The sugar debate
BIZLINKS - Rey Gamboa (The Philippine Star) - March 21, 2019 - 12:00am

To protect the local sugar industry in 2017, the Sugar Regulatory Administration imposed restrictions on high fructose corn syrup (HFCS) importation. Manufacturers were importing the cheaper HFCS for their sweetener requirements, causing a glut in domestic sugar production and a steep drop in prices.

Last year, an added excise tax on sugar-sweetened beverages (SSB) was imposed under the Tax Reform for Acceleration and Inclusion (TRAIN) initiative, the first package of many planned under the government’s Comprehensive Tax Reform Program.

This was supposed to help local sugar planters and millers since the excise tax further discouraged importation of HFCS. There was much protest from various sectors covering a broad range of interests, from manufacturers citing the unfairness of only SSBs being singled out by the sugar tax measure, to advocacy groups saying that the tax was anti-poor.

Still, the excise tax on sugar TRAIN stayed, even with pressure to repeal the law after prices of basic commodities rose, and inflation staying high for most months of the year.

Supply-demand disparity

In the middle of 2018, a number of other noteworthy developments unfolded. First, domestic sugar prices rose to double the world market average as local production dropped purportedly due to weather conditions during the year, which affected farm yields and sugar content of harvested sugar cane.

With the new excise taxes on SSB in effect, coupled with the SRA’s tight control on the importation of HFCS, a higher demand for local sugar was created. Unfortunately, with crop yields not enough, a supply-demand disparity was created.

This imbalance elicited mixed reactions from beleaguered manufacturers. Coca-Cola FEMSA sold its 51 percent stake in the Philippine business to Coca-Cola Co. of the US and withdrew from the local market, citing sugar supply problems as a reason.

Another multinational, Nestle Philippines, initially announced it was closing down its manufacturing facility for the Nescafe 3-in-1 mix, but later recanted. It, too, gave sugar supply issues as one of the reasons.

Local snack food maker Universal Robina chose to buy the sugar milling and refining assets of Roxas Holdings Inc. in Batangas to ensure its own sugar for its drinks, including Kopico, one of Nescafe’s stronger competitor brands.

Then, in the closing months of 2018, the government started floating the idea of liberalizing the sugar industry to allow more consumers to benefit from lower-priced imported sugar and to push local producers to shape up.

The proposed free market regime for sugar was almost immediately pummeled by the intense protest of local sugar growers and millers, who warned that this move would truly kill the country’s centuries’ old sugar industry and imperil the livelihood of over 700,000 people.

Because of this, our government’s economic managers have decided to do more studies on the proposed liberalization of the sugar in the country, from finding out why sugar producers continue to be uncompetitive vis-à-vis competitors in other countries.

Changing times

The sugar industry in the Philippines today is protected by tariffs on importations, but there has been widespread criticism on the failure of government and its assigned agencies to provide the necessary support in adapting to changing times.

While domestic demand for sugar continues to rise due to a growing food processing and beverage manufacturing sector and consumer market, buoyed by improved standards of living and continued economic growth, domestic sugar production is sensitive to a host of external conditions.

Extreme climate changes can cause substantial drops in production and significant price shifts, which worries stakeholders in the manufacturing sector. The technology used in sugar milling is outdated, and sugar farmers need to mechanize their farming methods.

Globally, domestic sugar faces competition from other sugar sources, like corn, as well as non-sugar sweeteners. A worldwide lifestyle trend that discourages consumption of sugars is also gaining traction as findings associated with its excessive intake has been linked to the growing number of obesity and diabetes cases.

While sugar farming and milling continues to be a major mover in the country’s agricultural sector, we must be prepared for eventual changes in consumer demand and its economics. In future, we can look at transforming existing sugar lands to cultivating other agricultural products.

The same goes for the issue of liberalizing sugar. If the country will benefit more from a more open market that will allow manufacturers to produce food products at a lower cost, then this should be seriously considered while ensuring the least disruption in livelihoods of sugar producing industry stakeholders.

Health issue

Processed sugar in food as a health issue is perhaps not as urgent as tobacco, but warnings about excessive intake of sugar has been scientifically supported with evidence by the World Health Organization during the last few years.

Many people have become too dependent on sugar in foods and beverages, hankering daily for that sugar rush from a can of soda (or soft drinks), a slice of cake, or a creamy frappe. These foods, unfortunately, have become part of lifestyles that need to be discontinued.

Studies point to the fact that sugar really contributes no added nutrients to the human body. But the use of processed sugar use in foods and beverages is a multi-billion business today, one that employs hundreds of thousands of people.

And when the radical concept of doing away with processed sugars is brought up, livelihoods and people’s rights become hostage to health advocates’ call to limit – or even repudiate – sugar use by people.

Just like with the issue of tobacco use, government interventions such as taxes and a continued information campaign are our best option to wean people from a sugary lifestyle.

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.

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