Who's afraid of AFTA?

Our local business leaders dread the coming of 2010, when our commitments to the AFTA will finally take effect. Come next year, many of our industries see an end to the good times, and see themselves struggling from all sides.

The 10 countries from the ASEAN region have agreed that by 2010, there will be zero tariff for all goods coming into these countries if exported by another member of the agreement. The Philippines is of course a signatory to this trade agreement and agreed with everybody else to scrap all importation tariffs among the member countries. Now, one after another, they are crying for a suspension of the imposition of the AFTA agreement. 

One of the first to voice out their concerns was the sugar industry. Last week, I wrote about this and a reader gave me some feedback on this piece.

Mr. Philip Ortiz of Bacolod City says that Thailand is our main competitor for sugar in the ASEAN region. He wrote: “It has been said that the typical Thai sugar planter is happy if he sells one LKG of sugar at the equivalent price of P400 while the Philippine cost of production alone per LKG bag of sugar is around P800. The price now of b sugar in the market is in the area of P1,000 per 1 k bag. So you can see how disadvantaged we are in terms of pricing.”

The Sugar Regulatory Board cites the government subsidies enjoyed by specific industries in other countries. In Thailand for example, aside from the subsidy enjoyed by the sugar planters, they have access to easy credit. In contrast, according to letter-writer Mr. Ortiz, crop loans extended to our sugar planters cover only “50 kphp/hectare where a planter would need at least 80 kphp/hectare”.

Thai sugar is far cheaper than Philippine sugar. Aside from the government support they enjoy, there is also the far superior infrastructure of the country. Their farm-to-market roads and their much-improved irrigation have contributed greatly to this. Woe to the Philippine sugar planter who can’t compete with his Thai counterpart in the world market and can only afford to sell at a profit to the local market. And woe to the Filipino consumer who has to pay more for a commodity that he can get cheaper from other countries.

Another reason for our exorbitant sugar prices is the high price of urea fertilizers. To illustrate this point, Mr. Ortiz wrote: “In 1999, when I first started planting sugarcane, the price of one LKG bag of sugar was P800, while urea was P300/one kilo bag. Now the price of urea is P950/k while sugar is only P1,000/one kilo bag.... organic fertilizers are not readily available and cannot be a complete substitute for chemical fertilizers. What is needed is nitrogen and they have not come up with an organic fertilizer with pure 46-0-0 (46- nitrogen, 0- phosphate, 0- potassium). That’s why we still need chemical fertilizers.”

Apparently, the only way for Philippine sugar to survive come 2010 is for the government to extend the same subsidies that the Thai planters enjoy. Mr. Ortiz continues: “A safety net we can use, however, is that if imported sugar is found during milling season (Sept.-April), SR can classify such sugar as “c” (reserved) and cannot be sold until they get clearance from the SRA. But let’s not get naive, I am sure that “reserved” sugar will eventually find its way to the open market”

“In conclusion, let me just say this: I have found a formula that will generally make sugar planters happy. This is the formula: price of a 50-kilo bag of sugar should be no less that P300 more than the urea. So, if presently urea is selling at P1000/bag, price of sugar should be no less than P1,300/bag. And this is not unrealistic because in 1999, as pointed out, sugar was P800/ one kilo bag while urea was P300/1 kilo bag, a difference of P500. With this formula, I think I speak for many sugar cane planters, they will be content.”

Thanks for sharing that Mr. Ortiz.

Another one crying out for the temporary suspension of the AFTA is the hog industry. 

They recently held the 18th Hog Convention and Trade Exhibit at the World Trade Center and we had occasion to get some inputs from Mr. Albert R.T. Lim Jr., president of the National Federation of Hog Farmers, Inc.

First off, the hog farmers are definitely not ready for the 2010 implementation of the AFTA. Interestingly, they also single out Thailand as a stiff competitor in the hog industry, and also point out the government subsidies enjoyed by the Thai hog producers as one of the main reasons for our uncompetitive prices in the world market.

There are other reasons that the federation raises to support their claim that they are not quite ready for 2010. One of these is the skyrocketing price of corn. From P12.50/kilo, the hog raisers found themselves faced with doubled prices — P24/k — until the Department of Agriculture’s Sec. Arthur Yap intervened. He allowed the hog producers and feed millers to import corn (which had a tariff of 35 percent!).

Everybody assumed that the country had an abundant supply of corn, so the price jump was unexpected. Apart from weather problems (too much rain, and the corn couldn’t be dried), there was also the problem of less farms planted to corn. More and more corn farmers are shifting to other crops like rice, and this has contributed to the shortage.

Fortunately for the hog farmers, there was ample supply of feed wheat, which they used in place of corn.

Then too, there was the Ebola scare which prompted the Chinese government to issue a ban against all pork products from the Philippines. It’s a good thing we do not export to China, nor are there any plans to do so in the near future. Our bulk export to Singapore, though, had to be shelved because of the Ebola scare.

So who’s scared of 2010? At least these two big industries.

Last week, I thought I couldn’t rush this column because of time constraints. Lucky for me I was able to squeeze this through. Anyway, by the time you read this, my family and I would be roaming the back streets of Barcelona looking for good bargains. Then off to our long-awaited Mediterranean cruise aboard the Norwegian Cruise Lines (Norwegian Gem). I should be writing about this when I get back in two weeks time.

Mabuhay!!! Be proud to be a Filipino.                                

For comments: (e-mail) [email protected]