Commodities
Government’s Build, Build, Build program will create a huge demand for construction materials. Businesses are now positioning to meet that demand.
The expectation of robust market demand magnified rifts between competing businesses. For instance, a group of cement importers recently sued an undersecretary of the DTI for a department order that (they say) makes it more difficult for enterprises engaged in importation to bring their commodities in.
The department administrative order in question (DAO No. 17-02) requires companies engaged purely in cement importation to secure an Import Commodity Clearance (ICC) for the commodities they intend to bring in. Local cement manufacturers, for their part, are not required to secure an ICC when they need to import during times when market demand exceeds local production capacity.
Cement importers complain of unequal treatment because they are required to possess an ICC even if their counterpart local manufacturers acquire their imported stocks from the same sources. They accuse the DTI of favoring the evolution of a domestic cement cartel. The disparity in import requirements, they say, goes against our international commitments on trade facilitation and ultimately harms domestic consumers when cement prices spike.
The Complainants also warn that the restriction on pure importers of cement could jeopardize the Build, Build, Build infra program if supply is threatened in the face of rising demand. That warning could be highly speculative, however.
Despite the DTI order, however, cement prices climbed down significantly from a high of about P300 per bag in 2015 to P217 per bag in 2016 to only P197 per bag at the moment. The lower price may be due to larger trends in the international market as well as to lower power costs for domestic manufacturing.
The DTI requirement is a matter for more exhaustive debate, however. The Trade Department is mandated to support domestic manufacturing and protect Filipino consumers from substandard imports. We have seen, from recent calamities especially in the Visayas, how Filipinos have been harmed by substandard steel imports, much of which were smuggled into the domestic market.
Furthermore, preferential treatment of Filipino manufacturers is the norm. After all, local manufacturers assume the business risks of establishing plants and hiring local workers. Those who import have no lasting domestic investments and contribute nothing to our manufacturing base. They simply exploit opportunities opened when domestic manufacturing supply falls below demand.
In addition, from the point of view of our trade regulators, local manufacturers may be held to account when a commodity is found to be substandard. The same cannot be done for commodities manufactured abroad and freely imported into our market.
But lawyers and judges might have a different view. Cases are now pending at the Makati Regional Trial Court questioning not only the legality but also the constitutionality of the DTI’s administrative order that companies engaged purely in cement importation find adverse to their interests.
For better or for worse, it will be the lawyers, not the economists, who will argue this thing out.
Hands-off
A few months ago, during a Cabinet meeting focused in climate change issues, President Duterte told the Climate Change Commission (CCC) to get its act together in the face of weather-related challenges. Specifically, the President expressed the hope that CCC head Vernice Victorio will be a hands-on and productive leader of that agency.
Victorio’s appointment to this vital and highly technical commission raised not a few eyebrows among the staff. She did not seem to have the credentials or the administrative record to properly lead the agency’s mission. But they gave her the benefit of the doubt, however.
Her months on the job, however, have not been encouraging. The commission’s staff members are now complaining about how little is getting done and how Victorio appears content to yield her responsibilities to underlings she brought into the agency. She seems content boasting about how close she is to Executive Secretary Salvador Medialdea.
The CCC is no decorative agency. It controls the use of the P12 billion People’s Survival Fund meant to help local government units reduce their vulnerabilities to severe weather patterns. No local government unit has found traces of the intended assistance.
In addition, the CCC has the task of securing grants for the country from the United Nations Framework Convention on Climate Change. No grant has yet materialized.
Staff members of the CCC are dismayed that Victorio appears to have handed effective control of the agency to a “close friend” named Tony Abaya. Although he is not formally a government official, Abaya is said to have begun treating the agency as his own private kingdom.
In addition, Victorio “verbally appointed” Tecson Lim as some sort of Acting Secretary/Chief Legal Counsel/head of the Climate Change Crisis Secretariat/ deputy executive director/project manager. That seems to be a huge set of responsibilities for a person whose last job was city administrator of Tacloban when the city was hit by Typhoon Yolanda.
Like Victorio, Lim compensates for his lack of achievement by reminding the unimpressed staff members of the commission that he is close to the Executive Secretary and even to the President. It does not seem to have occurred to Lim that this does not help provide legitimacy to occupation of the post. It only allows the new tyrants of this small fiefdom to exact obedience that might not be deserved.
It might be time for President Duterte and Executive Secretary Medialdea to take a really close look at the state of affairs in an agency that is key to helping our communities survive severe weather patterns.