$130-M loan eyed for sugar mills

The Department of Agriculture plans to avail itself of a $130 million soft-term loan under the special environmental loan of the Japanese 24th yen loan package to finance the upgrading of selected sugar mills in the country.

The loan will be under the investment and program umbrella of the Agriculture and Fisheries Modernization Act or AFMA.

As planned, the Landbank of the Philippines will serve as a conduit of the loan. Landbank will lend out the money to project proponents based on `individual project feasibility and their compliance with the requirements of an environmentally sound plant.'

In a study prepared by Landbank, it was noted that of the three agricultural food commodities considered most strategic and critical to the country's food supply, namely, rice, corn and sugar, its is sugar that is most threatened with declining productivity performance.

Despite billions of pesos in investments put in by some mills to improve efficiency (P11 billion from 1990 to 1997 in 14 mills), some sugar mills still continue to suffer from obsolete equipment and technology, low capacity utilization due to declining farm productivity, among others.

The study pointed out that with globalization, the local sugar industry has to be highly competitive to be able to compete with those coming from other countries.

The proposed investments that will be financed by the loan have to take into account three methods to improve efficiency; Environmental rehabilitation of existing factories; energy conservation and efficiency improvement; and relocation and rehabilitation of depressed factories to strategic areas like Mindanao, the study said.

It added that a project providing for environmental rehabilitation, energy conservation, and improvement to existing operating mills will cost the industry $1.2 billion.

A loan from the Japanese Overseas Economic Cooperation Fund (OECF) will serve as an initial fund source. According to the project study, other subsequent loan packages will be availed of until the program is completed.

The Department of Agriculture noted that social costs involved in the program are far greater than the economic benefits to be derived. "If government will be able to provide access to funds that can uplift social benefits of the program, the sugar industry would once again become a sunrise industry providing more opportunities to the country," it was noted.

The program envisioned by the DA will be two-pronged. The first will ensure food security by empowering the sector to improve field productivity and factory performance while the second will provide for a loan facility as part of the Agriculture and Fisheries Modernization (AFMA) to upgrade the operational efficiency of sugar factories, help the marginalized sector of society, and prepare the industry to meet the challenges of the ASEAN Free Trade Area by year 2010 and the World Trade Organization.

It is expected that once capacity utilization among mills is increased to an average of 80 percent, sugar production will increase by 1.34 million metric tons equivalent to $150 million. At present, the country produces 1.7 million tons of sugar. Sugar workers are also expected to get an additional P134 million on top of the present sugar amelioration fund of P191.8 million. Republic Act No. 6982 or the Social Amelioration Program for the sugar industry provides for the imposition of a P5 per picul on all sugar produced.