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Business

Sugar daddy

DEMAND AND SUPPLY - Boo Chanco - The Philippine Star

Our government’s decades old strategy of playing sugar daddy to our sugar industry has to end for the good of the rest of us Filipinos.

The sugar barons have enjoyed many decades of prosperity under favorable government treatment that enabled them to live profligate lifestyles in the midst of poverty. Not even their poor workers in the field, known as sacadas, shared in the bounty.

Because the sugar industry has been spoiled silly like a mistress, it has failed to improve its productivity at the farms and at the refineries. Very little investment had been made so that one sugar mill after another closed down.

Now, Thailand is the more efficient sugar producer. In fact, we have been buying sugar from Thailand to cover shortfalls over the last few years.

Unfortunately, the response of all administrations, past and apparently the current as well, is to coddle the sugar industry some more. The sugar lobby is just too strong for our officials to take the national interest view.

The issue of importing sugar is on the front pages because domestic consumers are protesting the rise in prices to over P110/kg. Sources in the government and private sector have pointed out that we have a shortage of sugar available for the domestic market.

That’s not good for the economy. Food manufacturing industries, big and small, will be severely affected. We are not just talking of Coke and Pepsi, but MSMEs, the mom- and-pop type of cottage industries may even have to shut down.

Around 50 percent of our sugar is consumed by the manufacturing sector, particularly the food and beverage industry. High sugar price means high input costs.

High costs will have negative implications to the competitiveness of our food and beverage manufacturing (which accounts for more than 50 percent of the gross value added in manufacturing).

This also affects the manufacturing sector’s growth and employment. Consumers must also pay high prices for all sugar-based food and beverages.

Bottling companies may start cutting down on the number of their workers due to inadequate supply of sugar. They can shut down operations if sugar supply and prices remain iffy.

It will be worse for our banana or camote cue, turon, pili nuts and other native delicacies. Workers and vendors will lose their livelihood if they can’t produce their products or can’t sell at usual prices. Junior and his advisers have not thought about the implications of the decision not to import an emergency supply of sugar on our poor food vendors.

If this keeps up, it is possible that many big local food processing industries will migrate to neighboring countries where sugar and other raw materials are far cheaper. Tariff levels for sugar are sky high.

Experts I have talked to say we will run out of supply of raw sugar this month. Refined sugar stocks will only last until October, even with local production.

For August alone, the estimated raw sugar deficit is 37,000 metric ton (MT). For September to October, even with local production, there is another raw sugar deficit of around 35,000 MT.

A former DTI Secretary is worried that with prices now over P110/ kg, and no announcement of replenishment, local supply might even disappear in anticipation of further increase in prices.

There are reports that there are stocks of sugar within the country, but these are classified as for export only and can’t be released to the domestic market. SRA prevents quedan A sugar from being sold here to alleviate price pressure.

It doesn’t make sense. Local prices are much higher now than the one to be obtained from our US sugar quota market. Assuming there are enough stocks, it is not even a sense of patriotism to shift from the US sugar quota market to the domestic market. It is just a simple business decision to maximize profit.

An expert explained that “for many years, the domestic price has exceeded the US price. I think the A quedan is a bit of a costly nostalgia at this point.”

I understand that Junior was briefed by his now resigned chief of staff at DA last week. The COS got the impression that Junior agreed to import 300,000 MT of refined sugar and he was instructed to prepare papers for this.

Since he was given authority to sign on Junior’s behalf through an SO from OP, he did sign to facilitate matters and bring down retail sugar prices faster. Unluckily for him, the sugar lobby got to Junior and Junior disowned the decision. So, the COS, a decent man, resigned.

Those who know the COS say he is most technically competent. He has a PhD in plant protection from Cornell. He was a TOYM awardee and PhilRice director. He worked in Vietnam, Myanmar, and Cambodia as a rice scientist. The Vietnamese government awarded him the highest honor in agriculture for contributing immensely to increasing rice productivity in Vietnam. He is incorruptible and lives an almost ascetic lifestyle.

We have lost another good person due to bad politics. It also showed how strong the sugar lobby is.  How dare this technocrat try to do the right thing!

One excuse I heard is that it will soon be the sugar harvest season anyway. But from cane harvest to bags in the markets will take time. Our sugar mills and refineries are old and not that efficient. In the meantime, what about the consumers who must deal with no stock or high prices?

Our government keeps on saying the goal is to protect local producers, even if they are inefficient and uncompetitive. We are always being told about the need to balance the needs of local producers and our consumers. But food prices keep on soaring and we are paying a lot more for our food than our neighbors in ASEAN.

The real problem is that the government consistently fails to help our rice, sugar, and other farmers enough to make them competitive. Who pays for government failure? Us consumers, of course.

The government must stop being a sugar daddy. It is time to look after the good of most Filipinos. Those once profligate rent seekers have been living off all of us long enough.

 

 

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco

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