Offensive and defensive plays in the tobacco industry
For our agriculture to develop, we need both defensive and offensive strategies.
How? We must defend our produce from smuggling of illegal imports, which deprives us of our livelihood. We should also have an offense initiative to produce the best product quality to compete successfully in the export market. This will provide additional jobs we sorely need to reduce the very high rural poverty rate of 30 percent.
These were the two conclusions arrived at during a public-private sector meeting last June 2.
Private stakeholders said it was the first time they met all relevant government agencies in one room. Among those present were Trade Undersecretary Allan Gepty, Special Assistant to the Agriculture Secretary for Export Development Philip Young, Philippine Tobacco Authority Administrator Belinda Sanchez, Philippine Tobacco Institute president Jericho Nograles and Universal Leaf president Winston Uy. They thanked Agriculture Secretary Francisco Tiu Laurel, Jr. for his welcome initiative on meaningful participation in agriculture governance.
Tobacco industry
According to Sanchez, tobacco is grown in 23 provinces in two regions. The industry has 2,112,800 stakeholders and involves 516,083 farmers and farmworkers.
Annual sales in 2023 amounted to P58 billion: 61 percent from exports and 39 percent from local. Tobacco products constitute 59 percent, while tobacco leaf was at 41 percent, showing good value added.
Excise taxes from tobacco amounted to P132 million. These resulted in valuable benefits especially in health-care (P68 million), local government support (P21 million), and international revenue allotment (P17 million).
Defense
With the tobacco industry’s importance to our nation, we must defend it against a real and increasing threat: smuggling.
When COVID-19 started, the transport of tobacco was severely hampered. Smuggling, on one hand, increased.
After the pandemic, smuggling not only continued but even further increased. No significant defensive action was done, resulting in job displacement and an estimated excise tax loss of P72 billion in 2024.
I can only think of this quote from the Gospel: “Be gentle as doves, but wise as serpents.”
Unfortunately, some unscrupulous politicians act like doves, but in reality, they support and benefit from smuggling.
At a follow-up public-private sector meeting (and using the wisdom of serpents in deciding on antismuggling tactics), it was agreed that forces need to raid areas where few politicians have extraordinary influence. These can later be duplicated in other areas, with help from the media, which can help deter the protection of smugglers.
Offense
At the same time, our tobacco industry, which is already globally competitive, will strive to be the best in the world.
Universal Leaf’s Uy shared with us his development strategy, which can be modified and used successfully by other agriculture subsectors.
Uy’s record is impressive. He took over his father’s business at age 35 in the early 1990s. He achieved remarkable transformation through creative technology and good management.
From an initial tobacco market share of 3 percent, Universal Leaf now has 85 percent. From 134 farmers, they are now partners with 145,000 farmers (covering 16,000 hectares) through contract growing.
Middlemen who are present in many layers in the production process were eliminated. They used to get a 90-percent contractor’s share of the final price. This is now down to 10 percent.
Farmer income now averages P120,000 per hectare.
In addition, Universal Leaf not only has one of the best tobacco globally, it is also the largest supplier of broadleaf tobacco in the world.
What did Uy do to achieve this transformation? Here are two of his many initiatives: (1) Listen to all stakeholders in the value chain; learn from them, and implement their valid recommendations; and (2) Digitalize the agriculture system using digital databases, remote sensing technologies and mobile apps.
An initial 7,000 farmers working for Universal Leaf now receive through their phones weekly updates on weather, pests and even business conditions done by Universal Leaf. These will significantly help farmers’ planning on a real-time basis.
Tobacco now has better defense and offense initiatives. All our agriculture subsectors should have both if we are to achieve significant agriculture development.
