STUDY ON PRIVATE-INITIATIVE INFRASTRUCTURE PROJECTS IN DEVELOPING COUNTRIES IN FY2011 STUDY ON THE NEW CEBU CONTAINER PORT AND THE REDEVELOPMENT OF THE EXISTING CEBU PORT IN THE REPUBLIC OF THE PHILIPPINES SUMMARY February 2012 Prepared for: The Ministry of Economy, Trade and Industry Prepared by: Oriental Consultants Co., Ltd. Ides Co., Ltd. (1) Background and Necessity of the Project The Study of the development of Cebu Port was started with the JICA report, ”The Study on the Cebu Integrated Port Development Plan in the Republic of the Philippines” in 2002 In the JICA Study the short-term and long-term development plans were proposed including preliminary design, cost estimate, economical/financial analysis and environmental and social impacts assessment. After the JICA report in 2002, a study on the feasibility of Japan’s ODA loan, which focused particularly on STEP ODA in 2003, was conducted by the study group which was commissioned by the Ministry of Economy, Trade and Industry in Japan. In the study report made by JICA in 2004, “The Study on the Master Plan for the Strategic Development of the National Port System in the Republic of the Philippines,” PPOSS (Philippine Port System Strategy) worked out a strategic national port master plan with the target year 2024 and an urgent development plan with the target year 2009. Cebu Port is designated as one of six major national gateway ports (major ports for international container trade) in this national plan. In addition, Economic Research Institute for ASEAN and East Asia (ERIA) issued a report in 2010, “The Comprehensive Asia Development Plan,” in which Cebu Port is also identified as the major port of the Philippines that needs to be developed urgently. However, due to a policy change by the proponent of CPA, a proposal for development by a private investor and no agreement by the local government, development of the New Cebu Port has not materialized. Ten years have passed since the JICA study in 2002. Nowadays, the congestion has become more serious due to increasing cargo volume. The congestion of the international and domestic container terminals is remarkable. In order to handle the increasing container cargo, two quayside gantry cranes installed in 2003 were increased to four gantry cranes in 2010 and will increase to five gantry cranes in 2012 with seventeen RTGs. For other cargoesexcept containers, due to the very narrow apron area, congestion during the loading and unloading is much more serious. Therefore, the efficiency of cargo handling decreases and the safety of port operations will become an issue. According to information from the shipping companies, the water depth in front of the wharf is too shallow for efficient and economical international shipping operation from/to Kaohsiung, Pusan, Hong Kong and Singapore. They have a lease contract for empty container stocking in the city proper because of the lack of available land in the terminal. Deepening of the berth to accommodate bigger container ships is very difficult because of the structure of the berth, pier type with a retaining wall. Expansion of the wharf into the sea is also difficult due to the narrow strait between Cebu Island and Mactan Island. 1 The Aquino Government started in 2010, announced that national projects should utilize a PPP scheme in order to reduce the governmental burden by introducing private investment. DOTC follows the same policy and is examining their handling projects on the practicality of introducing PPP schemes. In this Study, the past study JICA 2002 is reviewed taking into account the recent economy and port surrounding conditions. Then, the Project will be renewed applying a PPP scheme, i.e., survey how we can introduce private investment to the Project considering finance methods and procedures. On the other hand, the cooperating proponent, Mitsubishi Corporation, intends to participate in the operation of the new container terminal as one of the Japanese groups considering partnership with Filipino companies and to confirm the realization of the Project. Another proponent, Nippon Steel Corporation, intends to participate in the supply and construction of the large steel pipe sheet pile type structure for the New Cebu Port. This Study examines and evaluates the various procedures for construction of the New Cebu Container Terminal and for port development and shall provide a proposal with action plans from the viewpoints of the private firms in order to ensure implementation. 2 (2) Basic Policy Concerning Decisions on Project Content The Study comprises the following steps: 1) Selection of the Site for the New Cebu Container Port In the 2002 JICA Report, five candidate sites were proposed as shown in Figure 1. As the PPP scheme is assumed for this project, the estimated construction cost is used as the most important factor for evaluation of the site selection even though other factors such as ease of access to the New Port and safe navigation of the ships are also important. To compare the sites, rough port planning was done to calculate the major volume of quantity such as dredging, reclamation, container berth and breakwaters to estimate the construction cost. The Consolacion site is the most economical and recommendable considering evaluation factors as shown in Figure 2. Therefore, the preliminary design, cost estimate of the Project implementation, and economical and financial analysis were made based on the Consolacion site. Figure 1 Candidate Sites of New Cebu Container Port Cebu Baseport Minglanilla Consolacion Cebu South Mactan North Mactan South (Source: JICA Report 2002) 3 Figure 2 Comparison of Construction Cost for Candidate Sites 0% 100% 200% 300% 400% A1 5% 83% Assume 1.0 Consolacion 12% A2 111% 29% 1.4 Mactan-North 4% A3 Breakwater 83% 92% 24% 47% 2.5 Mactan South Reclamation Dredging Road A4 166% 28% 71% 2.7 Cebu-South A5 97% 51% 142% 3.0 Minglanilla (Source: Study Team) 2) Technical Review The technical items are studied as mentioned below. a) Cargo Demand Forecast - Economic Framework The Government of the Philippines formulated the basic strategic policy on national economic development entitled, “The Philippine Development Plan 2011 – 2016.” In this Plan, the Government sets the corresponding targets of a high economic growth rate of 7 to 8% per year for at least 6 years. On the other hand, considering growth rate forecast of the International Monetary Fund (IMF), an annual growth rate of 4.9% until 2016 and 5.0% after 2016 has been established in this study as a conservative estimate. - Cargo Demand The actual annual growth rate of the total cargo volume was over 3% after 2000 at Cebu Baseport. A high correlation (coefficient of determination＝0.8297) has been observed between total cargo volume and GRDP. Based on the above growth rate of the economic framework, total cargo volumes are estimated as 16 million tons and 24 million tons in 2020 and 2030 respectively. - Forecast by type of trade Cargo volume of import, export, domestic loading, and domestic unloading are forecasted either through correlation analysis or elasticity analysis with GRDP. Import growth rate is the biggest among all cargoes from 2010 to 2030 and import cargo will reach 7.9 million MT around 2030, which exceeds the domestic unloading volume of 7.8 million MT. - Forecast by Package Type 4 Four package types of bulk cargo, break-bulk cargo, container cargo, and rolling were forecasted. Shares by package type are set for each trade type taking into account the past achievements and recent development. Thus, cargo volume by trade type and by package type can be estimated. - Demand Forecast for International Containers (TEU) To forecast the future foreign container volume, a correlation analysis between container volume (TEU) and GRDP of Region VII is implemented. A high correlation between the two variables is confirmed with a determination coefficient of 94.0%. Resultant foreign container volume is estimated at 343,000 TEU in 2020, and 594,000 TEU in 2030. Cargo volume by trade type by package type can be estimated as shown in Table 1. Table 1 Summary of Demand Forecast by Trade Type and by Package Type Foreign Trade Foreign Trade Domestic Trade Year Container Import Bulk Export Bulk Import Export Container Inbound Bulk Outbound Inbound Outbound Inbound Outbound Passenger TEU MT MT Brkbulk (MT ) brkbulk (MT ) TEU (MT) Bulk (MT) Brkbulk (MT) Brkbulk (MT) Rolling (MT) Rolling (MT) Pax 2000 103,944 48,203 14,338 372,268 2,651 299,630 1,366,913 1,494,780 0 0 10,059,048 2001 112,700 70,971 5,542 417,270 2,647 310,845 32,255 2,332 1,741,965 2,251,422 0 0 10,156,654 2002 103,139 53,912 20,000 406,547 2,484 337,370 42,507 6,824 1,696,717 2,611,269 0 0 10,738,198 2003 115,246 73,986 10,027 259,359 3,520 335,092 45,060 9,625 1,913,186 2,143,714 0 0 10,934,435 2004 120,281 60,931 6,000 192,140 31,735 311,282 78,396 99,700 1,852,455 2,255,197 0 0 11,785,915 2005 128,803 44,206 2,000 333,910 21,254 317,317 70,573 37,200 1,740,712 2,146,086 0 0 11,945,178 2006 146,459 75,648 7,800 276,922 30,177 279,442 10,666,071 2007 169,191 42,056 0 350,477 30,100 292,548 10,921,179 2008 157,634 93,287 0 423,989 32,062 295,155 10,321,278 2009 178,879 125,543 0 411,523 8,335 257,469 122,699 71,662 1,780,891 2,421,876 269,250 314,158 9,784,977 2010 202,213 156,373 0 358,674 0 247,295 273,754 194,678 2,030,300 2,303,575 279,634 366,817 10,993,921 2011 202,454 174,708 0 382,455 2,279 278,904 266,807 187,470 2,089,791 2,349,794 291,742 381,172 11,195,137 2012 215,129 195,129 0 408,142 4,648 294,434