Jammed

The most bizarre traffic jam in the world happened at the Suez Canal – the most vital waterway in the world.

Since last week, a Japanese-owned but Taiwanese-operated container cargo ship ran aground and sits diagonally on the canal, completely blocking traffic flow. On either end of the waterway, hundreds of ships are sitting idle, waiting for the canal to be cleared.

The ship, Ever Given, is truly titanic. It is 400 meters long and carries 18,300 containers. There are no giant cranes in the part of the canal where this ship is stuck. If it comes to it, several weeks will be required to remove the cargo from the listless ship.

About 12 percent of global trade passes through the Suez Canal. This includes the bulk of trade between Europe and Asia.

It is estimated that each hour the canal is blocked, $400 million in trade is lost. In the days since the ship ran aground, global trade suffered billions in losses.

The costs are greater for specific countries. Syria, for instance, is expected to run out of oil the next few days because deliveries are trapped in the jam. The supply chains in Europe and Asia will be seriously disrupted shortly.

Years ago, Egypt improved the capacity of the canal – from which it draws billions in revenues. But shippers also began building even larger cargo ships to take advantage of the cost savings.

There is only one plan to extricate the trapped ship. This involves dredging about 20,000 tons of sand where the ship is lodged and then righting the vessel with the help of a small flotilla of tugboats. Extrication was supposed to happen last Saturday when the tide was at its highest. The effort failed.

Experts have been flown in from everywhere to advise the team on the ground. A large floating crane is moving as quickly as it can from Cyprus. The trapped ship had emptied its water ballasts.

As I write this Monday, news broke that Ever Given has been successfully refloated and should now be on its way through the canal unless some structural damage is found in its hull. This is very good news.

Immediately, prices for crude oil dropped sharply and we could expect more rollbacks next week. The spreads for US bonds tightened.

This is how vital efficient shipping is for the other aspects of our economic life.

Arbitrary

This other story is about shipping as well – although the potential disruption to domestic trade will be entirely induced by the impunity of local potentates.

The Sangguniang Bayan of San Pascual, Masbate passed two resolutions asking the MARINA to cancel the missionary routes of Lucena City-based Starhorse Shipping Lines Inc. (SSLI). The resolutions were reportedly at the urging of San Pascual Mayor Maxim Lazaro and Masbate Governor Antonio Kho.

Vice Mayor Haira Rivera and Secretary Ernani Lazaro authored the resolutions that should by now be with the MARINA. They claim that SSLI failed to operate its ro-ro vessel during the first ECQ (March-June 2020) and then later in December.

The municipal council is not representing things honestly. During the first ECQ, national government suspended operations of passenger vessels. When such operations were allowed to resume, Governor Kho opened all Masbate ports except the one in San Pascual.

As part of the incentive for ro-ro operators to serve missionary routes, they are allowed exclusivity in certain routes while the market is being developed. The incentive is justified by the fact that ship owners are expected to be losing money in the first years of servicing a missionary route. SSLI enjoys exclusivity for the Lucena-San Pascual route.

The exclusivity enjoyed by SSLI over the San Pascual operation apparently does not sit well with Governor Kho and Mayor Lazaro. Both local officials own wooden hulled ships that could profitably operate this particular route.

There are other mysterious circumstances relating to SSLI’s operations at the San Pascual port. In February 2020, SSLI’s ro-ro vessel Virgen Penafrancia VI was attacked with a rifle grenade. The local police unit never got around to solving this crime.

According to Mrs. Merian Reyes, SSLI chief executive, shortly before the attack several persons approached her demanding protection money. She rejected the demand. The grenade attack on the vessel appears to be related to this demand for money. The local police remain clueless.

For months since the attack, the ro-ro operator labored in fear of further atrocities done to dissuade them from continuing the business. Now, the municipal council is openly hostile, asking for their license to be withdrawn.

MARINA ought to look very closely at this case. The entire “nautical highways” system depends on the viability of modern roll-on, roll-off vessels’ missionary routes to stimulate inter-island trading activity and tourism.

Serving these missionary routes is a capital-intensive proposition and the shipping companies are expected to pro-actively spur economic activities on either end of the route to make the business viable. At the very least, MARINA should ensure the security of ro-ro operations and the predictability of the incentives granted shipping companies.

This is the least national government agencies can do to keep the nautical highway system viable. This system is vital to bringing once-stranded island economies to the mainstream of domestic trade. The nautical highways will be the means for new businesses to prosper and incomes to improve in the formerly isolated island communities.

The good things will not happen if local power brokers are allowed to disrupt businesses through the blatant impunity with which they exercise petty power.