Rice prices may decline toward the end of the first quarter of next year once a measure that removes the cap on imports is enacted into law, according to the National Economic and Development Authority (Neda).
Socioeconomic Planning Secretary Ernesto M. Pernia made the pronouncement after the bicameral conference committee approved the rice tariffication bill on Thursday. The measure may be signed into law before the end of the year, but Pernia said “policy reforms have lagged effects.”
Neda Undersecretary for Planning and Policy Rosemarie G. Edillon welcomed the approval of the bill and said the P10-billion Rice Competitiveness Enhancement Fund (RCEF) will enable local farmers to compete.
“We’re happy to hear about the result of the bicam especially since Congress chose to institute sweeping reforms and not merely comply with our WTO [World Trade Organization] commitment. Within three months, we expect rice prices to go down,” Edillon said.
“The RCEF will ensure that measures to enable our local farmers to compete against farmers from other countries. [But] we need to guard against anticompetitive practices,” she added.
Philippine Institute for Development Studies (Pids) Senior Research Fellow Roehlano M. Briones also welcomed the “swift passage” of the bill. Briones added that the approval of the measure, coupled with the strict implementation of rules on the issuance of the sanitary and phytosanitary clearance, will cause rice prices to go down before the end of 2018.
He said, however, that the decline in prices will not be steep given the “deals that still need to be made” and the ongoing truck holiday that may affect the flow of goods in the country.
“A bigger change should be seen already by mid-2019 assuming Vietnamese 25 percent broken [rice] holds at $380 per ton, or lower,” Briones said.
Local economist Calixto V. Chikiamco told the BusinessMirror that while the passage of the rice tariffication bill is welcome, he could not comment on the movement of prices after it is enacted into law. Chikiamco said, however, that the rice tariff measure would entice more players, like San Miguel Corp., to enter the rice market.
Society Towards Reinforcing Inherent Viability for Enrichment Foundation Inc. Founding President and Chairman Leonardo A. Gonzales said the measure’s impact on prices “may be short-run and may only be a function of the rice trade.”
The real challenge, he said, will come three to four months after the implementation of the law when farmers’ incomes will be affected, especially with the removal of the National Food Authority (NFA) as buyer.
Based on the approved version of the bill, Senate Committee on Agriculture and Food Chairman Cynthia A. Villar said the NFA’s functions will only be focused on buffer stocking. The bicameral committee version removed the licensing function of the NFA.
“For as long as trade is open, the impact on domestic rice price is downward. What we will worry about is after three to four months [and] what will be the impact on farmers’ incomes. Surely this will go down with the exit of NFA as buyer,” Gonzales said.
He also expressed concern about the establishment of the RCEF as “the government does not have a good track record” when it comes to implementing financing programs.
Gonzales cited the Agricultural Competitiveness Enhancement Fund which was “mired in controversy” due to numerous problems, such as low repayment.
“The implementation of this legislation should be anchored on a good road map for the rice sector which is not yet finalized,” he said.
Ibon Foundation Inc. echoed Gonzales’s sentiments, particularly the measure’s impact on farmers’ incomes. It added that the removal of the nontariff barrier will worsen poverty.
The nonprofit organization also said the RCEF was “too little, too late” and compared unfavorably to the support given by other countries to their respective farm sectors.
Ibon noted that Vietnam’s support to farmers amounts to $400 million yearly; the United States, $619 million; Thailand, $2.2 billion to $4.4 billion; India, $12 billion; Japan, $16 billion; and China, $12 billion to $37 billion.
“If the Philippines imports 2 million metric tons of palay, for instance, some 500,000 of around 2.4 million rice farmers will be adversely affected. Even the government’s own Pids projects, a 29-percent decline in rice farmers’ incomes from a P4 decline in palay farm-gate prices when rice tariffication is implemented,” Ibon said.
The group said there is no guarantee that retail rice prices will be lower in the long run with unhampered importation. “Relying on rice imports makes the country vulnerable to higher world market prices, as well as to rice production and export decisions of other countries.”