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ARE DOMESTIC CEMENT PRICES ARTIFICIALLY HIGH?
The Philippine Star And again, the perennial questions and subsequent debates on the state of the domestic cement industry will be resurrected: the rational behind rising cement prices; on whether a cement cartel exists; and whatever happened to previous discussions about scrapping the current five percent tariff on imports to bring down prices. The dominant cement manufacturers, which in fact are largely owned by multinational cement companies, are saying that the move to eliminate the low five percent tariff is insane. They argue that such an act would surely lead to the collapse and inevitable demise of the industry, which is just starting to gain ground after years of stagnant sales since the 1997 Asian financial crisis. These cement makers are also saying that between them and the smaller independent players, the industry is still operating below capacity levels. There are 18 integrated plants capable of producing 18.5 million tons of clinker and 26 million tons of cement annually. And yet, they claim that domestic production just averages 12 million metric tons because of soft demand. Construction frenzy This is quite hard to ingest, really, when you consider the rate of construction in both the high-end and affordable housing sectors; the frenzied building of malls, not just in Metro Manila, but in key growth cities in the provinces; the expansion of BPO offices; and the development of world-class luxury leisure resorts and residences by the country's major property developers. Now therefore is the time for cement makers to make good their statements that with overcapacity, all they have to do if demand increases, is to crank up their machines to produce what the market requires. But you could also expect them to insist that there is no need for imports which already, are giving them a hard time because domestic prices are several notches higher. Worse, they have questioned the quality of imported cement that supposedly are priced at dump levels. The Fair Trade Alliance has thrown its support to local cement makers, saying the likes of And why shouldn't they? That is after all the spirit of competition. The one with the best cost efficiencies should be able to pass it on to consumers. In this regime of bullying lobby groups, not to mention, proliferation of grease money, it is almost impossible to achieve a level playing field. Everyone has the option to hide behind their efficiencies (or inefficiencies) through all sorts of tariff and non-tariff trade barriers. Bloated costs charges The Department of Trade and Industry is trying very hard to balance the interests of end-users and the claims of “helplessness” by the local cement makers. Trade Secretary Peter Favila in rather uncharacteristic fashion, hinted cement companies, especially the big ones, may have been bloating their financing charges to justify their relatively high prices, and could be colluding together with the smaller players to justify soaring prices. Favila dared to say he will allow imports to continue if the price spikes continue. A technical working group of the Tariff Commission is currently discussing whether the tariff removal would be seasonal or permanent. Lobbying for continuing dominance The Tariff Commission said that after the financial crisis, many of the local cement companies were on the brink of collapse. Inevitably, they had to take in foreign partners as white knights which had the financial muscle to save their operations. Thus, between 1997 and 1999, What we apparently have now is a group of dominant foreign cement companies fiercely lobbying for government protection to retain control of their hold on the real “helpless” sectors here – the construction sector and the people who have every right to enjoy the little economic growth our country is now experiencing. Allow consumers to benefit from competition It's about time that the industry is opened up to more foreign competition. This should keep local cement makers on their toes. In fact, the Tariff Commission pointed out in its report that the industry improved its productivity as a result of rising foreign competition. The World Bank is also saying that cement prices here are higher than the rest of East Asian economies, reflecting the lack of competition, and undermining cost competitiveness across a range of fixed investments, especially in infrastructure. With things hanging on such a precocious balance, the all-important question that comes to mind now is for how long will the issue hang? The longer the delay in resolving the matter, for sure, it is the consumer that is denied the benefit of cheaper priced cement. Collegiate National Championship on Solar Basketball TV The television coverage of Solar's Basketball TV of the Filoil Flying V Collegiate National Championship started last Saturday, Nov. 10, with the FEU Tamaraws, Unigames Champion and seeded no. 5 eliminating the 12th seeded CUSA champion MLQU Stallions. Solar Entertainment is providing coverage of the games for the benefit of those who would like to see exciting collegiate basketball as players give their all for their respective alma mater. The airing schedules of games are as follows: today – UST vs Mapua and San Beda vs. Sacred Heart College Stallions (5:00 pm and 12:30 am replay); Tuesday – JRU vs. West Negros Colleges (3:00 pm, 12:30 am replay); Wednesday – UE vs. STI; Ateneo vs. San Sebastian College (5:00 pm, 12:30 am replay); Thursday – DLSU vs. University of Mindanao (3:00 pm, 12:30 am replay; and Saturday – University of Visayas vs. Lyceum (3:00 pm, 12:30 am replay). Watch the games and enjoy the display of raw talent and fighting school spirit. Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center,
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