Business World Online (Philippines)
By Neil Jerome C. Morales
July 21, 2009

www.bworldonline.com

Agriculture sector deemed ill-prepared

… to weather lower tariffs starting next year

PHILIPPINE AGRICULTURAL produce will not be competitive enough to weather, much less take advantage of, lower tariffs in Southeast Asia next year due to high production cost and lack of technical efficiency, an agriculture economist said in a working paper he discussed with state agriculture officials and private experts last week.

"When tariffs go down to zero, many commodities will have a tough time competing like sugar and corn, or will not be competitive at all like rice," Rolando T. Dy, executive director of the University of Asia and the Pacific’s Center for Food and Agribusiness, wrote in the paper.

Under the country’s commitment under the Association of Southeast Asian Nations’ Free Trade Area-Common Effective Preferential Tariff (AFTA-CEPT) scheme, duties on a whole range of agricultural goods will drop to 0%-5% in January next year from current levels, such as 30% for corn, 28% for sugar, and 20% for live and dressed chicken and pork.

The current 40% tariff on rice, classified as highly sensitive, will be cut in 2012.

"To improve competitiveness, there is a need to improve yield levels and technical efficiencies, lower costs of fertilizers and chemicals as well as feeds, provide adequate post-harvest facilities, reduce cost of logistics and encourage investments," the paper read.

Last April, Agriculture Secretary Arthur C. Yap said ASEAN countries should suspend by five years full implementation of tariff cuts under this scheme, given the economic crisis.

Not sympathetic

"The AFTA is something that the country should have prepared for a long time ago. The country did not — and from the looks of it, other ASEAN countries do not — seem to be sympathetic," Mr. Dy wrote.

Commercial rice, for instance, which now costs about P30-P37 per kilogram, will have to compete with rice imported from within Southeast Asia that could be priced just P24/kg at 0% tariff.

Local sugar, which now costs P29-P40/kg, will have to compete with P16/kg imported sugar under the same regime.

The sugar industry is clamoring for postponement of the tariff cut to 2015.

"Thailand has big production [of sugar] and they [sic] are near the Philippines," Archimedes B. Amarra, executive director of the Philippine Sugar Millers Association, Inc., said in a phone interview yesterday.

"We are moving towards diversification and our target is to produce different products," Mr. Amarra said, adding that the industry might engage in power co-generation and bioethanol production.

Mr. Dy noted, meanwhile, that "cost of feed is a common refrain" for the hog and poultry industry.

"We are lobbying for zero tariffs on feed ingredients for us to have access to cheap ingredients," Renato R. Eleria, chairman of the National Federation of Hog Farmers, Inc., said in a separate phone interview.

"Our call is for the hog industry to be efficient in management…and lower tariffs will be good because of cheaper corn imports," Carlos B. Mendoza, officer-in-charge executive director of the Livestock Development Council, said in a telephone interview.

For corn, the main ingredient in animal feeds, local farmers will have a hard time competing with the P10/kg imported corn, lower than P11-P13/kg local prices.

"The government should give us the necessary defenses like infrastructures," Roger V. Navarro, president of industry group Philippine Maize Federation, Inc., said in a phone interview, adding that "a five-year extension would be used to put in necessary infrastructures."

Early this year, the National Corn Program committed to spend P800 million this year to build post-harvest facilities to increase quality of corn produce and reduce losses.

"The key is that the government already gave the P13/kg support price so more areas will be planted," Dennis B. Araullo, Agriculture assistant secretary and the director of the National Corn Program, said yesterday in a phone interview.

"We are also targeting lower production cost and increase yield per hectare through organic fertilizers," he added.

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