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Tariff Cut Not Sweet, Filipino Sugar Farmers Say

Agriculture: Growers insist they'll be forced out of business when it goes into effect in July. Officials say the high import tax made growers complacent.


BACOLOD, Philippines — For most of this century, sugar was king. A handful of barons controlled the Philippines' top export commodity, accumulated vast fortunes and ruled their fiefdoms with iron fists and private armies.

But big sugar producers are now begging for help, saying they will be forced out of business along with more than 60,000 workers if tariffs on imported sugar are reduced as planned in July.

"If nothing changes . . . most sugar producers will be on the verge of bankruptcy," Negros Occidental Gov. Rafael Coscolluela said.

Ten of the country's 37 sugar mills may be forced to shut down if the tariff cut--to as low as 52.5% from the current 100%--goes through, he says.

A group of large growers in Negros Occidental province, the Philippines' "sugar bowl," say the cut, part of a free-trade agreement among Southeast Asian nations, must be retracted because it will make imported sugar cheaper than domestic sugar.

But sugar industry analysts say high tariffs, not low ones, created the industry's ills by making growers complacent and uncompetitive.

Bernardo Villegas, dean of the School of Economics at the University of Asia and the Pacific, says a return to a higher tariff would only be a temporary solution and delay badly needed competitive reforms.

The dire warnings highlight a striking reversal of fortunes for the industry.

Until World War II, sugar accounted for about 60% of the country's exports. It remained the top export commodity into the mid-1970s because of preferential trade arrangements with the United States.

During the industry's lengthy heyday, hacienderos, or plantation owners, were notorious for their profligate lifestyle, acting as feudal lords and local political kingpins.

They benefited from high sugar prices and steep tariffs on imported sugar. Without foreign competition, producers invested little in modern equipment and grew increasingly inefficient, despite the low wages they paid workers.

But Philippine sugar exports, no longer globally competitive, slumped in the 1990s to just 4% of total exports. Nearly all went to the U.S. market, where prices were higher than world-market levels and the Philippines received an annual access quota.

Total production, meanwhile, dropped from 2.1 million tons in 1993 to 1.79 million tons in 1996 as imports began to sprinkle in, according to the Philippine Sugar Millers Assn.

The big producers strongly reject charges they were lazy and pampered.

They say the industry's problems date back to the 1970s with the National Sugar Trading Corp., a sugar trading monopoly accused of amassing large profits and funneling funds to then-Dictator Ferdinand Marcos.

"Before, we were doing well. We were really modernizing, the mills were functioning well, our farms were productive. But Marcos took advantage of it," sugar planter Eduardo Alunan said.

The monopoly was dismantled after Marcos was toppled in 1986 but producers complain they are still heavily indebted.

Alunan, who is vice chairman of the United Sugar Producers Federation of the Philippines, said another reason producers have invested little to improve yields is because they don't know whether their land will be redistributed under the government's land reform program.

Both landlords and would-be beneficiaries of land reform criticize the slow pace of the program, which began in 1988. Of the 573,000 acres of sugar land under the land reform program, only 3% is now occupied by new farmer-owners, according to the peasant group Agrarian Reform Alliance of Democratic Organizations.

Wilson Gamboa, administrator of the government's Sugar Regulatory Administration, says large producers have been hit harder by the industry's plight because of higher costs resulting from their still-luxurious lifestyles, and are "clutching at straws."

Gamboa says the growers must accept two irreversible trends: land reform and freer trade. The main obstacle, he says, is the industry's "complacency, calcified by decades of prosperity."

Growers don't like that message. They are lobbying for Gamboa's dismissal and using their still-potent political clout to fight the tariff reduction.

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