A multi-sided rice crisis requires a holistic policy approach 

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.




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