Maintaining the status quo at the National Food Authority (NFA) would be “untenable” once Manila converts its quantitative restriction (QR) on rice into tariffs, according to a study conducted by the Philippine Institute for Development Studies (Pids).
In a Policy Note, Pids Senior Research Fellow Roehlano M. Briones said retaining the regulatory powers of the NFA, particularly the power to issue import licenses, will be “problematic.”
Briones said the import licenses could be deemed a nontariff barrier under international trading rules.
“While this is technically permitted even under tariffication, the involvement of state trading enterprises [STEs] in trade falls under a stringent set of international trading rules to ensure that STE trade is not used to circumvent WTO [World Trade Organization] obligations,” he said.
One option, Briones said, is to repeal the NFA’s mandate to regulate imports. However, under this option, NFA maintains its status as STE and its mandate to maintain its food security stocks.
The NFA will only participate in the market as part of its buffer stocking functions. Regulating the rice trade will be left to other government agencies.
The other option is to “decouple” government-controlled stocks. Under this option, the country’s rice stocks will not be held by the government but by the private sector.
However, the private sector will be contracted to sell to the NFA during emergencies at market price. Nonetheless, this option will require the Philippine Competition Commission (PCC) to strictly enforce fair competition in the market.
“[This] option assumes the presence of a strong private sector with vigorous competition among diverse players. This assumption may not hold during episodes of supply scarcity, when the large traders can manipulate the market price,” Briones said. He said that in the long run, the ideal setup is to rely on the private sector in all provinces. Transitioning this option requires greater private-sector development thrust.
Earlier, Socioeconomic Planning Secretary Ernesto M. Pernia confirmed that the Economic Development Cluster (EDC) wants to strip the NFA of all its regulatory functions and limit its function to buffer stocking.
Pernia confirmed this to the BusinessMirror after the EDC meeting late Tuesday. The tarification of the country’s QR was the primary agenda discussed by the EDC.
This will essentially expand the changes in the NFA’s functions under the proposed bill to convert the rice QR. The House of Representatives has already approved the bill on third reading but did not change the NFA’s functions, while the Senate version is still pending but it contains the removal of the NFA’s function to issue import permits.
Pernia previously said the passage of the amendments to Republic Act 8178, or the Agricultural Tariffication Act, is a “crucial step” in reforming the agriculture sector.
This proposed bill, once signed into law and fully implemented, is expected to help bring down the prices of rice and provide farmers better access to farming technologies and high-yielding variety crops.
Briones said measures that are being undertaken by the government, such as the tariffication of the country’s quantitative restriction on rice, are sufficient to bring down rice prices, the country’s food staple.