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Philippine agri-food trade: Smuggling or under-reporting?

Farmers’ groups have long complained about smuggling that has been very detrimental to their livelihood. Quick actions are imperative.

What is really happening to the imports and exports of Philippine agri-food products? Do official statistics reflect trade realities? Or is there widespread under-reporting or under-recording through no fault at all of the statistics agencies?

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This article draws from United Nations trade data which are accessible to the public under the UN Trademap. The analysis covers selected products during 2002-2011, or 2012 when data is available.

It will track a country’s export to the Philippines and Philippine imports from such country. It will cover selected products: rice, onions, garlic, chicken and pork, sugar and palm oil for imports; and Cavendish banana for export.

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Rice

 

Based on Philippine statistics, the country imported from Vietnam some 581,000 tons of rice in 2011, and 823,000 tons in 2012. Sadly, Vietnam has not released its export data by country since 2010.

Is it a delay or something fishy is going on? Meanwhile, the US Department of Agriculture (USDA) reported that the Philippines imported a total 1.5 million tons each year in 2011 and 2012, most, if not all, from Vietnam. Why the large discrepancies? Is USDA in error?

Vietnam rice has the lowest price in the world market which hovered around $400 per ton, lower by about $50 per ton compared to India rice, and far lower than Thai rice at over $550 per ton, FOB.

Smuggling is too tempting as rice could land in the Philippines at P18 per kilo compared to a least P25 per kilo wholesale price.

In late April 2013, Philippine Customs authorities announced they had uncovered P1.2 billion ($29 million) worth of smuggled rice in Cebu declared as stone and granite slabs in 1,169 containers from Vietnam.

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One 40-foot container had at best 40 tons of rice, and thus, the total volume was about 46,760 tons. There must be other shipments that are not detected.

Garlic

Look at the supermarkets. One will see imported garlic. China is the main source.

Consider the numbers: China exported 66,270 tons in 2009, 54,353 tons in 2010 and 60,999 tons in 2011. A glaring contrast is that the Philippines imported only 33,237 tons in 2009, 17,611 tons in 2010 and 7,800 tons in 2011 from China.

These large discrepancies had been there for at least 10 years but turned for the worst in 2010. Indeed, there is truth to the reported 1,000 missing container vans. But more of garlic than onion!

The landed values of garlic are out of reality. In 2011, $78.5 million worth of garlic left China; but only $1.4 million were received in the Philippines.

Some importers saved lots of taxes?

Onion

China exported 16,164 tons of onion in 2009, 6,131 tons in 2010 and 22,929 tons in 2011.

Very little reached the Philippines: 2,096 tons in 2009, 1,431 tons in 2010, and 1,577 tons in 2011.

By value, some $9 million worth of onions left China but only $0.2 million arrived in the Philippines!

Chicken

The US is the main source of chicken. It exported 52,078 tons ($49 million) of chicken meat in 2010 and 65,032 tons ($61.8 million) in 2011. By contrast, the Philippines imported 49,833 tons ($34.3 million) in 2010 and 58,149 tons ($41.8 million) in 2011. There is significant undervaluation.

In 2011, alone, the average f.o.b. price of US chicken was $0.95 per kilo but only $0.72 per kilo when it landed the Philippines!

Meanwhile, Canada exported 24,596 tons ($18.0 million) in 2010 and 24,231 tons ($ 20.1 million) in 2011. Of these, 23,712 tons ($14.7 million) and 24,884 tons ($16.7 million) arrived in the Philippines, respectively.  Another case of undervaluation!

Further, the Brazil-Philippine leg appears questionable. In 2010 and 2011, Brazil exported 18,806 tons ($10.6 million) and 24,230 tons ($14.4 million), respectively to the Philippines.

By contrast, the Philippines imported 18,268 tons ($12.0 million) and 13,758 tons ($9.8 million), respectively, during the period, showing a huge gap in 2011.

Pork

The US exported 39,549 tons ($71.4 million) of frozen pork in 2010 and  29,204 tons ($60.3 million) in 2011. Meanwhile, the Philippines imported 24,714 tons ($19.0 million) in 2010 and 17,381 tons ($15 million) in 2011.

Where did the huge gaps go? While the US exported edible offal of red meat at 9,418 tons in 2010 and 6,090 tons in 2011, lo and behold, the Philippines imported 26,449 tons of red meat offal in 2010, and 18,434 tons in 2011 from the US.

There was diversion from high value meat ($2.06 per kilo) to low value meat ($0.58 per kilo).

As to the Canada trade, the country exported 36,400 tons ($36.8 million) in 2010 and 29,692 tons ($47.2 million). By contrast, the Philippines imported 17,280 tons ($12.2 million) in 2010, and 13,987 tons ($11.0 million).

These are large diversions and undervaluation. Also, Canada exported 2,436 tons and 3,153 tons of poultry and pig fat in 2010 and 2011, the latter was valued at $1.16 per kilo.

Interestingly, the Philippines imported much more from Canada: 10,059 tons and 7,703 tons, respectively.

The latter was valued at $0.67 per kilo. This was another clear case of diversion from high value meat to lower value meat.

In 2010, China recorded a 120 tons pork carcasses export to the Philippines.

There was no record of such import here.

The above are only examples. There are also similar cases with the Philippine-Europe meat trade.

Sugar

Thailand exported 309,858 tons ($170.1 million) in 2010, and 162,761 tons ($115.6 million) in 2011.

By contrast, the Philippines imported 160,518 tons ($100.6 million) and 20,219 tons ($18.9 million) during those years. Again, these are huge gaps.

Palm oil

The country imports palm cooking oil from Malaysia. In 2011, Malaysia exported over 503,000 tons of cooking oil to the Philippines valued at $1,127 per ton.

Mysteriously, only 24,000 tons “reached” the Philippines. Meanwhile, Malaysia  exported only five tons non-edible palm oil exports , but to the Philippines imported 313,000 tons.

The latter was valued a much lower amount of $815 per ton. Diversion from one product type to another type is obvious.

Meanwhile, the balance of over 164,000 tons was missing. At a smaller scale, a similar story can be told for Indonesia-Philippine trade.

Palm oil is slapped a value added tax. Imagine the tax losses. These discrepancies with Indonesia and Malaysia widened since 2007, which incidentally was an election year.

Banana exports

The banana export data are highly suspicious. China imported 436,746 tons in 2010  and 693,830 tons (some 50 million boxes) in 2011.

In the midst of the then noisy Scarborough shoal controversy, this must have declined by about 40 percent to less than 2010 level.

And how much did the Philippines “officially” export? It was 165,797 tons in 2010, 358,828 tons in 2011, and 423,211 tons in 2012!

The gap was a whopping 270,949 tons in 2010 and 270,619 tons in 2011!

However, the Philippine data indicated an increase in 2012 of 18 percent when, in fact, there was a decline of about 40 percent!

A Philippine official recently announced in the media that banana exports to China rose in 2012 despite Scarborough!

Yet another similar story comes from South Korea-Philippine trade. South Korea imported 336,563 tons of bananas in 2010, 347,635 tons in 2011, and 362,876 tons in 2012.

By contrast, Philippine data showed 113,281 tons in 2010, 195,696 tons in 2011, and 265,506 tons in 2012. The gaps are no statistical discrepancies.

They were huge: 223,282 tons (197 percent) in 2011, 151,939 tons (78 percent) in 2011, and 97,370 tons (27 percent) in 2012!  For both countries, the data discrepancies started to widen since 2001.

What now?

 

Smuggling, its consequent tax evasion, and its negative effects on local producers, are a major hindrance to economic development.

Imagine the tariff loses as pork and chicken have import duties of 30 to 40 percent, and palm oil has value added tax of 12 percent?

The country needs taxes for its many programs and, especially at this time, its poverty reduction efforts. Local producers and investors also want a level playing field.

Smuggling is a serious impediment to the promotion of agri investments and job creation in the countryside.

A serious campaign to curb it is imperative.

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is the Executive Director of the Center for Food and AgriBusiness of the University of Asia & the Pacific. Feedback at map@globelines.com.ph. For previous articles, visit <map.org.ph>.)

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TAGS: Agriculture, Exports, food, imports, Philippines, Smuggling, Trade
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