PRESIDENT Rodrigo Duterte’s call on Congress to pass the Rice Tariffication bill in compliance with our commitments to the World Trade Organization (WTO) will help moderate the inflation rate and encourage the agriculture sector to become more competitive.
Rice accounts for a big part of the inflation basket of goods and services. It is also one of the biggest expenditure items among average Filipino households. The proposal is to lift the quantitative restriction on rice imports, as we committed to the WTO, and replace it with a 35-percent tariff rate or higher that will allow the private traders to import the commodity from other rice-producing countries to augment domestic supply. The tightness in domestic supply is what is causing prices to soar in the past two years.
This will also help abolish the rice cartels that dictate the domestic prices of the staple, and remove from the state-run National Food Authority the monopoly of rice supply. President Duterte himself warned against “rice hoarders, cartels and their protectors” who were causing artificial shortage of rice to cause prices to go up.
I believe prices, especially those of rice, will start to come down after the government imported more rice. A stable and adequate supply of rice, without a single entity controlling it, is seen resulting in more affordable prices, which would be beneficial to Filipino consumers, according to government agencies.
The bill will amend Republic Act (RA) No. 8178 or the Agricultural Tariffication Act of 1996. “We need to switch from the current quota system in importing rice to a tariff system where rice can be imported freely,” President Duterte said in his State-of-the-Nation Address, as he asked Congress to prioritize the urgent reform measure.
National Economic and Development Authority (NEDA) director-general Ernesto Pernia said the Rice Tarrification bill will make our agriculture sector more competitive in the long term. He said that in the short term, the headline inflation rate would go down by one percentage point if the domestic wholesale rice market matches the level of imported rice.
In its own estimate, the Bangko Sentral ng Pilipinas claimed that allowing cheap rice imports with tariffs would ease inflation rate by 0.4 percentage point.
Finance secretary Carlos Dominguez, who heads the economic team, said rice import liberalization would be vital in helping low-income households cope with inflation, as rice accounts for 20 percent of their consumption. The proposed bill would complement the social mitigation measures to further ease the impact of inflation on poor households.
However, opening the domestic rice market to imports will naturally affect the livelihood of millions of Filipino rice farmers. Many subsistent rice farmers lack the capital to buy mechanized farm tools, procure hybrid seeds or apply fertilizers and pesticides. They are at the mercy of traders who buy their produce below market rates, and the farmers are forced to bite the predatory rates charged by loan sharks.
Rice is also very dependent on rain. Farms that are not connected to irrigation systems could only produce rice once a year, instead of the three harvest periods made possible by modern techniques. This means more irrigation systems are needed to expand the country’s rice production areas.
A farmer who harvests rice only once a year from a one-hectare plot that is not connected to an irrigation system and who lacks access to mechanized farming techniques will find it hard to earn enough for his family’s daily needs. What if a typhoon hits the farm during the harvest season?
In low-rice productivity areas and places where irrigation is absent, it would be more prudent for farmers to switch to more financially rewarding crops such as coffee, cacao, peanut, corn, fruits and vegetables.
Forcing the Filipino farmers to become more competitive and bringing down the prices of their harvest to the levels of Vietnamese or Thai rice would require government support or subsidy.
Rice produced by Vietnam and Thailand are cheaper because farmers in these countries are supported by their respective governments and they are mechanized. There is a need to upgrade the skills of Filipino farmers and provide them with better equipment to raise their yield and enable them to compete at the international level.
A government subsidy is needed to improve rice productivity. Such subsidy should help farmers mechanize their techniques, procure higher-yielding rice varieties and give them access to irrigation all-year-round.
To support the family’s daily needs and send their children to school, a rice farmer should be able to harvest at least 6 metric tons (120 sacks) of rice per hectare, three times a year. At present, the average yield per hectare in the Philippines is below 4 metric tons. However, some Filipino farmers using modern techniques have reported production of over 10 metric tons per hectare.
This means Filipino farmers could compete with their Asean counterparts if they have the tools they need and support from the government. In short, Filipino farmers need safety nets in the form of government subsidy so they can provide adequate and affordable food for the growing Philippine population.
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This piece first came out in Business Mirror on July 30, 2018 under the column “The Entrepreneur.” For comments/feedback e-mail to: mbv.secretariat@gmail.com or visitwww.mannyvillar.com.ph./PN
