LOCAL ETHANOL PRODUCERS have urged the government to raise tariffs on ethanol imports to 20 percent from the current 1 percent, to protect and boost investments in the industry.

The Ethanol Producers Association of the Philippines (Epap) pointed out that unless there was a strong government support and protection for the industry, investors would remain reluctant to invest billions of pesos in the Philippine ethanol industry.

In a letter sent to Edgardo Abon, chair of the Tariff Commission, Epap executive director Tetchi Cruz-Capellan said the ethanol industry had not progressed much as predicted two years ago because it lacked equity investments and stronger political support.

Capellan said the Philippines had to be aggressive in attracting foreign capital to sustain initial efforts on biofuels and reach the mandated E10 blend by 2011.

To do this, Capellan said an increase in import duties, not further reduction of tariff, would give foreign investors confidence in the Philippines. The tariff protection , she added, would accelerate construction of more ethanol plants in the country.

She noted that in other Asean countries, particularly Indonesia, ethanol producers were given as much as 30 percent tariff protection.

?Increasing the current tariff [from 1 percent] to 20 percent will send a clear signal to investors,? Capellan said.

?Even an old-timer in ethanol production, like Brazil, still protects its market with a 20-percent import duty on ethanol. Why should our own government deny the local producers the same treatment and protection?? Capellan asked.

Without higher tariffs serving as a support mechanism in place, Epap believes that foreign capital will bypass the Philippines and instead, seek other countries with more favorable investment climate and stable domestic market, the association said.

In a study undertaken by the USAID-funded Eco-Asia Project, the Philippines was cited as having the potential to produce as much as 1.7 billion liters of ethanol.

?Obviously, foreign capital is the only missing ingredient to transform this huge potential into reality since the cost of building ethanol plants requires massive capital expenditures,? Capellan said.

According to Epap, there are two more ethanol plants that are expected to be constructed next year by Green Futures Innovation and Alto Power.

?Epap believes these two plants are key to the country?s full compliance to the 10 percent mandated blend by 2011. Presently, a substantial portion of the capital for these two plants is being raised by the private sector. But still, government support is essential to cement the strategic partnership with foreign partners,? Epap said.

Amy R. Remo