately conduct a competitive bidding in the procurement of cargo handling operator for long-term contract consistent with RA 9184.There is a sufficient lead time to conduct the competitive bidding. Ensure the active involvement of the shippers’ association and local chamber of commerce in the Bid and Award Committee.
4. For the PPA to include in the terms of reference on the procurement of the cargo handling operator of the proposed tariff rate (advantageous to the shippers) and investments on cargo-handling equipment.
5. For the PPA to conduct regular performance audit on the management and operation of the cargo handling operator to ensure compliance of the contract particularly on the equipment and port workers trust fund. PPA shall regularly provide the shipping lines and shippers’ association a copy of the performance audit.
6. For the PPA to prohibit shipping companies from owning and exercising controlling interest in cargo handling operations.
7. For PPA to set a cap on the participation of cargo handling company (equity) in other ports.
8. For the PPA to provide the MINFESA an update on the Presidents directive to “formulate a more transparent, cost-based and consumer-oriented methodology in defining the rates of cargo handling services, especially of fees charged on port terminal operations.” Said directive was issued during the Mindanao Business Conference on 30 August 2002 in Surigao City.
9. For the President to request Congress to amend the PPA Charter amend establish an independent port regulation and port administration.

         RESOLVED FURTHER, that copies of this resolution be furnished to the following agencies/organizations: DOTC,PPA, MARINA, DENER,DTI,NEDA,DOF,MEDCO, House Speaker, Senate President, Philippines Chamber of Commerce and Industry, and members of the Special Committee on Mindanao Affairs.

                UNANIMOUSLY ADOPTED this 6th day of June 2005 in Cagayan de Oro City,Philippines