Palm oil smuggling: Triple whammy to the country

Column box-DR. JESUS LIM ARRANZA

I have been writing in this space that smuggling is costing the Philippine government up to P250 billion in foregone value added tax every year. Now comes another big issue, which is the smuggling of palm oil that could kill the country’s coconut industry that employs millions of Filipinos.

I am pleased that the House Committee on Ways and Means has initiated a probe on palm oil smuggling in April. Committee Chairman and Albay Rep. Joey Salceda estimated that government revenue losses has reached P45 billion as a result of the misdeclaration of P300 billion worth of palm oil as animal feeds additives.

Exposing this illegal entry of palm oil is a good start. I am just wondering, after the House probe, what’s next?

Coconut industry players have been complaining to me that imported palm olein has been flooding the market. This smuggled oil is allegedly being sold in the country as cooking oil. If this is true, this smuggled product will kill the coconut oil industry.

Our coconut oil is currently being used as biodiesel additive. Some of the complaints I received was that palm olein products are not only sold as cooking oil in the country; they are also being used as biodiesel additives, giving unfair competition to our coconut oil.

Copies of Bureau of Animal Industry (BAI) records and from the Bureau of Customs show that based on import arrivals of palm olein, millions of kilograms of crude palm oil entered the country as additives for animal feeds. The BAI is the agency that issues sanitary and phytosanitary certificate for these imports.

What I find extremely anomalous is the fact that importation of palm olein being declared as additives to animal feeds has been growing by leaps and bounds despite the fact that the Philippine hog sector has been devastated by African swine fever outbreaks. In 2017, inspected net weight of palm olein imports was recorded at 2,781,370 kilograms; the figure went up to 8,515,376 in 2018.

Here’s what I find anomalous: The Food and Agriculture Organization said that“since the Department of Agriculture confirmed the first outbreak of African swine fever in the Philippines in July 2019, as of July 2022, 53 provinces, 704 cities and municipalities, and 3,832 barangays have experienced ASF outbreaks.” There was an unresolved ASF outbreak until July this year, but imports of palm olein being declared as additives to animal feeds surged to 14,281,972 kilograms in 2021!

When the Food and Drug Administration was still the agency that determined whether the imported palm oil is unfit for human consumption, and hence categorized as animal feeds, palm olein imports did not breach the million-kilogram mark. For example, palm oil imports in 2016 only reached 721,730 kilograms.

It was only after the authority to declare that the imported palm oil is unfit for human consumption and classified as animal feeds additives was transferred to BAI from the FDA that a dramatic surge of palm oil imports was observed. This was done through BIR Revenue Memorandum Circular No. 100-2021 issued on September 14, 2021, which amended RMC Nos. 55-2014, 66-2014 and 78-2014.

In our TV program “Dito sa Bayan ni Juan” at the SMNI News Channel, which is hosted by Chief Presidential Legal Counsel Juan Ponce Enrile and yours truly, we had a chance to interview the BAI Director who admitted the surge in palm oil imports. Sadly, he does not know whether or not the feed millers are using these imports. We volunteered to help if BAI will conduct an investigation to determine where the huge volumes of palm olein imports go, but we have not heard from the BAI official since then.

We have an anomalous situation that can cause a triple whammy to the country: First, the government is losing billions of pesos in foregone revenues as a result of the misdeclaration of palm oil imports as animal feeds additives; second, palm olein imports unjustly compete with our own coconut oil products in the market, which may ultimately kill the coconut industry; third, millions of jobs will be lost if coconut farmers stop planting the crop and coconut oil mills are forced to stop operations. This is bad for the Philippine economy.

After hearing the litany of complaints from coconut farmers and local coconut oil manufacturers, here’s my humble proposed solutions:

First, let’s stop the bleeding that could kill our coconut industry. It would do well for the Bureau of Animal Industry if it starts monitoring palm oil imports declared as animal feeds additives. It can do this by requiring importers to declare and make an official list of the feed millers that buy their palm oil imports. The agency must monitor how much palm oil is added to feed products and check this against production output.

Second, the government should have a complete list of those selling biodiesel. This way, it can check their activities whether they are truly adding coconut oil or palm oil to their biodiesel products.

Third, which I think is urgently important, is to involve the Philippine Coconut Authority in keeping track of palm oil imports. The PCA has the requisite industry knowledge and is mandated “to promote the rapid integrated development and growth of the coconut and other palm oil industry in all its aspects.”

As the Chairman of the Federation of Philippine Industries, it is my vision to see the Philippines becoming a super market of edible oils. Right now, there are already budding palm oil plantations in the country. These plantations need government and private sector support to become viable enterprises, which will be able to compete in the global stage and earn dollars for the country.

We can help our coconut industry and our budding palm oil plantations by stopping the practice of palm oil smuggling. As I have been saying for the longest time in our fight against smuggling, this is the worst form of economic sabotage.

Dr. Jesus Lim Arranza is the chairman of the Federation of Philippine Industries and Fight Illicit Trade; a broad-based, multisectoral movement intended to protect consumers, safeguard government revenues and shield legitimate industries from the ill effects of smuggling.

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