Sugar liberalization put on hold

Duterte economic team heeds Senate request to defer import-easing plan

By: Ben O. de Vera, Philippine Daily Inquirer, 18 Nov 2019

The Duterte administration’s economic team is heeding the Senate’s request to defer the liberalization of the sugar industry even as the government wanted to bring down domestic prices and address supply shortages by possibly amending the current revenue-sharing structure between mills and farmers.

“We will respect the desire of the Senate to discuss this at length, and I think it’s a right move,” Finance Secretary Carlos Dominguez III told reporters last week when asked to comment on Senate Resolution No. 213 signed by 21 senators opposing moves to allow more sugar imports into the country.

In their resolution, the senators claimed that sugar industry deregulation would affect 84,000 farmers and 720,000 industry workers as well as their families, resulting in a potential negative impact on the livelihood of up to five million Filipinos.

The senators also warned that increased sugar importation would push affected households into poverty.

But Dominguez said the government still needed to address high prices and one proposal he had in mind was “incentivizing” improved efficiency among mills.

“You see, the situation in the sugar industry—our population has really grown. It’s already at least 105 million, and we’ve seen in these last two to three years there’s always a shortage [in sugar supply] and the domestic prices are double [that of] the world market,” noted Dominguez, who heads the economic team.

“I also told Sen. [Juan Miguel] Zubiri that the other problem is the legislation that regulates the relationship between the planter and the mill. The law says the planter gets 60-70 percent share of the crop and the mill gets 30-40 percent, it really depends on the area. Because of that, the mills have no incentive to put capital expenditures to improve the efficiency of their mill. Because when you put a capital expenditure there, you only are able to recover 30-40 percent of the revenue of the mill because the balance goes to the sugar planter,” Dominguez said.

“We should also think about a new kind of relationship between a mill and the planter so that the mill is also incentivized to be more efficient so they will spend for the necessary technology and capital to extract more sugar from the cane,” Dominguez added.

Asked what would be an ideal revenue-sharing scheme, Dominguez replied: “If you look worldwide, the mills and the farmers do not share. The mill buys the cane, so if they own the whole cane then they can extract, they have every incentive to extract the most amount of sugar.”

For Dominguez, the current system has to be changed.

Dominguez said he was optimistic that discussions on sugar would not be more difficult than the government’s successful move to liberalize rice trade, which took nearly the first half of the Duterte administration’s term.

“I think if everybody sits down and be reasonable, we can arrive at a good solution—basically improving yields from the farm and the mill, satisfying the local demand, and possibly even exporting and being competitive worldwide,” according to Dominguez.