Lafarge, Cemex and Holcim – Oligopoly

World Bank Slams “Oligopoly” In Philippine Cement Industry For Causing High PricesManila, Philippines (AHN) – The World Bank on Wednesday called on the Philippine government to dismantle what it calls an “oligopoly” in the local cement industry. The international lending institution made the call to urge the government to introduce a liberalized policy towards that sector so that more funds could be channeled to the public infrastructure.The World Bank said that the price of cement in the Philippines was among the highest in Asia. It said this is hurting infrastructure spending as cement is a key input in fixed investment across a wide range of the economic sector.The bank said in a statement, “Bringing down cement prices to levels comparable with other countries in the region could engender significant cost savings, thus enabling the government to step up public investment in infrastructure while adhering to its goal of balancing the budget (by 2008).”Lowering the prices of cement would also boost the momentum in economic growth particularly in the housing construction sector, especially with the strong remittances coming from overseas Filipino workers.A World Bank report said, “The industry structure is oligopolistic and price competition appears to be constrained. The industry has become highly concentrated.””Given the central role of cement in making infrastructure and housing sector investments affordable, in the short run, imports should be used as the basis for containing price pressures,” the World Bank said.The bank also asked the Arroyo administration to encourage fresh foreign and domestic players to enter the sector, actively promote the industry and strengthen its machinery to detect and deal with anti-competitive practices.”Given the strategic importance of cement, it could be important to put in place a permanent mechanism to monitor demand and supply situation, price trends and industry practices with a view to maintaining competitive conditions,” it said.In the fourth quarter of 2006, cement prices in the Philippines averaged about $72 a ton as against $35 in China, $52 in India, $49 in Malaysia, $50 in Thailand, $69 in Indonesia and $65 in Vietnam, the World Bank said.It noted that the Philippines’ top three cement makers, multinational corporations Holcim, Lafarge and Cemex, accounted for nearly 90 percent of installed clinker capacity of 22 million tons, while the remaining 20 percent was in the hands of four small independent producers.

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