Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

ANALYZING THE IMPACT OF IMPROVING PORT FACILITIES AT TUMINDAO PORT ON THE SEAWEED INDUSTRY AND LOCAL ECONOMIC DEVELOPMENT

Crispin Emmanuel D. DIAZ Associate Professor School of Urban and Regional Planning University of the Philippines – Diliman [email protected]

Abstract: The Philippines is composed of a large number of populated yet remote islands. These populations are among the poorest in the country. Sitangkai municipality is located at the southernmost part of Tawi-Tawi province an thus has poor access to the rest of the Philippines. However, it has a relative advantage in the production of seaweed, having ideal agro-climatic endowment. One concern related to this industry is how to transport the harvested and dried seaweed to market cities. The paper examines the case of proposed improvements to the Tumindao Pier of Sitangakai. The impacts that these improvements may have on transport and cargo handling costs are discussed, in terms of the impact to the local economy, including the effect of transport costs on market price competiveness of Sitangkai's dried seaweed.

Keywords: Sea ports, dried seaweeds, economic development, intermodal transport

1. BACKGROUND

The Philippines is composed of a large number of populated yet remote islands. These populations are among the poorest in the Philippines. Table 1.1 shows the bottom ten provinces (out of 77 provinces) in terms of the Human Development Index (HDI), which is a composite measure of health, education and income. The HDI is the combination of a Life Expectancy Index (LEI), an Education Index (EI) and an Income Index (II). Among the provinces, Tawi-Tawi and Sulu were the lowest ranked in 2000. Over the period between 1997 and 2000, Tawi-Tawi experienced a significant reduction in its HDI.

Table 1.1 The bottom ten provinces in HDI, 2000 Percent Province 1997 2000 Change HDI Rank HDI Rank 1997-2000 Sulu 0.336 77 0.351 77 4.3 Tawi-Tawi 0.430 74 0.390 76 (9.3) Basilan 0.439 73 0.425 75 (3.3) Ifugao 0.452 72 0.461 74 1.9 Maguindanao 0.416 75 0.461 73 10.8 Lanao del Sur 0.415 76 0.464 72 11.8 Agusan del Sur 0.482 70 0.482 71 - Samar 0.493 67 0.511 70 3.6 Lanao del Norte 0.470 71 0.512 69 8.8 Sarangani 0.494 66 0.516 68 4.5

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

Source: National Statistical Coordination Board, 2003

Sitangkai is a municipality located at the southernmost portion of Tawi-Tawi province. This means that Sitangkai has relatively poor access to the rest of the Philippines, although it is quite close to Sabah, Malaysia. But because it has a relative advantage in the production of seaweed, having ideal agro-climactic endowment for seaweed cultivation and the competitiveness of Philippine Natural Grade (PNG) Carrageenan with refined carrageenan from other species (SIAP, 2005) the last few decades has seen the growth of the industry, with Tawi-Tawi and Sulu contributing almost 53% of Philippine output, which was 618,038 metric tons in 2000 (UAP for GEM, 2001). Carrageenan and other hydrocolloids (derived from seaweed) have a wide variety of food applications, including cosmetics and pharmaceutical products (UAP). World demand for Philippine Carrageenan and other Hydrocolloids is expected to grow annually by as much as 5% to 7% in value (UAP) applied to a year 2000 base of 1.9 Billion Pesos (Bureau of Agricultural Statistics). Thus, this industry is perceived as having great potential to support further efforts to raise the incomes of people in these remote provinces.

Sitangkai has 15,840 hectares of coastal waters with good potential for growing the type of seaweed which is in demand. However, at present only 5,822 hectares was productive in 2005 (SIAP), corresponding to production of 54,255 metric tons (9% of Philippine production). With the potential to almost triple production (based on area of cultivation and not counting possible increases due to productivity gains), Sitangkai may be expected to increase its production dramatically in the coming year. One main concern would be getting the product to the market. With such a significant increase in volume, the ability of the existing transport system to handle cargo is a concern. This paper focuses on analyzing the effect that the existing transportation system would have on the cost of transporting seaweed from Sitangkai towards major markets, such as Zamboanga and Cebu where raw dried seaweed is processed before shipping to international markets.

2. OBJECTIVES OF THE PAPER

This paper has the following objectives: • To describe the existing transportation flow of dried seaweed from Tumindao Port in Sitangkai to market cities • To identify transport service issues and how these may be addressed • To describe how addressing the abovementioned issues may affect the cost of transport and the value of transported goods

3. LOCATION OF THE STUDY AREA

Sitangkai is in a relatively remote location with respect to Zamboanga and Cebu, main markets of raw dried seaweed. Sitangkai Municipality consists of several islands. It can be observed that the locals have a preference for living on smaller islands and houses above the water instead of land. Sitangkai (referring to Sitangkai Island, as opposed to Sitangkai Municipality) is sometimes called the 'Venice of the Philippines' due to the use of boats as primary transportation, although footbridges connect one house from another on Sitangkai Island.

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

Figure 3.1 Vicinity of Sitangkai municipality

Figure 3.2 Photos of Sitangkai island settlements

Figure 3.3 Location of Tumindao pier relative to Sitangkai Island

4. TRANSPORTATION SYSTEM

4.1 Transport Modes

With respect to cargo and passenger movement in the Sitangkai area, there are 3 main seaborne modes. These are shown and described in Table 4.1, according to name, type of construction, approximate capacity, functional role, as well as pictures taken by the author.

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

Table 4.1 Transport modes in Sitangkai area Mode Hull Approxi-Function Picture (Example) Name Construc-mate tion Cargo Capacity (tons) 1 Tempel Wood 1.9 Local islands / access

2 Motor Wood 40 Interisland Launch / line-haul

3 Conventio Steel 100 Interisland nal / line-haul

At present, shipping service linking Sitangkai’s Tumindao Pier with Zamboanga via Bongao is provided by 6 steel-hulled ships with gross registered tonnage (GRT) ranging from 231 to 499 tons and corresponding passenger capacities of 275 to 444. These each make trips one a week, although services were reduced when one ship recently was placed in dry-dock (GEM, 2004).

The Tumindao Pier of Sitangkai is about 37 nautical miles away from Bongao (which is the capital of Tawi-Tawi Province) with trips taking between 4 and 6 hours, while Bongao is about 211 nautical miles from Zamboanga, with direct trips taking around 17 hours. Other

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007 connections to Zamboanga from Bongao are taken via Siasi and Jolo in Sulu Province. (GEM, 2004). It used to have a causeway connecting it to the island of Tumindao, but this causeway is currently unusable. The Tumindao is accessible through the use of small wooden boats that ferry passengers and cargo to and from the neighboring islands. No land connection is available. The Tumindao pier sits on the edge of the coral reef where it is deep enough to service steel-hulled ships. At low tide the many of the areas near to the shores are impassable even to small ships.

The ITDP study (ADB, 2006) indicated average total cargo loads of 70 tons, which translates to about 52 tons outbound cargo. These ships have a capacity of about 100 tons, but this is not completely utilized at Sitangkai, perhaps because shops still stop over at other ports along the way to pick up passengers and cargo.

4.2 Transportation of Seaweed

The movement of seaweed cargo can be summarized in the following four steps (shown in Figure 4.1). First, dried seaweed from growers in nearby areas is delivered to buying stations at Sitangkai Island (Southwest Sitangkai). Second, packed dried seaweed in sacks is delivered to Tumindao Pier. Third, the 60 to 65 kg sacks of seaweed are unloaded at Tumindao Pier, and finally, after loading unto the conventional vessel or motor launch, the seaweed cargo is transported from Tumindao Pier, to Zamboanga, via Bongao-Siasi-Jolo or direct. From Zamboanga, it may continue on to Cebu where the largest seaweed processing capacity in the Philippines currently is.

Figure 4.1 Transport flow of seaweed from Sitangkai

4.3 Estimates of Transport Cost

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

At present, seaweeds coming from Sitangkai go through the transportation process shown in Figure 4.1. Seaweed goes from the farmers to the processors or exporters through the transportation and handling chain involving several transfers. Costs are incurred at each stage. The figures indicated are approximate figures1 and are used to illustrate the effect of transport and handling on cost. The corresponding costs are shown in Table 4.2. The figures indicate that total handling and transport costs do not exceed 4% of the farm gate price of 18 pesos per kilo for raw dried seaweed.

The transport and handling cost is relatively small compared to the farmgate price. Since return on investment for farmers is estimated to range from 355% to 900%, depending farming method used (UAP for GEM, 2001), it is judged that the cost of transport is not yet constrictive of the production for the raw dried seaweed market via any total market price effects.

Table 4.2. Cost of transport and handling: Tumindao to Zamboanga Pesos per Particulars Sack Remarks Handling / Transport: Buying station to From interview with Tumindao Pier Tumindao Pier 15 officials Author’s estimate based on several Handling: Tumindao Pier to Ship 5 interviews Freight 28.4 12% VAT 3.4 subtotal 31.8 Based on UAP for GEM 1997, Handling: Zamboanga Port 11.6 adjusted to 2001 level using 12% VAT 1.4 estimated average cost of freight subtotal 12.9 between Zamboanga and Cebu Warehouse/Storage Cost 11.6 (UAP for GEM 2001), per sack, 12% VAT 1.4 then adjusted using implied annual subtotal 13.0 cost increase between 1997 and Trucking: Pier to Warehouse 13.2 2001 (7.2%) Transport and Handling Cost Per Sack at Zamboanga 91.0 Based on an average size of 65 kg Transport and Handling Cost per kilo 1.4 per sack Based on interviews with SIAP Seaweed Farmgate Price (Pesos/kg) 18 members in Sitangkai Ratio of Transport and Handling Cost to Farmgate Price 0.078 Calculated

5. TRANSPORT SERVICE ISSUES

The Intermodal Transport Development Project (ITDP) study prepared an assessment of transport-related problems at the Tumindao Pier as follows:

1 These figures are “approximate” since there are is no regulated price for these services. At the same time, the final price is a matter of secret negotiation between some shippers and transport service providers.

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

- The existing stair landing for “tempels” (small wooden-hulled vessels) is narrow and very congested. Unloading and loading of cargo and embarkation or disembarkation by passengers is difficult and very slow between the port and calling temples (see Figure 5.1)

- With regard to problems related to movement of traffic inside the port, the port area is crowded/congested and there is no traffic management for the proper flow of traffic.

- There is insufficient space for staging and marshalling area as well as for the construction of passenger terminal area, vendors area and other port related offices. (See Figure 5.2)

- The existing cargo transit shed is inadequate in size and is dilapidated. Lack of space in the shed means that sometimes cargo may not be unloaded if is not immediately claimed upon arrival of the ship. Unclaimed general merchandise are brought back to their point of origin, (e.g. Zamboanga).

Figure 5.1. Tempels docking Figure 5.2. Congested marshalling area at Tumindao pier stairlanding

Current practice of unloading and loading of cargo is done manually, and this makes loading and unloading cargo a slow process and suggests long turnaround times for vessels and thus higher berth occupancy ratios. The optimum ratio waiting time to service time recommended (UNCTAD, 1985) is 30 percent. Since Tumindao Pier has only one berth for the steel-hulled vessels mentioned earlier, this corresponds to a berth occupancy ratio of about 0.45 which means that the berth should be occupied 45% of the time or less. Visual inspection at the site indicated that the current demand is almost at this level. Low cargo-handling speed and small size of port mean that the port is close to its practical capacity

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

Figure 5.3. View of Tumindao pier from approaching conventional vessel

The dilapited transit shed is too small to store the large quantities of seaweed. These are protected from the elements by shippers using rubberized or vinyl canvas covers that they provide by themselves. The main is to maintain the moisture content of seaweed below a certain level so that it is not prone to rotting. Thus, having better storage and protective facilities in sufficient quantity will not only help in the reduction of spoilage, but also in the reduction of “balking” by shipping companies who are carrying cargo that they cannot unload because of insufficient protected storage space at the pier.

6. PROPOSED IMPROVEMENTS

The main improvements suggested by the ITDP study included the expansion of the staging or marshalling area to improve flow of people and cargo and the demolition of the old cargo transit shed and the construction of a new shed in an on-site location that allows the increase of useful available marshalling space. These can be expected to improve service times and raise the service capacity of the port. The reduction in service time means that the ship operator may have the opportunity to increase the number of trips that can be made in a year.

For scheduled shipcalls, however, there may be a more important benefit as well – if a ship can take more time to make the journey between ports and thus reduce ship speed, fuel costs can also be reduced. Since the increase in fuel consumption is proportionate to speed raised by a factor of 2 or more, (fuel ∝ speed(x≥2)), there is considerable potential to greatly reduce operating cost. However, the lack of competition between ship operators means that they are unlikely to pass on any savings to shippers of seaweed. This is further evidenced by the weakness of the seaweed industry in terms of limited competition at the farm level marketing chain (SIAP, 2005).

6. DISCUSSION OF POTENTIAL IMPACTS OF IMPROVEMENTS

The improvement of facilities at the Tumindao Pier, based on the ITDP report can be taken to have the following benefits:

a. Transport Cost Savings vs Nearest Port - The Tumindao Pier, which serves the residents of the “hinterlands”2 of Sitangakai Island, is the gateway port for the transport of seaweed produced in the area. Due to the limited service capacity at the

2 The word “hinterlands” is used to refer to the all the areas that may be served by the port and not strictly an inland area. These are the areas near to the port that may be served by it. The area is basically the areas with shallow water that are appropriate for seaweed culture.

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

pier, the producers will consider alternative ports through which to ship their product. The nearest port of some potential to serve this capacity (although this port itself has limited capacity) is found on the Island of Sibutu, which is located 19 km away from Tumindao Pier. It is estimated that, on a per sack basis, it would cost an additional P114 per sack (or P1,754 per ton) more than it costs to bring a sack of seaweed (or other similar product) to Tumindao. Due to the relatively shallow waters surrounding the port at Sibutu, only small ships (such as motor launches) will be able to call there. The per-sack transport cost going to the Port of Bongao from Sibutu is estimated to be equal to that from Tumindao Pier. b. Spoilage Reduction - The current situation in the port is conducive to losses due to damage to cargo resulting from poor quality of cargo handling. Manual handling of almost all cargo means that losses can occur each time, for instance, a sack of grain is moved, lifted or placed down. The condition of perishable products like fresh fruits, vegetables or sea products is also affected by the type of packaging used, how they are handled and transported and the length of time that they are in transit. In addition, there is the current lack of facilities to protect goods in transit from the elements. The introduction of better (fast and safe) cargo handling technology and the provision of protective structures are expected to reduce spoilage of incoming and outgoing cargo. c. Vessel Waiting Time Cost Reduction - The improvements “with the project” are anticipated to reduce the time spent at the port by vessels. It is assumed that these time-savings will translate into increased productivity of the vessels, for example, by increasing the number of round-trips per year. The benefits from time-savings are the reduction in operating costs for the vessel operators.

The avoidance of the above costs are taken to be economic benefits. On the other hand, depending on whether these savings are passed on to shippers, and thus affecting how final selling prices are determined, the impact on price competitiveness of Sitangkai seaweed (and other sea products) may be seen. This price competitiveness would determine to some degree the scale of demand for the area’s production and the prospect for continued growth of this activity. Thus, increasing capacity at the port would be a way to reduce the local seaweed industry’s economic costs, that could lead to further economic growth.

7. CONCLUSIONS

The paper examined the peculiar case of proposed improvements to the Tumindao Pier in Sitangkai Municipality. It was discussed that these improvements may have impact on the transport and cargo handling cost which may in turn have impact on the on the local economy, in the way that transport cost could affect the market price competitiveness of Sitangkai’s dried seaweed produce. Although the analysis is still rough and would have to be further improved, the following conclusions are drawn based on the presented analyses: - Transport and handling cost of seaweed are currently a relatively small part of its at- market cost. - As production of seaweed increases and cargo throughput at the port increases, it is expect that there will be increasing pressure to improve the efficiency of transport services in terms of unit costs - There is an indication that capacity constraints may prove to be the more immediate concern and this should be addressed through recommended improvements at the

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

Tumindao Pier. If producers are forced to access farther ports, the costs of transport and handling for cargo that beyond the port’s capacity could go up dramatically and, in turn, dampen the growth of the industry. Thus, assuming that the ship operators would also be able to provide additional trips, the timely increase of the port capacity should allow the seaweed industry in Sitangkai to continue its growth that is hoped by the residents to improve their economic condition.

ACKNOWLEDGEMENT: The paper draws heavily on the author’s involvement in the Intermodal Transport Development Project, during which he had the opportunity to better understand the situation at Sitangkai. The paper however does not necessarily reflect the thinking of Project Team. Any errors in this paper are solely the author’s. The author expresses thanks to Dr. Fiebel for sharing the GEM reports, Mr. George Esguerra for providing the material on UNCTAD and Ms. Manatad and Mr. Napone for assistance in the conduct of related data collection.

REFERENCES

Asian Development Bank (ADB), Draft Report, Intermodal Transport Development Project (TA-4344-PHI), 2006

University of Asia and the Pacific (UAP) for Growth with Equity in Mindanao (GEM) Project, Final Report:Philippine Eucheuma Seaweeds / Carrageenan Industry - Industry Analysis and Strategic Directions, 1997

University of Asia and the Pacific (UAP) for Growth with Equity in Mindanao (GEM) Project, Final Report:Philippine Eucheuma Seaweeds / Carrageenan Industry - Industry Analysis and Strategic Directions, 2001

Growth with Equity in Mindanao (GEM), Draft Proposed RoRo Shipping Operations in Sulu, Basilan and Tawi-Tawi, December 2004

United Nations Conference on Trade and Development (UNCTAD), Port Development – A Handbook for Planners in Developing Countries, 1985

OECD Trilateral Logistics Project (TRILOG) Asia-Pacific Taskforce, Logistics Integration in the Asia-Pacific Region, Institute of Highway Economics, 2000

SIAP, Seaweed Road Map, Powerpoint Presentation slides, August 2005