THERE were empty tables and chairs at the office of the National Food Authority (NFA) where it conducted its first bidding of the year for rice imports under the government-to-government (G2G) scheme on April 27. The venue was not jam-packed despite the fact that the NFA was under pressure to replenish its depleted stockpile, which fell to less than a day of the country’s total national rice consumption.
The NFA had wanted to import rice earlier, but the government’s economic managers and the food agency’s highest policy-making body—the NFA Council (NFAC)—thumbed down the G2G scheme. They claimed that the procurement mode was “vulnerable” to corruption.
But the current state of the NFA’s buffer stock forced the government to resort to it again. The food agency was supposed to have a stockpile equivalent to 15 days of consumption, or around 465,000 metric tons. As of April 27 the buffer stock stood at only 8,500 MT. This caused the NFA to stop selling cheap rice.
The purchase of rice abroad via G2G would take only 30 days to be completed. In contrast, buying rice via the open tender would require at least 45 days.
The food agency now under the Department of Agriculture (DA) is currently struggling to bring back “affordable” rice in the market, the sale of which was temporarily suspended due to the depletion of the NFA’s buffer stock. The poor who patronize the NFA’s cheap rice, however, would have to wait a little longer.
Possible suppliers
In a G2G rice importation, the NFA could only purchase rice from countries with which Manila has an existing memorandum of understanding (MOU). In this case, only Vietnam and Thailand could participate to offer to sell rice to the Philippines.
Under the approved terms of reference (TOR), for the NFA’s purchase of 250,000 MT of rice via G2G, the food agency would only accept offers until the 10 a.m. of April 27. On that day, people from the government, media and non-governmental organizations (NGOs) started to arrive by 9:10 a.m. There were circular tables prepared for guests from the media, observers, NFAC and the government.
Members of the participating countries sat just across the NFA’s Committee on G2G Procurement (CGGP), which oversees the whole bidding process.
Representatives from Bangkok were the first one to submit their offers in a sealed envelope at around 9:46 in the morning. Applause filled the room while the Bangkok representative, while holding the sealed envelope, faced the members of the media for a photo opportunity. The sealed envelope was placed inside the empty box, which was in front the table of the members of CGGP.
Shortly after, a member of the five-man delegation of Hanoi placed their bids in the box. This was applauded by some of those who attended the bidding.
At exactly 10 a.m., Deputy Administrator Judy Carol Dansal, who chairs the CGGP, formally announced the closing of the presentation of offers. Dansal then instructed a member of the secretariat to close the box.
“Thank you, governments of Thailand and Vietnam for participating in this G2G tender for the supply of 250,000 MT of rice for the food security and buffer stock of the NFA,” Dansal said.
“We invited observers from NFA Council, House and Senate Committees on Agriculture, religious sector, NGOs, Office of the President, media and the DA, to show to the public that all aspects of this importation process are above board and in strict compliance with pertinent rules and regulations on government procedures,” Dansal added.
Bid process
Dansal explained that the NFA opted for a G2G importation to fast-track the delivery of rice needed to boost the agency’s buffer stock. “As you know, no less than the President instructed the NFA to immediately replenish our depleted buffer stock.”
“And G2G importation is the fastest means of bringing the needed stocks for food security and stabilization of rice prices in the Philippines,” she added.
Dansal then announced the NFA’s reference price for rice imports. It is usually not announced ahead of the bidding day. The NFA computes its reference price a day or two before the bidding day based on the prevailing world market prices. An NFA official said they do this as to not preempt and influence the bid offers of the participating countries.
The NFA’s reference price for the 15 percent brokens was at $483.63 per MT and $474.18 per MT for the 25 percent brokens. The reference price pertains to the maximum amount that the NFA would pay for the imports. Offers that go beyond the reference price are automatically thumbed down by the agency.
The NFA will import 50,000 MT of 15 percent broken rice, while the remaining volume of 200,000 MT would consist of 25 percent brokens.
“The average freight on board price was based on quoted world market prices as of April 25 from Thai Rice Exporters Association and Board of Trade of Thailand. Historically, these are the traditional sources of the world market price indicators for rice,” Dansal explained.
She said the reference price also included “the incidental expenses which is comprised of 14 percent of total costs considering the actual submitted cost of the rice suppliers during the last G2G importation in 2016.”
The NFA used the peso-dollar foreign-exchange rate at P52.20 quoted on April 24. This means the maximum budget of NFA for the importation is around P6.19 billion, based on the computation of the BusinessMirror.
Failure of bidding
The offers made by Vietnam and Thailand were accepted by the CGGP and were turned over to the technical working group (TWG) to evaluate and check if they have complied with the needed requirements under the approved TOR.
As both countries were declared compliant with the requirements, their offers were opened. Dansal first opened the sealed envelope containing the offer of Thailand.
“There is no price offer for 15 percent brokens. For the 25 percent brokens, Thailand’s offer is $530 per MT which is not compliant with our reference price of $474.88,” she announced.
Almost everyone in the room, including members of the media and the NFAC, were shocked by the offer of Thailand. One even remarked, “that’s too high!”
Members of the Vietnam delegation kept a straight face while Dansal read their offer. “Vietnam has an offer 50,000 MT 15 percent brokens for $540 per MT,” Dansal paused. “This is not also compliant with the reference price of NFA, which is $483.63.”
The observers chatted among themselves and said, “it’s too high! The increase was more than $60.”
“The offers submitted are far beyond the reference price of the NFA. We are giving the chance to both governments to make a reoffer until 3 p.m. today [April 27],” Dansal said.
But before the first round of bidding adjourned, Dansal asked the members of Vietnam and Thailand if they were willing to again make an offer. “Are you willing to do a reoffer Vietnam?”
A member of the Vietnam delegation answered in the affirmative. When the Thai delegation was asked whether they will make another offer, one of the members signaled that they will have to make a phone call. The Thai representative immediately made a phone call while members of the Vietnamese delegation talked among themselves.
According to some NFA officials, it could be a tactic by the participating countries to initially offer a high price just to know the reference price. After this, the participants will make a decision as to whether they would continue selling rice to the Philippines or just back out of the bidding.
One observer even said that Thailand would back out due to the difference between the reference price and their initial offer, leaving Vietnam as the lone participant.
However, at around 11:48 a.m. Thailand made another offer. At 12:17 p.m., Vietnam submitted its new offer. The CGGP opened the sealed envelopes at 12:19 p.m.
“The revised offer from the government of Thailand is $520 per MT, which is not compliant with the reference price of $474.18 for 25 percent brokens,” Dansal announced.
“Vietnam’s new offer of $530 per MT for 50,000 MT of 15 percent brokens is not also complaint with the reference price of NFA, which is $483.63,” she added.
By this time observers murmured among themselves that the bidding process will fail.
“For the 25 percent brokens, Vietnam offered to sell 100,000 MT at $521 per metric ton which is also way above the $474.18 as reference price of NFA,” Dansal said.
She then announced, “Ladies and gentlemen, the bidding we had today is a failure for noncompliance with the reference price of the NFA. We will conduct a rebidding.”