Asean economic integration

The weather has been crazy lately and so many in my circle of family and friends have been under the weather, this writer included, causing me to miss deadlines and appointments, even cancel scheduled trips at the last minute, etc.  My sincere apologies to Volkswagen Philippines for cancelling out on the Cebu dealership launch of this iconic brand.  The bed rest did wonders for me, so after a few days on my back, (and catching up on the latest movies and TV series) it’s back to chasing deadlines for me. So sorry for missing last week’s column, so here’s more on the business front at home.

We had a couple of years to prepare for the coming economic integration in 2015, but now that we’re down to the last few months of 2014, we’re scrambling once again to get in shape. The ASEAN Free Trade Agreement is really just an integration of the region we belong to so that we can, as a bigger and united block, be competitive in commerce against other more developed blocks. Everything from banking to export will be touched by this economic integration, so the smaller banks here at home will be stared down by the much bigger Asian banks and swallowed whole. House Bill No. 3984 was  introduced to allow the full entry of foreign banks through the authority of the Monetary Board and such banks must be widely-owned and publicly listed unless these are controlled by the country concerned. This qualification by the Monetary Board ensures that only the top foreign banks (top five in their country and among the top 150 in the world) can be allowed to operate in the country but it will also ensure that Philippine domestic banks will keep control of the majority of the resources or assets of the entire banking system in the Philippines.

I have full confidence in the Monetary Board and the Bangko Sentral ng Pilipinas, which has seen us through the Asian crisis of the late nineties virtually unscathed and I think the domestic banking community shares this sentiment, so there isn’t much anxiety or uncertainty here.

As far as rice self-sufficiency is concerned however, we’re still far from the promise made a year ago, so much so that we are again requesting for a waiver related to the special treatment of rice. This is the third extension of the Quantitative Restrictions negotiated under the World Trade Organization, the first extension having expired in 2005 last extension, wrangled under the Doha round, having expired in 2012. The Department of Agriculture (DA) made the request for the waiver to the Council on Trading Goods.

For the rice, we negotiated for an increase in the Minimum Access Volume from 250,000 metric tons to 805,200 metric tons and a reduction in the quota tariff.  All importations beyond this quota will be slapped higher tariffs of up to fifty per cent more.  This, however, will have no effect on other importations.

Of course, the nine other countries have also signified their interest to also be part of this waiver, and as compensatory measures go, certain products like dairy, chocolate and malt extract among others, will benefit from this waiver.

The Tariff Commission has scheduled public hearings for this issue.  Should it be finally implemented, the DA argues that it can only allow for more investments towards increased rice production to provide rice security for Filipinos as well as increase the rice sector’s competitiveness and protect our farmers when the economic integration finally descends upon us.

On the sugar front, the Administrator of the Sugar Regulatory Administration, Ms. Regina Bautista-Martin seems to be on the ball to ensure that the sector remains healthy. We’re a long way from regaining our foothold, but we’re still holding on. Thailand has overrun us in the region and is now the biggest producer with 12 million metric tons/year as against the Philippines’ 2.5 million MT.

 Brazil, of course is the runaway biggest producer of sugar in the world.  They have over nine million hectares of land planted to sugar, and with over four hundred sugar mills operating in this country; you can see that it is a major force in this sector. In contrast, the Philippines has about thirty two sugar mills.

What happened somewhere along the road?  Agrarian reform took place.  The Philippines has about 423,000 hectares planted to sugar, but ninety five per cent of this consists of small landholdings.  This distribution of land has not done the industry much good, so now the Sugar Regulatory Authority (SRA) has to work on consolidating these smaller parcels of land and integrate them into plantation-size holdings which measure from thirty to fifty hectares each. Block Farming is what they call this, according to Ms. Martin, and SRA is effectively managing the land holdings of the agrarian reform beneficiaries corporate style, transforming these land reform beneficiaries into “agripreneurs” and increase our national average production from the present 58 tons/hectare to perhaps 75 tons/hectare like Thailand.   This agency hopes that the Sugar Cane Development Act which they crafted will be passed by Congress because it hopes to develop the areas in their entirety where the sugar mills are located.

Ms. Martin recently went to Brazil on official business to learn from this country’s advanced technology. The ethanol industry here is more advanced than anywhere in the world, and their blend of ethanol in their fuel mix is now between 75-80 percent, which is the reason why Ms. Bautista-Martin says the clean air in Brazil is unmistakable and very enviable. Yes, there is indeed more to sugar cane than just our regular table sugar.

Brazil also has excellent high-yielding varieties of sugar cane, new farming and processing technologies that we can learn from, and the good news is the Brazilian government is very cooperative and open to technology exchange with the Philippines, even offering free training for our researchers. The Philippine Sugar Institute, a local foundation is willing and ready to work with private research institutions in Brazil like to EMBRAPA to improve our sugarcane productivity levels to prepare us the ASEAN Free Trade Agreement.  When this is finally upon us, Ms. Martin says that, hopefully, when we use sugar, we should think “sariling atin muna.”

Mabuhay!!! Be proud to be a Filipino.

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