DOF bolsters case to liberalize sugar

The case for the liberalization of the domestic sugar industry has strengthened as the Department of Finance (DOF) found out that the sector enjoyed a high level of protection that eventually redounded to elevated prices for consumers and manufacturers alike.

“For the past eight years, quantitative restrictions imposed on sugar imports raised the wholesale price of refined sugar by 235.8 percent above the export price of Thailand and 393.2 percent above FAO reported prices. This means that consumers and downstream industries have been paying more than twice (or thrice using FAO prices) the global price for the commodity,” Finance Undersecretary and chief economist Gil S. Beltran said in an economic bulletin Friday, referring to the United Nations agency Food and Agriculture Organization.

Beltran said that while the tariff slapped on sugar imported from Asean was only 5 percent, “the direct action of limiting import volumes increases the level of protection far beyond the 5-percent tariff rate.”

For one, the Sugar Regulatory Authority (SRA), which greenlights import permits and restricts volumes, “affects the level of domestic prices,” Beltran said.

Using the measure called effective protection rate (EPR), Beltran said sugar enjoyed a high rate of 247.8 percent.

The EPR of sugar meant that for every peso of value added, the commodity was accorded a 247.8-percent price edge over imports.

“The downstream industries food manufactures and beverage industries purchase 40.9 percent and 2.8 percent, respectively, of total sugar output. These industries are burdened by the high cost of sugar. Food manufacturers have to raise their efficiency by 6.6 percent above that of their import competitors to be viable. Beverage industries will need to jack up their efficiency level by 6.4 percent,” Beltran said.

“Despite the burden of high-cost sugar input, food processing industries that use sugar as major input, excluding those directly involved in sugar refining sector, account for an estimated P853 billion of value added (about 26 percent of the manufacturing sector) and employ 1.26 million workers as of 2018. In comparison, the sugar industry directly employs 84,000 farmers and generates P96 billion value added,” he added.

As such, Beltran urged reforms in order to “introduce competition” in the sugar sector. —BEN O. DE VERA