AN ANALYSIS OF FERTILIZER POLICIES I_ TttEPHILIPPINES
C. C. DAVID
and
A. M. BALISACAN
STAFF PAPER SERIES No,
82-1
PHILIPPINE INSTITUTE FORDEVELOPMENT STUDIES MAY
1982
AN ANALYSIS OF FERTILIZER POLICIES IN THE PHILIPPINES* C. C. David
& A. M. Balisacan**
Introduction
Fertilizer agricultural
policy has been
policy,
for fertilizer
an important
particularly
in the seventies.
is still relatively
been a critical
low for most
source of agricultural
land-man
ratio is low and declining,
directed
towards
phasing
increasing
out of direct
yields
subsidies
the declining
real price
price becomes
of great concern.
The government's areas,
including
development prices,
for more
production The purpose
of Philippine
Although
crops,
fertilizer
and technological
per hectare.
in fertilizer
has
With
are
the gradual
fertilizer
industry
and
of fertilizer
covers wide
ranging
crops,
for fertilizer,
of this paper
where
innovations
fertilizer-responsive capacity
expenditure
in the Philippines
of rice and sugar, the issue
breeding
and so forth.
growth
to the domestic
involvement
of domestic
component
extension,
rural credit,
is to analyze
government
*Paper presented at the Workshop on the Re-Direction of Fertilizer Research, Tropical Palace, Metro Manila, October 26-28, 1981. This paper is part of the project "The Impact of Economic Policies on Agricultural Development" funded by the Philippine Institute for Development Studies and Philippine Council for Agriculture and Resources Research. **Research Fellow at the Philippine Institute for Development Studies, on leave from the University of the Philippines at Los Ba_os; and Graduate Student at the University of the Philippines at Los Bafios, respectively.
2 policies
affecting
the policies
fertilizer
after
ment policies
1973.
by domestic
economic
policies
quotas,
pertaining
and direct
subsidies
characteristics
to exchange
of the fertilizer
Growth
and Changes
on the quantity • annual except
of domestic
in the early
Program.
To hedge against
fertilizer, 1974.
the government
Ironically,
largely
a short-run
Increases
originated
imports
declined
the 1960's.
mainly
the Philippines
and
Industry
of fertilizer, has increased
launched
by almost prices
based at an
stable
quadrupled
the Masagana
and physical
in world
fertilizer
supply
from domestic
from I00 percent
Three
the growth
99
shortages
175 percent
of
in
turned out to be
phenomenon.
in available
decades
increase
control
described.
prices of fertilizer
imports
import
growth was fairly
price hikes
increased
the sharp
This
the government
further
taxes,
that, however,
and imports, i).
from the price
such as price
total availability
(Fig.
and when
tariffs,
in the Fertilizer
1970's when world
due to the oil crisis
rate,
Before
production
rate of about 8 percent
the impact of govern-
market arebriefly
Over the past three decades,
emphasizing
The impact of both broad
to the industry
is quantified.
period
paid by farmers
producers.
specific
the postwar
distinguishes
of fertilizer
fertilizer
etc. and policies
during
Our approach
on the price
received
prices
fertilizer
(Luzon), Maria
during
sources
the first
as the proportion
in 1950 to 41 percent
plants,
namely,
Cristina
two
Chemical
Fertilizer
of
by the close Industries
Corporation
of
of
(Mindanao),
D
Imports Domestic
production
I_. 11_4 ._.
1300
_--I_A
1100
_
zooo 900 800 o
_
._ __
_l
_
v
°
600-
_
_!io__r_...._,:.,,...,.__
Indirect Subsi-die:, on imported fertilizers and _aw materials
and subsidy
"
and subsidy RA 701 _ • _" Indirect subsidy on_r 30@- agricultural cooperatives
400-__
2_
urchases
1952
54
56
58
60
62
64, 66
,68
70. 72 , 74
76
78
Year Fig.
1.
Total imports and dcmetic Philippines _ 1951-1980.
production
of inorganic
fertilizers,
80
4 and Atlas Despite
Fertilizer
Corporation
the addition
(formerly leveled
(Visayas)
of the largest
the Esso Fertilizer
plant,
Company)
total supply
Growth
in fertilizer
by =he early
in fertilizer
of nutrients
or changes
supply,
supply
is even more
in the composition
while
fertilizer priate
during
demand
nutrient
the growth
fertilizer
in favor of urea
(Table
and nitrogen-sugar
cheaper
of nitrogen.
(Table 3).
changed 1970's.
Increased
industry
demand
of
consisted
In
of
was primarily
shifted
significantly in
is the most approby the trends of the 2, urea
is a
relationship
was
in demand
for
on imports.
sector absorbed
as the single most
of fertilizer
in terms
over time.
The shift
for fertilizer
by the latter
supply.
two-thirds important
in the rice sector
to 40 percent,
half of total
if measured
in Table
the 1970's.
reliance
The share of sugar dropped nearly
to 75 percent
of the price
the export crop
the sugar
the crop distribution
which now consumes
have accounted
of increases
nitrogen
ratios
The worsening
Up to the late sixties,
Demand
As evidenced
price
the increasing
with
imports
production
as a result
I).
less for rice tBan for sugar during
of total supply,
consumption
in the rice sector where
urea also explains
production
of fertilizer
1969).
the seventies
supplement
rapid
in domestic
(Barker,
nitrogen-ralay source
Inc.
1980_s.
ammonium
up of mixed
then,
its share rising
the bulk of fertilizer
sulphate
Since
in the 1950's.
Products,
in 1966, d_mestic
the early period,
buyer
Planters'
off as early as the late 1960's.
for the growth
made
were established
second
part of the only to rice
The introduction
of
" II U I l I H R
U
I-.,., II II
oO ,,,-0,,,_ 0 O'_("_,.,,4 O ,._
0 0 _
¢,"_ 0'_ .,._ 0',_u"_ 0 P*_,-i,-i,-_,,._ 0 ,-_
_
0 CO 0"_
¢:)_) r_ eq 0
II
II
ii fl II
_
r..,..4 ...? r-._
'-'
II B
"-'
'-'
¢r_
Ii o-, H II _ _
,-q
I O 0
II
{=} ME) I _ ',,,_
H
H II O 0
O'_
I OO r... u_ Cr_,-4 _,"_e,,i ,,-,t ,,-,t
I O
r_ r,,,,,
II
I
I'-.. _:) -7 ,-,-_O O'_ r,.. _,10_ O
o'_ O r.-. o., O I-,.. e4 ,..-_e,,_ o
,-4
m Lrl
_
O O
O O
_ r'..
II II
II # P
II II H II II fl II
O
r'.- u"_ {:_ O 00 _",,I_'-',4,'-,,Ie,,.i
-.1-,.Tr
O'_ CO 00 O m
_ ,,-4
_ r... _
..1" r",,-
,,_ m u'7 r-. -..Tr _'4 e.,i e4 ._ ,._
_O
| H
o
III H II H II II
|
r... O",,
N ,--I ,el
_,_ H N H
O 0_ U
II I1 II If
_
,._
H H I
,_1
.IJ
I
_ u"l
"t:l
u_ ',,..'T 0 0",0 _0 e'l ,,-,I -,._I-O _
._,-i
0 O ,,,4
II (',,I O I',_"_oo q_l e,_ ,,,,4('_
If
II H
I
130 ,r,,,t r-,, 0"_
,-4
II
..I,J,-,4
_o
_ _ ,,_ r-I
W n
II II II II
Iz,
,e-t .-,4 ,r,l
_I
_:_
II II II
o
.,'4 _ _
0",:.'.I" ,_
..i..,t _ ,J= ,..-.t
,-_ _-I _
coP't
_o
_
,._ 10
o
i,-I
II
II
O
¢.)
ii II
o
,, ,._ _
-H _ _
_.l._
N
O
O ..IJ 54
o
_
e,,.l c'4,.-i ,-i,,-_ 0 •-_
O
[;_ _J
_
0 _ I_
_
0
II II it
II !! I
I H H
II H
II H _ H
I_ r"i G", II _
l
II
I H
I_ 0
,l.i
O 'F'i .a_
•el
H
if
6
Table 2.
Year
Price relationship between nitrogen crops, Philippines, 1968-1980.
Nitrogen(N) Price Urea Ammosul _/MT _/MT
and some agricultural
Palay Price _/MT
Sugar Price _/MT
1968
330
587
1078
1390
3.27
4.21
1.84
2.37
1969
340
597
980
1390
2.88
4.09
1.64
2.33
1970
360
738
1253
1867
3.48
5.19
1.70
2.53
1971
550
841
1304
1909
2.37
3.47
1.55
2.27
1972
610
943
1304
1909
2.14
3.13
1.38
2.02
1973 -_/
790
943
1231 2138
1762 2686
1.56
2,23
1.30
2.85
1974
890
1750
3844 6498
4286 8038
4.32
4.81
2.20
4.59
1975
930
1812
3738 5780
4433 7305
4.02
4.77
2 06
4.03
1976
960
1350
3409
4586
3.55
4.78
2.52
3.40
1977
I000
1500
3409
5195
3.41
5.19
2.27
3.46
1978
I000
1500
3409
5195
3.41
5.19
2.27
3.46
1979
1050
1653
3973
6105
3.78
5.81
2.40
3.69
1980
1078
2058
4502
7143
4.18
6.63
2.19
3.47
N-urea Palay
Price Ratio N-ammosul N-urea Palay Sugar
N-ammosul Sugar
_/From 1973 to 19759 domestic fertilizer prices were based on a twotier system: the first entry refers to Priority I prices (for food crops) and the second to Priority II prices (for export crops).
Table 3.
Total fertilizer
consumption
thousand
by crop,
1967_ / Percent I_ share
1967 and 1977.
thousand
1977_/ Percent MT share
Food crops
133.8
32.9
353.6
51.5
Rice
107.4
26.4
315.1
45.9
,Maize
13.0
3.2
26.8
3.9
Vegetables
13.4
3,2
11.7
1.7
crops
283.0
67.1
333.0
48.5
Sugarcane
221.1
51.9
2?0.0
39.4
62.6
15.4
62.5
9.1
406.8
I00.0
686.6
I00.0
Export
Others
Total
_/From
"Data Series
_/From
Fertilizer
on Rice Statistics,"
and Pesticides
Philippines_
Authority.
IRRI,
1976.
8 modern
varieties
fertilizer program
and expanded
irrigation
in rice significantly_
and the subsidized
price
of fertilizer
As in food policy, is to achieve
a balance
low fertilizer
prices
fertilizer
low food prices, latter
between
credit
Policies
approach
producers.
to fertilizer
objectives
and giving adequate
agricultural
to the pervasive
production concern
of providing
incentives
The former is in line with
policy
to
the goal of
and farm income.
The
for self-sufficiency, critical
parti-
to food production.
Prior to 1973
lizer industry exemptions
existed
granted
the 1950's,
necessary" revenue
99 supervised
to the food crop sector
the conflicting
to farmers
Two types of government
During
Fertilizer
in the supply of inputs considered
Policies
to
the impact of the oil crisis on
the government's
higher
is related
cularly
response
demand.
Government
domestic
yield
but the Masagana
from 1973 to 1975 have also cushioned fertilizer
raised
before
fertilizer
industries
which
to imports
One consisted
were
granted
under
the domestic of various
tax incentives
was included
duties
full exemptions
Republic
equipment.
was passed
ferti-
tax
laws.
in the list of "new and
Act 35.
Act in 1961 limiting
of capital
law for fertilizer
to develop
of general
by the Basic Industries
taxes related incentive
1973.
in a series
tax and customs
replaced
incentives
This
internal
law was
exemptions
However_
extending
from
to
a special
the tax exemptions
tax
9 to
all types of imports
Investment
Incentives
also included
Another domestic
were replaced
margin
deposit
decontrol
price above world and multiple
by a set of tariffs, for imports
in the early
payment
tax exemptions
of advance
of 1961 further This was, vision
however,
from payment
Since only Cooperative nized
in 1965.
Act 701 which sales
Association
from these
privileges,
laws to bring lower fertilizer 1955, _42.5 million
prices
was released
Credit and Cooperative
originated
rates
raised
mainly
during
sales
Farmers
under
a number
Republic
the 1950Vs
tax, and and
from payment
of programs
Act 701 passed
including
fertilizer.
exemption
Republic
of import
exempted
registered
in
from
Act 3050
duties.
The same law continued
tax for imported
the sugar cooperatives,
and Marketing
to benefit
to cooperatives_
rescinded
of advance
which
the devaluation
implemented
to farmers.
cooperatives
found in Republic
These
differential
sales tax on imported
exempted
to producers
exchange
after
tax incentives,
1960's.
the cost of fertilizer
1972 provided
given
foreign
broader
The subsequent
industries.
prices.
At the same time, the government to reduce
provided
of incentives
requirements
period
1961 to 1965.
as one of the priority
type consisted
fertilizer
from
Act of 1967, which
fertilizer
from import controls which
by the industry
the pro-
cooperatives
fertilizer.
specifically (SPCMA), were
the Sugar
Planters
sufficiently
the government
enacted
orgatwo other
to rice and corn farmers.
In
RA 1609 to the Agricultural
Association
(ACCFA)
for the purchase
and
I0 distribution Purchases
of fertilizer
from domestic
of total supply through
during
farmers'
over a period
producers
under
this period
cooperatives
of seven
years
this program
(Table 5).
at 50 percent
(Table 4).
averaged
These were
ii percent
distributed
of the commercial
retail
price.
Republic _44.5 million
Act 2084 supplemented worth of fertilizer,
1958 and 1964. fertilizer
fertilizer
that was purchased
the four-fold
the immediate
production
of mixed
relative
(Barker,
1969).
of
between
of the
was diverted
by ACCFA
industry.
Industry
domestic
industry. Pesticide
in the world
in 1973, the government
the Fertilizer imports,
jump
need to recover
of the fertilizer
to the
over nitrogeneous
to the pattern
of farm
of fertilizer,
coupled
production
drop
intervened
into the operation
Presidential
Authority
Authority
and safety
Decree
and marketing
industry.
of fertilizer
directly
in rice
(PD) 135 established
(FIA) primarily
(FPA) to continue
Chemical
price
from the 20 percent
In 1977, PD 1144 reorganized
the agricultural quality
problems
subsidy
that about half
for rice and corn producers share
the purchase
from 1973
With with
however,
The disproportionate
demand also created
Policies
sold at a 50 percent
There were reports,
intended
sugar sector.
the same effort with
to regulate
aspects
prices,
of the fertilizer
FIA into the Fertilizer
and extend In addition,
and agricultural
and
the FIA regulations the control chemicals
to
of the
became
part
11
Table 4.
Total fund releases and RA 2048.
for fertilizer
(thousand
subsidy
under
RA 1609
pesos)
YEAR
RA 1609
RA 2084
1956
2,500
-
1957
7,650
-
1958
8,923
5,547
1959
3,773
11,161
1960
2,375
9,088
1961
8,333
5,498
1962
7,458
6,255
1963
1,500
5,606
1964
-
1,376
Total
SOURCE:
42,513
44,531
Agricultural Credit Administration (from R. Barker, "The Philippine Fertilizer Industry: Growth and Change", IRRI, 1969).
12
Table 5.
Fertilizer
procured
and distributed
under
RA 1609,
m
YEAR
Fertilizer Procured
Fertilizer Distributed
Fertilizer Distributed Percent of Total Supply
1957
52.5
44.5
23.9
1958
52.5
47.5
34.1
1959
9.0
I0.0
3.9
1960
9.0
8.0
4.1
1961
29.0
9.5
3.8
1962
44.5
32.5
12.2
1963
15.5
33.0
18.8
9.0
2.9
1964
-
Total
212.0
194.0
26.5
24.2
Average
SOURCE:
10.9
Agricultural Credit Administration (from R, Barker, '_The Philippine Fertilizer Industry: Growth and Change", IRRI, 1969).
13 of its functions.
Between provided
1973 and 1975, a two-tier
for a significantly
to export
crop producers.
at prices
50 to 70
were allowed credit
percent
was the mechanism
price
Two sets of policy announced
linked
representatives of fertilizer domestic
production
the targeted importers. exempted margin
deposit
Second,
on the value
domestic
for imports
are paid
are allowed duties,
ensured
fertilizer
of enforcing price
a two-
of fertilizer,
that the fertilizer
First,
FPA, together
agencies,
decides
"fill up the difference
domestic
a
of the import
between
or to authorized
budget
and are
tax, and the 50 percent
letters
are also exempted
of raw materials.
with
The FPA then allocates
producers
sales
price
on the level
only with FPA authorization
advance
producers
from the government
and fertilizer
the lower-priced
in the world
national
which would
to existing
from customs
99 supervised
extension,
and total requirements"째
imports Imports
credit,
in the market.
from four other imports
The Masagana
crops which
in 1976.
instruments
by FPA prevails
which
to food compared
for export
of the difficulties
single price was set starting
mants
prices.
syste m as well as the decline
was enforced
for the food crop sector was sold
for distributing
Because
system
of fertilizer
less than prices
for rice which
to the rice sector.
price
Fertilizer
to rise with world
program
subsidy
lower
price
In addition, for losses
of credit.
from the same requiredirect
incurred
cash subsidies by the domestic
14 producers
as a result of the price
exemptions
on imported
Impact of government
The impact of the farmers producers. the effect
policies
of government
of government
policies
interventions
opportunity
would have
paid without
price differs
interventions
the relevant
by the concept
the percentage
difference point
which
cost of fertilizer, government from border
of fertilizer
question
has been on the fertilizer
intervention price
between
unit value,
i.e.,
as a result
in this case are primarily
price
domestic chain, z/
represents
the price or under
is what
of the implicit
in the marketing
in this case the CIF import
the social
from the viewpoint
and from the viewpoint
of farmers,
price at a comparable
The border price,
tax and duty
and raw materials, l/
may be analyzed
This can be quantified
price and border
and despite
on farmers
From the standpoint
(T) which measures
Domestic
fertilizer
as users of fertilizer
paid by farmers. tariff
finished
control
farmers
free trade.
of government
due to import
quotas
and price controls.
Table 6 presents types of fertilizer
estimates
of implicit
from 1973 to 1981.
tariffs
Implicit
of the four major
tariffs
have
changed
_/Direct subsidies as determined by FPA are based on the difference between sales valued at government set prices and actual production cost plus a 5 per cent mark-up. In the case of Planters' Products, Inc., the 5 per cent mark-u__pis not supposed to apply
-_-
11 x 100; where
Pb denotes
border
price,
Pd is domestic
wholesale price, ex-Manila. These two prices are assumed to be at a comparable point in the marketing chain so that differences between domestic and border prices may be explained by government interventions rather than by real marketing costs.
15 through
time mainly
government
policy
average
farmers
in general
price
implicit
tariff
paid a price
than border
pricing
prices.
during
enjoyed
because
the FIA lowered
a price subsidy
of about
the price
carryovers
from the huge
imports
to allow the fertilizer stabilization for the very
measures
imports
higher
prices.
tariffs
and, thus_
have been relatively
has not been uniform
to be a strong
tendency 99 typical
rice of about 4 bags of mixed fertilizer
where
of losses.
one reason
to almost
In recent from
there has been,
on fertilizer
and 3 bags although
of urea. small,
years,
5 to 7 percent.
the use of mixed
recommendation
of even
not have made
by type of fertilizer.
to promote
prices
by the price
1974 in anticipation
low_ averaging
fertilizer
and mixed
inventory
Of course,
most probably
crop
respectively,
above world
decision
a
1975, however,
losses incurred
period.
sector would
of imports
based on the Masagana
in mixed
to recoup
I0 peruent
the two-tier
the large After
I).
that
sulphate,
of 56 percent
of the 1973-1975
The private
Price policy appears
industry
Table
food and export
in 1974.
at the very high prices of
the same magnitude implicit
ordered
as
indeed received
ammonium
large losses was the government's
double
indicates
years when
to drawdown
rose to a high level
(Appendix
46 and 14 percent,
of urea,
crop sector
prices
that is about
In 1975, both
to the export
tariffs
this period
the food crop sector
fertilizer
implicit
prices
for fertilizer
of about 32 percent.
sectors
domestic
in world
For the first three
system was in effect,
subsidy
of fluctuations
tried to stabilize
Overall
higher
as a result
There fertilizer use for It is only
a measure
of
16 Table 6.
Estimated implicit tariffs fertilizer, 1973-1981.
on four grades
(Percent of border
prices)
Fertilizer Urea
1973
of finished
Grade
Ammosul
Mixed
Muriate of Potash
Weighted Average
i Food crops II Export crops
-25 31
- 9 39
-49 - 2
119
I Food crops II Export crops
-II 50
-23 44
-33 17
81
I Food crops II Export crops
-39 - 5
-43 - 5
-56 -31
86
1976
65
86
30
85
56
1977
55
59
13
105
41
1978
28
37
- 5
96
19
1979
34
52
15
89
32
1980
7
43
-14
68
5
1981
8
45
-II
80
7
16
27
- 4
86
10
1974
1975
Weighted Average
- 5_/
7
-30
Legislated Implicit Tariffs 1960s
16
1970s
35
_/From 1973-1975_ figures Pziority I and II prices.
refer to weighted
average
of
17 price
subsidy
farmers higher
over the whole
have paid prices than border
The implicit
and typically
crops, has been set much higher,
Impact
of governmenfpolicies
From ment
the standpoint
policies
protection
used
producers,
As mentioned
tax exemptions
of raw materials
prices,
1973 through
or subsidies
received
is in the form
i.e._
the implicit
government-regulated
import quotas,
and finished
The total nominalprotection
of total protection
export
the impact of govern-
producers
earlier,
since
cash subsidies.
of potash,
of the total nominal
t_ fertilizer
prices have been achieved on imports
for muriate
producers
domestic and border
tariff and a cash subsidy.
lfiand 27 percent
for sugar and other
by the concept
The protection
eulplmte,
at 86 percent.
of fertilizer
of a price wedge between
tariff
on fertilizer
may be measured
rate.
For urea and ammonium
that were on the average,
prices.
which is all imported
period,
tariff
and
fertilizer,
rate measures
by the fertilizer
and
the amount producer
as
3/ a proportion
of the value
Since domestic
producers
the value of protection policy
on the imported
the other hand,
of domestic are, usually,
production also
due to the price component
the total
at border
the authorized
difference
prices.importers,
caused
by government
of total supply was also included.
value of protection
Z/It should be noted thatthe value of raw materials was not included in our rate. If this was included, the measure rate which takes into account the impact prices of inputs, would even be higher.
is related
On
to domestic
of tax exemptions on imports measure of total protection of total effective protection of government policies on the
18 production
only and not to total
protection
afforded
production
and not simply
explanation Appendix
by government
policy
the activity
of the concept
is intended
to promote
4/ of importlng.--
of the total nominal
that the
A more
protection
domestic detailed
rate is given
A.
Table
7
protection tariff
supply on the assumption
gives the estimates
on the fertilizer
on fertilizer
protection
because
It represents
cash subsidies.
relative
prices was over 50 percent.
protection
was funded by implicit
higher
prices
budget
and shouldered
while the remaining
The bottom and nominal
rates of protection fertilizer
in column
implicit
I as the
the latter
one-third
with the major
to the value
charged
two-thirds
of the total part accounted excess
of production
to farmers
was financed
of
through by the national
public.
6 and 7 indicate
the implicit
due to the legal
before
from
are exempted
One third of this level
taxes
by the general
rows of Tables
taxes on finished
average
producers/importers
about
industry
of total nominal
From 1973 to 1981, the percentage
of the value of total protection at border
The I0 percent
by fertilizer
the fertilizer
and rates
is translated
and imports
and taxes.
accorded
for by direct
received
production
from all tariffs
industry.
paid by farmers
value of price subsidy both domestic
of the value
and during
tariff
tariffs
and indirect
the 1970's.
These were
_/However, imports of mixed fertilizer were added to domestic production because the cash subsidy would be covering losses from its imports due to the negative price protection on mixed fertilizer.
in
19 Table 7.
Estimates of value of subsidies and nom_uQal rate of protection of fertilizer, 1973-1981.
Subsidy ' _7 Price_'
Year
1973
-
1974 1975
(_ million) Cash
Total
Value of Fertilize__b / Nominal Protection (2 million) Rate_/
22
47
25
88
68
156
333
-47
836
-6
-380
262
9
1,106
14
1976
281
108
389
245
159
1977
256
55
311
2.24
139
1978
161
117
278
372
75
1979
322
15
337
417.
81
1980
71
300
371
580
64
1981
116
550
666
672
99
Average Legislated Protection
53
System
1970s
31
Z/Does not include produced fertilizer. _/Fertilizer border prices.
indirect
production
subsidies
plus imported
on inputs of domestically
mixed
fertilizer
valued
_/Percentage of total subsidy to total value of fertilizer production plus imported mixed fertilizer at border prices.
at
20 superceded by the FIA-FPA policy package in the latter period.
Implicit
tariffs in both periods were higher at 16 and 35 percent, respectively, than actual average implicit tariffs but nominal protection rates implied by the tariff and indirect taxes were much lower than 53 percent.
The
legislated implicit tariff paid by farmers on the imported fertilizer, although higher, would, however, be received by the government.
Thus,
it may, in part, accrue back to the agricultural sector in the form of government expenditures.
The growing subsidy which seems to be required by domestic producers despite a declining share of domestic production to total supply and the significant profit margin permitted by the FPA on imports are perhaps not surprising.
As noted earlier, existing plants were built in the
1950's and 1960's.
Technological developments in the fertilizer industry
have been quite rapid as evidenced by the falling world price of fertilizer in current terms before 1973 and in real terms even after the oil crisis.
The nature of technological improvement has also been in the
direction of increasing economies of scale, particularly in the production of nitrogen, the most important fertilizer element in Philippine agriculture.
Somehow, domestic plants have been operating only at about
55 percent of total rated capacity, and technologically_ they have become much less competitive over time.
Even with technologically up-
to-date plants, we probably do not have comparative advantage in the domestic production of fertilizer because it involves a highly capital intensive technology and the importation of basic raw materials.
21 Concluding
It should be emphasized to protect
food production
Remarks
that the FIA policy from the sharp
of fertilizer
in 1973.
was necessary
at that time of virtual
Clearly, sector
1973 to 1975.
has served
Moreover,
in the choice
attempt
to relate
Indeed,
protection
tion especially
is highest
of muriate
by some objective
the 1970's have
the burden
industry
(David,
policies.
lizer prices duction industry
may likewise to search
regulation supplies.
to the food crop
1975, the FIA-FPA of domestic
of protection
policy
producers-importers. there was no
to efficiency
and to the least by the losses
findings
undervalued together
There
Without
will drop
given
price
import
of firms. alloca-
efficient
incurred
firm
rather
than
of efficiency.
of the growing
1981).
government
instruments/guidelines,
of potash,
that farmers,
to bear
in the world
to firms with the largest
empirical
generally
subsidy
after
is determined
measure
Given the recent
fertilizer
of policy
was initiated
crisis in food grain
protection
the distribution
since the cash subsidy
is unfortunate
However,
to increase
increases
stronger
too, there was a significant
from
package
Undoubtedly,
package
agricultural
inefficiency
import
levels,
but domestic
fertilizer
means
of meeting
it
also have fertilizer current
and taxes,
This will put pressures
for more efficient
public,
to review
tariffs,
in
prices,
of the domestic
therefore,
quotas,
policies
product
with the general
is a need,
to world
shrink.
that government
fertipro-
on the fertilizer farmers'
demand
22 for fertilizer. inefficient
Efficient
firms can be allocated
use less resources imported ability
firms will survive.
to obtain
fertilizer,
to economic
the foreign
or to other means
of agriculture.
The cost of suSsidizing activities
exchange
which
will
needed raise
which
will
to purchase the profit-
24
REFERENCES
Abed, B. L. 1980. "Economic Profile and Prospects of the Fertilizer Industry." Paper presented at the Seminar on Mineral Resources Science and Technology Status, Metro Manila, March 26-28. Anden
and Palacpac. 1976. "Data Series on Rice The International Rice Research Institute.
Statistics,
Philippines. _'
Barker, R, 1969. "The Philippine Fertilizer Industry: Growth and Change." Paper presented at the Seminar on the Economics of Rice Production in the Philippines, Department of Agricultural Economics, IRRI, Los Ba_os. Crisologo, L. C. 1981. "The Distribution Effects of Consumer Price Control Policies, 1971-1979." Unpublished Masters Thesis, University of the Philippines, Quezon City. David, C. C. 1981. "Analysis of Agricultural Policies Unpublished paper, CDEM, U. Po at Los Ba_os.
in the Philippines."
"The Fertilizer Industry in the Philippines" Journal of Philippine Statistics30(4):
nrticle).
(a feature ix-xxiii.
1979.
Iiio, J. F. 1978. "The Philippine Fertilizer Industry: A Domestic Resource Cost Analysis." Philippine Review of Business and Economics 15(3): 70-100. Medalla, E. Mo and J. Power. 1979. "Estimating Implicit Tariffs and Nominal Rates of Protection." In Bautista, R., Jo Power and Associates, Industrial Promotion Policies in the Philippines. Philippine Institute for Development Studies. Paje, Ho, Do Kunkel and A. Alcasid. 1974. "The Fertilizer Supply and Marketing System in the Philippines, 1954-1972." BAEcon Working paper No. 4, BAEcon, Quezon City. Rodriguez, G. R. 1979. "The Effects of Fertilizer on Rice Production and the Evolution of Fertilizer Policies in the Philippines." Bureau
of Agricultural
Economics,
Ministry
of Agriculture.
Zosa, M. M. (no date). "The Philippine Domestic Fertilizer Situation." Fertilizer and Pesticide Authority.
Marketing
Appendix
Table
I.
Border
and domestic
Urea import Price Domestic (_/mt) ex-warehouse price
Year
Implicit tariff (%)
wholesale
of finished
_mmosul _ Import Domestic Implicit price ex-waretariff (_/mt) house (%) price
(_Imt) 1973_/
prices
fertilizers,
Mixed Fertilizer Import Domestic Implicit price ex-waretariff (_/mt) house (%) price
(_Imt)
735
554 962
-25 "31
406
370 564
1974
1946
1730 2924
-11 50
1176
1975
2745
1682 2601
-39 -05
1976
927
1534
1977
988
1978
1973-1981.
Muriate of Potash Import Domestic Implicit price ex-waretariff (_/mt) house (%) price
(_Imt) -
(_Imt)
9 39
1029
528 1005
-49 - 2
364
798
119
900 1688
-23 44
1974
1319 2306
-33 17
616
.1115
81
1621
931 1534
-43 - 5
2797
1231 1941
-56 -31
666
1242
86
65
517
963
86
950
1231
30
578
1072
85
1534
55
684
1091
59
1094
1231
13
524
1072
105
1201
1534
28
798
1091
37
1300
1231
- 5
547
1072
96
1979
1330
1788
34
844
1282
52
1345
1548
15
684
1290
89
1980
1900
2026
7
1049
1500
43
1999
1724
-14
1125
1890
68
1981
2200
2387
8
1217
1766
45
2319
2069
-11
1178
2120
80
_/From 1973 to 1975, domestic fertilizer prices were based on a two-tier system: the first entry refers to priority I prices (for food crops) and the second to priority II prices (for export crops). For muriate of Potash, domestic prices given for this period refer to priority II prices. Source:
Fertilizer
and Pesticide
Authority