Our stubborn rice policy

I have written so much over the years, including in this column, about our deeply flawed policies on rice. It has been tiring and exasperating. I’ve had the chance to advise several secretaries of agriculture, whether officially or otherwise, starting with Finance Secretary Sonny Dominguez, when he held the agriculture portfolio in the Cory Aquino Cabinet three decades ago. It seems that most of those who have occupied that position quickly take to heart the seemingly widely accepted proposition that rice is a “political crop” in the Philippines—and that this gives license for them to perennially defy sound economics in setting the country’s policies on the crop.

Today we are seeing it play out again, with almost exactly the same timeworn script, as if we simply refuse to learn the lessons from history and from our neighbors. It is said that the success of a Philippine secretary of agriculture (and even president) is measured by the Filipino public on the basis of whether he/she can achieve rice self-sufficiency for the country. The fact is, the more we believe in that, the more that success in managing our agriculture, raising farm incomes, and bringing down high levels of rural poverty and malnutrition will simply keep eluding us.

These days, the commodity is in the limelight again, after fellow economists and former economic policymakers belonging to the Foundation for Economic Freedom publicly expressed concern over recent extreme pronouncements from the President himself, obviously ill-advised. Their message says what I and other economists have been saying time and again about our self-destructive rice policies. The problem with our restrictive rice policy is that it makes rice unduly expensive to 103 million rice consumers, supposedly for the sake of 2.4 million rice farmers. This makes it antipoor and has led to large numbers of food-insecure Filipinos and alarming rates of malnutrition and stunting (33.5 percent!) among young Filipino children, leading to irreparable lifelong impairment of brain and physical development. Yes, most of our estimated 2.4 million rice farmers are poor, and most certainly deserve help. But we should bear in mind that with a poverty rate of over 21 percent, there are nearly 10 times as many poor Filipinos, including rice farmers, who studies have consistently shown to
be mostly net buyers of rice as well. The
numbers of our poor could be significantly reduced if only they could buy their food
staple at prices similar to what our Southeast Asian neighbors do.

There is so much I can say and reiterate, but let me distill it down to what’s wrong about what we have been doing in rice. We have for too long insulated the domestic rice market from the international market for the commodity by tightly controlling imports via the National Food Authority (NFA). But we have a long enough history with this to know that the government is a bad judge on when or how much to import, which only led to highly volatile prices for rice. The age-old recommendation to remove rice quantitative restrictions (QRs) via the NFA monopoly on rice importation does not actually imply letting rice get in duty-free, but to change the form of protection to an import tariff. Done right, we need not see a sudden domestic price fall with the lifting of rice QRs. The government has no business being in the rice business, especially if it’s a losing proposition that bleeds the national treasury of billions of pesos we taxpayers all pay for.

There is a much better way. We should have long ago permitted the private sector to import the commodity subject to an import tariff that sets domestic prices to wherever we want it, balancing the interests of farmers and consumers. Not only would we stop government coffers from bleeding due to the NFA’s perennial losses from its commercial operations (P167 billion at last count); it will actually gain substantial revenues from the tariff on rice imports, that can then be used to help our rice farmers raise productivity, and lower costs. But first we have to put aside the obsession with producing all our rice ourselves, until such time that we can produce it at the same costs our neighbors do.

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