VIEWPOINT- SIPA’s tariff and related revenue issues

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Solomon Islands Ports Authority
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WILLIAM BARILE

Former CEO of SIPA

IN support of my previous article on the question whether SIPA is monopoly I would like to draw reader’s attentions to the long drawn trail of errors and, lack of due diligence perpetrated since the time of Colin Yaw as CEO. 

Without experience in International Port Management, Colin Yaw was selected for other reasons and was placed as the administration head of SIPA. 

I took time to revisit the Commission of Inquiry (COI) report into SIPA’s Reform Program chaired by Anthony Hughes in 2017. 

This is what the COI report says; I quote, “TOR 2(c): The appointment of Colin Yow as Chief Executive Officer, including the manner in which he was engaged and whether sufficient due diligence was undertaken before the appointment was made.

“Following the termination of William Barile as CEO in 2013, the SIPA Board advertised the position on 19 March 2014.

“Eight applications were received, but the Board decided the position should be re-advertised as most of the candidates shortlisted were not suitable.

“The re-advertisement stated that candidates must have experience in port operations and management. Four candidates including Colin Yow were shortlisted for interviews.

“Subsequently Colin Yow was interviewed in Singapore on 3 October 2014 by the Chairman Nollen Leni, Vice Chairman Moses Virivolomo and Directors Pascal Ohoau and Ken Grossmith.

“The assessment sheets used for the interviews scored Colin Yow as the preferred candidate. His CV states that he was a Trainee Manager with Singapore Ports Authority from 1972 to 1974, and subsequently had considerable experience in advising financially troubled businesses.

There is no record of any reference or history checks or other ‘due diligence’ inquiries being carried out, and his appointment appears to have been made on the basis of the interview in Singapore including the CV provided and on his financial strength.

“Nor does there appear to be any record of the proposed terms and conditions to be offered to a successful candidate, and the terms of the contract appear to have been decided by Colin Yow himself.

“The financial aspects of the contract appear not to have been discussed formally or informally by the SIPA Board, and amount to a remuneration package considerably in excess of those applying to comparable positions in Solomon Islands and the region.,…. end of quote.

From the outset CEO Colin Yaw set about enacting Port Reforms, albeit without appropriate sanction from the Board which was supposed have been a mandatory requirement. 

To his good credit he collected long standing business debts from creditors; an achievement which I and my predecessors failed to address during our time.

But unlike what the COI made it out to be when they claimed SIPA was operating under the radar during our time, we had indeed been plagued with political interference.

CEO Colin Yaw moved on to review the Port Tariffs.  Here is what the COI Report says; I quote, “TOR 2(g): The rationale and process by which SIPA has set fees, and whether fees must be set by way of a regulated consultative process under the Ports Act [Cap 161].

The Ports Act [Cap 161] gives SIPA the power to levy dues and rates; Section 72 of the Act gives SIPA the power to make rules for levy of dues and rates. Section 73 states such rules shall not have effect until approved by the Minister of Finance.

In 2014 SIPA changed its method of calculating revenue related to size of vessels, to be in line with the method adopted by other ports in the Pacific Region, from reference to Length Overall, to reference to Gross Registered Tonnage; this change was not implemented until 2015. Other tariffs were reviewed and increased in June 2015 and again in September 2015. The reason given for the increase in September 2015 was to bring them in line with ports within the Pacific Region, but a comparison of these charges with other Ports by ADB in June 2016 indicates the increased tariffs are now the highest in the region. Compared to the June 2015 tariff, SI port charges have increased between 55% and 540% per item.

Although SIPA is not presently required by law to consult with port users when carrying out a review of tariffs the ADB report recommends port users and interested parties be consulted. This clearly makes sense, and we also recommend it in the conclusions to this COI report”…. end of quote.

While the COI did its assessment and calculations on the items that are subject to tariff charges, at about the same time I did a comparative exercise with other regional ports in response to CEO Colin Yaw’s claim to have taken comparison with other Pacific Ports and found that SI tariffs were the lowest.  I carried out the comparative exercise through networking with counterparts from Fiji, PNG, Australia and New Zealand. 

I released the following article in March of 2016.  Facts revealed in the figures therein had been verified with local Shipping Agents and Bulk Fuel Importers.

SIPA’s Heightened Tariff is an Act of Terror against Solomon Islands compiled by William Barile, former CEO of SIPA:

This may sound overly dramatized but it is far better to risk being proven wrong; than to be silent and watch the country plunge itself into self-destruction. 

Consciousness must be raised to alert the nation to the possible dark side of SIPA’s heightened tariffs. 

At least by highlighting the likely other side of SIPA’s reforms and be offered truthful, rational and factual information, scepticism will be put to rest. 

The analysis of the recent increased tariff figures is meeting with apprehensions, even fear.  They fall horrendously far beyond the limit of elasticity of the economy of this country. 

In the article headed ‘the Downside of SIPA’s Reforms’ (published in the Sol Star edition No. 6080 Monday 18th January 2016), I referred to the difficulty consumers of imported goods will be facing with the newly introduced SIPA’s Tariffs. 

I also stated that the prices of our exports will be more expensive and may lose their markets overseas.

In SIPA’s web site, the CEO claims that he had made comparisons with other pacific ports and found that SI is the lowest tariff base. 

Yes this may indeed be so but this is relative to the in country economic environment, a mere sub set of the larger Australasia wide business environment. 

The good man made the grand entry his time last year hitting the ground running. 

He may have neglected as trivia the necessity to be grounded thoroughly on the trends, the status quo, and the programmed policy for future advancement that are in place for the country as laid down by her leaders. 

He came, he saw and he intends to conquer.  In his haste he would not careless to follow the laws of the land and he has gotten away with a lot that others would have been penalised for. 

He had raised the tariffs in the short twelve months; on the 30th March 2015, on the 20th July 2015 and again on the 1st October 2015.  Goodness knows when the next one will be.  This is nothing less than atrocious. 

It is an act of terror against the economy of Solomon Islands. 

All this, he is doing with an equally outrageously high salary package (higher than the salary Australians pay their Prime Minister). 

Along with this he enjoys tax free salary, he lives in a serviced apartment at Heritage Park Hotel, he moves around with Security Guards in tow, he has a chauffeur driven vehicle; he takes overseas trips almost on a monthly bases, etc. 

It will not be too far off to assume that a major chunk of the takings of one month’s revenue of SIPA are burnt up paying for these employment entitlements.

It would appear that by approving these new tariffs after the CEO’s urging, cabinet had legally ushered this country out of economic viability; deceived and innocently ignorant of the implications. 

I questioned the competence of the proposers of these increases and the advice.  Were the ripple effects properly analysed for affordability of businesses and the masses given serious consideration? 

There are questions, questions and more questions.  The simple truth could be that Solomon Islands is definitely headed for economic turmoil. 

A comparative table of Solomon Islands Tariff with Fiji, Melbourne, Auckland and PNG appears below. 

In the table FIJI is Fiji, MEL is Melbourne in Australia, AKL Auckland in New Zealand and PNG is Papua New Guinea with her 22 International ports. 

Information in the table is but a partial representation of the proportion of the costs. 

A detailed collection of all the other associated costs will place the figures some magnitude higher.

Rates in SBD for unloading and loading FEU (Forty Foot Equivalent Unit)

IMPORTSIPAFIJIMELAKLPNG
Discharge35881053119314823221
Wharfage960391147  
Total45481092234014823221
Compare, OTHER:SI (%)unit24%52%32%71%
Compare, SI:OTHER (%)UnitSI is 416% more than FIJISI is 194% more than MELSI is 307%  more than AKLSI is 141%  more than PNG
      
      
EXPORTSIPAFIJIMELAKLPNG
Load 702119310611992
Wharfage1529117569  
Total3323819176210611992
Compare, SI:OTHER (%)unit25%53%32%60%
Compare, OTHER:SI (%)UnitSI is 400% more than FIJISI is 188% more than MELSI is 313%  more than AKLSI is 167%  more than PNG

These countries of comparisons have, by far, greater and broader-based economic environment.  Solomon Islands is small, weak and fragile. 

Citizens of Solomon Islands must not be fooled.  There are no secret formulas to explain these madness. 

The new tariffs are simply outrageous.  All that these tariffs will do is to polarise earnings to a monopoly SOE called SIPA, which in reality will lead to self-destruction and make come true the ‘law of diminishing return’.

Our country must urgently move to rectify the nonsense.  Our export commodities are already suffering decline. 

Copra and cocoa have dwindled their export tonnages in recent years.  Palm Oil had suffered expensive demurrages of up to a quarter million dollars recently. 

This gnawed at their turn over and will potentially frustrate augmentative development prospects.

Bulk fuel had already suffered 25% loss of the price advantage Oil Companies enjoyed in the brief period of eighteen months previously. 

It was the cumulative effects of these that had manifested themselves in the construction boom we have been enjoying in recent times. 

Fuel was the raw material energising these endeavours.

We have been taken down the path of uncertainty but also possible doom.  This is not the proverbial ‘darkest before the dawn’.  It is simply all murky and grey.

THE END.

Note that in this foregoing compilation I had warned about the high costs of our commodities export due to the heightened tariff will kill them.  Today copra and cocoa exports have dwindled to insignificance.

To cap these concerns about tariff charges and their collection thereof, I would like to present to readers another analogy well worth taking note off.  The competence of the incumbent CEO of SIPA is in doubt. 

The current outbursts are results of obvious misjudgements he is continuing to make.  He figure points Leroy Wharf Port for being allowed to land cargo. 

He does not concede that appropriate authorities have sanctioned and given consent to its operations.  

Then there is the case of serious breach of ISPS code, an unforgiveable violation of IMO security safeguard for international ports. 

In my next media release I will reveal another unforgiveable mistake the CEO has committed. 

Whistle blowers have blown their whistles and I have a grave duty of care to echo their concerns.  It is a matter of serious national security but the Board of SIPA is not taking steps to address it.

But for now I would like to present the analogy referred to above.  It pertains to the recruitment of Mr Colin Yaw.  I strongly feel the same mistake has been repeated. 

I present here another finding of the COI on Port Reforms of 2017, chaired by Anthony Hughes. 

I quote; “TOR 2(l): The amount paid by SIPA for overseas travel for Colin Yow during his tenure as Chief Executive Officer and whether such travel was approved by the SIPA Board.

We were unable to locate supporting documents or evidence as to the purpose of Colin Yow’s overseas travel. Under the terms of his contract he was entitled to four business class tickets per year. However it appears from record that he travelled more frequently overseas (refer to appendices x). 

We have reviewed the report by KPMG Fiji dated 18 August 2016 which indicates total cost of overseas travel on behalf of SIPA for the period of his employment of $3,858,557 of which $3,177,427 is not adequately supported by documentation.  We have not found any evidence of Board approval for this travel or expenditures.”…. end of quote. 

Information coming from current and former workers of SIPA unanimously claim that the current CEO has done a lot more overseas travel than the sacked Colin Yaw. 

I therefore harbor the opinion that the prevailing situation of SIPA under this CEO is an exact mirror image of that during the reign of Colin Yaw. 

Would this then, warrant another Commission of Inquiry?

I wish to close by reiteration two lines from the previous article on the subject of high tariffs. 

“The two alternative balancing act in this scenario are to rationalise and right-size the tariff or introduce competition. 

“The latter has happened and will continue to happen.  SIPA’s Point Cruz Port is bottlenecked and choked by Honiara city growth.”


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