Strictly limit NFA’s role
There have been growing complaints about inflation, how everything is costing more and people are suffering. Yet one simple thing we in the economic world have been complaining about for years remains unresolved.
Every Filipino eats rice, large amounts of it at every meal, every day. Some restaurants even offer unlimited rice to lure more customers (a very unhealthy thing to do). An average Filipino consumes about 110 kilos of rice a year versus the global average of 65 kilos, almost double.
And the price of rice has risen, some 9 percent just this year. The cheapest rice costs P39 per kilogram. In Thailand it costs P19 per kg, in Vietnam P17 per kg.
Filipinos are being penalized by a policy based on two wrong precepts: An estimated 2.4 million rice farmers should be protected over about 104 million Filipinos who eat the staple, and that the Philippine government knows best how to manage the sale of rice.
Rice is not efficiently grown in the Philippines. It’s much more expensive to grow it here. Data from the Philippine Statistics Authority reveal that an average Filipino rice farmer shells out P12 to P13 to produce a kilo of rice. In Vietnam, it’s P6 to P7 per kilo, and P8 to P9 per kilo in Thailand and India.
The basic problem is the National Food Authority (NFA). It should not be involved in controlling the market; it does a lousy job, as its more than P160-billion debt abundantly demonstrates. We, the people, will have to pay that debt.
The NFA’s functions need to be rationalized. It’s been more than adequately proven that free, open markets work best. If we allowed open entry of rice, Filipinos could pay what the Thais or Vietnamese do.
But to be realistic about it, that’s a bit too drastic. So imposing a reasonable tariff would be a reasonable compromise. If that were done, rice prices, according to the National Economic Development Authority, could fall by P7 per kg. You’d pay between P30 to P32 per kg. I’m not too worried about putting some rice growers out of business, they can move to other more profitable, high-yielding crops.
To do that legally, we need the Rice Tariffication bill filed by Sen. Ralph Recto, which would strike out the provision in Republic Act 8178 or the Agricultural Tariffication Act that exempts rice from tariffication. The bill would also remove the commercial functions of NFA, thus barring the agency from selling rice. The agency would then just focus on ensuring that the country has sufficient buffer stock.
The bill also mandates the creation of a Rice Competitiveness Enhancement Fund (RCEF) that would be generated out of the tariff revenues of rice imports. The RCEF would support rice farmers, particularly those that will be displaced by the removal of the quantitative restriction (QR). The fund would also finance programs that will modernize the rice industry and hence improve production efficiency.
Sen. Recto noted that about 17 percent of palay harvest is lost to inadequate post-harvest facilities and practices every year, resulting in wastage of about 2.5 million metric tons of rice. That volume is sufficient to cancel annual rice imports, or meet Metro Manila’s annual rice demand.
Its counterpart bill has been filed at the House of Representatives. Unfortunately, both measures are still pending with their respective committees. President Duterte should certify the measure as urgent.
Lower prices will help the one group we most want to support, the poor. Some 31 percent of the daily food spending of the poorest 20 percent of Filipino households is set aside for rice. A P7 saving would lead to a dramatic improvement in their lives. It would lessen malnutrition as kids get more rice, or consume more fish, fruits and vegetables that their families can’t otherwise afford.
Lower rice prices will play a crucial role in reducing the ranks of Filipinos living below the poverty line. At present, about 21 percent of the population is poor, way higher than Indonesia’s 10.6 percent, Thailand’s 10.5 percent and Vietnam’s 9.8 percent. Cheaper rice would enable more people to purchase other necessities.
Doing this would also reduce the inflation to below 4 percent by the latter part of 2018. It’s a no-brainer. Get the government out of the market. Congress can do it with one simple act. Pass the Rice Tariffication bill now, and give consumers a break.
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