On Myrna Austria’s Research Paper on Shipping Competition

In Cebu, competition is still strong.

Image by Mark Edelson Ocul

One of the funniest research papers I ever read on local shipping was the work of Dr. Myrna S. Austria with the title, “Philippine Domestic Shipping Transport Industry: State of Competition and Market Structure”:

http://dirp3.pids.gov.ph/ris/rps/pidsrp0302.pdf

The paper enumerated a lot of routes with “No Competition” and “With Mild Competition”. For testing of the state of competion the Herfindahl-Hirschman Index (HHI) was used.

https://en.wikipedia.org/wiki/Herfindahl_index

The base data she used for the research was 1998 and it came from the PPA (Philippine Ports Authority) and the paper was published in 2003.

I have read before that the PPA itself admitted that the reports of the shipping companies are not complete (this can be seen in that some shipping companies have no reports). So while there is a report on a service crossing the 75-meter width of the Davao River (but she does not know there are two ferry routes crossing the Davao River), there is no mention of Bicol ports, routes and shipping companies nor of operators in the important Liloan-Lipata route. There is also no coverage of the likes of the Lucena ports and routes, the Lamon Bay and the Polillo Strait ports and other routes in that general area. There are other ports and routes I know that are not mentioned like crossings between Cebu Island and Negros Island and many routes in the Palawan-Calamian-Mindoro-Semirara backwaters. She included motor banca routes (does she know those are motor banca routes?) but tons of motor banca routes were missed.

Some of the declared number of passengers carried are also incredible. So many, I am sure are underdeclared. How can a shipping operator sustain operations if the number of passengers in a year is less than a hundred? And knowing personally many sea crossings, I am sure the numbers provided by the PPA is not the true traffic of many routes. I may not have the data but in so many cases personal knowledge trumps official reports. Anyway, official reporting is not one of the strengths of our Republic.


Thousands of passengers still rely on ferries. © Jonathan Gultiano

The cargo revenue report, I am also sure, is also spotty and more so. I think it is highly incomplete. Moreover, most of the tramper routes were treated as if those are liner routes with regular schedules like those operated by the container shipping companies. This treatment is completely wrong. The run of the tramper might not be repeated again or if repeated might have a different origin (like the cement might come from Northern Mindanao next time rather than Cebu). The delivery point might also differ as in the Ormoc copra might be sent to Lucena rather than Cebu. From Myrna Austria’s view, “they don’t compete”. It is nonsensical. It is markets, producers manufacturers and shipping companies that compete and not routes. The routes are just incidental in tramper trading.

There is the universally-accepted principle of “Garbage In, Garbage Out” (GIGO). Myrna Austria seemed to have committed this in using highly-flawed and incomplete data from the PPA.

I have always been against landlubbers doing research on shipping matters. I am sure they will never get it right (does a social scientist do research in the physical sciences?). They might be bright but their understanding and conceptualization of shipping (which they don’t ride historically or just in a limited sense) are poor. The sad consequence is their works get used and quoted but it just mislead government policy makers and planners and also their readers who do not know shipping.

Ship spotters and those who are literate in shipping know that one cannot compartmentalize routes. Take for example the sea crossings between Cebu Island and Leyte/Biliran Islands. We know it is not only shipping companies that compete but that different routes also compete. One might be bound for Ormoc or Hilongos (both have ferry connections to Cebu) but we know we can take a Baybay ferry (which is cheaper) and ride a bus or a van after. This is what we call “parallel but competing routes” and this is true even in cargo (especially rolling cargo). We also know that going to Tacloban, we can take a ferry to Ormoc, Baybay and even Palompon and continue the travel using a commuter van or bus and arrive even earlier. And if there is no ferry to Naval one can take an Ormoc or Palompon ferry and then transfer to a bus or a van. We also know that the Western Samar ports withered and its shipping companies all got defunct because one can take an Ormoc ferry and continue with the bus or van. All over the country, there are so, so many such examples but Myrna Austria obviously have no conception or knowledge of them.

Myrna Austria is also confused by the differing names of the ports. To her Dadiangas and General Santos ports are different. So are the the Butuan and Nasipit ports. And the Dipolog and Dapitan ports. She has also no conception that all the ports and routes in the southwest corner of Cebu Island connecting to Negros Island are all competing. Or the many connections between Samal and Davao or between Cebu Island and Bohol Island. With those mistakes, she underestimated the true state of competition.


Batangas remains as one of the most-contested ports in the country. © Nowell Alcancia

The bulk of the routes cited by Myrna Austria have “no competion”, “with only one effective competitor” and “with mild competition”. But as they say, “the proof is in the pudding”. The decade when she published her paper was also the decade after the 1980’s when so many shipping companies folded (but the 1980’s was a period of great economic crisis while in the 2000’s our economy was rather stable). The failures were concentrated in three main shipping areas -– the Camotes Sea and Bohol Strait routes, the routes emanating from Zamboanga Port and the routes emanating from Batangas Port. In the last two, especially, fare wars even erupted (can this happen with mild competition?). [These failures will be topics on future article in the PSSS Website.]

Myrna Austria never ever thought that there are cases when a route can only sustain one or two shipping companies. Or even none at all (there were routes encouraged by MARINA or tried by some shipping companies that cannot be sustained for lack of traffic). Over-all, I was appalled by the blindness and idiocy (pardon my term but that is the proper term) of her paper.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s