Betting big on cement

Tycoon Ramon “RSA” Ang’s  move to bid for Holcim Philippines — and beating foreign giants at it — has been hailed as gutsy and bold by industry players.

I agree. It's not an easy decision, but RSA’s track record of growing businesses through the decades is enough proof that he knows what he's doing.

Just look at the diversification of San Miguel Corp. He led SMC’s diversification from just a brewer to become a major player in unexplored territories. Now, SMC is the country's biggest conglomerate with businesses in power, tollroads, oil refinery, packaging, and now cement.

The only remaining hurdle is the Philippine Competition Commission, but RSA is confident the transaction would get the approval of the government’s anti-trust agency.

It is, after all, a bold acquisition by a Filipino-owned company and not a foreign player. Besides, he said, Holcim’s market share is less than 20 percent of the market.

“Do you know that 35 percent of cement sold in the Philippines is imported? And do you know who are the major players in the Philippines — Holcim, Cemex, Lafarge, Taiyo — these are all foreigners. So aren”t you proud a Filipino buyer won (Holcim)?” he said on Tuesday after Petron’s annual stockholders meeting.

Cement tariffs

Speaking of cement, cement manufacturers in the country are lobbying for a permanent tariff on the product, claiming that imports are harming their business.

The World Trade Organization (WTO) rules allow governments to use safeguard measures against imports that harm local industries.

Cement players believe that the quality of imported cement may not be that good.

“Some cement that come in are of poor quality. It was always suspected that Bohol suffered major damage during the last earthquake because they have been using lousy imported cement,” one source said.

In all, industry players claim that the recent four percent tariff has failed to curb the flood of imported cement in the country, thus requiring more protection for local manufacturers.

The Tariff Commission through its initial investigation, has said that imposition of safeguard duties on the imported cement is indeed justifiable.

In fact, according to the latest monitoring of the trade department, cement imports are still on the rise despite the tariffs.

Volume of imports rose to 1.74 million metric tons in the first quarter of the year from 1.06 MT a year ago, data showed.

Against this backdrop, it is now up to the trade department to determine if the tariff is enough to protect public interest and ensure the stability of supply and pricing in the local market.

Good quality cement

Nowadays contractors say that the Duterte administration's Build Build Build is finally gaining momentum and that demand for cement is growing.

With this development, the government should ensure that the quality of cement we use especially for our infrastructure projects is good, whether or not it is locally-made or imported.

Higher tobacco taxes

Another industry that seems to be discombobulated these days is the cigarette industry.

JTI Philippines president and general manager Manos Koukourakis must be scratching his head in frustration.

I can almost hear Manos sighing — with his heavy Greek accent — on how smuggling might worsen if cigarette taxes increase drastically again.

“Countries which raised taxes steeply still suffer from the effects of smuggling government coffers included. Everything looks good short term, but mid to long-term the consequences are rather dire and we’ve seen it in Malaysia, Thailand, Singapore, Indonesia and so many other places,” Manos said in a statement on recent moves to raise cigarette taxes again.

According to Manos, tobacco farmers, millions of retailers, employees and those indirectly working for the tobacco industry  will be affected when sin taxes are raised drastically.

Manos asserts that the Philippines already has a balanced situation wherein smokers have been ditching the habit. From 26 million in 2013, it has gone down to 16 million in 2018. The tobacco smugglers are broadly kept at bay and the government keeps collecting more from tobacco — P130 billion in 2018 and more in 2019.

As such Manos said, “When such a unique balance is struck why would anyone like to disrupt it?”

Manos has reasons to be frustrated. JTI Philippines's parent firm Japan Tobacco poured in billions in the country when it acquired Mighty Corp., taking into account the sin tax landscape at the time.

But, unfortunately, for cigarette companies, the popular boxer and Sen. Manny Pacquiao has joined the fray, knocking out the comebacking Yosi Kadiri mascot in powerful TV ads launched by the Department of Finance and Department of Health.

 Round one goes to Pacquiao and the anti-tobacco lobbyists. Round two will likely go to Big Tobacco and the fight will go on and on.

Of course, the DOF and the DOH are right in saying that the government really needs additional revenues to fund health care.

But let's be wary of smugglers who might take advantage of the situation. While the tobacco war goes on, smugglers may be laughing all their way to the bank as their businesses just keep on growing with higher taxes.

Iris Gonzales’ email address is [email protected]. Follow her on Twitter @eyesgonzales.