Detestable rent seeking
Nothing reduces what little credibility the administration has in fighting corruption than reports of blatant breaking of rules to enable detestable rent-seeking. The President, if his agriculture deputy is to be believed, has apparently allowed the recent importation of 440,000 metric tons of sugar with the usual regulations set aside.
You can only shake your head in disbelief as Senior Undersecretary Domingo Panganiban matter-of-factly said in a press conference that he allowed the importation without the required sugar order. Worse, he said he personally chose the three traders who would be allowed to import because “I consider them as the most capable importers that we have.”
Panganiban could not say what criteria he used to justify his selection. Basta lang. He just chose three from a three-page list of potential traders. Wow! Given the amount of money involved, it is easy to raise eyebrows.
Not a fan of SRA rules, which are heavily stacked in favor of the sugar cartel and never considered the consumer. But the Sugar Regulatory Administration or SRA has the sole authority to issue import permits and also has the authority to decide, by law, who among the traders will be awarded import permits. Usec Panganiban effectively admitted ignoring the SRA rules in that press conference.
A former Negros governor was reported to have exclaimed: “Wow. Sebastian took the effort to pass a sugar order, signed it on behalf of the President as duly authorized, then got clobbered for passing an ‘illegal’ sugar order. No actual importation took place, but he and the Sugar Board got crucified by the Senate.
“Now, Panganiban orders actual importation WITHOUT a sugar order and he says the Executive Secretary’s instruction is tantamount to one. On top of that, he alone decided who gets to import based on a list given to him. No need for SRA to legalize it or go through the formal process! Brazen. What’s to stop them from making this a habit? Bottom line: No more rules!”
Will Senate President Zubiri and Sen. Tolentino skewer Panganiban this time the way they did Sebastian? Indeed, the sugar shipments arrived ahead of the issuance of a sugar order. Can the shipment be considered technically smuggled when released before the issuance of the sugar order?
It is scandalous. The favored importers probably acquired the sugar from Thailand at around P20 a kilo. The imported volume is about 440,000 MT. DA announced a target price of P70 to P75 per kilo once imports arrive, supposedly to reduce inflation.
Do the math, count all the zeroes and see how much windfall profits the traders will earn from this favored treatment. A windfall profit tax is called for.
The importers should be required to unload the questioned imported sugar at the domestic price in May 2022 of about P50 per kilo for refined white sugar and brown sugar at just above P40 per kilo. Tariff is a mere five percent for sugar from Thailand, an ASEAN country.
That means the importers can still just about double their money by selling at May 2022 retail prices. Allowing them to sell at P70 or worse, at the prevailing price of about P100/ kilo, is sobrang sobra na. Too much undeserved profits realized through favoritism or in economic terms, rent-seeking.
Responding to questions from Sen. Risa Hontiveros, Panganiban said that President Marcos “was properly informed that the sugar had already arrived.”
That really puts the President in an awkward situation. He reacted negatively to Usec Sebastian who followed the rules and even had him investigated. Now, something worse happened with Usec Panganiban, what will he do to respond to shocked reactions from the industry and the public?
Sugar Order 6 says it is effective three days after its filing with the Office of the National Registrar at the UP Law Center. It was stamped received by the UP Law Center Feb. 15. The imported sugar was said to have arrived on Feb. 9. Sen. Hontiveros asked: “Can a sugar order be retroactive to cover shipments that arrived before its effectivity date and before the notice of award allocation?”
Rules are still rules and must be implemented or scuttled. If the sugar shipments that arrived in Batangas were technically smuggled, confiscation is a must and its importer blacklisted and criminally charged with violation of the Anti-Agricultural Smuggling Act.
The sugar industry doesn’t seem amused. The president of the National Federation of Sugarcane Planters (NFSP) was reported to have said that his group received reports that “5,000 MT of imported sugar from Thailand” before SO 6 was released. “The importer seems to have advance information on the signing of the sugar order, and this importer seems certain that he will receive an allocation from the importation under [SO] no. 6…”
A joint statement released on Feb. 22 by the NFSP, the Confederation of Sugar Producers Association, the Philippine Sugar Millers Association, and the Panay Federation of Sugarcane Farmers, said the public deserves to know who is responsible and what actions will be taken by the concerned government agencies to address the issue.
It is difficult to buy the urgency justification of Panganiban because that existed months ago. Indeed, the urgency may soon be over as the sugar harvest season started last October and will end around June.
If it is alright to break the rules due to urgency, dapat noon pa. Besides, the SRA still hasn’t allowed quedan A sugar, set aside for export, which will never happen, to be sold domestically as the President ordered. That would help alleviate supply constraints.
The SRA created the problem. Retail levels would not have gone through the roof if imports were planned and calibrated way ahead of time. Not that hard to do since harvest season always starts and ends around the same time and we are always SHORT. For example, if it was known since last October 2022 that 80,000 MT would come in each month from May to September, traders are less incentivized to speculate/hold/push the price up.
Oh well… just another day in our lives in this country where rent seeking presents a very uneven playing field for the business sector.
Boo Chanco’s email address is bchanco@gmail.com. Follow him on Twitter @boochanco