With environmental protection high on the agenda, Manila must double down on fuel marking

10 September 2021

Philippine President Rodrigo Duterte has come under fire in recent days after he reversed his decision to ban casinos on the resort island of Boracay. While the President has underscored the need to generate tax revenue amid the country’s unending fight against Covid-19, environmental activists and a local politician are rallying in opposition to the plan.

Duterte’s move is perhaps not surprising for the notoriously raucous leader, but it’s certainly an audacious one that comes at a time when environmental protection has become one of the prime causes of mobilization for civil society in the Philippines. This is no small part a result of the Covid-19 pandemic, whose lockdowns and restrictions led to an unprecedented drop in environmental pollution. With air quality at its best in decades, demand for the greater protection of the country’s nature and ecosystem quickly became a major priority for people across the Philippines.

This newfound activism is now coming to the fore in Boracay – especially after the island was closed for six months for rehabilitation in 2018, following reports that the water around Boracay had become dangerously polluted due to the direct disposal of human waste into the sea. The opening of a casino is expected to attract more than 4,000 clients every day, far exceeding Boracay’s daily capacity for environmental sustainability.

While the affair surrounding the planned casino is just the latest example of a broader understanding of how human activity affects the environment in the Philippines, the issue goes far beyond Boracay and large-scale construction projects. Indeed, it’s shifting attention to another long-standing problem that has been plaguing the Philippines and the wider ASEAN region consistently for years – fuel smuggling.

The practice is classified as a “pollution or environmental crime” by Interpol, and is considered a serious threat to sustainable development. This is because activities like illegal tapping, bunkering and ship transfers carry a much higher risk for oil spills and blown pipelines, and can cause major damage to soil fertility, clean water sources and marine life in the long-run.

In Southeast Asia, the practice used to fly under the radar and fuelled a thriving black market. However, the issue became difficult to ignore in 2018 with the bust of what is now known as the “Bukom heist”, a major fuel smuggling operation involving Royal Dutch Shell employees in the Thailand-Vietnam-Singapore triangle. The triangle is characterized by shipping lanes that are notoriously difficult to control, which allowed fuel to be siphoned from storage tanks and even at sea. In January that year, Singaporean authorities conducted raids across Bukom Island, arresting several suspects.

With fuel smuggling and theft estimated to be worth hundreds of billions of dollars globally, and up to $10 billion in Southeast Asia alone, regional governments have been much more vigilant in curbing these kinds of activities in the years since. Indonesia intercepted two ships in January, and China seized 11 ships and detained 171 suspects in an expansive raid in March.

After losing some 357 billion pesos to fuel smuggling between 2010 and 2019, the Philippines introduced a fuel marking programme in 2019 using a high-tech solution from Swiss security experts SICPA. So far, the programme has been a remarkable success—two years in, it’s permitted the Philippine government to collect some 280 billion pesos in duties and taxes. It’s no surprise that policymakers are seeking to expand the programme, in particular by extending it to freeports, “where fuel marking is only conducted at the gates” and enforcement laxer since freeports are located outside customs territory.

By adding a unique chemical identifier to fuel, governments are able to ensure the fuel is coming from legitimate sources and remains unadulterated. Countries which have applied these kinds of marking solutions extensively across their fuel sectors have seen remarkable results. Mozambique, for example, has been relying on state of the art fuel markers to radically cut fuel theft. Implemented in 2017, the government was able to recover a whopping $25 million in lost revenue while adding $650,000 to state coffers through the successful prosecution of offenders. Another impact of the initiative was a 32% growth in fuel-related tax revenues in the first six months.

A similar fuel marking programme in Uganda also successfully reduced petroleum adulteration from more than 29% in 2008 to just 0.5% in 2021. In Tanzania, where a colossal 78% of fuel on the market was adulterated in 2007, a national fuel marking scheme brought this number down to just 4% in 2019 using the same fuel marking solution.

Manila could likely achieve a similar decimation of the illicit fuel trade if it doubles down on the early successes of its own fuel marking programme. The recent news that the Philippines’ Department of Energy and the country’s two main tax agencies will exchange information to strengthen the fuel marking scheme is an encouraging start, but it’s clear that Manila must remain laser-focused on the fight against the illicit fuel trade. Indeed, the consequences of fuel smuggling extend far beyond economic factors and are in direct opposition to the United Nations’ Sustainable Development Goals (SDGs), including access to good health, clean water and clean energy, as well as the protection of life on land and in the sea. If the Philippines is ever to truly protect her precious biodiversity, fuel smuggling must be quashed for good.

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