Why Jason Aquino is at the tip of this rice crisis

So the rice cartels are a raging hot topic. Up until this point in history, no president has ever mentioned the word “rice cartel.” Save for the stinging words of the current President in his last State of the Nation Address (SONA) last July 23, 2018.  What this is doing, and the events leading up to the immediate spike in rice prices bears some analysis and a review of history, a subject that most Filipinos are unfortunately poor at.

Lets examine what i believe are the roots of this issue...

The Self Sufficiency hoax and how the cartels benefit from it

Achieving rice self sufficiency has always been a political dream that sadly, has never been met. It is important to note that the Philippines only achieved a rice surplus for a few years (not the whole time) during the Marcos regime. At all other times, we imported rice to fill the gaps left by the persistent desire, and failure to achieve self sufficiency in this vital crop. This has kept the rice cartels, that cabal of traders and their fronts happy and fat at the expense of the public who has had to deal with prices these cartels have kept high.

Thus, to say that we were always self sufficient or that ex president Ferdinand Marcos got us to be self sufficient all throughout his regime is another fat lie.

To push this failed dream, billions have been spent or misspent in all administrations, including the last PNOY one. We barely met 95% sufficiency to fill our bodegas, or so they claim. The deeper hoax of rice self sufficiency goal is that 30 million Filipinos can barely afford to buy the rice they need on a daily basis, since the price remains out of reach for them. Thus, while the cartels have their warehouses filled, many pinoys cannot afford the rice in it.

Why has this dream always failed?

Its true, studies show our rice really is more expensive than Vietnam

The fact is that our rice will always be more expensive than our neighbors. In his Business World column last August 1. 2017, Dr. Rolando Dy, Executive director of the University of Asia and the Pacific’s Center for Food and Agri Business, quots landmark six nation study by Philrice in 2015 called “Benchmarking the Philippine Rice Economy Relative to Major Rice-Producing Countries in Asia.” Where comparative studies were done in sites representing irrigated and intensively cultivated areas in six countries: the Philippines, China, India, Indonesia, Thailand and Vietnam.

With this, Dy  notes that the Philippines is ”third to last after India in high-yield season (dry season crop in the Philippines), and 34% lower than highest yielder Vietnam (5.68 tons/ha vs. 8.56 tons/ha).The Philippines is lowest in low-yield season (wet season in the Philippines). It is 39% lower than that of Vietnam (3.84 tons/ha vs. 6.33 tons/ha).

In terms of Farm cost comparison, he has this to say:

“Yield affects unit farm costs. For the high-yield season, the Philippines recorded the third highest farm cost of P11.13 per kilogram (kg) compared to Vietnam’s P5.14/kg, Thailand’s P9.07/kg, and India’s P9.27/kg. In effect, the Philippines is highly uncompetitive with rice exporters (116% higher than Vietnam, and 23% higher than Thailand).In the low-yield season, Philippine cost is the second highest after Indonesia. It is, however, two times that of Vietnam, and 1.6 times higher than Thailand’s.”

(http://www.bworldonline.com/rice-farming-can-profitable/)

Noting this in our own reading of the study, (www.philrice.gov.ph/wp-content/uploads/2016/08/Book_CPRA_22June2016_3.pdf) only Vietnam and Thailand are truly self sufficient, with the former able to do it through an average of three crops a year. The rest of Southeast Asia, Thailand included, can only manage two. Not even Malaysia and Indonesia are rice self sufficient and import at least ten percent of their requirements. That’s the truth. Check them out for yourself.

We mention this because the unfulfilled dream of self sufficiency is what has helped rice cartels thrive, as the inability to meet the state goals has created the gaps in supply, giving the government the duty to import rice over the last 25 years. 

Read on to dig deeper and understand how this failure got worse ... 

GATT, the G2G quotas and cartels

Nonetheless, since the entry of the Philippines into the Uruguay round of the General Agreement on Tarriffs and Trade (GATT) almost 25 years ago, we negotiated that rice be a protected commodity, meaning that it will not be subject to imports in order to protect the livelihood of some 2 million rice farmers.

Thus, the importation of rice into the country was governed by quotas set by the government, the purchase of which will be made with money which is paid for by taxpayers supposedly to subsidize its cost and allow rice prices to remain low.

That is the Government to Government (G2G) importation system, where the NFA selects who can receive the rice that the government buys for the country. Word has it that the rice cartels are the ultimate recipients of much of this supply, often obtained through “farmers groups” that are the recipients of these stocks on paper.

Has this achieved the desired result of lowering rice prices or broadening our production to achieve self sufficiency? Again, No.

Instead, the G2G quota importation system was gamed as a measure to achieve two things: get cheap rice in while controlling the supply and keep prices up. For so long this was a dream combination that kept the decades old rice cartel happy and rich, and allegedly lined the pockets of many NFA officials since time immemorial who let this nefarious practice go on.

All of this is in the guise of protecting the same farmers who found it tough to afford the very rice they produce.

When quantitative restrictions on rice importations ended in June of last year, it was understandable that the rice cartels that for so long used this subsidized importation system to fill their warehouses with cheap rice, to be resold at jacked up prices went into panic mode. No longer would they be able to use  imports.

 

Manila Times columnist Malou Tiquia gives us a lowdown:

“Then there is corruption, decades of mismanagement at the National Food Authority causing it to be bled dry. Government subsidies to the agency stand at P45 billion over a 10-year period. The NFA is consistently among the top five GOCC losers. And you can count the number of times a boat capsized with imported rice missing; the empty but “fully stocked” NFA warehouses; the diversion and selling of NFA stocks to chosen private rice traders; when an NFA official acts beyond deadlines from quotas, prepaid taxes not being settled, multiple bills of lading and removing all NFA representatives in the ports of entry of NFA, among others. Are we seeing government-sanctioned smuggling?

And when you have an NFA administrator telling a congressional hearing that the remaining rice supply stocked by the NFA was just equivalent to about one-and-a-half days, how should the market react? “ (https://www.manilatimes.net/the-politics-of-rice-2/394573/)

 

The NFA Council, composed of the heads of various agencies, ought to oversee operations of this agency. Instead of forming collegial decisions that could have made the entry of rice easier to plug supply gaps, the council’s mandates were curtailed and the trust was given to the NFA administrator Jason Aquino to continue the importation on a G2G basis last April 2018. What happened after that manifests today.

 

The recent Zamobanga hiccup

The scuttlebutt heard in many quarters is that during the Pacquiao fight in Kuala Lumpur, discussions at the sidelines between Duterte and Malaysian Prime Minister Mahathir partly touched on controlling the smuggling of Malaysian rice into the country’s southern corridor. Whether or not this is true, the outcome is clear: for some reason the smuggling has reduced considerably, and some traders have thus jacked up prices in an apparent response to a drop in supply.

As smuggling has apparently failed to continue in the Zambasulta area, this caused a major hiccup in the old supply chain- stocks that cartels once used to count on to pad their stocks and keep process high and prevent sharp fluctuations have now run dry. This has left them exposed to deal with the market, something they have avoided for so long.

Jason Aquino at the tip of the rice crisis

Thus, when President Duterte castrated the NFA council and placed his “trust” on NFA Administrator Jason Aquino, the controversial Customs official was unwittingly raised to the tip of the old G2G rice importation system, leaving him the sole defender of “bukbok” in imported supplies and answering questions on the billions allegedly diverted over the last years, and alone to justify this old practice amid its decades old failure to keep rice prices stable and cartels at bay.

Pressure to keep this system going is all the more tough in light of new legislative proposals such as rice tarrification that threaten to dismantle the cartels’ stranglehold on rice importation, and with the presidents historical calling out of the cartels in his SONA. When this happens, anyone can now import, not just those the NFA selects. Apparently, the G2G system no longer has the rest of the government’s backing, since it has not helped lower prices nor helped us achieve self sufficiency. It only makes the problem worse

With this reality comes the hard questions:   Csn ee continue ounder these failed systems? Has a can of worms on the NFA been opened? Will Aquino continue to helm the NFA, or will he be its last administrator? Being at the tip of such a controversy is not a comfortable place, since signs are strong that a tipping point will follow shortly thereafter. Whether the NFA will continue as an agency remains to be seen. How Aquino will tip is up to him.

Photo; NFA

Editor's Note: Pilar Santos works for a women's NGO in Butuan City. The opinions expressed in this article are entirely her own and do not reflect the opinions of esurgent.ph and its editors