“‹It’s bad enough when a top official of a government regulatory agency has a flawed sense of reasoning. When the official practically sides with a cartel in the industry his agency is regulating, that’s worse. The worst case scenario is when the official goes out of his way to defend the cartel with flimsy, groundless reasoning.
“‹That is what is happening now in the Department of Trade Industry, the government agency tasked by law to protect consumers from hazardous and substandard products, unfair competition, fraudulent trade practices, and manipulation of the prices of basic supplies and commodities.
“‹More specifically, a top trade official has been acting and sounding like the spokesman of cement manufacturers cum importers when he defended a controversial order of the DTI which, if not rescinded soon, will certainly cause the price of cement in the local market to increase exponentially.
“‹In other words, something really stinks in the DTI.
“‹As pointed out in an earlier column, the price of cement in the local market is, like any commodity, dictated by the law of supply and demand. Thus, when the supply is low and the demand is high, the price of the commodity increases. It follows that the greater the demand, the greater the increase in the price tag. The converse is also true. When the supply is not wanting, and demand is low, the price plummets. That’s basic economics.
“‹Undoubtedly, cement is indispensable to the construction industry. To a great extent, infrastructure development in the country depends on this commodity. Considering that President Rodrigo Duterte has embarked on a Build, Build, Build aggressive infrastructure project worth P9 trillion to jump-start the Philippine economy, the supply of cement in the country has suddenly moved to center stage.
“‹Actually, the supply of cement in the Philippines is maintained by two sources, namely, local cement manufacturers which operate plants in the Philippines and which are allowed by the DTI to import cement (manufacturers-importers), and local enterprises which do not manufacture cement, but which are allowed by the DTI to import cement (pure importers).
Philippine law authorizes local cement manufacturers to import cement when they are unable to meet the local demand. This way, the price of cement in the Philippine market remains stable. Consumers are thus protected against price manipulation.
“‹In the same vein, Philippine law authorizes the pure importers to import cement to discourage or even prevent manufacturers-importers from forming a cartel to manipulate import quotas for the purpose of creating an artificial cement shortage that will pull up the local price of cement. This way, the consumers remain protected from price manipulation.
“‹As an added protection to consumers, all manufacturers-importers and pure importers must import cement from sources which are certified by international certification bodies abroad. Since the quality of the cement from this foreign source is certified by an international certification body recognized the world over, consumers in the Philippines are assured of the quality of the imported cement.
“‹To protect consumers further, the law requires that all imported cement must bear the Product Safety (PS) standard mark also required by Philippine law.
“‹With such an arrangement in place, how can things go wrong for Filipino consumers? Well, things have gone wrong since the DTI issued Department Administrative Order (DAO) No. 17-02, as amended by DAO No. 17-05.
“‹Under DAO No. 17-02, as amended, pure importers are subjected to additional but useless requirements, like obtaining an import commodity clearance certification mark prior to any importation. This burden practically makes it impossible for pure importers to import cement.
What is highly suspicious and downright anomalous about DAO No. 17-02, as amended, is that the manufacturers-importers are exempted from the ICC requirement imposed on pure importers. Since the imported cement comes from the same foreign source anyway, why did the DTI impose an additional burden on pure importers, without imposing it on the manufacturers-importers?
“‹That’s unwarranted favoritism plain and simple. In fact, it’s considered a corrupt practice under the Anti-Graft and Corrupt Practices Act.
“‹When some industry insiders complained in the news media about the anomaly underlying DAO No. 17-02, as amended, the top DTI official quickly defended the order. His justification—manufacturers-importers have to protect their reputation as sellers of local brands, and for this reason, they can be expected to import only quality cement. He added that the DTI order deters unscrupulous importers.
That’s hogwash! Since the cement imported by manufacturers-importers and the pure importers emanate from the same foreign source, there is no difference in the quality of the cement imported by manufacturers-importers, and the cement imported by pure importers. Moreover, the DTI should simply go after unscrupulous importers rather than making it well-nigh impossible for all pure importers to import cement.
Likewise, the added burden imposed on the pure importers by DAO 17-02, as amended, has no justifiable basis. It only adds to the bureaucratic red tape which President Duterte, in his recent State of the Nation Address, has promised to eliminate.
“‹Industry observers believe that if pure importers are put out of business by DAO No. 17-02, as amended, the price of cement will sour to its 2014 price of P300 per bag from its current price of P197. With 720-million bags of cement sold annually in the country, manufacturers-importers are anticipating an annual profit of P81.36 billion! That is the same amount of money consumers save yearly if pure importers remain in the market.
The price is expected to skyrocket further once the “Build, Build, Build” project of President Duterte takes off. Perhaps this is the real reason for DAO No. 17-02, as amended.
Evidently, that DTI official is either out of his mind, or is lying just to protect the manufacturers-importers which are trying to form a cartel to the detriment of consumers. Whatever it is, President Duterte should fire him!