The Thai prime minister recently floated the idea that Thailand and Vietnam should jointly raise rice prices to boost their bargaining power in the global market (See, “Rice giant Thailand wants to coordinate price hikes with Vietnam,” in the BusinessMirror, May 28, 2022). Thai Premier Prayut Chan-o-cha said the move will benefit millions of rice farmers in the two countries who have struggled with rising input costs amid the relatively stable prices of the grain. Bloomberg reported that Vietnam’s Deputy Agriculture and Rural Development Minister Tran Thanh Nam met with Thai officials to discuss a framework for cooperation.
The plan of the two top rice-exporting countries raised alarm bells in the world, particularly in the Philippines, which sources a big chunk of its imported rice requirements from Vietnam. If it pushes through, the planned cartel could cause spikes in international rice prices and make the staple more expensive (See, “Viet-Thai tandem rice price hike to hurt PHL,” in the BusinessMirror, May 30, 2022). Vietnam alone shipped 2.36 million metric tons of rice to the Philippines last year, according to official data.
The envisioned cartel underscores the fact that the Philippines is at the mercy of food exporters like Vietnam and Thailand. And during times of crisis, food sellers will always prioritize the needs of their citizens and the welfare of their own farmers and traders. International trade agreements give them that leeway, particularly when their own food security is under threat due to natural disasters and external factors, such as the Russia-Ukraine war, which has caused commodity prices to rise to unprecedented levels.
Meanwhile, food buyers like the Philippines can do nothing but wring their hands and appeal to exporters to keep their agricultural markets open to prevent inflation from accelerating further. Manila urged the United Nations Food and Agriculture Organization to “spearhead another global appeal to various countries to keep unhampered the movement of food and agricultural inputs.” The government made this appeal after food-exporting countries, such as India, banned the export of wheat, which the Philippines imports in huge quantities simply because the crop cannot be grown in the country.
Rice, however, is grown in almost all regions in the Philippines and the country has the potential to further increase its output, particularly if the sector is given the support it requires to improve productivity. Shooting for a higher rice self-sufficiency rate may be an expensive proposition now, given the current fiscal situation of the government. This, however, may no longer be avoided due to the climate crisis that has put crop production at risk.
Apart from the Rice Competitiveness Enhancement Fund, which consists of tariffs collected from rice imports, the incoming administration must consider setting aside more resources to improve the sector’s productivity. Importing may be cheaper, but the pandemic and the conflict in Eastern Europe have shown the perils of relying too much on other countries for our food requirements. Strengthening the agriculture sector is the way to go as this would help cushion the impact of pandemics, the climate crisis and the presence of cartels that control local food prices.