Abolish the NFA!

Will 2018 be a reprise of 1995? In 1995, the Ramos administration was hit by a double whammy: the Flor Contemplacion tragedy in the first half of the year, and then the rice price crisis in the second half.

The net satisfaction rating of President Fidel Ramos, which had been Very Good (+50 and up) from mid-1992 to the end of 1994, fell to Moderate levels +24 and +26 in the first two quarters. But when the rice crisis struck, it bottomed to Neutral levels of +1 and +2 in the third and fourth quarters of the year, and did not recover to Moderate until 1996.

In the Ramos administration’s Report Card, the net satisfaction on fighting inflation—the worst subject for all administrations—collapsed to a record low -51 (Very Bad). It was usually Bad (-30 to -49) under Estrada and Arroyo. It was positive in 11 of 24 quarters under Noynoy Aquino, and also in 7 of 8 quarters under Duterte, but fell to -1 last June.

The present rice crisis. To veterans in rice economics, the weakness of NFA imports for dampening prices is a very old story. It is 50 years since the publication of my estimate that, in 1956-1967, the retail price of rice fell by only 1.5 centavos per ganta for every extra 100,000 tons of government imports, versus 9.7 centavos for the same addition to domestic rice production (“The effect of importation on the price of rice,” Philippine Review of Business and Economics, December 1968).

I have consistently written that the economics profession is united in urging that international trade in rice be opened to ordinary market forces, and freed from government control (“The maldistribution of rice,” 3/22/14; “End the NFA monopoly!”, 4/22/17; and “The Bangsamoro should defy the NFA,” 8/11/18).

Position of the Foundation for Economic Freedom (8/29/18). I join my FEF colleagues in the following statement:

We, the Foundation for Economic Freedom, support the call of Senator Cynthia Villar, Chairperson of the Senate Agriculture Committee, and Senator Sherwin Gatchalian for the abolition of the National Food Authority (NFA).

The NFA has only caused and aggravated the rice inflation and rice shortage in several regions, compounded the debt and losses of the national government, and provided opportunities for graft and corruption for its officers and employees, from the purchase of imported rice to the distribution and transportation of subsidized rice.

With high average rice prices and periodic shortages, the NFA has also contributed to the country’s high wage costs and lower competitiveness.

We urge the Senate and the House of Representatives to immediately pass the rice tariffication bill. We support a version of the bill that will abolish the National Food Authority and its powers, including imposing import quotas to the private sector in the importation of rice and to license traders and importers.

We also support setting tariff rates as low as possible in order to make rice more affordable to more than 100 million rice consuming Filipinos.

Food security does not depend on the existence of the National Food Authority as recent events have shown. On the other hand, the NFA has been inefficient and clueless in the right timing in the importation of rice and its distribution. The private sector should be free to import rice from any source in whatever quantities the market needs. This is the only solution to the current rice shortage crisis and to the pervasive malnutrition caused by high food prices.

To maintain and manage buffer stocks, a new and much smaller agency can be created.

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