Dismantle sugar cartel to slash prices, Pernia says

By: Ben O. de Vera, Philippine Daily Inquirer, 20 Nov 2019

Dismantling the sugar cartel will slash local prices even as the government soft-pedals on its plan to liberalize the sector, the country’s chief economist said Tuesday.

Asked what the state planning agency National Economic and Development Authority deemed was the problem in the sugar industry, Socioeconomic Planning Secretary and Neda chief Ernesto M. Pernia replied: “I think it’s cartelism. Cartels.”

Further pressed on how the sugar cartel can be broken, Pernia replied: “That’s the challenge.”

“The PCC [Philippine Competition Commission] can contribute something to improving the supply of sugar and the prices,” Pernia said, referring to the country’s antitrust body.

According to Pernia, “I think the problem [in sugar was that] there are too many handlers, too many middlemen involved in the process.”

Pressed further if there was any collusion among sugar traders to keep prices high, Pernia replied: “That has to be investigated.”

Pernia said the earlier plan to liberalize sugar importation would be done “slowly” moving forward, as a majority in the Senate sought to stop the measure.

“We’ll try other steps first—if they succeed, then there may be no need for a full scale liberalization,” Pernia said.

Pernia echoed Finance Secretary Carlos G. Dominguez III’s recommendation to tweak the prevailing profit-sharing scheme among mills and farmers as the Neda chief said Dominguez had “more experience” in the sugar business.

Last week, Dominguez said that “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 the capital to extract more sugar from the cane.”

Dominguez had noted that at present, the planters received the bigger 60-70 percent share of the crop while the mills got the remaining 30-40 percent.

“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,” Dominguez said.