Tackling the sugar crisis long-term – Manila Bulletin

(Part 2)

The fourth reason why the Philippine sugar industry has not caught up with countries like Thailand in agricultural productivity is the paradox that as we aspire to have our own Industrial Revolution 4.0 (IR 4) together with the whole world, we them have not even completed the Industrial Revolution 1.0 that took place in England more than two centuries ago, when human labor was replaced by machines. The industry still depends on too many workers in the farm (including the so-called sacadas) that rising labor costs make the farms unprofitable. There are fewer and fewer young people willing to stay on the farms as they become better educated and choose non-agricultural jobs, particularly in the service sector in urban areas. These alternative jobs are less strenuous and offer higher pay. To make matters worse, the average age of a Filipino farmer is now approaching 60 years. These labor shortages could have been addressed with increased mechanization, but farming equipment and more advanced technology are beyond the reach of farmers who own ridiculously small farms that are not economical for growing sugar. As mentioned above, the ideal size of a sugar farm to accommodate more modern farming methods is 50 hectares. As we will discuss below, this ideal size can be achieved—without depriving beneficiaries of agrarian reform of land ownership—through what is known as “block farming.” Eventually, the sugar industry suffered the same fate as many sectors of the Philippine economy that had long been run by leaders with a protectionist, inward-looking, and anti-market mindset. like dr Adriano in his column wrote: “Too much government regulation and protection of the sector has the effect of protecting it from competition and promoting efficiency in its operations. Imposing higher tariffs on imported sugar (50% for quota MAV or minimum entry volume of 64,050 tonnes per year and 65% above MAV) and tightly regulating the entry of imports by issuing import permits was much easier than doing our homework, to make the sector efficient. But their long-term result is the gradual decline and decline of the sector that we are now witnessing.” These words are perfectly applicable to so many other sectors of the economy in agriculture, industry and services that never became globally competitive and which, due to over-protection, are often in the name of nationalism or so-called Filipino First policies, have nurtured domestic monopolies or oligopolies. Fortunately, the recent amendment to the Civil Service Act, allowing 100 percent foreign participation in telecommunications, transportation and other public services, dealt a significant blow to this mentality. We can thank the Duterte administration for this game changer.

To make matters worse, our sugar barons got away with the highest tariff protections of any agricultural product due to strong political clout. Within the framework of the World Trade Organization (WTO), we have agreed on the 50 percent tariff quota for MAV and the 65 percent excess of the MAV for sugar imports. These tariffs are even higher than rice, a commodity that is more important to the population. The duty is only 15% on rice and around 40% on meat. Another important piece of information from Dr. Adriano could eventually lead to the abolition of the sugar regulator by President Marcos Jr.’s administration. Under the Association of Southeast Asian Nations (ASEAN), the capped rate is just 5%, meaning sugar imports from ASEAN countries (such as Thailand and Vietnam) are subject to a 5% tariff. Due to the tariffing of sugar, the requirement for an import license should no longer be necessary as this is against our trade agreements with the WTO and our ASEAN partners. Curiously, no one seems to question the SRA’s current system of issuing import licenses (the bone of contention in the current sugar import crisis), even though it’s obviously a redundant system given sugar tariffing. It seems that the sugar industry is still the “nino bonito” of agriculture, as rice, corn, pork, poultry and other liberalized agricultural products do not require import permits other than the required sanitary and phytosanitary permits upon import. This first governance crisis under the newly installed government can be very fateful: it can lead to a complete reconfiguration, if not the abolition of the SRA.

In fact, President Marcos Jr. could explore the possibility of abolishing both the SRA and the Department of Agricultural Reform (DAR) and giving the Department of Agriculture the task of maintaining what those two institutions started a few years ago in order to reconsolidate small ones Sugar farms that resulted from the sweeping agrarian reform program unwisely applied to sugar, in contrast to the way the Taiwanese exempted sugar from the fragmentation process. I’m referring to log farming, which has shown promise for increasing the productivity of sugar farming, particularly in regions like Western Visayas and Central Luzon where sugar farming can still be profitable with the economies of scale that come with it. In contrast, I see sugar growing in CALABARZON as a dying industry. As a Batangueno, I see that due to the very high real estate prices in Batangas, sugar farming is being replaced by higher value crops such as vegetables and fruits and livestock are now prevalent in this rapidly urbanizing part of CALABARZON. In contrast, the greatest promise for improving sugar farm productivity lies in Mindanao, particularly Bukidnon, where farms are still reasonably large enough to adopt the most advanced forms of mechanization and modern technology, much like the banana and pineapple sectors that are globally competitive and contribute the most to our agricultural exports.

A report by the Peace & Equity Foundation described block farming as a variant of the Nucleus Estate model, which worked very well for Malaysians to grow palm oil. The report referred to farmer Ernesto Obtinalla, who registered his two-hectare sugar farm to block farming through the Crossing Ibos Farmers Credit Cooperative (CIFCC). After one year, its production increased from fifty (50) tons per hectare to seventy-three (73) tons per hectare. Its tonnage increased by 56% and its net income by 93%. CIFCC was just one of the cooperatives/associations to join the Multi-Sectoral Alliance for Development – ​​​​Negros (MUAD – Negros) Diversified Sugarcane Block Farming Enterprise Program. When growing blocks of sugar cane, small sugar farmers register their two to three hectares of farmland with their cooperatives/associations. Once the total number of hectares reaches the size where economies of scale can be achieved (approximately 50 hectares), a “block farm” will be formed. Each block farm has twenty to twenty-five participating farmers. They sign an agreement with their cooperative giving them full powers to co-manage the farmer’s registered land for three years.

Participating farmers received wages but were also considered part-time owners of the company, sharing the company’s risk and profits. They became agri-preneurs and were educated and retrained to learn how to run larger farms. The Peace and Equity Foundation (PEF) worked with the members of the MUAD farmer organization and provided production capital for the 55 hectares per farmer organization and offered incentives to the farmers with the highest volume of sugarcane. PEF also funded the business development services offered by MUAD. PEF can serve as a model for other non-governmental organizations (NGOs) or social enterprises dedicated to supporting small farmers. The goal is to reconsolidate the farms fragmented by CARP to reach an ideal size where mechanization and other more advanced methods of farming become economical, such as cultivation. The larger acreage cultivated allows for access to credit at lower interest rates and access to heavy equipment such as tractors for tillage and dump trucks for transportation. All of this can be promoted by the Ministry of Agriculture in close partnership with private business and civil society. SRA and DAR would be superfluous organizations.

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