Facing the long-term sugar crisis – Manila Bulletin

(Part 2)

The fourth reason why the Philippines’ sugar industry has not caught up with countries like Thailand in agricultural productivity is the paradox that as we aspire to join the world in having our own Industrial Revolution 4.0 (IR 4), we haven’t even completed Industrial Revolution 1.0 that happened in England over two centuries ago when human labor was replaced by machines. The industry still depends on too many workers on the farm (including the so-called sacadas) that rising labor costs are making farm operations unprofitable. Fewer and fewer young people want to stay on farms as they become more educated and opt for non-agricultural jobs, especially in urban services. These alternative jobs are less strenuous and offer higher pay. To make matters worse, the average age of a Filipino farmer is now approaching 60. This labor shortage could have been solved by increased mechanization, but more advanced farming equipment and technologies are beyond the reach of farmers who own ridiculously small farms that are not economically viable for growing sugar. As mentioned above, the ideal size of a sugar farm to adopt more modern means of cultivation is 50 hectares. As we will see below, this ideal size can be achieved – without taking land ownership away from the beneficiaries of land reform – by what is known as ‘block farming’. Finally, the sugar industry suffered the same fate as many sectors of the Philippine economy long ruled by protectionist, introverted and anti-market leaders. As Dr. Adriano wrote in his column, “Too much government regulation and protection of the industry has the effect of shielding it from competition and inducing efficiency in its operation. It was much easier to impose higher tariffs on imported sugar (50% for MAV within quota or minimum access volume of 64,050 metric tons per year, and 65% above MAV) and to strictly regulate the entry of imports through the issuance of import permits. than doing our homework to make the sector efficient. But their long-term result is the gradual decline and decay of the industry that we are currently witnessing. These words apply perfectly to so many other sectors of the economy in agriculture, industry and services which have never become globally competitive and which have nurtured national monopolies or oligopolies due overprotection, often in the name of nationalism or so-called Filipino politics first. . Fortunately, the recent amendment to the Civil Service Law, allowing 100% foreign ownership of telecommunications, transport and other public services, has dealt a major blow to this mentality. We can thank the Duterte administration for this game changer.

To make matters worse, due to the strong political influence of our sugar barons, they got away with the highest tariff protection among agricultural products. Within the framework of the World Trade Organization (WTO), we have agreed on a tariff rate quota of 50% for MAV and 65% above MAV for sugar imports. These tariff rates are even higher than those of rice, a more important commodity for the population. The tariff on rice is only 15% and on meat about 40%. Another vital information provided by Dr. Adriano could eventually lead to the abolition of the Sugar Regulatory Authority by the administration of President Marcos Jr. As part of the Association of Southeast Asian Nations (ASEAN), the bound rate is only 5%, which means that sugar imports from ASEAN countries (such as Thailand and Vietnam) will face a 5% tariff. Due to sugar pricing, the requirement to obtain an import permit should no longer be necessary as it is contrary to our trade agreements with the WTO and our ASEAN partners. Curiously, no one seems to dispute the current system of import licensing by the SRA (the bone of contention in the current sugar import crisis), even though it is clearly a redundant system given the sugar pricing. It seems that the sugar industry is still the “nino bonito” of agriculture since no import permit is needed for rice, maize, pork, poultry and other agricultural products liberalized outside sanitary and phytosanitary authorizations required upon importation. This first governance crisis under the newly installed administration risks being very providential: it could lead to a total overhaul or even the abolition of the SRA.

In fact, President Marcos Jr. may wish to consider abolishing both the SRA and the Department of Land Reform (DAR) and transferring to the Department of Agriculture the task of supporting what these two Institutions started a few years ago to reconsolidate the small sugar farms resulting from the comprehensive land reform program that was recklessly applied to sugar, unlike the way the Taiwanese exempted sugar from the fragmentation process. I am referring to block farming which has shown promise in increasing the productivity of sugar farming, especially in areas like the Western Visayas and Central Luzon where sugar farming, with the economies of appropriate scale, can still be profitable. On the other hand, I see sugar agriculture as a dying industry in CALABARZON. now predominate in this rapidly urbanizing part of CALABARZON. In contrast, the greatest promise for improving the productivity of sugar farms lies in Mindanao, particularly in Bukidnon, where farms are still large enough to adopt the most advanced forms of mechanization and modern technology, like bananas and pineapples. the sectors that are globally competitive and contribute the most to our agricultural exports.

In a Peace & Equity Foundation report, block farming was described as a variant of the nuclear plantation model that has worked very well for Malaysians in palm oil cultivation. The report refers to farmer Ernesto Obtinalla who registered his two-hectare sugar farm to block agriculture through the Crossing Ibos Farmers Credit Cooperative (CIFCC). After one year, its production increased from fifty (50) tons per hectare to seventy-three (73) tons per hectare. Its tonnage increased by 56% and its net income by 93%. CIFCC was just one of the cooperatives/associations that joined the Multi-Sectoral Alliance for Development—Negros (MUAD—Negros) Diversified Sugar Cane Block Farming Enterprise Program. In block sugar cane cultivation, small sugar producers register their two to three hectares of farmland with their cooperatives/associations. Once the total number of hectares reaches the size in which economies of scale can be achieved (about 50 hectares), a “block farm” is formed. Each agricultural block has twenty to twenty-five participating farmers. They sign an agreement with their cooperative, giving it full powers to co-manage the farmer’s registered land for three years.

Participating farmers received wages, but were also considered part-time owners of the business, sharing the risks and rewards of the business. They became agri-entrepreneurs and were upgraded and re-skilled to learn how to manage larger farms. The Peace and Equity Foundation (PEF) collaborated with the farmers’ organization members of MUAD and provided production capital for the 55 hectares per farmers’ organization, and offered incentives to farmers with the tonnage of highest sugar cane. The PEF also funded business development services provided by MUAD. The PEF can serve as a model for other non-governmental organizations (NGOs) or social enterprises dedicated to improving the lot of small farmers. The aim is to reconsolidate farms that have been fragmented by CARP to an ideal size in which mechanization and other more advanced farming methods become economical, such as having the right plant population, planting high yield, good nutrient management and cultivation. The larger cultivated area allows for credit at lower interest rates and access to heavy equipment such as tractors for land preparation and dump trucks for transport. All of these can be promoted by the Ministry of Agriculture in close partnership with private business enterprises and civil society. The SRA and the DAR would be superfluous organizations.

For comments, my email address is [email protected]

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