DOF bats for liberalization of sugar sector

MANILA, Philippines — The government must liberalize the importation of sugar to improve the competitiveness of the industry and its downstream sectors, such as food and beverage manufacturing, according to the Department of Finance (DOF).

In his latest economic bulletin, Finance Undersecretary and chief economist Gil Beltran said the government must lift quantitative restrictions on sugar imports and instead impose tariff to bring down prices and provide boost to the food processing industry.

“Reforms are needed to introduce competition in the sugar industry. Quantitative restrictions need to be replaced by tariffs and safeguard measures (for subsidized products) to allow for more transparent, competitive pricing and allow downstream industries to become more viable and grow as fast as their ASEAN counterparts,” Beltran said.

According to Beltran, the Philippines was unable to advance its food processing sector, unlike its neighbors Thailand and Malaysia due to the high effective protection rate (EPR) imposed on sugar, which is a basic food processing input.

“For the past eight years, quantitative restrictions imposed on sugar imports raised the wholesale price of refined sugar to 235.8 percent above the export price of Thailand and 393.2 percent above Food and Agriculture Organization reported prices,” Beltran said.

“This means that consumers and downstream industries have been paying more than twice or thrice using FAO prices the global price for the commodity,” he said.

Beltran said that while the tariff rate for sugar is only five percent under the ASEAN Trade in Goods Agreement (ATIGA), the quantitative restrictions increases the level of the commodity’s EPR to at least 247.8 percent.

Downstream sectors, such as food manufacturers and beverage industries purchase 40.9 percent and 2.8 percent of total sugar output, respectively, according to Beltran.

“These industries are burdened by the high cost of sugar. Food manufacturers have to raise their efficiency by 6.6 percent above that of their import competitors to be viable. Beverage industries will need to jack up their efficiency level by 6.4 percent,” he said.

Despite the burden, Beltran said that food processing industries that use sugar as major input, excluding those directly involved in sugar refining sector, accounted for an estimated value added of P853 billion and employed 1.26 million workers in 2018.

In comparison, he said the sugar industry directly employs 84,000 farmers and generates P96 billion in value added.

Earlier this year, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the government wants to deregulate the importation of sugar.

He said the proposal is seen to cut the cost of the commodity, which will then benefit the exports sector.