THE finance department has formally proposed import liberalization for the sugar industry modeled on the opening up of the rice market, signaling a showdown for another key commodity as economic managers sought to make prices more competitive.
“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,” the Department of Finance (DoF) said in a statement.
The Sugar Regulatory Administration (SRA) currently approves import permits and determines how much can be imported for the current crop year. Imports are charged a 5% tariff.
Finance Secretary Carlos G. Dominguez III said in July that the government is taking a close look at sugar import liberalization because domestic prices are double the world market price, weighing on the competitiveness of the food processing industry.
Last year, the SRA approved imports of 250,000 metric tons of refined sugar in August, and another 150,000 metric tons of raw and refined sugar in October. This was implemented to address projections of low raw sugar production in crop year (CY) 2018-2019, which at 2.073 million MT was lower than the revised target of 2.079 MMT and the initial target of 2.25 million MT.
The production estimate for CY 2019-2020 is 2.096 million MT.
The DoF noted that in the past eight years, limiting sugar imports has raised the wholesale price of refined sugar to the equivalent of 235.8% of Thai export prices.
The food and beverage industries purchase about 40.9% and 2.8% of sugar output, respectively. The DoF noted that food processors that use sugar as a major input generated about P853 billion in revenue and employed 1.26 million workers in 2018.
“This means that consumers and downstream industries have been paying more than twice (or thrice using FAO prices) the global price for the commodity,” it said.
“…the direct action of limiting import volumes increases the level of protection far beyond the 5% tariff rate,” it added.
This has also increased effective protection rate (EPR) of the sugar industry, which penalizes consumers and prevented the growth of industries. EPR is a measure of the total effect of the tariff structure on the value added per unit of output when intermediate and final goods are imported. — Vincent Mariel P. Galang