The moribund state of our sugar industry

First of two parts

Following the damage caused to sugar producing areas and sugar mills in the Visayas region by Typhoon “Odette” in December last year, the Sugar Regulatory Administration (SRA) granted the request ( through the sugar ordinance [SRO] 3, series of 2021-22) industrial users (i.e. soft drink companies and food processors) of sugar to import refined/industrial grade sugar for use in the manufacture/processing of their products. This is not a fanciful decision on the part of the SRA considering that a study of local sugar production reveals a real shortage due to the damage caused by Odette. In fact, our export of sugar to the US market (which was our premium market in the past as it offered higher prices) was diverted to the local market as there was consensus that there was a serious supply shortage.

Then suddenly, legal injunctions were filed by the group of sugar cane planters: one in Sagay City; and the other in Himamaylan City, Negros Occidental. As a result, temporary restraining orders and writs of preliminary injunction have been separately issued by the court to stop the implementation of ORS 3. Industrial sugar users are panicking as they anticipate that if they will not get not an adequate supply of sugar this month and the months they will have to lay off their workers and abandon any expansion plans that are supposed to take advantage of our economic recovery.

The Trade and Industry Ministry also claimed that a number of beverage and food manufacturers have chosen to locate their operations in Thailand or Vietnam due to the availability of cheap sugar in those countries. So jobs that would have been created here have been taken away from us by these countries because of the high sugar prices here.

Sugar is an important raw material in the manufacture of beverages (e.g. soft drinks and fruit juices, etc.) and foods (sweets, canned fruits, among others, including popular local delicacies such as turon and the tail of banana and camote, rice favorites based on [puto, sapin-sapin, kalamay], hamon, among others). Thus, high sugar prices will certainly drive up the prices of these beverages and food products, making them uncompetitive with our rivals in the global market.

Outrageous sugar prices

The current local price of raw sugar is around 54 pesos per kilo (kg) while its suggested retail price (SRP) is only 45 pesos. On the other hand, the price of refined sugar is around 64 pesos per kilo while its SRP is only 50 pesos per kilo. The international price of sugar ranges from P25 to P30. It is clear from these figures that there is a real shortage of supply as retail sugar prices are skyrocketing and local sugar users/consumers are once again victimized in the current situation.

The usual argument used to justify maintaining the status quo is that we must help preserve the jobs of small sugar farmers and workers. And that instead of importing sugar, we need to improve the productivity of our small farmers to make them efficient and productive so that there is no need to import the commodity.

What is always forgotten in the talk of the fate of the sugar industry is that the protection of the sugar industry has been maintained for more than half a century now and has not resulted in make it effective. In fact, he achieved quite the opposite. While it was at the top of our economy almost 50 years ago a century ago, it is now lagging behind in the international sugar market. Moreover, the promised improvement in the lot of small-scale sugar farmers and workers has not materialized after all these years of protection of the sector. In fact, they remain among the poorest workers in the country.

Are we going to stick with that old, worn-out argument of supposedly protecting our small farmers despite their lack of improvement? Or do we heed Albert Einstein’s exhortation (i.e. “Repeating things over and over and hoping for a different outcome is the height of madness!”) and start heading in a new direction to develop the sugar industry?

“A Queen Dies Slowly”

This is the title of historian Alfred McCoy’s classic essay on how Iloilo City, the center of the sugar industry at the turn of the 20th century until the start of World War II, lost its luster in as the first city in the country with the decline of the sugar industry. As McCoy noted, the industry was the progenitor of the capitalist industrial revolution in the country, propelled to rapid development under American colonial rule. The Spanish colonial regime also relied on sugar exports (along with tobacco) to generate revenue for the colonial government, but did not introduce modern technology to industrialize its operations. It was the American colonizers, with a rapidly expanding American economy, who fostered the development of the Philippine sugar sector, as its food processing industry required a huge supply of sugar.

It was during the era of American colonial rule that steam engines were massively deployed to operate sugar mills and transport their products to the United States using ships powered by steam engines. Given the huge raw material needs of these sugar mills, sugar cane plantations were established in conjunction with the Filipino elites of Iloilo and Negros, which eventually came to be called “sugar hacenderos”.

The construction of modern sugar factories and the frequent visits of modern steam-powered ships then to the port of Iloilo made the city of Iloilo the main center of the industrial revolution of the country, surpassing that of Manila. But constant labor problems, combined with the presence of more fertile and suitable land for growing sugar in the island province of Negros, eventually shifted the focus of sugar development from Iloilo to Negros.

Due to the enormous wealth generated by the sugarcane plantation for the sugar hacenderos, it was easy for them to acquire considerable political influence and, in doing so, occupy the highest political positions in the country. A cursory review of the list of highly influential politicians in Philippine politics from the American colonial rule until the 1980s will reveal this reality in Philippine politics.

Sugar’s guaranteed access to the US market, which paid a high price for Philippine sugar under a quota system, allowed the sugar hacenderos to lead luxurious and pampered lives. Access to the US market was guaranteed through effective lobbying by the Philippine government in the US Congress, even after the expiry of the agreement granting preferential treatment to Philippine sugar exports to the US market.

However, in the long run, protection and a guaranteed market did little to improve the industry. And that is why our sugar industry is in a moribund state right now.

Part 2 of this essay will discuss why our sugar industry has moved from its lofty position in the world sugar market to where it is today.

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Rachel J. Bradford