Honeyman: Sugar

Monday, September 19, 2011

THE Sugar Regulatory Authority (SRA) stated with spurious accuracy and authoritativeness that domestic consumption of sugar during the 2010-

2011 crop year was 1.63 million metric tonnes (MMT). This was based on the erroneous assumption that no sugar was smuggled into the country.

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In fact, domestic consumption for 2010-2011 was 1.63 MMT plus illicit sugar imports.

We believe that SRA’s persistence in being in denial about smuggling caused domestic consumption to be understated. We understand that SRA lacks investigative resources since smuggling is not part of its mandate. But it would help to improve accuracy of the data it receives from the mills if a robust verification process were in place.

SRA is incorrigible. It estimates that for the 2011-2012 crop year domestic demand will be below 2.00 MMT. How does it know? It doesn’t.

There would be no apparent surplus domestic production if the Bureau of Customs had the will to prevent illicit sugar imports which causes us to be awash with sugar. Recently, it was reported that we have an overhang of 0.6 MMT. Since SRA estimates production in 2011-2012 to be 2.4 MMT, this means that to avoid a permanent substantial overhang we need to consume 3.0 MMT plus smuggled sugar less 138,000 tonnes exported to the US less other exports. Therefore, we are heading towards a chronically soft domestic market.

We trust that smugglers will be less successful in 2011-2012 than they were in 2010-2011. Shame on those who facilitate smuggled sugar to become part of our orthodox distribution channels.

We sense that unreliable data may be causing the industry to lose credibility with Agriculture Sec Alcala and perhaps even the President. Alcala is anxious that the Philippines becomes self-sufficient in our major crops, but he seems somewhat reticent about the state of our sugar industry.

It is imperative that future SRA pronouncements make sense.

Last week’s announcement that former Muntinlupa Representative Ruffy Biazon is to be the new commissioner of the Bureau of Customs (BOC) is welcome. Biazon’s statement that he would be seeking to make reforms based on a review of the bureau’s systems and procedures, organizational structure, personnel morale and the agency’s image is also reassuring.

Operationally, the appointment of former Scout Ranger commander Brigadier General Danilo Lim as Customs deputy commissioner for intelligence may be even more significant. Lim does not mince words. His statement that ‘he would use his mandate to help the government in effective revenue generation by preventing and suppressing smuggling and other forms of corruption inside the bureau’ suggests that he is not concerned about being popular within BOC. Not being a team player is sometimes a good thing.

The missing 1,900 containers, which eluded BOC recently, could have held up to 57,000 tonnes of sugar. The containers will probably not be retrieved, at least not with the goods intact. Lim understands about the risks taken by whistleblowers. Speaking in Dumaguete recently, he lamented that during the Arroyo administration, whistleblowers and others who gave information about corrupt practices were often harassed, generally given a hard time and even thrown into jail. We trust that Lim can develop a mechanism whereby he can receive and act on useful anti-smuggling information without risk to the whistleblowers.

Lim’s role is crucial to the sugar industry. Eradicating smuggling will eventually, once the overhang is consumed, eradicate the need for ‘D’ sugar with its associated low price.