PRESIDENTIAL front-runner Davao Mayor Rodrigo Duterte has devoted most of his effort in his cam-paign into convincing undecided voters that they will be torn apart by a rabid mob if they don’t swear fealty to him, but there have been occasions when he has made a visible effort to stop being a horrible little goblin for a few moments and discuss actual policy.
One of those moments occurred last week when the goblin paid a visit to Negros, and was asked what he would do to support Negros’ most important business, the sugar industry. Duterte had two main points. First, he would subsidize sugar prices to make Philippine sugar more competitive in the export market. His second point, although he was less emphatic about it, was that the land reform program should not be extended (a bill to give it two more years of life has been stalled in the House for about a year).
That is exactly what people in the Philippines’ “sugar bowl” want to hear, but to be fair to Duterte, he at least remembered to be consistent; he had the same message for Negros when he made his first visit as a candidate back in February.
Duterte’s land reform position, vague though it is, is not actually too egregious, at least as it pertains to the sugar industry. Industry experts have repeatedly said that breaking up land into small plots is une-conomical; sugar is one crop that only becomes profitable at scale. Small, independent farmers just cannot produce enough on a hectare or two to even earn a subsistence-level income, let alone a prof-it. Not surprisingly, it was a bloc of Visayan congressmen who threw an obstacle in the path of the bill to extend “notices of coverage” (HB 4296) for two more years, despite its having been certified as “ur-gent” by President BS Aquino 3rd. Their motivation may have been less than noble (at least some of them are landowners with substantial holdings), but the move was at least accidentally economically sound.
What Duterte might propose as an alternative to land reform, however, is still a mystery, perhaps even to him. Not imposing land reform is better for sugar productivity, but does not in any way answer the problem of profound poverty among farm workers that spurred the push for land reform in the first place. Solving the basic social issues will require comprehensive work that crosses over some min-isterial boundaries. No one really expects a candidate to have a complete plan to address that, or be able to explain it in campaign stump speeches, but most would feel more reassured if the candidate at least indicated awareness that “let’s not push land reform” is not by itself the solution.
I would be willing to give Duterte the benefit of the doubt that he has thought about the complexities of that issue, if his other suggestion, subsidizing sugar prices, was not such a lazy non-solution. The basic rationale is that in order to compete with other sugar producers, the Philippines has to offer the commodity at a lower price. As one former Congressman argued, farm subsidies in places like the US make it a necessity that the Philippines does the same.
A bit closer to home, China, India, Indonesia, and Thailand all have price subsidies for sugar; Philippine sugar competes with those countries for the export market in the US. But at least so far, this has actu-ally not presented much of a problem for the Philippines; the US market is so huge that the Philippines sometimes cannot produce enough to fill its allowed quota, as was the case this year when lower pro-duction due to the drought obliged the country to look for sugar to import to make up for the deficit.
Politically, subsidies are poisonous, because once implemented they cannot be withdrawn without the risk of serious social and economic upheaval in the affected sector. Economically, they are not very smart, because subsidies distort the market on the one hand—prices do not reflect actual supply-and-demand factors—and they discourage agricultural diversification, which slows development of the sector. Impoverished sugar farmers might be lifted out of poverty by subsidized sugar prices, but only to a certain level, since the controlled price effectively imposes a ceiling on what they can earn.
Subsidies also increase the risk—some economists say make it inevitable—that a commodity bubble will form. Production of the single crop is encouraged by the subsidy, to the point where the supply is so large that the subsidized price cannot be supported. The US ran into the problem decades ago with corn subsidies, and resorted to the dubious solution of paying farmers not to plant part of their land, because again, subsidies cannot be taken back once they are offered because of political concerns.
The obviously better, sustainable solution is to invest the government’s resources into developing the sector, allowing prices to moderate naturally through increased efficiency and productivity. Of course, doing that means the politician standing behind the solution doesn’t get any credit for his paternalistic largesse, which is an option no Philippine politician would willingly accept, Duterte included.