PHL’s banner fruit export is slowly but surely losing its global market foothold

By Manuel T. Cayon & Jasper Emmanuel Y. Arcalas

DAVAO CITY—Home-grown bananas, the country’s banner agricultural export crop, may be progressively losing their share in the world market due to a range of issues ranging from high tariffs, plant infections, rising competition and an aggressive, government-subsidized foray by Latin American producers into traditional Philippine markets.

For one, banana exporters have sounded the alarm over the looming threat of a shrinking share in the Chinese market due to rising competition with Asian neighbors like Vietnam and Cambodia, which have also started to “pirate” local industry experts to develop their plantations.

At a recent virtual briefing, the Pilipino Banana Growers and Exporters Association (PBGEA) chairman Alberto Paterno F. Bacani said the rise in banana exports from Laos, Cambodia and Vietnam to China is one of the “biggest threats” to the country’s top banana market.

Bacani explained that these three countries, which are close to China, enjoy logistical advantages as they can transport banana shipments via land through trucks. They also have vast idle tracts of fields compared to the Philippines.

Worse, Bacani disclosed that they discovered that Chinese banana companies in Vietnam and Cambodia were already “pirating” Filipino banana experts to develop their produce with high incentives such as better pay.

Losing export market share

The Philippine Cavendish banana, according to Bacani, is gradually being eased out from the traditional market it used to monopolize, and may have lost as much as 65 percent of its original export market share within the last decade and falling.

This could be seen in the primary market of Japan and South Korea and in China, and also the Gulf states, he said.

In Iran, the Philippines now accounts for 70 percent of the banana supply. But previously, it was the only supplier of banana, especially in the heyday of 2009 and 2010, when the Philippines exported 40 million boxes there. This changed a few years after the United States imposed trade sanctions on the Middle Eastern country.

Some years later, the supply picture again shifted dramatically when Ecuador, the world’s biggest producer, dumped its excess supply on  the European Union to Iran and other Middle Eastern countries at very low prices, Bacani said.

“Now Ecuador accounts for half of all banana supply in the Gulf,” he lamented.

The same scenario is unfolding in the prime market of Japan and South Korea. The Philippines was also then enjoying the patronage of the Japanese market a decade earlier, especially at the height of the banana diet fad in 2009 and 2010.

Philippine Cavendish bananas in Japanese store shelves soon experienced a decline, not because there was a diminished Japanese consumption or a shift in fruit preference among Japanese consumers. On the contrary, Bacani said, consumption per capita has increased and banana remained far ahead of apple as a preferred fruit.

He said this transpired when Latin American countries, like Ecuador, Guatemala, Costa Rica and Panama, entered the scene.

A similar experience was observed in South Korea, where the share of Philippine Cavendish bananas in the market plunged to a low of 65 percent.  “It’s pretty much the same as Japan, where consumption per capita is increasing and Latin American suppliers are eating away at our market share,” he pointed out.

Tariff issue

All these declines in supply and revenue from Philippine banana exporters were happening alongside “increasing consumption per capita in these markets,” Bacani said.

He said the country is losing much of its share in these markets on the issue of tariff preference, where the Philippines is eased out of preference despite being an old supplier.

For instance, South Korea, Bacani said, was granting as low as zero tariff, or no taxes at all, to Latin American supplies because they had struck bilateral trade agreements with Seoul.

“We are finding it difficult to compete with these countries when we have to start with a 30- percent tariff,” he said.

In Iran, Ecuador could afford to trade its bananas in the Middle East “because these are excess volumes that the EU could not accept anymore.”

So, Ecuador and other Latin American producers just unload the excess produce in the port of Turkey and these are loaded on to boats for countries around the Persian Gulf, such as Iran, the United Arab Emirates and Qatar.

“We are no match to their price,” Bacani said.

Another advantage of these South American producers is the full support of their respective governments “because banana is also their main income generators and because they are—literally and technically—banana republics.”

“They have also lower production cost due to the absence of, or under-control, banana pests, unlike in the Philippines which is battling the Black Sigatoka pest,” Bacani said.

China market

China has somehow compensated for the loss of market share in traditional markets. However, the Philippines was also slowly feeling the crunch of competition posed not only by South American rival suppliers, but also by the Asian neighbors of China as well.

Vietnam, Cambodia and Laos are now exporting to China just a few years after China itself started to build plantations in Cambodia, Laos and Myanmar a decade ago. “While these countries produce inferior quality bananas, it would not be far-fetched that they could catch up,” Bacani said.

“They are about five years behind our technology because we have been in this industry since the 1950s,” Bacani said. “But China and Vietnam have been reported to be pirating our very own experts here and giving them attractive compensation package, and it would be soon that they could catch up.”

Government help

Officials from the Departments of Agriculture, and Trade and other offices agreed with the points raised by Bacani and Stephen Antig, executive director of PBGEA, on the need for government intervention in bilateral trade negotiations by seeking favorable tariff reductions and research works in combatting plant diseases like the Black Sigatoka and the dreaded Fusarium Wilt.

Some wanted to get a clearer picture on the extent of devastation wrought by the Fusarium Wilt on the plantations, which the PBGEA estimated has already laid waste to some 30,000 hectares.

The PBGEA official said its 24 member plantations have more than 80,000 hectares, accounting for half of all areas planted with banana of all kinds and varieties.

“We are outpricing ourselves out of the market,” Bacani warned.

Reversing the ‘brain drain’

PBGEA President Victor S. Mercado, however, said if the local banana industry could expand hectarage amid Panama disease challenges and other factors, then they can bring back the Filipino experts who went abroad.

“If we can expand to new lands then we can take back these people as we can afford to pay them the money they need,” Mercado said.

Bacani said their foreign counterparts are paying Filipino banana industry experts a salary of P100,000 per month, with additional incentives compared to their maximum salary in the Philippines of P25,000 per month.

“We talked to some of them and they are willing to come back here even with a smaller salary just to be with their family,” he said.

“Once you’re in the banana industry, especially for production and quality people, it is hard to move to other industries. These people lost their jobs and they moved somewhere—it is not entirely about the pay—but they are willing to come back here with their old salary to at least be at home,” he added.

PBGEA sees total banana exports this year to decline by 17 percent to 162.2 million boxes from 195.5 million boxes last year. Value of shipments is projected to fall by $300 million to $1.65 billion from $1.95 billion last year, according to PBGEA’s latest estimates.


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