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Sweet Deals: The Phillipine Sugar Industry

1610 words - 7 pages

Gerald Y. Cruz
2003-30983 BA Political Science
Econ 141
Prof. Mesina
23 March 2011

Sweet Deals: The Philippine Sugar Industry

History

From the 19th century until 1970s, sugar has been one of the most important agricultural products in the Philippines. Philippines have been one of top exporter of sugar in the world and the sugar has been one of the pillar of the agricultural Philippine Economy.

Jose Maria Zabaleta in his paper discusses the Philippines’ comparative advantage in the sugar industry:

“Comparative Advantage
The middle islands of the Visayas and the northernmost island of Luzon lie in the typhoon belt of the Pacific Ocean, and its eastern seaboard, ...view middle of the document...

However in 1970s, the sugar exportation decline as stated by Ronald Dolan in his book “Philippines: A Country Study”:
“ In the 1950s and 1960s, sugar accounted for more than 20 percent of Philippine exports. Its share declined somewhat in the 1970s and plummeted in the first half of the 1980s to around 7 percent.” (Ronald E. Dolan, 1991)
From then on, the sugar industry started to decline. This situation was further aggravated by several other factors.

Problems, Issues, and the Decline
The most important factor that contributed to the failure of the sugar industry is the reliance to the US quota and the subsequent removal of the quota. When the Laurel-Langley Agreement expired in 1974, the US quota was effectively removed thereby resulting to the reduction of assured market sales for sugar producers. This resulted to tremendous decline of sugar exportation which means low profit or even losses for local producers.
Another important factor that contributed to the decline of the sugar industry is its failure to adapt to technological advancement. While there are efforts to upgrade the sugar industry, it remains minimal with insignificant impact. Jose Maria Zabaleta stated in his paper that:
“In 1991, the sugar industry started to implement a Rehabilitation and Modernization Program to upgrade the mills which have been left in a state of disrepair and obsolescence during the crisis in the 70s and 80s. While it is true that some of the mills have invested and completely re-built and changed their equipment, making them the equivalent of new mills, and others have made major investments in upgrading or adding equipment- it is undeniable that many mills are also maintained in their dilapidated state and used as milking cows by their proprietors. These mills not only produce inferior sugar which oftentimes fetches lower prices, but also prevent farmers from optimizing the potential of their farms. They are prone to breakdown and cause harvest losses and have very poor extraction, significantly contributing to the decline in sugar recovery per ton of cane.” (Jose Maria Zabaleta)
The failure of the government and the private sugar producers to effectively upgrade the sugar industry into a globally competitive level is problematic for the sugar industry. Inferior sugar produce means lesser marketability, lower price and ultimately lower profit.
Another factor that contributed to the decline of the sugar industry is the volatility of price in the market and the depreciation of the Philippine Peso. The fluctuation of sugar prices in both domestic and local markets contributed to the general decline sugar industry wherein sudden fall in sugar price is resulting to heavy losses for producers. To further aggravate this, the depreciation of Peso against the US Dollar and other currencies resulted in lower income from sugar exportation.
These are the major factors that contributed to the general decline of the sugar industry in the...

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