Potential diplomatic row

Still reeling from the issue of an American soldier raping one of our own, Philippines-US relations face another potential major irritant – this time over detergents.

American companies manufacturing detergents in the Philippines, led by Procter and Gamble Philippines, have sought the assistance of the US government and the American Chamber of Commerce in the face of rising duties being slapped by the Philippine government on imports of sodium tripolyphosphate or STPP, which accounts for a substantial portion of the cost of making detergents.

It will be recalled that Procter & Gamble and other members of the Soap and Detergent Association of the Philippines (SDAP), including Unilever Phils., ACS Manufacturing, Magiclean Corp., Manufacturing Service & Trade Corp., Peerless Products Manufactuing, Royal Industrial Development Corp., and Wellmade Manufacturing, have questioned the imposition by the Department of Trade and Industry of a P14.15 per metric ton provisional safeguard measure on the importation of STPP.

The P14.15 per metric ton (42 to 45 percent)  provisional safeguard duty is on top of the regular import duties (five to seven percent) and the dumping duties (11 to 12 percent) already imposed on STPP, which brings total duties paid on STPP imports to around 61 percent. [Note: Anti-dumping duties are imposed only on imports from China. There are reports that CAWCI wants the period of imposition of the dumping duties to be extended and the amount increased}.

Both the safeguard and dumping duties were imposed by DTI on the strength of representations made by local STPP maker CAWCI (Chemphil Group) on the presence of an alleged import surge causing damage to its local business.

But SDAP insists that CAWCI  is an inefficient producer of STPP and will not benefit from safeguards and that there are no legal grounds for the imposition of such duties.

What the DTI probably did not anticipate is the adverse effects of the provisional safeguard measure on the domestic economy. Imports of finished detergents have soared because it has become more cost effective to import them.

Several companies, including Procter and Gamble, have also threatened to shut down their detergent-manufacturing facilities in the Philippines. It is estimated that it would be cheaper by P6 per kilo to produce detergents in Vietnam, so why insist on making it here.

And because it is cheaper to manufacture detergents elsewhere, detergent imports from China and Indonesia are now the fastest-growing brands in the market, at the expense of Filipino-produced brands.

SDAP members employ around 20,000 employees compared to CAWC’s 66. The Philippines cannot afford additional members of the unemployed sector.

The 61-percent duties on STPP imports will also drive up prices of detergents by as much as five percent. The DTI should be reminded that detergents are no longer luxury items but necessities, so why punish the small consumers.

Meantime, CAWCI which has monopolized STPP production for the longest time has already enjoyed in financial terms for STPP alone since 1997 (not counting the incentives and tariff protection it enjoyed since the ‘70s) as much as P674.8 million or around $12.97 million, SDAP president James Lafferty, in his letter to Trade Secretary Peter Favila, said.

P&G’s Lafferty adds that the amount paid by local soap and detergent manufacturers to CAWCI in excess of the import price since 2003 has now reached $6.065 million or a whopping P315.39 million.

Unfortunately, because the local detergent manufacturers are convinced that enough is enough, they would rather close shop or import STPP at a high price and pass on to the consumers than continue to subsidize CAWCI’s existence.

Pull out of foreign investments, major unemployment, a sharp rise in the price of detergents, possibility of being sued before the World Trade Organization for unfair trade practices, damaged reputation before the foreign business community on one hand, and the threat of closure of one local company on the other. It should not be hard for the Philippine government to decide.

Nenaco sale

Don’t be surprised if one day, we’ll learn that Metro Pacific Corp. (MPC) has been dissolved.

MPC has sold its 83.7-percent interest in the shipping firm Negros Navigation Co. (Nenaco) for a measly P5 million to Negros Holdings and Management Co., a newly incorporated holding company owned by members of Nenaco’s present management, led by Nenaco chairman Sulficio Tagud Jr.. The sale was completed last Dec. 20.

MPC, the Philippine flagship of Hong Kong-based First Pacific Co., also used to own profitable property developer Landco until its shares were transferred to Metro Pacific Investment Corp. (MPIC).

With MPC virtually a shell company, there is no logic in keeping it.

For a long time, Nenaco has been MPC’s blackeye. Not good for First Pacific which is also the controlling shareholder of the country’s most profitable and valuable company Philippine Long Distance Telephone Co. (PLDT).

First Pacific wanted a clean MPC specifically, one which was not being dragged down by losses by the financially troubled Nenaco which has been under court receivership for the past two years.

MPC posted a net loss of P477.9 million in the first nine months of 2006 mainly due to Nenaco.

With MPC only having minimal interests in Nenaco, the stage was then set for the blame for the shipping firm’s eventual bankruptcy to fall on the new owners.

Nenaco owes creditors and suppliers more than P2.4 billion in payments for services and supplies rendered. Only the court approved rehabilitation plan for Nenaco in 2004 kept the shipping firm afloat. Even at that time, Nenaco creditors and suppliers were opposed to the court approved rehabilitation plan claiming that it only gave the shipping firm more time to dodge its liabilities. Now, creditors and suppliers believe that their worst fear has come about.

Just recently, GE Seaco which is the world’s largest container lessor has asked a Manila court to order Nenaco to pay its rental fees after the debt-saddled shipping firm reneged on its promise to settle its obligations this year.

Lawyers of GE Seaco claim that Nenaco did not pay them a single centavo this year despite the program of payments agreed upon by both parties. For July alone, Nenaco has unpaid fees of $18,835.60 for the rental of GE Seaco’s container vans which became due end-August.

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