An issue that could affect our pan de sal?

The issue continues to rage between the Philippine Association of Flour Millers, Inc. or PAFMIL headed by Mr. Ric Pinca and the Filipino-Chinese Bakers Association headed by Mr. Benito Lim.

As a brief backgrounder, PAFMIL claims that cheap Turkish flour is being dumped in the Philippine market and cited the importers of Turkish flour for violation of our own anti-dumping laws and of unfair trade practices. The association of flour millers is also seeking to increase the tariff on this merchandise to 20 percent from the current seven percent tariff that it is enjoying.

The local bakers’ association, on the other hand, is up in arms against this petition of PAFMIL because it will unnecessarily increase their costs.  According to Mr. Lim, Turkish flour comes out cheaper than local flour milled here by as much as P170 – 180 per sack.  That is a substantial difference for commercial bakers, but why should imported flour be cheaper than local flour?

In citing the anti-dumping law, PAFMIL says that Turkey uses high-grade flour for their domestic consumption and sends the inferior quality flour to other countries like the Philippines.

However, the bakers’ association president also claims that the so-called inferior quality Turkish flour being exported to the Philippines is made from low quality wheat which is the same quality as that which our local flour millers use. They have based their argument on this:  “dumping occurs when a country exports a commodity at prices lower than in their domestic market. “  Since they only use high-grade wheat for their domestic consumption and sends out inferior flour to other countries at much lower prices, the bakers claim that the anti-dumping law does not apply in this scenario.

The Anti-Dumping Law or RA8752 is similar to RA8800 which is the Safeguard Measures Act. The protective areas in RA8752 as pointed out by Mr. Lim are the flour milling companies, the welfare of consumers and/or the general public, and other related industries like community bakeries and home or cottage industries. Should the government choose to only protect the interest of the local flour millers in granting their petition for Anti-Dumping, Mr. Lim said, it is excluding the 2nd area which pertains to consumer welfare, and the third area which pertains to their sector, commercial bakeries. Consumer welfare because with higher tariffs on Turkish flour, the bakers will have no choice but to buy the more expensive local flour and pass on the difference to the consuming public.

When we interviewed Mr. Lim, we had a thorough discourse from him on what he thought of the petition of PAFMIL and the association’s contention of unfair trade practices.  Of course, the bakers have a lot to protect here, so they are fighting tooth and nail to quash the petition.  In fairness to PAFMIL and to Mr. Ric Pinca, they have always been a “suki” of Business & Leisure over the past few years, whenever a contentious issue involving local wheat flour is concerned.  They were always willing to shed light on any issues involving their sector.   For this one, however, we have only heard one side, and that is the side of the bakers.  We would love to hear from Mr. Pinca as it has always been our policy to air both sides of any issue.

This industry is not a small one, and there are a lot of stakeholders here. The biggest players are San Miguel Purefoods which increased their earnings by 25 percent and earned P699 million for the first quarter of 2013; Republic Flour Mills (RFC) which allegedly reported earnings of P153 million for the same period or an increase in earnings of 18 percent; and Liberty Flour Mills whose earnings for the first quarter were reported at P79 million, or an increase of 33 percent. Those are indeed healthy profits.

On the other hand, Lim pointed out, how can the local flour millers claim imported Turkish flour in the Philippines has increased its volume tremendously in recent times when business is this good for our local flour millers? That is also a question mark for me.

Again sourced from one side only, PAFMIL today still controls 89 percent of the market share in the Philippines.  They used to control 100 percent of the market share, but the influx of Turkish flour into the country has reduced this to the current 89 percent, Turkish flour now getting nine percent share, the other two percent spread out among other countries’ flour.

The bakers cite all these, including the hefty earnings reported for the first quarter of 2013, to support their claim that the petition for unfair trade practices and the violation of the anti-dumping law do not hold water because the local flour millers are in fact still enjoying a windfall and are still the dominant players in the Philippine market.

PAFMIL’s membership of seven big (original) members, while being still the dominant forces, is reportedly also being threatened by the entry of two new players, according to Mr. Lim.

The petition filed by PAFMIL is now with the Department of Agriculture, and as of this writing, we still do not know where the DA is going with these arguments presented. For sure, there will be a lot of lobbying from both sides which are two big forces in the industry. The Filipino-Chinese bakers say that they hope the Department of Agriculture will not have a double standard of justice – the country’s flour millers, of course, can mouth the same thing. I hope PAFMIL can likewise vent their side which we will be happy to print in the interest of fair reporting.  In the meantime, we also hope that both warring camps will see that the bottom line in all these is still the welfare of the Filipino consumer.

Mabuhay!!! Be proud to be a Filipino.

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