THE Ethanol Producers Association of the Philippines (EPAP) on Tuesday said it will seek the Tariff Commission’s nod for its petition to increase the most favored nation (MFN) tariff of ethanol to 20 percent from 1 percent.

“Unless there is strong government support, investors will remain reluctant to commit billions of pesos into the Philippine ethanol industry,” Tetchie Cruz-Capellan, EPAP executive director, said.

In a letter sent by EPAP to Tariff Commission Chairman Edgardo Abon, Capellan explained how the local ethanol industry has not progressed as much as predicted two years ago because it lacks equity investments and stronger political support.

 Capellan pointed out that the Philippines has to be aggressive in attracting foreign capital to sustain initial efforts on biofuels and reach the mandated E10 blend by 2011.

“In other Asean countries, particularly Indonesia, ethanol producers are given as much as 30-percent protection from imports. Without such support mechanism in place, EPAP believes foreign capital will bypass the Philippines and seek countries with more favorable investment climate and stable domestic market,” Capellan said.

In a study undertaken by the United States Agency for International Development-funded Eco-Asia Project, the EPAP official said the Philippines was cited as having the potential to produce as much as 1.7 billion liters of ethanol.

“Obviously, foreign capital is the only missing ingredient to transform this huge potential into reality since the cost of building ethanol plants requires massive capital expenditures,” said Capellan.

There are two more ethanol plants—Green Futures Innovation and Alto Power—waiting to be built in 2010.

Capellan said EPAP believes these two plants are vital to the country’s full compliance with the 5-percent mandated blend by 2011.

“Presently, a substantial portion of the capital for these two plants is being raised by the private sector. But still, government support is essential to cement the strategic partnership with foreign partners,” she added.

“An increase in import duties and no further reduction of tariff give foreign investors more confidence in the Philippines. Protection will accelerate construction of more ethanol plants,” Capellan said.

Thailand and Indonesia began their respective ethanol programs at about the same time the Philippines had enacted the biofuels law.

Two years hence, according to the Food and Agriculture Organization (FAO), Thailand’s ethanol production rose as much as 30 percent, or 176 million liters, with output growing from 408 million liters in 2008 to 584 million liters this year.

Likewise, production in Indonesia is also expected to reach thrice its present output, from 212 million liters in 2009 to 660 million liters by 2010.

 EPAP argues that the dramatic rise of ethanol production in these countries is largely attributed to investors’ confidence on government support of these countries to ethanol producers.

“Increasing current tariff to 20 percent will send a clear signal to investors,” says Capellan. “Even an old-timer in ethanol production, like Brazil, still protects its market with a 20-percent import duty on ethanol. Why should our own government deny the local producers the same treatment and protection?” said Capellan.