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By Angelo S. Samonte, Reporter
AT a time when it is hard-pressed
raising revenues, the government could lose a substantial amount
from cement import transactions if the tariff imposed on the product
is removed, the Cement Manufacturers Association of the Philippines
(Cemap) said.
The lobby group said the
government could loose P600 million a year in foregone revenues if
the tariff is slashed, similar to what happened from 1999 to 2000.
Cemap said the removal of the
tariff could increase unemployment as cheaper imports would force
local cement-makers to cut down on their production. Production cuts
in turn would reduce the industry’s tax contribution of P6 billion
each year.
The Tariff Commission already
sent a recommendation to the Cabinet-level Committee on Tariff and
Related Matters (CTRM) for the elimination of cement tariffs to
“inject more competition” into the domestic market and catalyze
the reduction of the prices of the commodity. Demand for the
construction material is on the uptrend in light of a booming
property sector.
A technical working group is
determining whether the tariff removal would be seasonal or
permanent.
Cemap said the removal of the
tariff would facilitate the entry of cheaper cement from China,
which has been trying to enter the Philippines among other markets
since February.
According to Cemap, China’s
ex-plant cement price is around $158 per ton while the landed price
is $152 per ton.
“If the government slash[es]
the 5-percent import tariff then the price would be $145 per ton and
this will impact heavily on the industry and the workers,” the
industry group said, adding that retaining the 5-percent tariff is
appropriate to protect domestic makers of cement.
The local industry employs
120,000 workers.
Cemap said there is also a need
to increase local cement prices in order for manufacturers to
recover their investments. While prices normalized in 2005, the
return of investments is only 3 percent to 5 percent return on
assets (ROA) for producers like Holcim. Another producer, Lafarge
enjoys a 4-percent ROA.
“In 1997 the cement price per
bag is P134, today it is P175 or a 3.7-percent increase. But the
people remember P100 in 2002 not P134,” Cemap said. “If we
factor inflation the price now should have been P230 per bag and not
P175.”
Cemap took appropriate measures
in 2005 to increase cement prices to P156 per bag, causing a
sustained increase in prices of around 6 percent a year.
Last year, the industry tried to
recover its losses but failed. And despite several recovery
initiatives, the industry suffered from continued losses due to the
entry of undervalued cement from other countries, particularly
China, Cemap said.
Local manufacturers said they are
losing P9 billion a year because of the entry of dumped cement. And
some are saying that they would just close shop and start importing
or transferring their operations to another country instead of
producing cement locally.
Cemap said even if only one-third
of 1 percent of China’s cement production enters the Philippines,
the domestic industry will lose 30 percent of the market.
The group also belied reports
that the Philippines has the highest cement prices in Asia, citing
the higher prices in India, Japan and Brunei.
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