Legalized smuggling

THE CONCLUSION of the three-man audit team hired by the Aquino administration to investigate the practices of the National Food Authority in the last decade was about as categorical as it gets: “PSF as implemented effectively legalized smuggling.” PSF refers to the private sector-financed importation of rice, a controversial initiative which the NFA implemented in the last three years of the previous administration.

The findings seem to confirm public suspicion about NFA incompetence and corruption, and especially of its mismanagement of rice imports in the last few years, which led to record high prices and the unfortunate label of world’s largest rice importer.

Key findings of the audit team outlined a pattern of cartelization. Despite a first-come, first-served policy, some importers managed to receive permits to import even though they were not first in line. “Apparently, the PSF importation was centrally orchestrated in violation of the NFA first-come, first-served rule and rationale of PSF. NFA utilized the first-come first-served rule for favored bidders,” the audit report said.

The use of similar names and of made-up corporate entities was also telltale signs of orchestrated fraud. “The names of contact persons on the manager’s checks submitted by different companies to the NFA were also the same,” the first part of the Inquirer’s Special Report read. Some of the companies taking part in the initiative turned out to be fictitious.

And even when different names were used, different companies would submit manager’s checks bearing consecutive serial numbers. “It’s too much of a coincidence,” the audit team commented.

The PSF initiative involved a total of 18 trading companies or multi-purpose cooperatives. The 10 from Pangasinan were Sta. Rosa Farm Products Corp., Pure Feeds Corp., Longos Proper MPC, Hillside MPC, Unzad MPC, Cabaritan MPC, La Tupiguera MPC, Pasileng Sur MPC, Eastern Binalonan MPC and D’Highlight Agri-Business MPC. The eight from Cebu included Radegonda Vallejo, Chevy Bacaltos, Edisa Cabuenas, Jugy Obando, Jerome Tan, Othoniel Acquiatan, Marivic Ventura and Glenn Ernesto Pacana.

There’s more. The importers paid the NFA a service fee to receive the license to import, but by some bureaucratic sleight of hand, most of these fees were returned to the traders, apparently as incentive. “Service fees, originally intended as revenue collection of NFA and for the purpose of equalizing the pricing gap of NFA import relative to PSF import were refunded at liberal discretion of NFA,” the report said. In 2010 alone, the 18 traders paid P400 million in service fees; almost three-fourths of that, or P298 million, was refunded.

And yet these and other telltale signs of a rice cartel, which set the government back by billions of pesos, were not the only “red flags” discovered by the audit team. While the NFA allowed the traders to process the imports in the NFA’s name, the agency itself had “no oversight or regulatory leverage on disposition of imports.” Until lately, it did not even know whether a particular shipment had arrived or not.

The traders were also allowed to sell the rice they brought in using NFA subsidies at commercial rates. “[A] PSF importer enjoys the same subsidy as NFA gets for its direct import, but PSF parties sell theirs at commercial prices and keep the profits entirely for themselves, duty and tax-free.”

But that wasn’t the worst, as the Inquirer story noted: “The report said the country’s purchase of rice in the last decade was marred by wrong timing, over-importation, off-the-mark estimates of per capita consumption and poor rice intelligence and management, which all contributed to the price increases, shortage and mounting debts.”

How, one may ask, did such things come to pass? We share the belief of many that it was the Arroyo administration’s culture of unmoderated greed that led to such large-scale, systematic plunder. Greed ran rampant because even questionable policies and bureaucracies-turned-cartels were protected by an expansive notion of the so-called presumption of regularity. That the obvious anomalies in the case of the PSF went on for almost three years virtually undetected is proof that plunder was, during those years, a regular thing.