The First “Great” Merger: The Failed Saga of WG&A and CFC

When WG&A was formed it was ostensibly to combat the entry of foreign shipping companies on local inter-island routes. That was the time of many so-called “deregulation” initiatives of Fidel V. Ramos. But even then I had doubts about this as an cabotage law was in effect in the Philippines. Cabotage effectively prevents foreign shipping companies from plying local routes. And to repeal it an act of Congress is needed and I heavily doubted then that the Philippine Congress will go along with that.

It is generally accepted that it was Aboitiz Shipping that proposed this big merger. Rumors had it that the biggest shipping company, Sulpicio Lines, which was also Cebu-based was also invited but it refused and preferred to go it all alone.

The merger brought together the second, third and fourth-biggest shipping companies in the Philippines reckoned by passenger and cargo operations out of a total of five long-distance liner companies (but may I note which is in fourth place might be disputed by Negros Navigation). It had the effect of lowering the number of long-distance passenger shipping companies from five to three.

The merged company and its subsidiaries were the biggest shipping combine that ever existed in the Philippines in terms of fleet and in terms of route network. It significantly brought to that Visayas-Mindanao and intra-Visayas routes and High Speed Craft(HSC) operations. For the former, the Cebu Ferries Corp. (CFC) was formed and for the latter SuperCat was retained.

Brought into the merger were the following ferries (including their former routes):

WILLIAM LINES INC.
Mabuhay 1 (Manila-Cebu and Manila-Iloilo)
Mabuhay 2 ((Mnl-Surigao-Butuan-Tagbilaran-Mnl and Mnl-Tagbilaran-CDO)
Mabuhay 3 (Manila-Davao-Dadiangas-Manila and Manila-CDO-Iloilo-Manila)
Mabuhay 5 [after a few voyages permanent fielding overtaken by merger]
Dona Virginia (Manila-Dumaguete-Ozamis-Iligan v.v.)
Maynilad (Manila-Zamboanga-Davao)
Masbate I (Manila-Masbate-Catbalogan-Tacloban)
Zamboanga City (Manila-Puerto Princesa v.v.)
Tacloban City (Manila-Batan-Dumaguit-Dipolog v.v.)
Iligan City (Cebu-Iligan v.v.)
Misamis Occidental (Cebu-Ozamis v.v.)
Mabuhay 6 [unfinished]

CARLOS A. GOTHONG LINES INC.
Our Lady of Akita (Manila-CDO-Butuan v.v. and Manila-Cebu v.v.)
Our Lady of Medjugorje (Manila-Dumaguete-Ozamis-Iligan-Cebu v.v.)
Our Lady of Sacred Heart (Manila-Roxas-Palompon-Isabel-Cebu v.v.)
Our Lady of Lourdes (Manila-Dumaguit-Palompon-Cebu v.v.)
Our Lady of the Rule (CDO-Cebu v.v. and CDO-Jagna v.v.)
Our Lady of Naju (Cebu-Ozamis v.v.)
Our Lady of Fatima (Nasipit-Cebu v.v. and Nasipit-Jagna v.v.)
Our Lady of Mt. Carmel (Iligan-Cebu v.v. and Iligan-Dumaguete v.v.)
Our Lady of Guadalupe [reserve/unreliable; formerly Cebu-Surigao v.v.]
Our Lady of Lipa (Cebu-CDO v.v.)
Dona Cristina (Cebu-Tacloban v.v. and Cebu-Palompon v.v.)
Dona Lili (Cebu-Surigao v.v. and Cebu-Maasin v.v.)
Don Calvino [reserve/unreliable; formerly Cebu-Iligan v.v.]
Our Lady of Akita 2 [unfinished]

ABOITIZ SHIPPING CORP.
SuperFerry 1 (Manila-Iloilo-GSC-Davao v.v. and Manila-Iloilo v.v.)
SuperFerry 2 (Manila-Cebu-CDO v.v.)
SuperFerry 3 (Mnl-Zamboanga-Cotabato v.v. w/ Boracay (summer) and Mnl-Dumaguit-Roxas v.v.)
SuperFerry 5 (Mnl-Cebu-Iligan-Dumaguete-Mnl) and Mnl-Dumaguete-CDO-Cebu-Mnl)
Elcano (was not used; obsolete/unreliable; supposedly not brought by ASC to the merger)
Allowing for database inaccuracies, the following cargo ships were brought to the merger:

CARLOS A. GOTHONG LINES INC.
Our Lady of Peace (112.9m x 18.0m, 17kts, b. 1974)
Our Lady of Hope (99.0m x17.3m, 17kts, b.1979)

ABOITIZ SHIPPING CORP.
Aboitiz Concarrier V (69.0m x 10.9m, b. 1968)
Aboitiz Concarrier XIV (71.0m x 10.9m, 13kts, b. 1965)
Aboitiz Superconcarrier I (115.1m x17.3m, 14kts, b. 1970)
Aboitiz Superconcarrier II (102.0m x 16.3m, 12.5kts, b. 1970)
Aboitiz Superconcarrier III (105.5m x16.3m, 12.5kts, b. 1976)
Aboitiz Megacarrier 1 (139.7m x 19.3m, 14kts, b. 1975)
Aboitiz SuperRORO 100 (108.2m x20.0m, 16kts, b. 1983)

WILLIAM LINES INC.
Wilcon II
Wilcon 4
Wilcon 5
Wilcon VI
Wilcon VII
Wilcon 8
Wilcon 11
ROCON I

Excluding HSCs which were just beginning to arrive in the Philippines, the combined fleet of WG&A was nearly 50 vessels, slightly more than double the fleet of Sulpicio Lines, previously the biggest shipping company in the country.

SHIP TRANSFORMATIONS AFTER THE MERGER
Mabuhay 1 became SuperFerry10
Mabuhay 2 became SuperFerry 7
Mabuhay 3 became SuperFerry 8
Mabuhay 5 became SuperFerry 9
Mabuhay 6 became Our Lady of Good Voyage
Our Lady Akita became SuperFerry 6
Our Lady of Akita 2 became SuperFerry 11 (and later the Our Lady of Banneux)
Masbate I became Our Lady of Manaoag (in 1998)
Misamis Occidental became Our Lady of Montserrat (in 1997)

VESSELS TRANSFERRED TO CEBU FERRIES CORP.
Our Lady of Lipa (later transferred to WG&A)
Our Lady of the Rule
Our Lady of Lourdes
Our Lady of Fatima
Our Lady of Mt. Carmel
Our Lady of Guadalupe
Dona Cristina
Dona Lili
Don Calvino
Misamis Occidental
Our Lady of Good Voyage (later)
Maynilad (later and also renamed Our Lady of Akita 2)
Our Lady of Banneux (later)
Our Lady of Manaoag (later)

Like all mergers and acquisitions (M&A), the terms “synergy”, “rationalization” and “streamlining” was bandied about as if these terms are positive terms in business. But soon these words brought chills to the rank and file because the sum of the 3 words is actually only one — “chopping block”. This is the field of bean counters where shipping passion is simply thrown out of the window.

Immediately, the Aboitiz Jebsens system was adopted. That means relying on bigger, faster ROROs and short in-port hours which equates to high utilization of ships. That called for good ship engines, a field of expertise of the now-renamed WG&A Jebsens. That system, however, also meant the death knell for the cruiser liners as their cargo booms meant long in-port hours and their having no car decks means low capacity for container vans.

The new style was to put all cargo in container vans and all container vans are mounted in trailers. For fast handling, tractor heads from trucks were no longer good enough. Only dedicated, automatic prime movers with the capability to raise the trailers were used. Calls on in-between ports generally were only 2-3 hours and ships don’t stay overnight at the farthest port of call of a voyage.

With so many ROROs sailing high hours per week (with some ships sailing 145.5 hours out of a 168-hour week), WG&A was confident it could sell less-efficient and slower ropax and container ships without affecting capacity and frequency. Soon some of the vessels were already for sale.

VESSELS SOLD SOON AFTER THE MERGER
Tacloban City (cruiser)
Iligan City (cruiser)
Dona Cristina (slow, small RORO)
Don Calvino (slow, small, unreliable RORO)
Dona Lili (slow, small RORO)
Wilcon 6 (old cargo ship)
Aboitiz Concarrier V (old cargo ship)
Aboitiz Megacarrier 1 (big, modern container ship)
Aboitiz SuperRORO 100 (big, modern container ship)
RoCon I (big, modern container ship, the biggest in the country)

VESSELS OFFERED FOR SALE BUT NOT SOLD THEN
Dona Virginia (cruiser liner)
Maynilad (big but slow RORO liner)
Zamboanga City (ROLO liner)
Our Lady of Naju (cruiser)
Masbate I (slow, small RORO)
Our Lady of Montserrat (cruiser)
SuperRORO 300 (former Our Lady of Hope, container ship)

With WG&A Jebsens managing the fleet, the merger upgraded the amenities, cleanliness and passenger service of the ferries. But initially all meals were for sale; vehement protests from patrons thereafter forced WG&A to backtrack. It was also claimed that safety standards improved as the whole fleet is now internationally-certificated. However this was not reflected in lower hull-loss rates. Ironically, it was the lesser Our Ladies (and not the SuperFerries) which proved to be unsinkable.

WG&A and CFC practiced branding. Branding is good in the sense that it promises consistent quality and service. On the other hand branding also utilizes ads and promotions. If that results in better market share then it should be good. Otherwise it only means higher level of costs. And higher costs are a threat to marginal routes and to less-efficient ships.

Initially, even with a fifth of their fleet sold (and with only one additional ship coming, the SF12 and while losing the SF7 to fire), WG&A was able to offer more frequencies because of the higher utilization of ships. But almost no new ports of call were added except for Bacolod. And probably the only significant new routes were the Manila-Cebu-Surigao-Davao (which passes through the eastern seaboard of Mindanao), Manila-Ormoc-Nasipit, Manila-Dumaguete-Cotabato and Manila-Cebu-Zamboanga-General Santos/Davao routes.

It was Cebu Ferries that added more new ports of call and routes (like Cebu to Dumaguit, Roxas City, Bacolod, Dumaguete, Larena, Jagna and Camiguin and Cagayan de Oro to Dumaguete) which in turn put a lot of pressure on the other Cebu shipping companies. CFC ships were faster than the competition and as former liners they simply outclassed the rest in terms of amenities and service.

Sulpicio Lines and Negros Navigation responded by adding ships. Sulpicio Lines basically kept to their old routes (except for the new Manila-Cebu-Davao-Dadiangas route) but Negros Navigation which previously concentrated only in Western Visayas has to venture in a lot of new routes and ports of call because their fleet more than doubled in a span of a few years. But then by sailing to Cebu, Nenaco also opened their former exclusive port of Bacolod to competition and they lost more than they gained.

This period right after the merger, the late 90s, was probably one of the best in Philippine passenger shipping. Competition was fierce, choices were many and there were a lot of newly-fielded ships. There were more shipping companies in the past but the ships of the 90s were far better than the ships of the earlier periods. In major ports there were nearly daily departures from all the liner companies combined.

But they say good times never really last. But I didn’t expect that the decline will be that soon, that fast, that continuous and what will be left is just the rump of the biggest-ever shipping company in the Philippines.

The first hint of trouble that I detected was when I noticed that WG&A was not properly assessing the threat, challenge and development of the intermodal system in Eastern Visayas which was then growing by leaps and bounds.

If Fidel V. Ramos had a deregulation program in shipping he also had a deregulation program in the bus and truck sectors. As deregulated area, bus companies can now ply Eastern Visayas routes with just a temporary operator’s permit. Soon a lot of buses were plying the Samar-Leyte-Biliran routes. Then the dominant short-distance RORO company in the Matnog-Allen route lost the case to protect their missionary status and new players entered that route ensuring that the ROROs needed will always be there. Long-distance trucking also developed with the loosening of the restrictions in the importation of surplus trucks. And with the advent of radial truck tires long-distance trucking became easy.

WG&A’s response was to withdraw from the Samar-Leyte routes except for the adjacent ports of Ormoc, Palompon and Isabel which actually comprises just one route. But soon under pressure from the buses these were lost too including the port of Masbate City which was also part of this route. Soon the islands of Masbate, Samar, Leyte and Biliran were lost to the intermodal trucks and buses.

Eastern Visayas was a signal victory for the intermodal system which was based on long-distance truck/bus plus the short-distance RORO ship. Wins by the challengers tend to have a multiplier effect. They become stronger, bolder and more confident. If the ship can be beaten in one area then nobody can pooh-pooh anymore that they will not be beaten in the next area of confrontation. And the next challenge probably happened before the WG&A has fully internalized their loss and it happened when they were in relative disarray.

A related development at this time was that WG&A’s new routes failed to stick and only the Bacolod route was able to survive. The new CFC routes also failed to pan out and were being abandoned one by one. One contributory factor for CFC’s retreat is fuel cost. The amenities and service of their ships might have been higher as those were former liners but as former liners it is also the reason why their engines are bigger and consume more fuel. Soon WG&A/CFC were selling ships. This was the second set of disposals and it happened at about the turn of the millennium. Also disposed in this period were at least six catamarans including vessels that came from mergers in the High Speed Craft (HSC) sector (the mergers with the Sea Angels of Negros Navigation and Waterjet).

At the same proximate time, it was already the strategy of WG&A to sell old and inefficient cargo ships and just let the ROROs liners carry the container vans. They then went for bigger ROROs later with twin cargo decks, the reason for the purchases of the SuperFerry 15, SuperFerry 16, SuperFerry 17 and SuperFerry 18.

The next challenge did not come from the intermodal. Rather it was the withdrawal of the Gothong family from the merger except for one scion. Soon the Gothong family re-entered the shipping business and re-established Carlos A. Gothong Lines Inc. (but they were not particular successful). Not long after this development the Chiongbian family (of William Lines) also withdrew from the merged company. But they did not re-enter the shipping business. Let it be noted, because it is important, that all the merged shipping companies independently retained their cargo forwarding businesess. For the Chiongbian family it was the Fast Cargo Transport Corp.(FCTC) and Gothong Cargo Forwarding Corp.(GCFC) for the Gothong family.

One can speculate that the sale of 10 vessels in 2000-02 (including those withdrawn from routes and old container ships) might somehow be connected to these withdrawals. When the company also took out a big loan in this period ($18.6 million) it might also have a relation to this state of affairs. Before the end of 2002, Aboitiz had already bought out its former partners. But it will still be later that the company will be renamed Aboitiz Transport System (ATS).

The next challenge came from the intermodal again. In 2003, the Western Nautical Highway opened and buses, trucks and jeeps were able to roll down to Panay island via Mindoro and Batangas. Soon the shipping routes and shipping companies serving Panay were under great pressure. Again, WG&A chose to withdraw (from Dumaguit and Roxas) and just tried to hold on to Iloilo port.

The opening of the Western Nautical Highway and the consequent withdrawal from routes, the withdrawal of the Chiongbian family and the need for new ROROs provoked a massacre of ships in this period as about 15 ships were disposed in the years 2003-06, both from WG&A and CFC, both ROPAX and container ships. It must also be noted that six catamarans were also sold in this period. WG&A was lucky that at this time world metal prices were peaking. If it hastened the disposal of ships I can say it is probable. Let me state that in the late 1990’s when all three families were still in WG&A, the company did not sell to the breakers, in general. In the first half of the first decade of the new millennium WG&A sold heavily to the breakers especially when world metal prices were peaking.

Attracted by the doubling of world metal price in 2007, WG&A then sold their prized ferries Superferry 15, SuperFerry 16, SuperFerry 17 and SuperFerry 18 to foreign liner companies.In the process they earned a windfall. But this is not without cost as they suddenly lacked the ships needed to carry the container vans. As a stopgap measure WG&A chartered 3 container ships, the “Myriad”, “Markella” and “Eponyma”. They then also converted SuperFerry 2, SuperFerry 9 and SuperFerry 12 into twin-cargo-deck ROPAX ships. Later the subsidiary cargo company 2GO was formed and the chartered ships were returned one by one.

At about the same time, in 2007, a very ominous development took place. Aboitiz partnered with MCC Transport of Singapore, the Asia subsidiary of the A.P. Moller – Maersk Group, the biggest container shipping company in the world and formed the MCC Transport Philippines (MCCTP). Since it met nationality rules, it was able to ply local routes and the ships invested by Maersk were given special permits by MARINA.

If the chartered ships of ATS and the ships of 2GO were a step up over local competition, the ships that came from MCC Transport were still another further step ahead in terms of size, speed and efficiency. MCCTP acted as feeder to MCC Transport which now dominates the Asia container routes. Together with the coming of more regional container ships (after APL) with direct foreign routes (like MELL, PIL, RCL and others), this completely undermined one important bread and butter of local container shipping which is the transshipment of foreign container vans. ATS and subsidiary 2GO cargo operations might have been affected by this but as a group Aboitiz is safe because they are also on the side of the winners through MCCTP.

After the sales of the four of the biggest and most modern SuperFerry ships in 2007, the fleet of ATS/CFC no longer grew. New ships have come like SuperFerry 20, SuperFerry 21, Cebu Ferry 1, Cebu Ferry 2 and Cebu Ferry 3. But ships have also been sold, lost or laid-up like SuperFerry 9, Our Lady of Medjugorje, Our Lady of Good Voyage, Our Lady of the Rule, Our Lady of Mount Carmel and SuperFerry 19.

With only six ships sailing, ATS ports of call were already down to half compared to its peak and in half of these ports the frequencies were down to once a week. CFC ports of call were also down to half and its fleet is less than a third of what it had before. CFC changed its website and no longer claimed it was the biggest Visayan shipping company (which is just a reflection of the truth). The Sulpicio Lines fleet was already bigger than the combined ATS and CFC fleets. If cargo ships are counted, Sulpicio’s fleet was almost double the combined ATS, CFC and 2GO fleets.

In 2008, KGLI-NM, the holding company owning Negros Navigation made an offer for Aboitiz Transport System. When the bank financing the take-over bid asked for more collateral the bid collapsed. This take-over bid was news for a long time because of the significance and it dragged. It was here that ATS propagated the canard that shipping is losing to the budget airlines and it obscured the fact that cargo is the lifeblood of shipping. Ironically it is this same year that regional container ships in Philippine ports multiplied. And not once did I notice Aboitiz discussing its shares in MCC Transport Philippines. But at least the Aboitiz group was frank enough to admit that the business of power generation attracts them more and that they are already heavily investing in it and if ATS is sold it will be one of their primary investment areas.

In 2010, with the assistance of the ASEAN-China Fund, Negros Navigation Company was finally able to secure the deal to buy Aboitiz Transport System and its subsidiaries especially Cebu Ferries Corporation, SuperCat and 2GO, the forwarding company. At its end as an Aboitiz company, ATS, CFC and 2GO had only 9 ROPAX ships and 2 cargo ships sailing which is not any bigger in gross tons than the company it merged in WG&A even if the SuperCats are counted. So in effect that means the bigger William Lines and Gothong sank without any replacement.

Aboitiz always says around that it has already gotten out of shipping and the maritime industry. But they completely obscure the fact that they are still in MCC Transport Philippines (MCCTP) and they completely own now the former Aboitiz Jebsens (renamed back when the Gothong and Chiongbian families withdrew from WG&A). The former Abojeb is in crewing and manning and that is one of the five recognized sectors of the Philippine maritime industry as defined by the government. MCCTP is already in expansion after Aboitiz sold Aboitiz Transport System. [Recently, Aboitiz clarified that some of their family members are engaged in MCCTP.]

Now, Negros Navigation Company owns Aboitiz Transport System and NENACO even retained the name and the brands. It will be a matter of time before it will be evident how big a bag they are holding.

The “great” merger of 1996 started out with a bang, lofty words and promises. It exited with just a whimper. But along the way it sank two great liner companies (William Lines and Gothong) and took down with it the liner industry.

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The Davao Ports That Handle Foreign Ships

I would have liked to expound on the ports under the Davao PMO. But that would mean tackling all the ports in Davao Region and that is just too many. I also wanted to tackle the ports and wharves of Davao City but I will still be burgeoned with many ports and wharves that basically handle traffic only to Samal island. I thought the best was to focus on one distinguishing mark of the Davao ports and that characteristic is many of its ports handle foreign vessels. Among the combined ports in the country it is Davao which has the most since about 20 ports here handle foreign ships, some regularly and some occasionally. But this will not be limited to Davao City only but will include ports in Panabo, Tagum, Maco, all in Davao del Norte and Sta. Cruz in Davao del Sur. This is a stretch of ports of about 25-30 miles of almost straight linear distance. Another trait of Davao ports is a significant number of foreign ships that call in Davao dock in two or three different ports trying to fill up more cargo. Senator Bam Aquino filed a bill that became a law allowing that but he was two decades too late and his bill just showed his ignorance of maritime matters.

Handling foreign ships is one thing that became more important in the last several years in Davao. This became more pronounced especially when passenger liners from Manila stopped calling in Davao. To Sulpicio Lines that was force majeure since they were suspended by MARINA (Maritime Industry Authority) from sailing in the aftermath of the capsizing of the MV Princess of the Stars in 2008. For Aboitiz Transport System (ATS), they said “there was not enough cargo” (and after that their competitors were simply too glad to fill up the void created).

The main type of foreign ship that calls on Davao are the regional container ships, otherwise called “feeder ships” abroad. I named it as such since they basically do regional routes especially in Southeast Asia and East Asia. Types like “Panamax”, “Handymax” or “Aframax”, etc. have no meaning in the Philippine context since only the smallest of international container ships call locally, in the main. Not that we are in an out-of-the way route but because that size is just what the size of our economy can muster (yes, we are mainly good only in producing people (and billiards players) and in fact, that is one of our main exports but they don’t ride container ships). Some of the ships that call in Davao goes all the way to Europe so not only regional container ships call in Davao.

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Regional container ships in Sasa Port by Mike Baylon

The second main type of foreign ships that call in Davao are the reefers or refrigerated container ships. These reefers and the regional container ships basically carry the export fruits (Cavendish bananas, broad-shouldered pineapples, solo papayas mainly but that can also include avocado, giant guavas and buko and many others) and export fresh produce (like lettuce, cauliflower and many other high-priced vegetables) grown in Southern Mindanao. Some of the refrigerated container vans loaded here come from as far as Agusan del Norte, Misamis Oriental, Bukidnon, Maguindanao and Lanao del Sur. Actually, almost all kinds of fruits and produce grown in farms and orchards are already exported now like camote, cassava, saging na saba (cardava in Bisaya), other varieties of bananas, mature coconuts, langka and gabi that we sometimes joke here that it seems they also cook ginataan (benignit in Bisaya) abroad now. Or make camote cue, banana cue, turon and ginanggang (https://en.wikipedia.org/wiki/Ginanggang) abroad.

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Reefer by Aris Refugio

The third main type of ship that calls on Davao ports are the tankers (included here are the like-type LPG carriers). Some of these are chemical tankers and they load coconut oil in the many oil mills of Davao. Many of these are oil tankers that bring in fuel to the tanker jetties in Davao (and that is why fuel is cheaper here since many of our fuel is from Singapore). The fourth main type of foreign ships that call in the Davao are the general cargo ships or simply freighters. Some of these bring rice, some are Vietnam ships that load copra meal, some load desiccated coconut. The fifth main type are the bulkers or bulk carriers. However, this type is not that frequent in Davao.

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Bulk Carrier by Aris Refugio

On the average, a total of more than 25 foreign ships call on Davao ports every week for an average of three four ships a day. In container volume, it is actually Davao which is number two in container ship calls ahead of Cebu and Batangas ports but behind Manila port, the national port. What happened is that after our first two main export commodity crops abaca and copra/coconut oil lost in the world markets because of economic shifts (abaca was displaced by nylon and copra/coconut oil lost to other edible oils) it is now fresh fruits and fresh produce (and also canned pineapple) which have taken their place. These are basically loaded in Davao as Southern Mindanao and Bukidnon practically lords it over the other Philippine regions in the production of those export goods as the other regions are still stuck to their traditional crops which are mainly not for export in significant quantity except maybe for the sugar of Negros.

Sasa Port is the main port of Davao. It is a government-owned port and it is the biggest in Davao. It is also the base port of Davao PMO (Port Management Office which is equivalent to a regional division). Sasa Port has a total wharf length of about a kilometer and six or more ships of 80 to 180 meters size range can dock simultaneously and more if the ships are smaller and/or local. Foreign ships, which are conscious of demurrhage are the priority here and there are inducements like crisp foreign bills so they will be given priority in docking. Since Sasa Port has the tendency to exceed its capacity then ships that cannot be accommodated or are displaced are made to anchor off Sta. Ana Port so as not to congest the narrow Pakiputan Strait separating Samal island from Davao.

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Sasa Port by Mike Baylon

One weakness of Sasa Port is the lack of gantry cranes. With that she cannot handle the gearless container ships that are now beginning to appear in Panabo Port. However, Sasa Port has the usual needs of foreign ships: reefer facilities, container yard, marshalling area aside from the usual open storage area. There are also transit sheds and a passenger terminal that is no longer being used. When regional container ships arrive speed is the essence in unloading so aside from their booms the reach stackers are widely used. There are two arrastre firms operating in the port. Sasa Port is due for expansion and renovation but its cost is shrouded in controversy and many local stakeholders and the local government unit of Davao City have formally objected. The administration of President Aquino then seems to be intent in ramming it through but now that plan is dead duck under the current Duterte administration. For sure, the plans will be modified as it was really overpriced.

The two Panabo ports are next in importance to Sasa Port. To an outsider Panabo Port might look to be a single port but they are actually two, the TADECO (Tagum Agricultural Development Company) wharf of the Floirendos and the PACINTER (Pacific International Terminal Services) wharf of Dole-STANFILCO. Together, the two along with minority interests reclaimed part of the sea and built an extension port and yard. This is equipped with gantry cranes and it is called the Davao International Container Terminal (DICT). It is the only port in Southern Mindanao that can handle gearless container ships at the moment and this port is the main handler of the produce of “Banana Country”, the wide flat swath of land in the localities of Panabo, Carmen, Braulio Dujali and Sto. Tomas plus parts of other towns that is dedicated to the propagation of Cavendish bananas. In “Banana Country” there is nothing else to see for kilometers on end but Cavendish bananas.

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Panabo ports (TADECO and Dole-STANFILCO) by Mike Baylon

These ports of Panabo are private ports. The DICT expansion cost only P2.7 billion (and was financed by private banks) and that was the comparison used why the local stakeholders blanch at the quoted price of the proposed expansion and modernization of Sasa Port (well, just adding gantry cranes, cold storage facilities and a little extension will already make it modern). [Of course, there are other and sometimes unspoken issues and projects that are related to this but that should be in another article.] Besides, the Panabo ports are also “Exhibit A” against those who badger the government to build ports for them for free or to pandering politicians who promise to build international ports and terminals just to get votes. If there is really traffic then the private sector will build its own ports rather than wait for government to build the ports for them (after all they will earn, won’t they?). And if the private sector builds the ports it always comes out cheaper than if government had it built (it is a question of corruption, inefficiency and waste). However, though expanded, DICT still lacks docking space many times and so container ships and reefers have to wait.

There is a modern, purpose-built port in Davao that was purposely-built for handling fresh fruits and fresh produce for export. This is the AJMR Port in the northern part of Davao City on the road to Panabo and this port is synonymous with Sumifru or Sumitomo Fruits, the biggest fruit distributor in Japan. Japan is known for having the highest quality requirement in fruits and they pay adequately for that. To meet that requirement, AJMR Port has its own vapor heat treatment (VHT) facility right inside the port, a plastic plant too and a factory for its carton boxes. However, the docking facilities of AJMR Port is rather limited and only two container ships or reefers can dock at the same time in its jetty-like wharf. By the way, AJMR is also classified as an “agro-industrial economic zone” which is similar to a “special economic zone”. That means it is enjoying a lot of perks from the government.

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AJMR Port by Mike Baylon

In importance, the adjacent Craft Haven International Wharf and TEFASCO Port might be next in importance. Craft Haven is also a purpose-built port to handle fresh fruits for export. Formerly, the place was once a shuttered plywood factory. Many of its exports goes west to the Middle East and India which are new markets for Cavendish banana (introduced by “Operation Desert Storm”). Many of its cartons bear the trademarks of Arab brands as well as the famous Unifrutti brands (i.e. “Chiquita”). The operator and agent of Craft Haven have good connections with Muslim planters of Cavendish banana of SOCCSKSARGEN region. The port has cold rooms but compared to AJMR it does not have its own carton box or plastic factories. But wood for making boxes is delivered in the port. The Craft Haven International Wharf can handle up to three ships simultaneouslyvand the “Cala” ships are regulars there. These are ships that trade to Japan and Korea.

I will go next to TEFASCO Port as it is just adjacent. TEFASCO means Terminal Facilities and Services Corporation. They so-famously won a landmark case then against PPA (Philippine Ports Authority) which set the principle that PPA can’t collect fees on ships docking in private ports. TEFASCO mainly docks local ships especially the container ships of Solid Shipping Lines but a few years ago they were able to lure Pacific International Lines (PIL) of Singapore which uses their wharf now to load container vans (these are the container ships with the name “Kota”). They only dock and does not engage in any processing of the fresh fruits and produce as they are not a “clean” port (a no-no in fresh fruits and fresh produce as it leads to contamination). Fertilizers and other contaminants are present in their port but refrigerated vans are practically hermetically-sealed unless Customs comes knocking.

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TEFASCO, Craft Haven and Holcim ports by Aris Refugio

Holcim Port is just adjacent TEFASCO Port and it also handled foreign ships in the last few years when Sasa Port and Panabo Port were experiencing congestion. However, the primary ships that Holcom Port handles are ships that carry cement (naturally!) and these are mainly local ships. Holcim is actually a cement plant (actually the biggest in the Philippines) as many knows. With cement dust (and also coal)  it is not also a “clean” port and so there are no processing facilities there for fresh fruits and fresh produce. It is simply a come and go operation there.

In terms of future growth the Hijo Port in Madaum, Tagum City, capital of Davao del Norte might be next in weight. This port is now a joint venture between ICTSI (International Container Terminals Services Inc.) which is not just an arrastre service anymore but operator of ports in other countries and the Manila International Container Terminal (MICT) and Hijo Plantation with the former in the saddle. ICTSI is developing this port to rival Davao International Container Terminal although in volume they are not yet there. Hijo Plantation is the main user of the port although it is intended to intercept the container vans coming from the north and east of Tagum but the intent has not materialized yet.

I will no longer go one by one with the other ports handling foreign ships as they are relatively minor or can just be bunched together. Universal Robina Corporation (URC) wharf sometimes handle bulk carriers which bring in imported wheat for URC’s need. The frequency of this in every few months or so. Down south in Astorga, Sta. Cruz, Davao del Sur, foreign ships load the products of Franklin Baker Company which is best known for its desiccated coconut which are mainly for export.

 

Meanwhile, Davao City is host to several coconut oil mills like Legaspi Oil, INTERCO, DBCOM and the New Davao Oil Mill. Foreign chemical tankers come to load their products and combined the arrivals are at least a week in frequency or even more frequent, on the average. Additionally, Vietnam freighters come to load their by-product copra meal (an ingredient and protein source for animal feed).

Davao is also home to several petroleum products depots like Chevron, Petron, Phoenix Petroleum and Shell. Aside from local tankers, foreign tankers also come especially those that come from Singapore. In addition, there are also LPG carriers that also come to the Price Gases jetty in Sta. Cruz, Davao del Sur, the Isla LPG Corporation wharf in Davao City aside from the tanker jetties of the petroleum majors and many of these are foreign vessels. The frequency of these foreign tankers and LPG carriers combined might be every week also.

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Tanker jetties, oil depot, Legaspi Oil, URC by Mike Baylon

Once in a while, a foreign ship will also come to Maco Port in Davao del Norte. This port is just near the Hijo Port in Tagum and both are located in the innermost portion of Davao Gulf (which is actually a bay).

And that sums up all the ports of Davao PMO handling foreign vessels. Sasa Port and DICT dominates the handling of the foreign ships. DICT don’t even handle local ships, in fact. The other ports, except the tanker jetties, started handling foreign ships because of the congestion of Sasa Port and the Panabo ports (except Hijo Port which handled their own shipments from the start).

With many ports handling ships, both foreign and local, one unintended benefit was road traffic did not build up so fast in the port areas of Davao unlike in Manila which is dependent on so few ports. Maybe a lesson can be learned here.

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Sasa Port by Mike Baylon