Indonesia-Philippines maritime reform may spur growth

Subject

The outlook for cabotage law reform and port investment in Indonesia and the Philippines.

Significance

One component of ASEAN's Economic Community (AEC, due end-2015) is ASEAN's Single Shipping Market (ASSM). Featuring in ASEAN's 2011 Master Plan on Connectivity, the ASSM envisions a liberalised, connected and competitive shipping industry, and calls for open ports for ASEAN shippers. To capitalise on this, ASEAN states need shipping reforms and investment. Indonesia and the Philippines, being large archipelagic states, have poor port infrastructure and high inter-island shipping costs, constraining trade and economic growth, plus cabotage laws. Philippines President Benigno 'Noynoy' Aquino seeks cabotage liberalisation. Indonesian President Joko 'Jokowi' Widodo targets port infrastructure investment support.

Impacts

• Aquino has lost some political clout post-Mamasapano, somewhat constraining his legislative influence.
• Domestic protectionism will slow achievement of the ASEAN Single Shipping Market.
• Philippines cabotage liberalisation could reduce poverty by lowering prices.