YEARENDER: Price control marked sales of basic goods

MANILA, Philippines – For the first time, and perhaps the last time during her presidency, President Arroyo, placed the entire country under price control after tropical storm Ondoy hit Metro Manila and some surrounding provinces. She regulated the prices of basic goods and services.

Consumers, especially those directly affected by the storm and subsequent typhoon Pepeng were grateful because they no longer had to contend with sudden spikes in prices for at least 90 days. Under the Price Act, the President may freeze prices for 90 days under a state of emergency.

The Department of Trade and Industry (DTI) vigilantly monitored prices. Although it reported many violations, there is no data that a case was filed in court against price control violators.

Shortly after the imposition of price control for basic commodities, the President ordered petroleum companies to roll back prices of petroleum products to pre crisis levels under Executive Order 839.

The move benefitted consumers who were still reeling from the losses they incurred because of typhoons. But it was deemed like a death sentence for retailers of petroleum products.

Issues such as supply shortage and increasing costs for retailers sparked protests over price control. Various business groups demanded the President to reconsider her decision, especially with regard to petroleum products.

The Joint Foreign Chambers joined local industries like the Philippine Chamber of Commerce and Industry (PCCI), Management Association of the Philippines (MAP), Makati Business Club (MBC), and the Federation of Philippine Industries (FPI) in calling for the termination of the executive order.

“We strongly recommend an immediate announcement of a termination date for EO 839 to mitigate the adverse impact of forced loses on the petroleum, risk of future adequate supply industry, and disincentive to future investment,” JFC said in a statement.

“Our members are particularly concerned about the open-ended nature of this price control with no specific “sunset” date which leaves the oil industry and all those who depend on oil products in a state of great uncertainty for the foreseeable future,” the group added.

According to them, Executive Order 839 will result in the reduction in supply to and availability of petroleum products in Luzon as importers will not wish to sell at a loss. Because Luzon comprises 80 percent of the Philippine petroleum market, it will have a negative impact on the capacity and growth of the Philippine economy.

JFC stressed that there is no need to impose a price control on oil firms because “oil companies operating in the Philippines have been demonstrating outstanding corporate social responsibility in various forms during the state of calamity in Luzon and, in particular, in keeping overpricing in check and bringing their damaged facilities quickly back into operational status to ensure continuity of petroleum supplies.”

JFC said that they understand that in some situations there is a need for price control

to prevent profiteering by some unscrupulous firms and “middlemen.”  However, they said that it was not the case here.

Aside from refusing to import more oil and oil products, foreign businessmen warned that price control would result in an  arbitrage between Luzon and the Visayas/ Mindanao as there will be an incentive to direct currently remaining oil inventories in Luzon to be sold in the Visayas and Mindanao where the prices are higher.

Likewise, with potential forced loses in petroleum sales, there was a disincentive to any further investment in the sector which would affect future supply over the longer term.

Shortly after the President bowed to the pressure and lifted all price controls before the 90 day period. Trade Secretary Peter B. Favila spoke to the media and assured the public that prices will not go up even if the price control was removed.

However, supermarket owners were singing a different tune. Prices of meat items, canned goods and refined sugar went up as the government lifted price controls although supermarkets said they are heeding the call of the government to not take advantage of the lifting of the price freeze saying that they would try to tone down price increases for basic and prime commodities until after Christmas.

“For the sake of those affected by the typhoons that hit our country, we will try to do our best to control increases until after Christmas,” Federico Ples secretary general of the Philippine Association of Supermarkets Inc. told The Star in an interview.

According to Ples, they expected price increase in refined sugar, canned goods and meat items. Ples explained that the government-declared standard retail price (SRP) for these products during the period of price control were too low.

Ples said that supermarkets would do their best not to increase their prices especially with the holiday season. “We have already reduced our margin to only three percent to five percent net.”

Ples added they would sell the commodities at the lowest possible price but they still remained dependent on the manufacturers, distributors and wholesalers. He noted that there was no need to immediately raise prices because the supermarkets still have inventory from the old prices.

For cement, there was a reported shortage and price surge a week before Christmas. The DTI is now investigating the big three cement manufacturers in the country as prices in selected areas went up by as much as P40 a bag and some markets are complaining of shortness in supply.

“We have called the manufacturers to inform them that monitoring reports received from the regional and provincial offices of the DTI in selected areas indicate that the retail price of cement has increased by a range of P10to P40 over the past week and some of the outlets/ hardwares stores do not sell claiming they have no supply,” Trade and Industry Undersecretary for Consumer Welfare Zenaida C. Maglaya said. –Ma. Elisa P. Osorio (The Philippine Star)