Fermin D. Adriano, PhD, is an Advisory Council member of the Asian Development Bank Institute (ADBI). Comment was delivered at the Management Association of the Philippines Chief Executive Officer’s Academy Forum on “Rice: Broad Effects on Inflation, Trade and Tariff Policy, and Poverty Program”, held at the Makati Shangrila, September 27, 2018.
“The goal of providing (rice) price stability could be achieved through relying more on the private sector both to trade internationally and to hold stocks. In order to minimize domestic price fluctuations arising in international markets, the government could use variable export/import taxes. A domestic price goal (i.e., a Manila reference price) that could be set and then a variable export tax could be imposed that would be equal to the difference between the domestic price goal and the actual world price. The private sector could then undertake whatever trade would be profitable.”
(Source: UPLB Agricultural Policy and Strategy Team (1986). “Agenda for Action for the Philippine Rural Sector”. UPLB and PIDS)
The above policy prescription was made 36 years ago by a group of economists and social scientists from UPLB and affiliated institutions and individuals who formed themselves into a group to help President Cory Aquino’s government then, months after the EDSA Revolution, to provide the economic blueprint for the reconstruction of the Philippine agricultural sector dominated by monopolistic structures that favored the interest of the Marcos cronies (such as those existing in the sugar, coconut, tobacco, cotton, wheat, livestock, animal feeds, timber, etc.) Note that the policy prescription was already pushing for a transition from QR (quantitative restriction) on rice trading to a tariff scheme with the proposal of imposing a “variable import/export taxes”. It argued that having paid this tariff, the private sector could then import as many rice stock they wanted though NFA would maintain “a buffer stock for emergency” purposes.
The core policy position of moving from QR to tariff, with some variants, have been advocated by reputable economists and agricultural economists, both by local and foreign, to address a major flaw and inefficiency in our rice trading regime, for all those three decades after the publication of this comprehensive policy assessment of our agricultural sector. Unfortunately, for the rice sector, the shift from QR to tariff has not occurred, although belatedly, another legislative measure is being attempted. Whether it will finally happen is still doubtful given positions of key decision makers on the sector.
Ostensibly, if the policy shift is a mere economic issue, it would have been effected by now. But because rice is considered a “political commodity”, decision as to the fate of the rice sector, particularly its trading aspect, has always been tarnished with a political agenda. I can detect three political agendas acting singly or in combination that prevents the policy shift from QR to tariff from happening, namely ideological, technical and greed or self-interest.
The ideological is basically a remnant of the Leftist cum populist thinking which views that because the country is so rich in natural resources, and that rice is a strategic commodity to attain our food security, we should be self-sufficient in our rice requirement. Never mind even if we do not have enough flat, fertile and well-irrigated lands; never mind that only around 1.8 million of the less than 4 million hectares (we have only 12 million hectares of cultivable land out of 30 million hectares which are mostly mountainous) of our rice lands are irrigated compared to Thailand’s 6.4 million has, Vietnam’s 4.6 has, Myanmar’s 2.8 has, and Indonesia’s 8.7 has; and never mind that we have more than 103 million Filipinos that we need to feed and adding 3 million more Filipino babies a year to our population; they persist in the belief that we can produce enough rice to feed our burgeoning population because we have rich and abundant, and almost limitless, resources for rice production.
The second is technical wherein our rice agricultural scientists and their colleagues would maintain that there are no technical barriers in achieving the goal of rice sufficiency. They assert that we have the technology to dramatically increase our productivity to reach self-sufficiency level. What they conveniently forget to mention is the exorbitant cost to the government and the consuming public of pursuing such a goal given that it will require irrigating even marginal lands for rice production, finding enough fresh water for irrigation in a situation where sources of fresh water supply are dwindling, and starving other agricultural commodities of support given that most agricultural resources are devoted to rice production and productivity enhancement program (which is already happening right now because around three-fourths of the DA budget goes to support the rice sector).
And third is greed or self-interest. In the current QR regime, it is an open secret that rent-seeking activities are happening in the G-G transaction given the willingness of the wholesale exporter from another country to provide facilitation fees to win contracts. Then there are the attendant contracts along the logistical chain of shipping and transporting rice from abroad such shipping, cargo handling and stevedoring, barging, bagging and trucking, storing, fumigation, etc. It is not surprising then to see a long queue of agents lurking in the premises of government offices responsible for rice trading during a rice importation binge. There are also favored groups that are awarded a portion of the MAV quota (lower tariff) in exchange for their continuing support for the current policy and institutional arrangement.
If I may use an analogy, our obsession to attaining rice self-sufficiency is akin to our dream of excelling in basketball in the international sporting arena. It does not seem to dawn on us that we are not genetically-predisposed to excel in basketball given our physical limitation. We tried very hard to be one because of our obsession to the sport, even instantly converting tall black players (who barely live in the country) to become part of our national pool of players. And yet, we still end up near the bottom of the elimination rounds. In the meantime, we give little resources and attention to other sports that have better prospects of securing for us our first “Olympic gold medal”. Yet after every major sporting event, we lament our poor performance despite being conscious of the fact that we did little to invest in other sports.
In the same vein, we are obsessed with attaining rice self-sufficiency despite knowing that we do not have abundant supply of flat land for rice cultivation and no huge body of water that can irrigate large swathe of land. We spend a huge amount of our agricultural budget for rice production, placing marginal lands under rice cultivation, and yet our yield has not experienced dramatic improvement and still unable to meet the demand of our ever-increasing population. Worse, because most of our financial resources are devoted to rice production, it has led to the neglect of our other agricultural commodities that could have gained us greater incomes and export earnings for our farmers. And at the end of the day, we still suffer from cyclical rice shortage and then blame the traders, “arm-chair” analysts, and multilateral financial institutions for the quandary that we are in. We persist with our failed rice policy of QR and G to G transaction believing that these twin measures will effectively address the rice shortage because it is now being implemented allegedly by a set of “dedicated, hard-working and wiser policymakers”, unmindful of what Albert Einstein declaration that “doing things in the same manner and expecting a different is the height of foolishness”.
The convergence of the three political factors I discussed above has made it extremely difficult to attain the reform that needs to be instituted in our rice sector to ensure cheaper and adequate supply of quality rice to Filipino consumers. To believe that logical economic argument will provide policy makers and the general public the enlightenment that they need to pursue what is good for the people is to engage in self-delusion. Only by recognizing that the solution to our rice problem lies in the political, and that corresponding political measures are undertaken by those seriously concern on our dilemma can we achieve real progress in reforming our rice sector.