Levelling the playing field

If we are going to propel a new era of industrialization for the Philippines as mandated by the Tatak Pinoy Act, which also aims to enhance domestic products and industries’ competitiveness, then the first order of business should be to level the playing field.

The Department of Trade and Industry (DTI), alarmed by the increased importation of cement into the country that resulted in an operating loss for the local industry last year, has by its own initiative (motu proprio) commenced a preliminary safeguard investigation to determine whether there is evidence that increased cement imports from 2019 to June 2024 are causing or are threatening to cause serious injury to the local cement industry.

Republic Act 8800 or the Safeguard Measures Act provides that the DTI secretary can immediately authorize the imposition of a provisional general safeguard measure in the form of a tariff increase in case of critical circumstances which would be difficult to repair, after a preliminary determination that increased imports are a substantial cause of, or threaten to substantially cause, serious injury to the domestic industry. Such provisional measure shall not exceed 200 days from date of imposition.

The law also allows the imposition of a definitive safeguard measure after the secretary transmits its records to the Tariff Commission for immediate formal investigation. Once the investigation is completed, the Commission will submit a report to the Secretary within 60 to 120 days and recommend an appropriate definitive measure such as an increase in duties on imported cement.

In 2019, the DTI imposed a general safeguard duty on cement imports, specifically for ordinary Portland cement type 1 and blended cement type 1P, for a period of three years after the Commission found a causal link between increased cement imports and threat of serious injury and impairment to the domestic cement industry.

In its notice published last Oct. 31, the DTI said that evidence made available to it showed cement imports increased by 10 percent in 2020, 17 percent in 2021 and five percent in 2023 in absolute terms. In relative terms, the share of imports also increased from 30 percent in 2019 to 47 percent in 2023 and 51 percent from January to June of this year.

It noted that during the period of investigation, the domestic cement industry has suffered serious injury based on evidence showing that despite the significant decline in market size, the share of imported cement increased; that the domestic industry’s sales revenues declined from P79 billion in 2019 to P64 billion in 2023 and that its operating profit dropped by 11 percent in 2020, increased by 12 percent in 2021, then significantly declined by 69 percent in 2022. By 2023, the local cement industry already posted an operating loss when profits dropped 137 percent.

It was also observed that the weighed average landed cost of imports is lower than the average selling price of domestic cement indicating a price undercutting of 24 percent and that local cement manufacturers have been forced to reduce prices by two percent just to compete with lower priced imported cement.

According to the notice signed by DTI Secretary Ma. Cristina Roque, evidence furnished the department also showed that the increased imports were the substantial cause of serious injury to the domestic industry based on the fact that the significant increase in the volume of imported cement preceded the serious injury in 2023 and that conditions of competition show that the market share of locally produced cement was essentially displaced during the period of investigation as the share of imports significantly increased.

How can we encourage our domestic cement industry to keep investing in new capacity and modernizing if cheap imported cement keeps taking a huge chunk of its market and unfairly at that? Most of these imported cement are cheap not because their producers are efficient but because these products are dumped, subsidized, or do not pay the correct duties.

In fact, in March 2023, the Philippine government imposed a definitive anti-dumping duty ranging from 2.33 to 23.33 percent on certain types of imported cement from Vietnam for a period of five years.

More than meets the eye

Just last Oct. 30, the Land Transportation Office (LTO)’s online portal called the Land Transportation Management Service (LTMS) bogged down for 12 hours and upon inspection, it was discovered that the main line that connects the LTMS center to the internet was cut.

The LTMS has been described as a complex system with 400 LTO sites connected to it. Motorists can access and manage their data through it while data from motor vehicle dealers, insurance companies, private motor vehicle inspection centers, among others, are processed through the system.

It is estimated that fee collection revenues lost by the LTO for just one whole workday shutdown amounted to a whopping P137.5 million. Last Oct. 30’s loss could even be more given the long holiday ahead.

What is alarming is the fact that the LTO has failed to ensure business continuity or resiliency when it neglected to provide redundancy by contracting a backup connectivity provider to step up in times of emergency suffered by such critical systems.

The Coalition for Good Governance urged Malacañang to address the culture of corruption and impunity at the agency. The group also critized the push for the old IT system of Stradcom Corp. supposedly to back up the LTMS.

The group revealed that the old Stradcom system is prone to human interference and can be manipulated.

It is said that the old Stradcom system has no verification feature for electronically submitted result from private emission testing centers and private motor vehicle inspection centers. This opens the door to registration of vehicles that may not be roadworthy.

The old system allegedly has a “by-pass” feature that can be used by corrupt employees to ensure the processing of registration renewals are given the “right amount.”

Under the LTMS, there is a three-digit security insurance code required and verified by the system to ensure that certificates of cover are not fake. The old Stradcom system does not have this security feature so bogus insurance policies can be manually entered into the database.

The old LTO IT system also required the payment of computer fees every time one registers his vehicle.

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