‘Unli rice’ and rice trade

Poor Sen. Cynthia Villar. She was well meaning, I’m sure, when she made that controversial remark last week about prohibiting unlimited rice servings in restaurants. One cannot disagree with her intended message: that excessive rice consumption can be unhealthy. But you can’t tell that to people who can ill afford the ulam (vegetable and/or protein dish) to go with their rice, the central and indispensable part of the Filipino meal.

In too many cases, rice is all a family would eat, because with meager income, that’s all they could eat. In such instances, rice can defy the law of demand in economics, which says that a higher price will lead one to buy less, and vice versa. But if a family’s limited income keeps it from buying more to eat beyond rice, it’s conceivable—and has been observed—that rising rice prices could lead it to buy even more rice. This happens when after the price of rice rises, what’s left of the food budget, or even of total income, isn’t enough to buy ulam; thus, the family just buys even more rice to make up. This “Giffen good” effect, the technical term for this perverse demand behavior, was also seen during the potato famine in 19th-century Ireland. As potato prices rose with the shortage, hungry Irish families had too little money left to buy meat or vegetables to eat with their potatoes. So they just bought even more potatoes to fill their stomachs.

In reality, the people most affected by an “unli rice” ban would be the last to worry about excessive calorie intake. Those who take advantage of free extra rice are those who need and want it and will not waste it. Expect an uprising if you take that away from them—and indeed we saw the makings of one last week.

The real issue in rice remains the very reason for the Senate hearing over which Senator Villar was presiding: It is the way we have insulated our domestic rice market from the wider rice market, through tight government control and even monopoly over rice imports. The result had been the widening gap through time between the price Filipino consumers pay for rice and those paid by our Asean neighbors. The gap between domestic rice price and the import price, or what economists call the nominal protection rate (NPR), had widened over time, representing a growing penalty on domestic rice consumers through the years. From negative NPR in the 1970s (meaning domestic prices were actually lower then!), the penalty on Filipino rice consumers had progressively risen to 11 percent by the late 1980s, 25 percent in the 1990s, and 87 percent by 2000. Why must we penalize 102 million rice consumers, especially around 22 million who are poor, in the name of helping 2.4 million rice farmers?

It has long been proven that the primary gainers from that price gap arising from restricted rice trade were not even the rice farmers, but the traders and processors. With proper productivity support, most of those farmers can produce our rice at costs comparable to what it takes our Asean neighbors to do so. That is, they can compete under more open trade in rice, and our poor would pay lower prices in turn. But for the rest who grow rice on lands better used to grow more profitable crops, it would be better to help them shift, and even give them money outright in the short term, than force everyone to pay up to twice for rice just to keep such farmers afloat.

There’s no question we must invest in rice productivity to match the costs of our neighbors, thereby helping both our rice farmers and consumers alike. But we need to do it right this time. It never helped that we put up an artificial shield, which only bred complacency and corruption. We teach children to swim by putting them in the water, not keeping them out of it.

Neither is there question that we can attain full self-sufficiency in rice. With the right science and inputs, we could. The question is, at what cost? Full sufficiency is a worthy goal. But to block rice trade, expecting sufficiency to come in the short or even medium term (i.e., in 5-6 years)
penalizes and forces the Filipino poor into food insecurity and malnutrition now, and condemning them into its lifelong effects—with or without “unli rice.”

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