THE present rice price crisis is deeply troubling for the nation. It is unprecedented in breadth and length. From P37 a kilo under the Aquino Administration, the price of the regular milled rice went up to P40 a kilo and, in August, zoomed up to over P50 a kilo, even as high as P80 a kilo in some markets. Moreover, in far-flung places, there is a shortage of rice being retailed, forcing the National Food Authority (NFA) to release its “bukbok” hoard to the market. Rice consumers are asked to limit purchasing to five kilos every other day.
Like other commodities in the market, the rice inflation was triggered by the implementation early this year of the new taxes under the TRAIN program of the government. The economic technocrats argue that the inflation impact of TRAIN is minimal and that its contribution to the surge in inflation is less than one-fifth; hence, TRAIN should not be blamed for the inflation phenomenon. What these technocrats forget is the dynamics of taxation and inflation. The implementation of TRAIN became the occasion for price gouging by the producers, importers, distributors and retailers of various products in a deregulated economy. The irony is that most countries in Asia have been experiencing a deflationary situation despite the upsurge in the prices of fossil oil in the global market, the lame excuse used by the government technocrats as the reason for the inflationary situation. The price gouging phenomenon happens to be most visible in the case of rice.
The situation is clearly explosive, rice being the national staple. It makes the people mad — mad at the government, mad at government failure to stabilize the rice supply, mad at government failure to anticipate shortages and cover these with timely interventions, mad at government failure to tame run-away price gouging, mad at government failure to arrest big-time rice hoarders and smugglers, and mad at the finger-pointing among the government officials in charge of the rice and agricultural policy.
The truth is that the rice crisis is truly a man-made one. It is also not new. It is a recurring one under various Administrations. In 2008, then President Gloria Macapagal-Arroyo and DA Secretary Art Yap transformed the Philippines into the world’s top rice importer by rushing the importation of all the available rice in the world market to prevent a rice shortage at home that was threatening the stability of the Arroyo Administration. Today, the rice crisis, unchecked, is also casting dark clouds on the stability of the Duterte Administration.
Now what are the factors that have contributed to the rice crisis of the country? There are several worth citing here.
First, incoherent and contradictory policies. In the Philippine Development Plan 2017-2022, the National Economic and Development Authority (Neda) is pushing for rice tariffication, which means open private sector participation in the rice importation business and the reduction of the NFA’s role or the minimization of the G2G or government-to-government importation system. This is really a continuation of the agricultural deregulation program that was imposed by the IMF-World Bank group in the 1980s as part of the structural adjustment program (SAP) for the heavily-indebted Philippines. SAP pushed the country back to its old status as a rice importer. Under SAP, input and credit subsidies to rice farming were removed, NFA support price for palay was reduced, the NFA itself was downsized to almost half (from over 10,000 personnel then to around 5,000), and the maintenance of various infras for agriculture such as irrigation were neglected due to SAP-related austerity program.
And yet, no government would dare present itself as anti-rice farmer and anti-consumer. Thus, from the 1980s to the present, various Administrations have been spouting pro-farmer and pro-consumer rhetorics, rhetorics that is negated by the government’s failure to provide funds for the NFA’s palay-buying program. Budgetary allocation for palay procurement by NFA was downsized to less than 10 percent of total national palay output when the ideal percentage should be 15 percent or more to make sure that the recommended support price for palay farmers is able to influence the market. At certain years, the NFA’s palay procurement even dipped to a minimal two percent or even less!
The general NFA procurement framework is “buy high for palay, sell rice at a low price” – for the benefit of producers and consumers alike. But given the limited budgetary allocations, this was hardly observed, with the palay farmers more and more dependent on the palay traders and the nation, eventually on more and more rice imports.
Thus, the incentive for rice farmers to increase production is virtually non-existent. And whenever there is a rice shortage, the NFA is simply asked to import, at whatever price, and build up its 30-day buffer stock. The overall result: the NFA has failed to fulfill its twin original missions of supporting the palay farmers and keeping the consumers happy with affordable rice prices under the framework of “buy-high-sell-low” system.
Meanwhile, the economists who dominate the so-called “NFA Policy Council”, a strange separate government entity from the NFA, have been pressing the NFA to abandon these twin NFA missions by allowing private sector participation in rice importation and distribution under the rice tariffication program and nudging the “unprofitable” or “marginal” rice farmers to switch to the so-called “higher-value crop production”. This is openly questioned by DA Secretary Manny Pinol, who succeeded in getting back some control over the NFA operations. Today, the conflict between the DA/NFA and the NFA Policy Council is out in the open. However, the latter is winning because the country is now on the road to rice tariffication, courtesy of Congress. The system of private sector rice importation, which means fuller control by the rice traders of the rice business, from buying the palay produce at home to the importation of needed rice and the distribution nationwide of this precious staple, shall be dominant.
Second, failure of the agricultural modernization program due to corruption and budget restraint. One obvious solution to the perennial rice crisis is agricultural modernization, that is, increasing the productivity of the rice farmers so that the country would achieve self-sufficiency in the staple food while the farmers are able to double farm incomes. This program was a total failure in the 1980s, a decade of IMF-imposed austerity and abandonment of support to the farmers and to agricultural infra development. In the second half of the 1990s, after the ratification of Philippine membership in the WTO, the Agricultural Fisheries and Modernization Act (AFMA) was enacted in support of agri modernization. This AFMA was badly implemented because of budget restraint, missing support by the national leadership to AFMA and the perennial problem of corruption in the bureaucracy (especially for those in charge of maintaining the nation’s irrigation facilities and the distribution of needed inputs in agriculture).
An accompanying Agricultural Competitiveness Enhancement Fund (ACEF), a credit facility for small farmers that is funded by agricultural tariff collections, became a facility for rich farmers such as the sugar planters. ACEF collection and disbursement were marred by charges of corruption. So far, there has been no formal government accounting on the overall achievements of the ACEF program. Now, through the proposed rice tariffication law, the legislators are proposing the establishment of a similar ACEF-like fund, purportedly for the modernization of palay farming. How different would this system be from the unlamented AFMA and ACEF programs?
Third, failure of the government to catch the rice hoarders, smugglers and trade manipulators. The palay and rice market is controlled by these shady characters. This is well known and is fully aired in Congressional hearings, past and present. And yet, very little is done to stop their nefarious operations. From time to time, truckloads of smuggled rice are confiscated, and yet, no smugglers are haled to court and jailed. No human face. Will the appointment of another military man as NFA chief make any difference?
Four, no integrated rice and farming development vision and program. As reflected in the present rice crisis, agricultural policy coordination is clearly missing. Programs are undertaken in a piecemeal and often uncoordinated manner. There is no unified vision of palay/rice development, only simplistic solutions such as more importation if there are shortages at home.
With so much rice now being imported by the NFA and the private sector, the price of rice is projected to stabilize in the latter part of the year. But given the unresolved issues outlined above, it is likely to recur again in the not so distant future.
