Meat processors get ‘processed’

In a recent trip to Cebu City as chairman of the Philippine Collegiate Champions League (PCCL), I had a long discussion with Felix O. Tiukinhoy Jr., long time commissioner of the Cebu Sports Foundation Inc. (Cesafi), the third major collegiate basketball league in the country.

After agreeing on the details of the PCCL-Cesafi tie-up for the 2014 National Collegiate Championship, we shifted our conversation to other non-sports issues.

Tiukinhoy is also the newly re-elected president of the Philippine Association of Meat Processors Inc. (PAMPI).

Meat processing in the country is a major business given Filipino’s appetite for meat products like luncheon meat, sausages, corned beef, tocino, bacon and ham. All 48 PAMPI members are now getting ready for ASEAN economic integration next year.

Questionable requirements

Specifically, PAMPI members are eyeing the ASEAN community as an expanded market not only to generate more sales, but also to become competitive and ensure long-term survival of their businesses.

However, Tiukinhoy says that the government, specifically the Department of Agriculture, seems to be giving local meat processors a tough time in favor of domestic livestock and poultry producers by making importation much tougher than necessary.

A few of the issues that we talked about dealt with the successive administrative orders, as well as a barrage of amendments to the Meat Inspection Code that were being issued by the National Meat Inspection Service, which all seemed to simply discourage all importation of meats.

Given these stiffer requirements, meat processors complained that the cost of imported meats has effectively increased, and this has not only penalized local consumers, but also puts to risk the future competitiveness of local meat processors in the ASEAN market.

Unnecessary requirements

A number of government processes are weighing down on our meat processors’ competitiveness.

One of the questionable and controversial requirements that the NMIS issued deals with the filing of inventory reports of all meats in cold storage. PAMPI members argue that compliance to this report is a breach of their operational security and trade.

PAMPI also underscored the continuing unnecessary and unjust charges being assessed on importers at the ports, and compounded by other delay costs. Demurrage and reefer charges at the ports and demurrage charges at the cold storage facilities add up to an additional cost of about P1.50 per kilogram.

Then there are also the truck bans issued by local governments that cause delays of cargo releases. This is a concern of brokers and forwarders who have no control over the LGU rulings. All these contribute to additional costs that the meat processors have to pay for.

Another concern that PAMPI members have raised has to do with the use of reference values for duty computation. They argue that this practice totally ignored the actual transaction values that importers have negotiated with their suppliers.

The use of reference values for taxation is in blatant disregard of the operating principles laid down by the World Trade Organization, and even then, the reference prices used are only those from the US trade survey reports. Our processors buy meat from other countries like the EU and Latin America.

Based on the wrong data, meat processors have to pay for duties in excess of what they ought to.

Challenge to local livestock and poultry producers

There are other issues that PAMPI members would want resolved as soon as possible to prepare for the ASEAN open market next year. In the meantime, they have also asked livestock producers to improve their supply capabilities.

Producers have been looking to gain as much patronage from local meat processors so that they are able to improve on their sales volumes and subsequently (and theoretically) bring down their production costs.

Meat processors are in favor of buying locally produced livestock and poultry, but they say that totally replacing importation is not an option since the quality of domestic production does not meet their standards. To date, importation is already at 450 million metro tons.

Redirect government support of domestic producers

If the government wants to promote local livestock production, it should focus on building support infrastructure for producers, including establishing triple-A abattoirs, and building modern fabrication floors and laboratories as well as refrigerated holding rooms.

These facilities will make available locally better quality of chicken, pork, beef and cara-beef meats for processors which are at par with imported grades. This move will also strengthen the producers’ sector and help them become more competitive.

For PAMPI members, getting good quality local produce will do away with a lot of costs that come with importation, like tariffs, storage facilities, shipping and land transportation. This will help them bring their unit cost lower.

Not only meat processors, but also even livestock and poultry producers can look forward to expanding their markets outside of the Philippines. This will mean more jobs and import earnings for the local economy.

Difficulty of doing business

Lastly, Tiukinhoy stresses that the government should move swiftly to address business issues. For example, when the DA issued AO 22 in 2010, meat processors and importers objected loudly to the obvious bias on imported meat.

But up till today, nothing much has been done to resolve this issue. Instead, the DA has introduced more orders that only demonstrate its blinded support for domestic livestock production through administrative sanctions that are short-sighted and do little to promote domestic economy.

Foreign investors have shown interest in investing and doing business in the Philippines, but become discouraged when they see the quality of governance that goes towards supporting business start-ups and continuity. Can we blame them?

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