Toward Relaxing the Cabotage Restrictions in Maritime Transport

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The present cabotage law is considered one of the serious bottlenecks to Philippine economic growth. The perennial inefficiencies in the maritime industry are linked to lack of competition due to barriers to entry, arising from the law's provision that allows only domestic shipping lines to serve domestic routes. The protection enjoyed by the domestic shipping industry through cabotage restrictions results in the lack of meaningful competition in the industry and weak incentives for operators to modernize and become competitive. This Policy Note presents the most essential facts about the Philippines' cabotage policy. Its argument for reform is tackled by discussing the specific impacts of the cabotage restrictions and comparing the national policy with those of other countries. A reform path is suggested in the end and how it can be rationally pursued.