FIFTEENTH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session '10 DEC 15 P4 :21 SENATE COMMITTEE REPORT NO. Submitted jointly by the Committees on Agriculture and Food, and on Trade and Commerce on Re P.S. Resolution No .. '263, filed by Senator Teofisto L. Guingona III Recommending the Adoption of this Report and the Implementation of its Recommendations Sponsor Senator Pangilinan MR. PRESIDENT: The Committees on Agriculture and Food, and on Trade and Commerce, to which was referred P.S. Resolution No. 263, filed by Senator Teofisto L. Guingona III, have considered the same and have the honor to submit this Report to the Senate, I. Finding that: 1. The Philippines is one of the biggest exporters of bananas worldwide; 2. There was no official ban 'on Philippine bananas to Iran, but the non-issuance of import licenses by Iran, and the non-issuance of letters of credit by UAE banks in view of economic sanctions imposed by the United States and the United Nations, is a de-facto ban; 3. The non-issuance of import licenses and letters of credit, which redounded to a decreased export sales both in volume and price, have crippled efforts of Philippine banana growers to recover from an earlier drought that hit the country;
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FIFTEENTH CONGRESS OF THE REPUBLIC
OF THE PHILIPPINES First Regular Session
'10 DEC 15 P4 :21
SENATE
COMMITTEE REPORT NO. _-,,1~4,,--
Submitted jointly by the Committees on Agriculture and Food, and on Trade and Commerce
on ~DE=C,-1",-5---,2=01=O_
Re P.S. Resolution No .. '263, filed by Senator Teofisto L. Guingona III
Recommending the Adoption of this Report and the Implementation of its Recommendations
Sponsor Senator Pangilinan
MR. PRESIDENT:
The Committees on Agriculture and Food, and on Trade and Commerce, to which was
referred P.S. Resolution No. 263, filed by Senator Teofisto L. Guingona III, have considered the
same and have the honor to submit this Report to the Senate,
I. Finding that:
1. The Philippines is one of the biggest exporters of bananas worldwide;
2. There was no official ban 'on Philippine bananas to Iran, but the non-issuance of
import licenses by Iran, and the non-issuance of letters of credit by UAE banks in
view of economic sanctions imposed by the United States and the United
Nations, is a de-facto ban;
3. The non-issuance of import licenses and letters of credit, which redounded to a
decreased export sales both in volume and price, have crippled efforts of
Philippine banana growers to recover from an earlier drought that hit the
country;
4. It is a must to assist banana growers, especially the small ones, to be able to
recover from losses they incurred, especially in the areas of loan refinancing and
crop insurance; purchase of agricultural inputs such as fertilizers and pesticides;
and improving their production processes;
5. The Philippine Government must further improve its relations with Iran,
especially in the area of bilateral trade;
6. The Government does not have high-level official representatives in Tehran who
could directly and effectively discuss pressing economic issues with the
Government of Iran;
7. There is a need to further expand the list of products that can be traded
between the two countries;
8. Other countries, and their business groups, are still able to directly trade with
Iran despite the economic sanctions imposed by the United States and the
United Nations; and
9. There is a need to find new and alternative markets for Philippine bananas, to
address possible temporary closure of, and diminishing, existing markets and in
view of the expansion of production in terms of hectarage and yield.
II. Recommending that:
A. In the Short-Term /Immediate:
1. For the President of the Republic of the Philippines, upon recommendation of
the Department of Foreign Affairs, to appoint an Ambassador to Tehran;
2. For the Departments of Agriculture, Trade and Industry, and Foreign Affairs, to
send a high-level delegation that will strengthen economic ties with Iran and
ensure the unimpeded or steady entry of Philippine bananas to Iran;
3. For the Department of Agriculture to appoint an agricultural attache in Tehran;
4. For the Department of Trade and Industry to explore counter-trade between the
Philippines and Iran, on products such as liquefied petroleum gas, tractors, oil
derivative products, and generic medicines;
5. For the Department of Foreign Affairs to study: i) how Ecuador and other
countries cope and are able to export to Iran given the same situation, and ii) the
free trade agreement between Peru and South Korea, specifically on zero tariff
for certain products, such as bananas.
B. In the Long-Term:
1. For the Department of Agriculture, in collaboration with the Department of
Agrarian Reform, 8angl<o 'sentral ng Pilipinas, Department of Environment and
Natural Resources, Department of Science and technology, Department of Trade
and Industry, Land Bank of the Philippines, and other concerned agencies, to
support small banana growers by:
a. Reviewing the Charter of the Philippine Crop Insurance Corporation, to
include trade embargo as one of the conditions that will make small banana
growers qualify for ins.urance coverage, aside from drought and flood;
b. Opening-up the Agricultural Competitiveness Enhancement Fund for
financing of importation of fertilizers and other inputs at a lower price;
c. Establishing a Research and Development Program to improve their
productivity and quality;
d. With the partiCipation of big banana growers, install capability building and
mentoring programs; 'and
e. Ensure adherence to sanitary and phytosanitary standards through
compliance to Philippine Good Agricultural Practices (PhiIGAP) Certification
process, Global Gqod Agricultural Practices {GlobaIGAPl, and other
internationally-accePted certification processes.
2. For the Department of Trade and Industry, together with the Department of
Agriculture and the Department of Foreign Affairs to develop and secure
alternative markets, such as China, Australia, United States including Guam, New
Zealand, Korea, Russia, Ukraine, and South Africa thru Singapore.
SEN.
Chairman Committee on rade and Commerce
SEN.EDGARDOJ.ANGARA
Trade and Commerce
SEN. RAMON REVILLA, JR.
Trade and Commerce
SEN. LOREN B. LEGARDA
Trade and Commerce; Agriculture and Food
SEN. FERDINAND R. MARCOS, JR. Trade and Commerce
SEN. MIRIAM DEFENSOR SANTIAGO
Trade and Commerce
Respectfully Submitted:
1~<;t.......,.,~NGILINAN
Chairman Committee on Agriculture and Food
MEMBERS:
SEN. TEOFISTO L. GUINGONA III
Agriculture and Food
SEN. JUAN MIGUEL F. ZUBIRI
Agriculture and Food; Trade and Commerce
SEN. SERGIO R. OSMENA III
Agriculture and Food
SEN. RALPH G. RECTO Agriculture and Food
SEN. FRANCIS G. ESCUDERO
Agriculture and Food
2. For the Department of Trade and Industry, together with the Department of
Agriculture and the Department of Foreign Affairs to develop and secure
alternative markets, such as China, Australia, United States including Guam, New
Zealand, Korea, Russia, Ukraine, and South Africa thru Singapore.
R"spectfully Submitted:
SEN. MANNY VILLAR Chairman Committee on Trade and Commerce
The Department of Foreign Affairs, through the Philippine Embassy in Tehran, inquired
from the Iranian authorities, specifically'from the Ministry of Jihad-Agriculture, on the veracity
of such news reports. It was eventually established that there was really no ban on Philippine
bananas.
Despite the non-existence of a ban, in a document submitted by the DFA, the following
information were gathered:
" All tropical agricultural products including Philippine bananas are not included in the list of 'banned' agriculture products That Iran has not banned the entry of Philippine bananas That importers, particularly those based in the UAE (United Arab Emirates), may not be able to open letters of credit in their ban k transactions due to UAE's implementation of UN/US economic sanctions against Iran; and That the local markets are fully supplied with bananas"
However, the same document s'tates the "while there is no clear-cut ban on entry of
Philippine bananas to Iran, different factors such as the suspension of import permits of UAE
importers and UAE banks cutting ties with Iranian banks, have led to a situation wherein there
is a de-facto ban on Philippine Bananas to Iran."
During the public hearing, Assistant Secretary Virgilio Reyes further clarified that, in the
Fifth Bilateral Consultation Committee on Political, Economic and Cultural Cooperation
Between Iran and the Philippines, the Iranian Government clearly pointed out that there is no
ban but the problem lies on financial transactions that can facilitate the entry of Philppine
bananas to their country. (Agreed Minutes of the Fifth Bilateral Consultation Committee on
Political, Economic and Cultural Cooperation Between the Islamic Republic of Iran and the
Republic of the Philippines, Tehran, 27 - 29 November 2010).
2. Non-Issuance/Suspension of Import Licenses
Despite the official pronouncement that a ban was never imposed on Philippine
bananas, the same DFA document cites that there was a suspension of the issuance of import
permits, as reported by Fresh Fruits Co., the largest importer/exporter of fresh fruits and
vegetables in the Middle East Region.
Mr. Valoria also indicated the decrease in the number and volume of import licenses
that are being issued for Philippine bananas. He noted that, in October of the year, Iran has
completely stooped the issuance of im'port licenses. With the "continued pressure" of the
Philippine government, he noticed that Iran resumed issuance the licenses, but not in a smaller
volume as compared to what the Philippines was previously enjoying. (TSN, MRCatadman, 1/-
2, December 2, 2010, 10:40 a.m., pp. 2 - 3).
3, Non-issuance of Letters of Credit·
Corollary to the problem of non-issuance of import permits is the problem on securing
letters of credit.
Iranian companies importing P\lilippine bananas are based in Dubai, United Arab
Emirates, With the imposition of the sanctions under the CISADA and the UNSC 1929, UAE
trading with Iran has greatly diminished,. Dubai banks, in order not to antagonize the United
States, were seen to be refusing to issue letters of credit to Iranian importers. (See Statement of
DFA ASec. V. Reyes, TSN, HSGayapa, 1- 2, December 2, 2010, 10:30 a. m., p. 2).
Compounding the problem of issuance of a letter of credit is the fact that the Iranian
Rial is not a traded currency. It is not pa'rt of the 16 currencies that are accepted worldwide,
and which, at present, does not form part of the international reserves of the Philippines. (See
Statement af Mr. Geronimo Reyes of the Bangko Sentral ng Pilipinas, TSN, HSGayapa, I - 2,
December 2, 2010, 10:30 a. m., pp. 5- 6).
4. Climate Change/Drought, The "Ban" and Effects on the Operations of Both Big and
Small Banana Growers
The Committees also note that the problem on climate change, such as annual drought,
has exacerbated the problem not only among the big banana growers but, moreso, for small
banana growers.
Mr. Lorenzo pOinted out that banana growers suffered from an EI Nino that occurred
early this year. Farmers were optimistic to recover their investments with the expected surge in
export sales in the third and fourth quarter of the year. This, however, was negated by the
sudden drop in exports to Iran. The "ban" was imposed at a time when banana production was
at its peak. (TSN, RJOrtiz, 11/- 2, Decemb'er 2, 2010, 10:50 a. m., p. 2).
This is also one reason why farmers are now having a hard time meeting their monthly
amortizations for their loans from bankfng institutions. A condonation on the interest charges
and penalties, a moratorium on amortizations, a refinancing of their high-interest loans with
lower interest rates, were suggested. (See Statements of Mr. Da/ayan and Former Governor
Pinal, TSN, HSGayapa, 1- 3, December 2,: 2010,11:10 a. m., p. 3, and TSN, MRCatadman, ,,- 3,
December 2,2010,11:20 a. m., pp. 1 - 7).
5. Inability of Small Growers to Purchase Necessary Inputs to Achieve Greater Production
and Comply with Product 5tanda~ds
With the onslaught of drought, and the drop in export sales due to the Iran problem,
banana growers, especially the small farmers were unable to recoup their investments, and are
therefore having a hard time starting anew.
Such situation has disabled them, the small banana growers, to fully purchase the
necessary inputs, fertilizers, pesticides, and other necessary inputs to achieve higher yields and
in conformity with product standards. (TSN, MRCatadman, 11-3, December 2, 2010, 11:20 a.
m., p. 1).
With respect to inputs, banana growers are faced with expensive fertilizers, pesticides
and other farm inputs. Government assistance, in the form of cheaper credit, or access to the
Agricultural Competitiveness Enhancement Fund, for the importation of lower-priced fertilizers
and pesticides were raised. (TSN, HSGayapa, 1- 3, December 2,2010,11:10 a. m., p. 5; and TSN,
MRCatadman, 11- 3, December 2, 2010, 11:20 a. m., pp. 1 - 7).
Compliance, therefore, to increasingly stringent sanitary and phytosanitary standards
has become a challenge for both big anq especially small banana growers. Mr. Antig raised this
in his initial presentation to the Committees (TSN, RJOrtiz, 111-1, December 2, 2010, 10:10 a.
m., p. 1).
6. Actions taken by the Industry/Private Sector
The private sector, including the PBGEA and its members, the agrarian reform
beneficiaries, and small growers, have put much investments to make the banana industry
achieve the stature that it has now.
To immediately address the ban issue, they immediately sought the attention and
assistance of government agencies that can help overturn the damaging effects of a ban on
Philippine bananas in Iran. They have turned to the Departments of Agriculture, Trade and
Industry, and Department of Foreign Affairs, to clarify the existence of a ban, and continuously
persuade Iran to issue import licenses fo~ their products. (TSN, MRCatadman, /I - 1, December
2, 2010, 10:00 a. m., p. 5, and TSN, RJOrtiz, 1/1-3, December 2, 2010, 11:30 a.m., p. 1).
They have also acknowledged that an expansion of their share of the global banana
market depends on "the entry of Philippine Cavendish bananas to non-traditional destinations
like the US and Canada." The European Union, United States and Canada "account for 68
percent of the world's banana imports.". They also realized that "(E}establishing a foothold in
these markets is one task that necessitates all-out partnership between the industry and the
government." (TSN, RJOrtiz, /II -1, December 2,2010, 10:10 a. m., p. 2).
Trade missions to Iran and other,'markets are being done individually and by groups of
banana growers.
7. Actions Taken by the Government
The Departments of Foreign Affairs, Agriculture, and Trade and Industry, immediately
responded to address the concerns of the banana growers. As early as October 12, 2010, the
Agricultural Attache in the United Arab Emirates, Mr. Gil Herico, clarified that the Philippine
banana was not included in the list of agricultural products that were banned. (TSN, Catadman,
1/-1, December 2,2010,10:00 a. m., p. 5).
As reported by DFA Assistant Secretary Reyes, and in the document submitted to the
Committees, the DFA requested the Iranian Ambassador to the Philippines to clarify the
supposed "ban" on two separate meetings in 15 and 22 October 2010.
The same document provides information on the consistent inquiries and continuing
talks made by the Philippine Embassy in Tehran and the Philippine Consul-General office with
Iranian authorities to ensure that Philippines bananas are not included in the list of banned
agricultural products.
In the Fifth Bilateral Talks of the DFA with Iranian Officials, as contained in the Minutes
of the Bilateral Talks, Iran formally informed the Philippines that it is willing to expand trade
with the Philippines through direct exch.,nge of national currencies and direct trading. Iranian
products, tractors, medicines, among others, are proposed for possible exports to the
Philippines in exchange for Philippine products like bananas and tropical fruits.
Despite these efforts, Assistant Secretary Reyes himself noted that government efforts
need to be further bolstered by:
1. Appointment of an ambassador to Tehran, who can immediately, directly and
effectively discuss and negotiate with Iranian authorities;
2. Sending of a high-level delegation, including the Secretary of Trade and Industry
and/or the Secretary of Agriculture, to Iran that will promote and ensure entry of
Philippine bananas;
3. Appointment of an agricultwral attache in Tehran, instead of relying with the
agricultural attache in Dubai, who still have to secure a visa to be able to go to Iran;
4. Studying what other countries (e. g. India, Italy, and South Korea) have done since
they are stili able to trade with Iran; and
5. For the Department of Trade·and Industry to monitor and explore the possibility of
another country being the gateway to be able to trade with Iran, as an alternative to
the UAE;
V. CONCLUSION
Based on the foregoing, the Committees conclude that:
1. The Philippines is one of the b'iggest exporters of bananas worldwide;
2, There was no official ban on Philippine bananas to Iran, but the non-issuance of
import licenses by Iran, and the non-issuance of letters of credit by UAE banks in
view of economic sanctions imposed by the United States and the United Nations, is
a de-facto ban;
3. The non-issuance of import "licenses and letters of credit, which redounded to a
decreased export sales both in volume and price, have crippled efforts of Philippine
banana growers to recover from an earlier drought that hit the country;
4. It is a must to assist banana growers, especially the small ones, to be able to recover
from losses they incurred, especially in the areas of loan refinancing and crop
insurance; purchase of agricultural inputs such as fertilizers and pesticides; and
improving their production processes;
5. The Philippine Government must further improve its relations with Iran, especially in
the area of bilateral trade;
6. The Government does not have high-level official representatives in Tehran who
could directly and effectively discuss pressing economic issues with the Government
of Iran;
7. There is a need to further expand the list of products that can be traded between
the two countries;
8. Other countries, and their business groups, are still able to directly trade with Iran
despite the economic sanctions imposed by the United States and the United
Nations; and
9. There is a need to find new and alternative markets for Philippine bananas, to
address closure of existing markets and in view of the expansion of production in
terms of hectarage and yield .. ;
VI. RECOMMENDATIONS
Wherefor, in view of all the foregoing, the Committees hereby recommend the
following:
A. In the Short-Term /Immediate:
1. For the President of the Republic of the Philippines, upon recommendation of
the Department of Foreign Affairs, to appoint an Ambassador to Tehran;
2. For the Departments of Agriculture, Trade and Industry, and Foreign Affairs, to
send a high-level delegation that will strengthen economic ties with Iran and
ensure the unimpeded or steady entry of Philippine bananas to Iran;
3. For the Department of Agriculture to appoint an agricultural attache in Tehran;
4. For the Department of Trade and Industry to explore counter-trade between the
Philippines and Iran, on products such as liquefied petroleum gas, tractors, oil
derivative products, and generic medicines;
5. For the Department of Foreign Affairs to study: i) how Ecuador and other
countries cope and are able to export to Iran given the same situation, and ii) the
free trade agreement between Peru and South Korea, specifically on zero tariff
for certain products, such as bananas.
B. In the Long-Term:
1. For the Department of Agriculture, in collaboration with the Department of Agrarian
Reform, Bangko Sentral ng,' Pilipinas, Department of Environment and Natural
Resources, Department of Science and technology, Department of Trade and
Industry, Land Bank of the ~hilippines, and other concerned agencies, to support
small banana growers by:
a, Reviewing the Charter of the Philippine Crop Insurance Corporation, to include
trade embargo as one of the conditions that will make small banana growers
qualify for insurance coverage, aside from drought and flood;
b. Opening-up the Agricultural Competitiveness Enhancement Fund for financing of
importation of fertilizers and other inputs at a lower price;
c. Establishing a Research and Development Program to improve their productivity
and quality;
d. With the participation qf big banana growers, install capability building and
mentoring programs; and'
e. Ensure adherence to sanitary and phytosanitary standards through compliance
to Philippine Good Agricultural Practices (PhilGAP) Certification process, Global
Good Agricultural Practices (GlobaIGAP), and other internationally-accepted
certification processes.
2. For the Department of Trade and Industry, together with the Department of
Agriculture and the Department of Foreign Affairs to develop and secure alternative
markets, such as China, Australia, United States including Guam, New Zealand,
Korea, Russia, Ukraine, and South Africa thru Singapore.