OPENING THE DOMESTIC WATER TRANSPORT INDUSTRY TO NEW OPERATORS AND INVESTORS

WHEREAS, Section 19, Article XII of the Constitution declares that “[t]he
State shall regulate or prohibit monopolies when the public interest so
requires. No combinations in restraint of trade or unfair competition shall be
allowed;”

WHEREAS, Presidential Decree No. 474, otherwise known as the Maritime
Industry Decree of 1974, provides that:

“It is hereby declared the
policy of the State to accelerate the integrated development of the maritime
industry of the Philippines to attain the following objectives: (a) To increase
production and productivity in the various islands and regions of the
archipelago through the provision of effective sea linkage; (b) To provide for
the economical, safe, adequate and efficient shipment of raw materials,
products, commodities and people; (c) To enhance the competitive position of
Philippine flag vessel in the carriage of foreign trade; (d) To strengthen the
balance of payments position by minimizing the outflow of foreign exchange and
increasing dollar earnings; (e) To generate new and more job opportunities;”

WHEREAS, Presidential Decree No. 474 likewise states that to attain the
foregoing objectives, the Government, through the Maritime Industry Authority
(MARINA), shall:

“(a) Adopt and implement a
practicable and coordinated Maritime Industry Development Program which shall
include, among others, the early replacement of obsolescent and uneconomic
vessels; modernization and expansion of the Philippine merchant fleet,
enhancement of domestic capability for shipbuilding, repair and maintenance;
and the development of reservoir of trained manpower;

(b) Provide and help provide the
necessary; (i) financial assistance to the industry through public and private
financing institutions and instrumentalities; (ii) technological assistance;
and (iii) in general, a favorable climate for expansion of domestic and foreign
investments in shipping enterprises; and

(c) Provide for the effective
supervision, regulation and rationalization of the organizational management,
ownership and operations of all water transport utilities, and other maritime
enterprises.”

WHEREAS, the growth of the national economy on a sustained basis required
an efficient water transport industry to ferry passengers and cargo at
reasonable and competitive rates.

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of
the Philippines, by virtue of the powers vested in me by law, do hereby order:

1. The entry of new operators
into the domestic water transport industry shall be liberalized to enhance the
level of competition and bring about reasonable rates and improved quality of
services.

1.1. Opening-up of all Routes

Public interest and public
convenience call for the levelling of the playing field for all existing and
new operators in the domestic water transport industry. Competition, provided
it is not ruinous, should be the norm to open-up the industry to new
investments and to stimulate further economic activity.

1.1.1. All routes/links shall
have a minimum of two (2) operators. Routes/links presently serviced by only
one (1) operator, or monopolized or cartelized as determined by MARINA, shall
be open for entry to additional operators.

1.1.2. All routes/links which
have been serviced by any operator for an aggregate period of at least five (5)
years shall be open for entry to additional operators without limit.

1.2. Encouraging Entry Into
Developmental Routes

The entry of operators in
developmental routes as determined by MARINA shall be encouraged. An operator
who pioneers in the provision of a certain technological level/type of shipping
service in a developmental route shall be authorized to charge market-accepted
freight and passage rates differing from the authorized fork-tariff, if availed
of; Provided, that the operator shall apply with MARINA for the
adjustment in or adoption of such rates, the approval of which shall be
accordingly granted; and Provided, further, that after five (5) years
of such operation, the continued authorization of such rates, or adjustments
thereof, shall be dependent on an evaluation undertaken by MARINA.

1.3. Deregulating Entry of
Newly-Acquired Vessels Into Routes Already Served By Franchised Operators

1.3.1. An existing or new
operator who acquires a vessel through importation, bareboat charter with
option to purchase, lease-purchase, or local construction, shall be granted a
Certificate of Public Convenience (CPC)/Provisional Authority (PA) and allowed
to operate such vessel in any route, even if already being served by existing
franchised operators for less than five (5) years, including developmental
routes; Provided, that the prescribed application for CPC has been
filed, and the basic requisites prior to issuance thereof have been complied
with; Provided, further, that upon filing of the application for CPC,
the presumption of public need shall be accorded in favor of the applicant,
especially but not necessarily when any of the following conditions shall be
shown to obtain:

1.3.1.1. The proposed operation
shall introduce innovative, technologically-advanced, or pioneering shipping
services in the route applied for, such as, but not limited to, the deployment
of fast ferries, cruise vessels, container vessels and RoRo vessels, or the
employment of modern and efficient on-board cargo handling equipment as an
integral part of the vessels operation;

1.3.1.2. The proposed operation
shall introduce improvements in the quality of service being provided in the
applied route/link;

1.3.1.3. The vessel proposed to
be deployed shall serve as an improvement over the existing vessels operating
therein, either in terms of the vessel’s age, size, capacity, hull material and
other vessel technical features;

1.3.1.4. The proposed operation
shall foster cost-effective/competitive shipping service in the route proposed
to be served;

1.3.1.5. The proposed operation
shall service priority tourist links as identified by the Department of Tourism
in its Tourism Master Plan;

1.3.1.6. The route/link applied
for warrants additional operators/services, as determined by MARINA or by
pertinent local government units, resulting in public invitations for
additional services therein.

This condition covers cases
where there is a duly verified and legitimate public clamor for additional
shipping services and it has been determined that existing authorized operators
in the route/link have not been sensitive to an increase in demand by offering
to increase capacity only after another operator has offered to provide
additional services therein; and

1.3.1.7. Where existing
authorized operators have abandoned their operations in a given route.

Any oppositor to the application
shall bear the burden of proving that there is no need for the proposed
service.

Provided, finally, that the vessel, upon issuance of the CPC, shall continuously
serve its franchised route for at least one (1) year.

1.4. Vessel Rerouting Or
Amendment Of Authorized Route And Change In Sailing Schedules And Frequency

Any change or amendment to the
authorized routing pattern of a vessel can be undertaken by an existing
authorized operator thru the following: (1) omission or deletion of port(s);
(2) addition of other port(s); (3) omission and subsequent addition of port(s);
(4) changing the sequence of port calls; (5) retention of authorized routing
pattern but with addition of one or more ports. Vacated port(s) or
link(s)/route(s) as a result of the above shall be looked into by MARINA
insofar as adequacy or sufficiency of the remaining existing shipping services
is concerned:

1.4.1. Approval shall be granted
to applications for any of the above forms of change or amendment of authorized
routing pattern by existing franchised liner vessels, Provided, that:

1.4.1.1. No conflict in sailing
schedules with other affected operators in the applied route/link shall result
therefrom, otherwise, the MARINA shall prescribe, motu propio, sailing
schedules that will best serve public interest and convenience;

1.4.1.2. No route or link shall
be left unserviced by the rerouting or route amendment, unless a substitute
vessel from the applicant will be deployed therein, or vessel(s) from other
existing authorized operators are left serving the route/link; and

1.4.1.3. Shipping service in the
previous route/link has been continuously rendered by the vessel for at least
one (1) year from issuance of CPC.

1.4.2. If the rerouting or route
amendment of a vessel is caused by the deployment of a newly acquired vessel
(either through importation, bareboat charter with option to purchase, lease
purchase or local construction) into the authorized route of an operator, the
policy of liberalized entry into any route under Section 1.3 above shall be
applied.

1.4.3. If no newly-acquired
vessel is involved and an application is filed for the rerouting or route
amendment of a vessel, where an entirely new route or link will be served, a
new application for CPC shall be filed and entry therein will depend on whether
any of the conditions or circumstances enumerated in Section 1.3 above has been
proven to obtain. Priority shall, however, be given to newly-acquired vessels
brought into the fleet, subject to Section 1.3, in the grant of CPC to a given
route.

4.4. In cases where only a
temporary authority has so far been issued to a vessel, pending resolution of
the basic application for CPC, an application for amendment of route or
rerouting may be filed and considered by the MARINA, but the amended authority
to be issued as a result thereof, shall be subject to the one (1) year maximum
period per issuance to be cumulatively reckoned from the first PA issued in the
original application.

2. All government departments,
offices, agencies, or instrumentalities, including government-owned or controlled
corporations, such as the Board of Investments, Bureau of Customs, Bureau of
Fisheries and Aquatic Resources, Bureau of Plant Industry, Bureau of Animal
Industry, National Quarantine Office, Philippine Navy, and the Philippine
National Police, are hereby ordered to assist and coordinate with MARINA in the
implementation of this Executive Order.

3. This Executive Order revokes
or amends all executive, department and other agency issuances or any provision
thereof inconsistent with this Executive Order. The MARINA is hereby directed
to issue rules and regulations to implement this Executive Order.

4. This Executive Order shall
take effect fifteen (15) days after its publication once in a newspaper of
general circulation.

DONE in the City of Manila, this 28th day of June in the
year of Our Lord, Nineteen Hundred and Ninety-Four.

(Sgd.) FIDEL
V. RAMOS
President of the Philippines

By the President:

(Sgd.) TEOFISTO T. GUINGONA, JR.
Executive Secretary

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