What’s behind the fuss over CP Foods of Thailand?

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First of four parts

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Editor’s Note: The following article was adjudged 2013 Agriculture Story of the Year by the BrightLeaf Agriculture Journalism Awards in December last year. It was originally published in the Livestock and Meat Business (LaMB) Magazine by the author, who started his journalism career as proofreader of The Manila Times.

When local swine and poultry raisers groups learned that the Board of Investments (BOI) had granted tax and fiscal incentives to a Thai agribusiness company, they immediately voiced their grievances and mounted a campaign to pressure the board to rescind its decision.

Their opposition to the BOI action was intense and unprecedented. After convincing legislators to conduct a congressional inquiry into the matter, they sued the investment promotion board before the Supreme Court. In a case filed in March 7, 2013, they have asked the High Tribunal to nullify and temporarily restrain BOI’s granting of tax perks to Charoen Pokphand Foods Philippines Corp. (CPF Philippines), calling the move “unlawful, whimsical and capricious.”

The petitioners include the National Federation of Hog Farmers Inc., the Pork Producers Federation of the Philippines Inc., the Association of Philippine Aqua Feed Millers, the Soro-Soro Ibaba Development Cooperative, and the Abono, Agham, and Agap party-list groups.

Since the Thai company is globally known to be an efficient feed and food producer and distributor—a stature domestic players haven’t yet achieved—they feared that the presence of the foreign firm in the local market which has been granted incentives will seriously threaten the livelihood of millions of workers in the farm sector.

The hysteria over the tax perks has gone a bit farther. Even Agriculture Secretary Proceso Alcala, whose department is mandated to uplift the productivity of farmers and fisher folk and ensure food is available and affordable to the nation’s 100 million inhabitants, was startled.

“I myself do not agree with the decision of the BOI. I am afraid it could eventually kill our domestic livestock industry,” Alcala declared during a TV interview last year.

Amid all the fiery rhetoric unleashed by local farmers groups and their political backers, this writer interviewed key informants from government, academe, feed, livestock, and meat industries, and dug up relevant data in an attempt to shed light on the issues raised and to present underlying factors behind the controversy.

Noise over CP but no howl over New Hope
To begin with, it was not only CP Foods that was given BOI tax and fiscal privileges. Months before the uproar, another huge offshore company, the New Hope Group, obtained similar perks when it registered its three feed milling projects north of Manila worth close to P400 million, official records showed.

The New Hope Group is China’s biggest agribusiness operator. With annual feed production capacity of 26.6 million metric (MT) tons, or more than four times the Philippines’ estimated total feed output of 6.25 million MT, the Chinese conglomerate is regarded as the world’s leading animal feed manufacturer today.

For administrative efficiency, it formed three locally registered business units to run the mills. They are identified as New Hope Central Luzon Agriculture Inc., New Hope Tarlac Agriculture Inc. and New Hope Bulacan Agriculture Inc., which handle plants in San Simon (Pampanga), Gerona (Tarlac) and Pulilan (Bulacan), respectively.

Altogether, the mills can produce 227,448 MT of animal feeds yearly. New Hope also has the option to go into large-scale poultry and hog production in the Philippines like what it is already doing in China, data obtained showed.

Given that local agribusiness groups are raising a big howl over CPF Philippines’ tax perks, one wonders why are they not also grumbling over the fiscal incentives given to New Hope.

Uneasy ties with gov’t
What is becoming apparent is that the raging BOI tax perks controversy epitomizes decades of difficult, and sometimes volatile, relationship between certain swine representatives with vested interests, and a bureaucracy widely perceived as not doing enough to address mounting concerns of the industry in the face of stiffer challenges brought by globalization and free trade.

“Some players feel they are being pushed to the wall not only because CP has already landed in their own turf but more importantly, because they believe government will not be of great help to them,” a Manila-based feed raw material supplier said.

“So, instead of taking a healthy attitude by figuring out what business and trade opportunities and new technologies would the new player offer and what can be learned from it, local groups want to shoo CP away using available state apparatus,” the businessman, who volunteered to speak candidly on condition of anonymity, explained.

“It is no wonder they are even invoking protectionism under the guise of achieving ‘fair competition’ to sway government’s sentiments toward their side,” he added.

This is not the first time livestock groups have demonstrated a combative stance toward authorities when they see that things get awry. In early 2012, they threatened the government with carrying out a “pork holiday” when ex-farm hog prices dropped for weeks due to alleged government inaction in curbing smuggling, and for allowing unhampered entry of imported meats.

They also demanded that the heads of the Bureau of Animal Industry (BAI) and the National Meat Inspection Commission (NMIC) should roll, blaming them for their economic woes. Malacañang gave in to their wishes, and the Palace announced that it was replacing BAI Director Efren Nuestro and National Meat Inspection Service NMIS Executive Director Jane Bacayo.

The groups also pushed for the Bureau of Customs to adjust the reference prices of imported pork and poultry products, claiming previous quotes no longer reflect market realities. They prevailed on this one, too. As a result, the landed cost of the two commodities went up, effectively making domestic pork and chicken prices more competitive than imports.

Handling favor seekers
As the groups, notably swine raisers, gained political influence over the years, their leaders have increasingly become more insistent in seeking concessions from DA to advance their interests. One towering industry representative was appointed member of the board of Quedancor during the term of Agriculture Secretary Arthur Yap. He enjoyed the perks that went with his post until the state firm was rocked by a multi-billion peso swine financing scandal.

Another hog leader was able to obtain financial assistance from the DA-administered Agricultural Competitiveness Enhancement Fund (ACEF) for a meat-processing project of his Batangas-based cooperative. Gaining stature for successfully negotiating the soft-term loan and for projecting himself as a tireless anti-smuggling crusader, he earned a seat in Congress as Agap Party-List representative.

In what many say as bordering on arrogance, some industry players have also been reported to be seeking or following up certain favors from livestock agency officials even way beyond office hours. DA sources said that they nag bureaucrats late in the night, treating them like “24/7” household servants.

“Some people in the swine sector are demanding. At times, they can be rude and irksome you really need a lot of patience dealing with them,” said Davinio Catbagan, DA assistant secretary for Livestock.

(To be continued)

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