Survival of the ‘firstest’

The delay in the implementation of the government’s Investment Priorities Plan (IPP) has affected the entry of a new cement player expected to break the perceived cement cartel in the country.

“It would be easier to break it if the IPP is in place,” Donald Dee, president of the Philippine Chamber of Commerce and Industry (PCCI) said in a telephone interview.

The 2007 IPP has included giving fiscal and non fiscal incentives for the cement industry, a provision not found in the previous IPPs.

The approval of the incentives meant to encourage businessmen to invest in two priority sectors of the government has been delayed due to the midterm elections. Trade Secretary Peter B. Favila said the final draft was submitted to the Palace March 30 and is currently awaiting cabinet approval. Favila said he expects the IPP to be approved after the election because officials have been “busy”.

Dee said a local businessman has already expressed interest in entering the cement trade. “He is still looking for a foreign firm to link up with,” he explained.

Dee said he observed that in spite of the underutilization of the cement firms, cement prices in the Philippines have been the highest in the region.

The World Bank has noted that cement prices in the Philippines are among the highest in Asia. As of last year, cement per ton was pegged $72 compared with $35 in China, $50 in Thailand and $65 in Vietnam.

For their part, the cement manufacturers are blaming the high cost of power as the main reason why the cost of cement in the Philippines is deemed highest in the region.

In a statement, Cement Manufacturers Association of the Philippines (CeMAP) said 25 percent of their cost is electricity.

The association said one of the major determinants of cement prices in the Philippines is power cost, which accounts for approximately 25 percent of the total cost. Therefore, to bring down cement prices, efforts should continue to bring down the cost of power and control overpricing at the retail level where the manufacturers have no control.

The big three cement firms, Holcim, LaFarge and Cemex, have agreed to not increase their prices until the end of May. With June fast approaching, there is still no word if the moratorium on price hike will be extended.