The Philippines, along with the other Asean member states, should eliminate unnecessary licensing requirements for maritime freight transport firms to avoid limiting market entry, an intergovernmental group said.
The Organization for Economic Co-operation and Development (OECD), in a recent report, identified economic needs tests and submission of business plans as “excessive licensing requirements.”
“While regulations very often have legitimate policy objectives, they can impose an excessive burden on operators or limit market entry beyond what is strictly necessary to achieve those policy objectives,” OECD said.
OECD said relevant agencies may conduct a review of the applicant’s business as part of the licensing process. For the Philippines, the Maritime Industry Authority (Marina) requires freight companies to submit a feasibility study, the group noted.
By virtue of Presidential Decree 474, Marina is mandated to supervise, regulate and rationalize the organizational management, ownership and operations of all water transport utilities and other maritime enterprises.
But OECD said, “Marina has broad discretion to consider the impact of the proposed service of the local area and evaluates the ‘economic and beneficial effect’ to the part, province or region that the shipper proposes to serve.”
The agency may also “assess the financial capacity of the operator to: provide and sustain a safe, adequate, efficient and economic service in accordance with the standards set by the government regulation,” it added.
In Indonesia, meanwhile, applicants are required to submit a business plan to secure a sea transportation business license.
“… [The] economic-needs test involves the government authority judging who should enter the market—such as the Philippine authorities evaluating feasibility studies provided by applicants or Indonesian evaluations of business and shipping business plans—even though the authority may not have all the necessary information or skills to assess new entrants’ viability and reliability,” the report read.
“The authorities’ discretion and lack of objective criteria may result in discrimination and lead to the selection of new entrants that do not deliver the best value to consumers; for instance, business plans and feasibility studies are based on forecasts that may not materialize.”
The group noted that submission of such documents may increase the cost of entry, especially for smaller firms.
Should the countries maintain the economic-needs test, clear and transparent guidelines must be crafted, OECD said, in addition to limiting the discretionary authority. The requirements must identify the criteria needed for the economic-needs test, it added
The OECD flagged the “excessive” requirements for water freight companies as these may interrupt the Asean’s logistics industry and supply chain. It stressed that maritime and inland water transportation are crucial for the movement of goods within the region.