Bittersweet

This controversy over the importation of sugar makes no sense to me.

Let us begin with the basic market facts: Domestic sugar prices, even before the recent surge, averaged double what consumers pay in neighboring economies. There is not enough supply in the market – all the beverage makers say so. There is no available sugar in my community market, forcing my favorite banana cue maker out of business.

Government spokesmen tell us enough sugar is coming because the milling season has begun. Therefore we will not import in the meantime. This sounds like something Stalin’s regime would say. We are supposed to have a free market, not a command economy.

The current policy condemns our consumers. We are all captive to domestically produced sugar at whatever price the rich planters and millers decide to sell.

The current policy is inflationary. If our consumers are forced to buy domestic sugar at twice the price the commodity is available in the rest of the region, this will fuel inflation rather than mitigate it.

The President tells us that postponing importation of sugar is meant to protect the livelihood of the workers in our sugar industry. He did not mention that this economic sector has the highest inequality and uses the most antiquated methods. Our sugar production has not progressed technologically precisely because of protectionism. The planters and millers are uncontested in the domestic market and simply pass on the costs of inefficiency on our consumers.

If the price discrepancy between domestic and foreign sugar continues, manufacturers will migrate to where raw material is cheaper. The local beverage industry will shut down because not only is sugar expensive, sugary beverages are now taxed heavily. No wonder the shelves of our supermarkets are overflowing with beverages and other processed food from neighboring economies.

It will probably take decades to bring up our sugar sector to the levels of efficiency pertaining elsewhere. Protectionism is not the way to achieving that goal.

Otherwise, as we are doing with our other sunset agricultural sectors, we could choose to transition our sugar sector towards other cash crops we might produce more efficiently. That might be accomplished at a shorter time frame and will involve less government intervention in the free market. It will also mean less corruption.

Scope

After the now controversial Sugar Order No. 4 (commanding the importation of 300,000 metric tons of sugar) was released, we were treated to the usual calls for heads to roll.

Heads did roll. DA Undersecretary Leocadio Sebastian resigned, so did the head of the Sugar Regulatory Administration and a board member of the agency. Signing on behalf of the President did seem odd, to say the least.

Some critics, however, pin the blame on the Executive Secretary for lack of clarity in designating the powers and responsibilities of the persons involved in this mess. In a memo entitled “Designation as Undersecretary for Operations of the Department of Agriculture” dated July 15, 2022, the Executive Secretary gave Sebastian the authority to sign contracts for the DA and act as head of the agency’s procuring entity.

The mentioned memo granted Sebastian unusual leeway, including the authority to “sign contracts, memoranda of agreement, administrative issuances, instruments and administrative and financial documents necessary to carry out department objectives, functions, plans, programs and projects, for the efficient and effective operations of the DA…” The undersecretary was likewise given the power to sit as ex-officio chairman or member of committees, councils, boards and bodies where President Bongbong Marcos as DA chief is a member. Sebastian was authorized to designate other DA officials to these bodies.

On top of all these, Sebastian was authorized by the Executive Secretary to act “as the designated Head of the Procuring Entity, and reconstitute the Bids and Awards Committee.” All of Sebastian’s actions, furthermore, “shall be considered valid, unless subsequently disapproved or reprobated by the President.” That leeway, as we saw, could be stretched.

On one hand, giving the undersecretary for operations a broad scope of authority is probably necessary. Like all of us, President Marcos only has 24 hours in a day. With all the things he has to attend to, he needs some sort of empowered COO to run the agriculture department – itself a complex agency.

On the other hand, devolving so much authority could be dangerous in an agency where so much vested interests impinge. President Marcos has, hopefully, found someone he could trust in designating an agriculture veteran to be Sebastian’s replacement.

Still short

The Philippines will never be self-sufficient in sugar. It is not a goal we should even think of aspiring for. We simply do not have the land to spare for this crop.

Our sugar lands are not configured for mechanization, unlike those of our neighbors. The plantations were laid out when planters brutally exploited migrant labor to make fabulous wealth for themselves. Today we pay the costs for tolerating this oppressive system.

As the economy grows and consumption rises, sugar will be short every year. The higher price we pay for domestic sugar will distort our manufacturing. If we do not import more sugar and bring down the price regime, we will end up importing more sugar-based consumer goods. That will restrict our economy’s value chain.

If reason alone is obeyed, we should prepare to transition out of sugar as we must out of other sunset crops such as tobacco. But that will require expenditure of much political capital as well as truly far-sighted statesmanship.