Fate, they say, plays cruel tricks. In our country’s relatively short history, it’s easy enough to analyze where we’ve gone wrong and what we need to change but unfortunately, our leaders don’t want to do it.
Why? The status quo favors them. Louie Beltran described it best. The Republic of Banana. The elite of our countrymen have no vision for the country to become great. They just want to continue with its rape. It’s what our colonizers did and what they continued to do when it was their turn after power was turned over to them in 1946.
Marcos Sr. had a vision but stumbled along the way because of his indiscretion costing him big-time with his Imeldific. Now, it’s another Marcos at the helm during a time when the situation is much worse.
Everything is coming to a head now. It’s time to face up to the consquences of inaction. We haven’t done anything radical to address the problems we face since 1946.
Since we can’t produce enough rice, we now import it in order to prevent food inflation. Now our antiquated sugar industry can’t produce sugar at competitive prices because the stakeholders never bothered with modernization because they controlled the system. The protectionist scheme is akin to the Japanese protecting their rice production at all costs. In Japan’s case, they can afford it. We can’t.
Agriculture hasn’t been contributing much to economic growth in the last couple of years. It’s akin to the perfect storm. It’s a combination of agrarian reform gone awry, natural and man-made calamities, climate change and misguided government policies, which have all combined to make it cheaper to import despite our having natural resources.
International price for refined sugar is about P22 per kilo. Our sugar costs P70 per kilo in supermarkets, if the commodity can at all be found. In the wet markets, the price hovers at about P100 per kilo.
Those numbers were relayed to me by Romy Neri from an apparently earnest online discussion group of economists trying to understand the sugar crisis. The more they talk about it, the more hopeless the outlook for our sugar industry seems. It is becoming apparent, this large sector of our agriculture has long been economically dead, kept alive by the protectionist life-support systems of the Sugar Regulatory Administration (SRA).
To put that most vividly: the sugar sector is a zombie industry. It can only be kept alive by keeping our consumers captive and imagining market forces did not exist.
It is even worse. The more we keep on protecting our sugar sector, the greater it will cost our economy. The industry drags us down the path to underdevelopment.
He proposes we use this measure to evaluate our policies regarding sugar going forward. If necessary, he thinks, we might need to pay our planters not to plant at all to save our economy from wasting resources on a futile commodity.
In a perfect world where logic rules, this should be a great idea. But there is one inconvenient fact: about half a million workers rely on the sugar industry for their subsistence. Famine once hit Negros island in recent memory. It could happen again.
But we certainly cannot go on with the present set of policies designed to victimize our consumers in order to keep a zombie industry on life support.
For instance, we should get rid of the classification system that sets aside part of our sugar production for export. This is a relic from a past when the economic facts were completely different. Given that our production costs are over twice the global average, we can no longer profitably export this commodity. No foreign buyers will buy our overpriced sugar.
Even as we hold our consumers prisoner to the sugar barons, it remains that our domestic production is 380,000 metric tons short of domestic demand. Importation is not an option. It is a necessity.
Even if we continue on with present protectionist policies, at the risk of being called out by the rest of the world for reneging on our free trade commitments, other domestic sectors will be stunted or deformed by the wide disparity between local and international sugar prices.
We cannot be competitive in the processed food sector, considering the cost of local inputs. We will therefore be foregoing potential investment and better employment opportunities in these sunrise industries. That is an economic cost we must bring into the equation.
For as long as the huge price differential between domestic and foreign sugar exists, the lure of smuggling and price speculation will be great. Suppressing these activities will entail huge enforcement costs.
If smugglers cannot bring in sugar in sacks, they may simply import beverages and other finished processed food items from neighboring economies such as Thailand. The latter is completely legal since we are committed to a regional free market.
For instance, as a rational consumer, I buy bottled milk tea produced in Taiwan for my sugar high. It is cheaper than its local equivalent.
At the rate we are ignoring the real crisis confronting the sugar industry, we will soon see our beverage manufacturers migrate their production to neighboring economies. This will worsen our trade imbalance and result in more unemployment.
Both the local sugar producers and the importers who make a killing from the inefficiency of our sugar production use the workers in this sector as a straw man. The local sugar industry must continue to be protected, they try to convince us, or the workers will lose their livelihood. But to do that, we deprive many more potential workers in more viable economic sectors the chance to even have a livelihood.
If government is to play a truly reformist role in this unfolding crisis, it must prepare the sugar sector for transition to more viable crops. Give up on sugar already. It is dead. The life support is expensive for everybody. Any attempt to save it will distort our domestic economy even more. Accept the short-term costs of transitioning to avoid the enduring costs to consumers and industry.
Sadly, the legislative inquiries held so far remain trapped in the preferred landlord/miller narrative about hoarders and smugglers. No legislator I have heard so far is talking about the bigger economic picture and the longer outlook.
Marcos has declared there is a serious crisis in agriculture which is why he has designated himself as the head of that department. Unfortunately, he doesn’t seem to be in a position where he realizes the gravity of the situation.
He deemed the sugar crisis resolved after a meeting with the stakeholders at the Palace where the statement was issued that sugar would be sold at P70.00 per kg. What wasn’t included in the statemen was if one could find it in the market at P70.00 per kg.
One of the reasons why we haven’t been able to produce enough quantities of staple agricultural commodities is the presence of cartels in the market. The sugar cartel is controlled by the Negrenses. One of the uncles of the Senate President represents his brother in the sugar cartel. That’s an open secret along with the favored trades and millers who are allowed to import sugar. If Marcos isn’t aware of this then he is being totally naive or in cahoots with the cartel.
Philippines most food insecure in East and Southeast Asia
The Philippines is the most food insecure country in Sotheast and East Asia as per the infographic. This means that it will probably not happen that we will be able to establish an agricultural export manufacturing base similar to what Vietnam and Thailand have accomplished.
Magno has made the suggestion that government should rechannel scarce resources considering that the sugar planters and millers haven’t made any effort to modernize their industry but instead have used regulatory capture to maintain the status quo.
Marcos should also be wary of this problem because agriculture has political ramifications. The cliche’ is a hungry stomach knows no law. Instead of Bayan Babangon Muli, it might well be Bayan Babagsak Muli under his watch and he is a man who is out for redemption.
If this is the case then he and his economic team should review their growth strategies. We are on the brink of another global economic crisis. The geopolitical situation is also not favorable given there is war in Europe and tensions are high between the US, China and Taiwan.
China is also grappling with a potential financial crisis in its property development and housing sector. It is the only country which has cut interest rates when every other one is raising interest rates to combat inflation.
Marcos should grab the bull by the horns and be aggressive in dealing with the serious problems the country faces. Otherwise, he may just fail just when he thought success was already his.
Comments