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SRA faces overhaul after import mess

Granulated white sugar and sugar cubes are seen in this picture illustration taken Dec. 16, 2018. — REUTERS/EMMANUEL FOUDROT/ILLUSTRATION/FILE PHOTO

By Kyle Aristophere T. Atienza and Luisa Maria Jacinta C. Jocson, Reporters

PRESIDENT Ferdinand R. Marcos, Jr. on Wednesday said the Sugar Regulatory Administration (SRA) will be reorganized, following the resignation of key officials who signed a sugar importation order without his approval.

“We’ll reorganize the SRA and then we will come to an arrangement with the industrial consumers, the planters, the millers, suppliers of sugar so that whatever available supply would be released to the market,” Mr. Marcos, who chairs the agency’s board as Agriculture secretary, said in a mix of Filipino and English.

Mr. Marcos expects the sugar agency to be reorganized “before the end of this week.”

Three members of the SRA board, including an Agriculture undersecretary who served as Mr. Marcos’ representative, quit after Mr. Marcos said he did not approve the order allowing the importation of up to 300,000 metric tons (MT) of sugar. 

The President said he is leaving it up to legislators to investigate the matter, so he can focus on resolving the sugar shortage. 

Mr. Marcos said if the remaining supply will still not be enough, “we will be forced to make an importation.” He earlier said the Philippines might only need to import 150,000 MT of sugar, half of the 300,000 MT earlier proposed by the SRA.

“It’s the same situation in all the agricultural commodities in the Philippines. We don’t want to import as much as possible. But the problem is that our production is not enough,” he said. “The price has been increasing.”

Mr. Marcos said he has been negotiating with traders to lower the price of sugar.

“They first offered P80 per kilo. But I asked them to bring it down to P70. We’re getting there,” he said.

Based on the latest data from the SRA, the average price of refined sugar in wet markets in early August rose by 79.5% to P95 per kilogram from P52.93 in the similar period a year ago. The average price of raw sugar in wet markets also climbed by 57.7% to P71.43 from P45.29.

Socioeconomic Planning Secretary Arsenio M. Balisacan expressed concern over the rising prices of sugar and their impact on local food manufacturers and small businesses.

“You need to have a balancing act. While we protect our farmers from headwinds, we also have to ensure that the tools that we employ to protect our farmers do not harm the rest of the economy, especially that we are trying to get poverty reduced and the economy moving at high-growth trajectory,” he said during the Economic Journalists Association of the Philippines forum on Wednesday.

Mr. Balisacan said they need to talk to the sugar planters to ensure there is sufficient supply.

“The supply has to grow. The local production has to grow. Imports should be allowed, otherwise prices will continue to skyrocket,” he said.

‘MONOPOLY OF THE STATE’Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, called for the abolition of the SRA, saying the private sector should be allowed to import freely without regulation.

“The SRA had functioned much like the National Food Authority (NFA) which regulated the supply of rice mainly through its control of imports in order to stabilize prices,” Mr. Lanzona said, recalling that the NFA was riddled with “corruption and inefficiency” and was unable to fulfill its mandate.

“We are seeing the same situation in the SRA. In this case, we should simply allow the private sector to determine the imports it needs. We should close the SRA and end the import monopoly of the state,” he added.

The government should allow foreign investors to own and operate sugar mills “to enhance competition, efficiency and innovation,” Mr. Lanzona said.

“Protection of the local sugar industry needs to be dismantled,” he said, noting that regulation has prevented sugarcane farmers from selling their products “closer to the competitive price.”

Terry L. Ridon, a former lawmaker, said without the SRA, the local sugar industry will lose government protection.

“While lowering sugar prices is certainly the concern of all, a balancing act needs to be made to ensure the survival of the local sugar industry, including poor farm workers dependent on sugar production,” Mr. Ridon said in a Messenger chat.

Industry stakeholders should disclose the actual status of local sugar supply and “answer inconvenient questions as to why sugar workers remain the poorest in the nation, despite decades of sugar plantation operations,” he added.

The SRA fiasco should prompt Mr. Marcos to designate a new Agriculture secretary, said policy analyst Michael Henry Ll. Yusingco.

“The President is primarily responsible for the entire Executive branch. For this reason, each department must have a designated secretary because the President cannot realistically give his 100% attention to every department in the Executive branch,” he said in a Messenger chat.

“A qualified person has to take care of the day-to-day operational details for him, hence the alter-ego principle.”

Mr. Yusingco said the new Agriculture secretary should be an expert in the field, not a political appointee. He noted the SRA fiasco “reflects badly on his leadership, especially if authorities find that corruption was involved.”

“The embarrassment is exacerbated by the fact that the President was actually the designated (Agriculture) secretary. Obviously, the presumption as well as the public expectation will always be that he was fully aware of the SRA’s actions and decisions.”

NO NEED FOR IMPORTSMeanwhile, sugar producers warned the government against allowing imports at the start of harvest season.

“Our mills are starting to harvest… If this harvest is lacking, then we agree with the President’s plan to import by October. But let’s wait and see if this harvest can augment supply,” Philippine Chamber of Agriculture and Food, Inc. President Danilo V. Fausto said in an interview on DZMM Teleradyo on Wednesday.

Mr. Fausto said the combined production of sugar farmers is 8,000 MT per day. He noted there is still an unused inventory of 171,769 MT available, 75% of which is for industrial use.

“We need to visit the warehouses to verify. That’s why I am wondering if they are saying there’s a shortage. Only when we are in a shortage do we turn to importation. You will kill the sugar industry and its workers… as long as we harvest, there should be no importation,” he added.

The SRA earlier estimated that raw sugar production in the crop year ending Aug. 31 will be 1.8 million MT, down 16% from the previous season.

United Sugar Producers Federation President Manuel R. Lamata said that prices will likely stabilize soon as the milling season begins.

“We have imported sugar also arriving as earlier ordered by SRA. We hope they will also locate where the imported sugar that came in is, so that it goes to the markets to help stabilize the price,” he said in a Viber message.

Samahang Industriya ng Agrikultura President Rosendo O. So said the SRA should consult with producers, importers, distributors, and traders to determine the appropriate import volume if the need arises.

“The volume will depend, that is why we need to speak to manufacturers. Whatever the remaining balance is, it should be the only import volume cleared. We are looking at around 100,000 MT, depending on production from October to December,” Mr. So told BusinessWorld Live on Wednesday.

The Foundation for Economic Freedom (FEF) said that the sugar crisis will likely impact the income of businesses and food processors, particularly small food vendors.

“We have been informed that a number of our bottling and fruit juice companies have cut down on the number of workers they hire because of inadequate sugar supply and the soaring prices of sugar in the country,” the group said in a statement.

The FEF said that the government should shift toward more “market-based solutions” while modernizing the industry to make it globally competitive.

IMPACT ON CONSUMERSMeanwhile, Eric Teng, president of the Restaurant Owners of the Philippines (RestoPH), said in a Viber message to BusinessWorld that restaurants serving food with high sugar content may need to raise prices.

“We all need sugar. Not just in restaurants but practically in every household. For our coffee, desserts, cakes, etc. We hope the government, the Sugar Regulatory Administration, and sugar planters can recover normal supply as soon as possible and lessen the worsening food inflation and supply problem,” Mr. Teng said.

He said restaurants may likely adjust prices “minimally” to not “scare away customers.”

“For sugar, I do not know if we have alternatives and I do not know if substitutes are acceptable. If a restaurant is serving high sugar content products, I suppose their prices need to go up,” he said.

The Philippine Chamber of Food Manufacturers, Inc. (PCFMI) Chairman and President Rita Imelda B. Palabyab said the group informed Mr. Marcos of a shortage of premium refined sugar that companies need for food and beverage products, “which is affecting their capability to produce goods.”

She said PCFMI is confident that “the solution to the sugar supply shortage, specifically premium refined sugar, will arrive very soon.”

Mondelez Philippines, Inc. said that they are “not as affected” by the sugar shortage, since their products such as chocolates, Oreo biscuits, and Tang powder juice are manufactured in other Southeast Asian countries.

“The products that require sugar are manufactured outside of the Philippines. The sugar shortage does not necessarily impact us because we have the supply for our products based in other plants in other countries. We get our products as finished goods already,” Mondelez Philippines Vice-President and Managing Director Aleli H. Arcilla said during a media briefing in Quezon City on Wednesday. — with Revin Mikhael D. Ochave and Diego Gabriel C. Robles

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