Imposing safeguard duties on rice imports will put upward pressure on inflation, which the Bangko Sentral ng Pilipinas (BSP) is now closely monitoring, according to a member of the Monetary Board.
V. Bruce J. Tolentino, Monetary Board member and a former Deputy Director General of the International Rice Research Institute, told the BusinessMirror that rice prices could fall below P30 per kilogram if safeguard duties will not be imposed on shipments.
Tolentino, who is also a former agricultural undersecretary for policy and planning, warned that rice prices and inflation would rise if government would impose safeguard duties.
“[The price] is really based on how futures and plans and imports will respond to the safeguard duty. Any increase in duty will increase prices, there’s no doubt about that. A 35-percent duty is very high compared to most countries [so] increasing it some more will increase domestic prices,” Tolentino said in an interview on Monday.
More expensive rice, he said, could put more pressure on wages. This, in turn, would affect firms in the Philippines, especially factories which employ a large number of workers.
“Any kind of increase in prices will increase the cost of living [and] translate into higher wage pressures. And so the entire manufacturing sector will be affected. We’re not just talking about farmers but we are talking about everybody,” said Tolentino.
He also said imposing safeguard duty may not be good for the Philippines given the reputation of the Philippines in terms of honoring contracts. Tolentino said the Philippines has earned the “unfortunate” reputation of entering into contracts only to renege on these agreements later on.
The monetary official said the Philippines must ensure predictability especially when it comes to policies. He said the government needs to assure the international community that “things will not change overnight.”
“[We have to be sensitive to] how the market reacts and to ensure stability. Otherwise, [our trade partners] cannot trust our word and that will always be a factor that could translate into higher prices,” said Tolentino.
Cheaper rice
He also noted that retail prices have not gone down despite the increase in purchases of imported rice. He attributed this to the possibility that rice stocks currently being sold by wholesalers and retailers are old stocks that were bought at higher prices.
“Things will normalize as long as there are no trade barriers of any kind. Sans the trade barriers, prices of Vietnam or Thailand rice should just be under P30 as long as [government] is able to withstand pressure to impose safeguard duties,” said Tolentino.
Prices are also not going down as fast as expected, he said, because the shipments that have arrived in the Philippines may just be enough for the requirements of Filipinos.
Tolentino lamented that the government’s grainy data on rice consumption, which is largely based on the crude disappearance method, may be underestimating the country’s rice consumption.
He was referring to the Supply Utilization Accounts (SUA), which is one of the sources of data for rice consumption regularly released by the government.
The SUA treats rice consumption as merely residual after computing rice stocks and removing exports and waste, among others.
“This information is crucial for estimating buffer stock for emergencies and is crucial to traders as they will want to know the country’s rice stocks so they can decide on import volume,” he said.
Last year, the BusinessMirror published a Broader Look piece titled “Snapshot of rice-consumption data remains grainy as Pinoys grapple with supply, prices,” which discussed the ways by which the government estimates the country’s rice consumption.