Ethanol producers press for tariff protection

MANILA, Philippines – A group of ethanol producers are calling for the increase in tariff for ethanol from one percent to 20 percent to encourage investors to put up more ethanol plants and meet the mandated five percent enthanol blend mandated under Biofuels Law.

“Unless there is strong government support, investors will remain reluctant to commit billions of pesos into the Philippine ethanol industry,” the Ethanol Producers Association of the Philippines (EPAP) in a petition to the Tariff Commission said.

In the letter sent by EPAP to chairman Edgardo Abon of the Tariff Commission, executive director Tetchi Cruz-Capellan explained how the local ethanol industry has not progressed much as predicted two years ago because it lacks equity investments and a stronger political support.

Capellan pointed out that the Philippines has to be aggressive in atttracting foreign capital to sustain initial efforts on biofuels and reach the mandated E10 blend by 2011. “In other ASEAN countries, particularly Indonesia,” she said, “ethanol producers are given as much as 30-percent protection from imports.”

Without such support mechanism in place, EPAP believes foreign capital will bypass the Philippines and seek countries with more favorable investment climate and stable domestic market.”

In a study undertaken by USAID-funded Eco-Asia Project, the Philippines was cited as having the potential to produce as much as 1.7 billion liters of ethanol. “Obviously, foreign capital is the only missing ingredient to transform this huge potential into reality since the cost of building ethanol plants requires massive capital expenditures,“ said Capellan.

There are two more ethanol plants – Green Futures Innovation and Alto Power – waiting to be built in 2010. EPAP believes these two plants are key to the country’s full compliance to the five percent mandated blend by 2011.

Presently, a substantial portion of the capital for these two plants is being raised by the private sector. But still, government support is essential to cement the strategic partnership with foreign partners.

“An increase in import duties,” said Capellan, “not further reduction of tariff, gives foreign investors more confidence in the Philippines. Protection will accelerate construction of more ethanol plants.”

Thailand and Indonesia begun their respective ethanol programs at about the same time the Philippines enacted the Biofuels Law. According to the Food and Agriculture Organization (FAO), Thailand ethanol production rose as much as 30 percent, or 176 million liters, with output growing from 408 million liters in 2008 to 584 million liters this year.

Likewise, production in Indonesia is also expected to reach thrice its present output, from 212 million liters in 2009 to 660 million liters by 2010.

EPAP pointed out the dramatic rise of ethanol production in these countries is largely attributed to investors’ confidence on government support of these countries to ethanol their producers. –Donnabelle L. Gatdula (The Philippine Star)