When the Department of Trade and Industry (DTI) issued earlier this year an administrative order requiring pure-cement importers to obtain an Import Commodity Clearance (ICC) on top of the Product Safety mark but exempting the big cement manufacturers-cum-importers, they probably did not anticipate that this would kick up a firestorm of protests from the small importers, who are now fighting for their very survival, amid the dire prospect of being pushed out of the industry by the giants.
The DTI asserts that Department Administrative Order (DAO) 07-02 (later amended by DAO 07-05) is intended to protect consumers by ensuring that only high-quality cement enters the country.
But the pure importers—as distinguished from the big local manufacturers who also import cement—have decried DAO 07-02/05 as unjust and discriminatory, since it would allow the giant manufacturers-importers to monopolize the cement industry and thereby take full control of the lucrative construction projects under the Duterte administration’s “Build, Build, Build” infrastructure program.
The small importers insist that there is no proliferation of substandard imported cement in the domestic market, as they and the big manufacturers-importers get their supply from the same sources abroad. Hence, the quality of imported cement is the same across the board.
Moreover, the small importers are saying there have been no consumer complaints against the quality of imported cement. The local cement manufacturers, on the other hand, have been the subject of many consumer complaints and formal charges over substandard quality.
The small importers are also asking these questions: How sure is the DTI that imports of the big cement manufacturers-importers are not substandard if they are not subjected to ICC procedures? Is being a big manufacturer enough to measure compliance with local and international standards? If the local manufacturers are confident that their imports are of good quality, why don’t they submit to a certification scheme?
The small importers have challenged the big manufacturer-importers to join them in submitting to preshipment tests.
Preshipment testing, they say, has many advantages. First, these are conducted using international standards and, therefore, will facilitate ICC issuance without delay. Second, no importer would bring in substandard cement since these will not pass muster with contractors, such as the Department of Public Works and Highways and other end-users. Third, if the product fails the test, the importer can easily have it replaced as the letter of credit cannot be drawn without his approval. And four, preshipment testing will assure ample cement supply for the Duterte administration’s various infrastructure projects until 2022.
The giant cement manufacturers have admitted they cannot meet the total demand for the vital construction material. They also say that it would take them two to three years to put up a cement plant. Given their undercapacity to meet market demand, the claim that the cement industry is threatened is an arrant nonsense. That the giant manufacturers are themselves also importing shows there is a huge demand for cement that they are unable to meet.
The cement manufacturers boast of creating jobs in the country. But surely, this does not give them carte blanche authority to manipulate the supply and prices of the construction material vital to the government’s aggressive infrastructure program.
The think-tank BMI Research noted in a recent report that while the Philippine construction industry has “the most favorable regulatory frameworks for private and foreign investments in Asia, in practice, the country’s poor-operating and political-risk environment limits the attractiveness of the fast-growing market.”
It said “the construction market is dominated by family-controlled and politically linked conglomerates that pose a significant barrier against the entry of other companies.”
In other words, there is a crying need to clip the wings of the emerging cartel in the cement industry.
That’s precisely why the Philippine Competition Commission (PCC) has already included DAO 17-02/05 as one of the important documents in its ongoing probe of the cartel-like behavior of certain local cement manufacturers-importers.
The PCC considers the following as anticompetition: “Restricting competition as to price or components thereof or other terms of trade, abusing their dominant position by engaging in conduct that substantially prevent, restrict or lessen competition, imposing barriers to entry, or committing acts that prevent competitors from growing within the market.”
In fact, small importers are saying, DAO 07-02/05 violates Articles 14 and 15 of the Philippine Competition Act, as it paves the way for the abuse of the dominant position of the giant cement manufacturers-importers.
So what would happen to President Duterte’s “Build, Build, Build” infrastructure program if only a few giant manufacturers-importers acting as a cartel are able to dominate the cement industry? Your guess is as good as ours.
E-mail: ernhil@yahoo.com.