Maintain the tariffs: CEMAP Philippines

Maintain the tariffs: CEMAP Philippines
Published: 29 October 2008

Dr Ordoñez, president of the Cement Manufacturers Association of the Philippines and the Asean Federation of Cement Manufacturers wants Philippine cement import tariffs to remain in place, especially with news of a regional cement demand slowdown and with a consequent higher export potential likely to target Philippine shores.

The problem is that these imports may be ‘dumped’ says Ordoñez which happened before. This cost the cement industry PHP9bn in losses in 2002 alone, before safeguards were eventually instituted.

“The case of Horse cement from China is an example of the need to strengthen our procedures to guard against dumped cement, which may also be substandard. The Horse cement imported in 2006 should have had a CIF value of at least US$63/tonne including a US$20-22/t freight element. Instead, the CIF value reported was less than half at $30/t.

“In addition to the Philippines’ weak enforcement against dumped and substandard cement imports and its very low 5% tariff (compared with Malaysia’s 50% and Vietnam’s 40% tariff), the proposed tariff elimination will send the signal to all countries that the Philippines should now be a prime target for exports, which may be ‘dumped’ and/or substandard.

“We will also have difficulty in securing future investments in the cement industry – claims Ordoñez The three leading firms have an average return on assets (ROA) of 4% over the last five years, very below the cost of capital and the 12% benchmark for acceptable ROAs. In 2006, these firms had an average of 7% ROA. But in 2007, since there was no price increase despite increasing costs, this dropped to 6% ROA.

“In 2008, price increases averaged 14%. But this is still well below the cost increase of at least 23%. Thus, we can expect a lower ROA in 2008. If, on top of this, the government reduces the 5% tariff to zero, it is unlikely we can attract future investments into this strategic industry" - Dr. Ordoñez claimed.