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“Syrup in the Wheels of Progress”: The Inefficient Organization of the Philippine Sugar Industry*

Published online by Cambridge University Press:  24 August 2009

Michael S. Billig
Michael S. Billig
Affiliation:
Franklin and Marshall College
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Extract

While the organization of the Philippine sugar industry evolved to promote and balance the short-term interests of planters, millers and traders, it now undermines the industry and threatens the economic fortunes of those who depend upon it. By perpetuating inefficiency and fostering a frenzy of trading that affords inordinate profits for the least productive sector, this structure has become the major obstacle to restoring the Philippines to its former status as one of the world's most efficient and technologically advanced producers of cane sugar. As efficiency falls further behind that of other sugar producing countries, and as industrial consumers become more disgruntled with paying high prices for sugar, the nation risks the collapse of an industry that has already proven vulnerable to intermittent crises. The last time a crisis occurred — in the mid-1980s — planters faced foreclosure, mills stood idle, and workers and their families suffered malnutrition and dislocation, leading commentators to refer to Negros, the nation's premier sugar-growing island, as “Asia's Ethiopia” and a “social volcano”. While conditions have improved since the EDSA Revolution, the structure that has emerged does little to encourage productivity, efficiency and fairness. Since the industry continues to employ 500,000 workers, with as many as three million dependents, a collapse would lead to mass displacement, hunger, and political upheaval.

This paper will outline the history of the Philippine sugar industry, examine its current structure, and describe the political and economic forces that sustain it. My first contention is that the institutional organization, rather than government policy, cultural attitudes, or neo-colonial dependency, is fundamentally responsible for the poor performance of the industry in recent decades and, unless major changes are forthcoming, will be mainly responsible for its ultimate demise.

Type
Articles
Information
Journal of Southeast Asian Studies , Volume 24 , Issue 1 , March 1993 , pp. 122 - 147
Copyright
Copyright © The National University of Singapore 1993

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References

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20 For more complete discussions of Philex and PHILSUCOM see Hawes, , The Philippine State and the Marcos RegimeGoogle Scholar, and Sa-Onoy, , The Philippine Sugar Trading MonopolyGoogle Scholar.

21 Benedicto was not the only crony involved in sugar industry. Among others were Armando Gustilo, the president of the National Federation of Sugarcane Planters and the “war lord” of North Negros, and Eduardo Cojuangco, who became the nation's largest owner of sugar land. Cojuangco finished third in the 1992 presidential election.

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28 Philippine Daily Inquirer, 13 07 1991Google Scholar. Up to 1990, world supply exceeded demand in 23 out of 28 years [Brown, J.G., The International Sugar Industry: Developments and Prospects (Washington: The World Bank, 1987, p. 6)Google Scholar].

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30 Paxton, J., ed., The Statesman's Year-Book, 1982–83 (London: Macmillan, 1982)CrossRefGoogle Scholar.

31 Although production by region varies in any year, Central Luzon generally provides 22–26 per cent of Philippine sugar, Negros about 50 per cent, with the remainder coming from Panay, Cebu, the Eastern Visayas, and Mindanao.

32 The cost of urea, for example, went from 115 to 335 in two years. There is debate about what percentage of sugar planters actually pay the minimum wage (which is 73.50 per day), though it seems that most larger planters today do pay it. Since no one is paid when they don't work, this wage remains below family subsistence needs.

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34 See Pandan, R.T., ed., The Agrarian Reform Process in Negros Occidental (Bacolod: ISRAD, USLS, 1991)Google Scholar; de los Reyes, R.P. and Jopillo, S.M.G., Pursuing Agrarian Reform in Negros Occidental (Manila: Ateneo de Manila University, 1991)Google Scholar; and, Ledesma, A.J. and Montinola, M.L.T., The Implementation of Land Reform in Negros (Bacolod: SRC, USLS, 1988)Google Scholar for how CARP relates to sugar land.

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36 A controversy took place in the summer of 1992 when DAR redistributed “foreclosed” land to worker/beneficiaries on a hacienda in southern Negros. The former hacenderos were able to obtain a court order declaring that they rather than PNB were still the rightful owners of the property. Two people died and several were injured when the hacenderos attempted to evict the workers from the land. This illustrates the amorphousness of the concept of “foreclosure” as applied to sugar land.

37 Billig, , “Stuck in Molasses”Google Scholar; and David, C.C., “Philippines: Price Policy in Transition”, in Food Price Policy in Asia, ed. Sicular, T. (Ithaca: Cornell University, 1989)Google Scholar.

38 In most countries mills purchase cane directly from planters and then own all the sugar and molasses produced.

39 Arsenio Yulo was Administrator from the SRA's inception until his unsuccessful 1992 Senate campaign. In July 1992, Rodolfo Gamboa, who had previously been the planters' representative on the board, was appointed Administrator, illustrating the loose nature of the sectoral representation.

40 In recognition of the 1992 failure, the agency has announced that it will be moving back to A, B, C, D and (maybe) E categories in 1993.

41 Sa-Onoy, and Delfin, columns in Today, 25 07 1991Google Scholar.

42 Business World, 23 Jul. 1991. Although the Philippines is not one of the world's biggest producers, it is one of the three biggest importers of sugar to the U.S. (along with the Dominican Republic and Brazil).

43 CONFED was begun as a spin-off from the NFSP during the Marcos years. Although Guanzon was an ally of Mrs. Aquino, he became NFSP President after Gustilo's death and has remained loyal to that organization, which now represents about 17 per cent of production.

44 Since cane quality is as important as quantity in determining yield, a shift to a cane purchase would require core sampling machinery to assess quality prior to milling. Such technology is readily available.

45 The dried cane from which the juice has already been pressed. Bagasse is the major fuel source for most centrals.

46 This is a neo-institutionalist perspective. An outstanding statement of that school of thought is D.C. North, Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University, 1990)Google Scholar.

47 The existence of the Big Five is a recent phenomenon, dating only from the martial law period. The older trading families were undermined by PHILSUCOM by being given small allocations of sugar. The current Big Five benefitted from their closeness to Marcos and his cronies by being given disproportionately large allocations.

48 Billig, , “Stuck in Molasses”Google Scholar.

49 With rediscounting the government pays the bank 80 per cent of the value of a defaulted loan, so the bank takes on only 20 per cent of the risk. Rediscounting is now available only to finance export-oriented industries and to implement certain externally-financed projects.

50 Sa-Onoy, column in Today, 25 07 1991Google Scholar.

51 This was part of a general move to simplify the tariff structure. Under the now-suspended Executive Order 413, 30 per cent would have become the highest rate in a four-tier system.

52 Lacson is a businessman, shipping executive, and planter, who has become a major figure on the national scene. He was until 30 Jun. 1992 the Governor of Negros Occidental, and, owing to his ardent support of Fidel Ramos, was subsequently appointed Chairman of the Council for Rural Development. On 28 Jul. it was announced that Lacson was taking over the chairmanship of PNB.

53 Rationalization of Tariffs on Sugar, Molasses and Sugar Substitutes, CONFED Position Paper, 1992.

54 Annual Synopsis of Production and Performance Data, 1988–89, 1989–90 and 1990–91 (Manila: SRA).

55 PS/TC varies widely among centrals. In 1990–91, the worst in the nation had a PS/TC of 1.13, while the best was 1.76 (Final Production CY 1990 to 1991: SRA).

Some representative figures for overall sucrose recovery (in 1988) are: Philippines (80.08 per cent); Hawaii (84.80 per cent); South Africa (85.65 per cent); Mauritius (87.70 per cent); and, Queensland, Australia (89.74 per cent) (from Covar, R.R., “Factors Affecting Cane and Juice Quality”, Philippine Sugar Quarterly 1 #2 (1990): 26–52Google Scholar.

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60 Ibid., p. 6.

61 Ibid., p. x.

62 Ibid., pp. 10–11

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