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, often visited by as many as twenty hurricanes a year two or three of which are often considered as destructive, is not suitable for maize, many tree crops, and year round agriculture. Sugarcane, however, grows luxuriantly and well, and suffers little from typhoon damage. It is, therefore, a crop of preference not only because its product, sugar, has a long shelf life and is easily transported, but because the farmer is never really in danger of losing his entire harvest because of its resiliency.”(Jose Maria Zabaleta) Sugar started to be commercially produced in the Philippines during the 18th century. Since then the sugar industry flourished to become a major commodity for export. In the 20th century, the greater demand for sugar in the American Market resulted into growth of the industry. (Jose Maria T. Zabaleta)
The United States gave preferential treatment to the Philippines by imposing quota for the Philippine sugar exports through the Laurel-Langley Agreement. Through this, producers of sugar in the Philippines are assured that their products will be easily sold at high profit. The sugar industry boomed and become one of the important sectors in the Philippine economy. It is earning millions of dollar from sugar importation.
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 Philippines. The decline of the sugar industry has numerous implications to the Philippine economy such closure of some sugar plantations/refineries, loss of jobs for sugar farmers, and lower export income for the Philippines.

Relations of Production in the Sugar Industry
Before the advent of the Comprehensive Agrarian Reform Program (CARP) in 1987, most of the sugar plantation and refineries were owned by few wealthy landowners such the Yulos of Batangas, the Cojuangcos of Negros and Tarlac, the Tuazons of Negros, and the Ledesmas of Negros. These families owned hundreds or thousands of hectares of sugar plantations. Most their wealth was derived from sugar production thus were at times referred to as the “sugar barons” of the Philippines. There was a time in Philippine History when this group have been very influential in the Philippine economy and politics.
On the other hand, the farmers who are actually working in the sugarcane plantations remained to be poor and voiceless. While those wealthy landowners are enriching themselves from big profits during the peak of the sugar industry, most of the farmers never benefited from it. Sugar cane farmers are oftentimes given low wages while small farmers who have their own little plantations have to sell their sugar cane harvest at low gate prices of big sugar refineries.
When the sugar industry declined, the immediate effect is reduction of farm workers to reduce the production cost for the landowners to keep their profits. Thousand of sugar farmers have been forced out of their jobs resulting to more poverty incidents in the rural areas and influx of former farmers to the urban centers to look for other job opportunities
After the implementation of CARP, some wealthy landowners have managed to keep their land. Some sugar plantations and refineries managed to continue operating in their old ways. A classic example of this is Hacienda Luisita, a 6000-hectares sugar cane plantation owned by the family of President Noynoy Cojuangco Aquino and her mother President Cory Cojuangco Aquino. In 2004, sugar cane farmers and workers of the hacienda launched a series of protest actions against the alleged unfair treatment on them the management. Their demand is basically to have higher wages since most of them are earning only about 10 pesos for a day of work even-though they are considered as stockholders of the hacienda. This culminated to the Hacienda Luisita Massacre in November 16, 2004.
The wealth earned from the sugar industry are concentrated in the hands of few landowners and refineries while thousands of farmers & farm workers who worked tirelessly for this are not receiving their appropriate share. This situation is happening in many if not all sugar cane plantations in the Philippines.

Sugar Industry Today
The Philippine Government established the Sugar Regulatory Administration through Executive Order No. 18 of 1986 with following objectives as published in the SRA’s official website: 1) To institute an orderly system in sugarcane production for the stable, sufficient and balanced production of sugar for local consumption, exportation and strategic reserve; 2) To establish and maintain such balanced relation between production and requirement of sugar and such marketing conditions as will insure stabilized prices at a level reasonably profitable to producer and fair to consumers; 3) To promote the effective merchandising of sugar and its products in the domestic and foreign markets so that those engaged in the sugar industry will be placed on a basis of economic viability; and 4) To undertake such relevant studies as may be needed in the formulation of policies and in the planning and implementation of action programs required in attaining the purposes and objectives set forth under Executive Order No. 18.
Since then, the SRA together with the private sector implemented various programs and strategies to boost the sugar industry. These efforts have bore fruit as far as making the sugar industry relevant is concerned, however, bringing the sugar industry back to its level during 1950-1970or even higher remains to be a prospect.
In general, there is still hope and positive indications for the sugar industry. It is important to look into the importance of the sugar industry to the Philippine economy. Rather than taking into consideration the interests of the profit-oriented landowners and refineries, the government must see to it that a reinvigorated sugar industry must contribute to poverty alleviation and uplifting the lives of Filipinos whose lives depends on the sugar industry.

Sources:
WILL THE PHILIPPINES REVERT TO ITS NET SUGAR EXPORTER STATUS, Jose Maria T. Zabaleta , for the United Nations Food and Agricultural Division
Sugar Regulatory Administration Official Website

Economic Policies for the Philippine Sugar Industry, Australian Centre for International Agricultural Research

Issues in Revitalizing the Philippine Sugar Industry, Development Research News, Philippine Institute of Development Studies
Philippines: A Country Study, Ronald E. Dolan, ed., Washington: GPO for the Library of Congress, 1991