Speech of Governor Hilario P. Davide III at the Philippine Sugar Technologists Association, Inc. (Philsutech) Convention

Hilario P. Davide III
Governor of the Province of Cebu
at the Philippine Sugar Technologists Association, Inc. (Philsutech) Convention 

[Delivered at the Waterfront Hotel and Casino, Cebu City on August 13, 2014]

Welcome to the 61st Annual Convention.

I see today the same faces I saw the last time I was here.

Just older.

But more beautiful and more handsome.

I also see a new hope.

Despite the challenges posed by the Asian Free Trade Agreement, which takes effect next year, and the pressure on the international market, sugar remains a robust export commodity for the Philippines. Behind coconut, rice and corn, sugar is the fourth biggest farm product in the country.

Unfortunately, sugar is not unique to the Philippines.

Damo man nacion me ara sugar.

Europe produces sugar from cane and beets, the central and south America farms enjoys proximity to the north American market, our neighbours Thailand and Australia produce more sugar, cheaper sugar.
When the Philippines offered a margin of preference of 35 percent to ASEAN countries in the Preferential Tariff Agreement of 1977, and further reduction in tariffs at the GATT conference in Uruguay in 1990, I suspect it was upon the assumption that we held superior production compared to our neighbours.

Little did we expect Thailand to invest so much on a full force sugar production program, – from efficient agricultural practices to efficient mills, and Australia to further make efficient its already efficient sugar industry.
To address the issue of efficiency, the 2011 Sugar Industry Roadmap proposed some bold and interesting solutions:

– Consolidation of smaller farms, into blocks of around 50 hectares at least, with the owners retaining ownership but allowing professional managers to run the sugar cane fields; this proposal is diametrically opposed to land reform and may not sit well with some sectors, and small landowners may not feel comfortable giving up control of landholdings to other people however professional they may be;

– Forming mill districts. This means closing the small and uneconomical independent mills and making the already big and profitable sugar mills become bigger and more profitable. Any threat to livelihood, however uneconomical that livelihood may be, is going to meet stiff opposition;

– And aggressively promoting bio-fuel as an alternative revenue targeting the 380 million liters of ethanol we import each year.

The target set three years ago was 75 tons per hectare, and a milling efficiency of 100 kilos per ton of cane. That comes up to around 7 and half ton of sugar per hectare planted to sugar cane. I am informed that today’s production is approximately 120 bags of sugar per hectare. That adds up to around 6 tons per hectare. That target was set for 2016, and judging from the confident smiles of the sugar technologists tonight, such target is perfectly within sight.

When that Roadmap was made, tariff on imported sugar was 38 percent. The Asian Free Trade Agreement brought that down to 28 percent in 2012, and further down to 18 percent last year. Today it’s just 10 percent. But in less than six months, it’s going to be just 5 percent.

That is something we should prepare for.

Another limiting factor is our restricted market. Out of the 2 Million plus tons of sugar per year from our plantations and sugar mills, only ten percent earns foreign exchange. Compare that with Thailand’s 8 million tons per year, and their 5 and a half million tons of export.

Devoting more real estate to sugar may not be the solution. Between 1990 and 2000, area planted to sugar in Negros Island increase by around 50 percent. While it may have increased volume, it did not improve economics.

I see that the way ahead is diversification and backward integration. You must consolidate cultivation, planting, harvesting, milling and marketing.

You must diversity. Alcohol can be made from molasses, paper and board can be made from bagasse, and organic fertilizer from filter mud. The development of saleable product from these by-products by millers widens the market and maximizes profits.

I know that this is easier said than done. There are laws, there are regulations, many of them probably obsolete. Many of these laws, while favouring specific sectors, also create artificial costs for the sugar industry and an anomalous imbalance in pricing absent in the other sugar producing countries. But I trust that you have enough representation in Congress to initiate institutional changes to make this possible.

If not, then maybe you should elect representatives who can.

The burden of making sugar sweetening its economic impact on the country rest upon the shoulders of the ladies and gentlemen gathered here tonight. Over 500,000 Filipinos depend on sugar directly. About a million more indirectly.

Let us succeed.

Good morning to all.