Cheaper rice for now, but at what cost?

by Sonny Africa

Africa, S. (2019, February 22). Cheaper rice for now, but at what cost? Retrieved February 26, 2019, from
http://ibon.org/2019/02/cheaper-rice-for-now-but-at-what-cost/

The government’s economic managers claim that the new Rice Tariffication Act which takes effect on
March 5, 2019 will ensure the availability of cheaper rice for Filipino consumers. They also claim that the
law will make Filipino rice farmers more competitive and profitable.

Yet while rice from abroad could become cheaper for a while, this is not necessarily unlimited and
forever.

Some 3.8 million rice farmers and farm workers nationwide will not be able to compete with cheaper
subsidized imported rice and will see their already low incomes fall even more. The average rice farmer
earns just around Php6,000 monthly on average which is far below even the official poverty threshold.
Hundreds of thousands of marginal rice farmers are at risk of being displaced entirely.

The country’s food security will be eroded. Trader preference for cheaper imported rice will drive many
rice farms to bankruptcy and worsen land and crop conversion. Domestic rice production will fall even
further behind population growth and make us even more dependent on imported supply sources.

Cheap, unli global rice?

Some 91% of global rice production is actually consumed locally. This means that only around 9%, or 47
million metric tons, enters global rice markets, which all the world’s rice importing countries will be
bidding against each other for.

The thin global rice market can get even thinner if major rice exporters for instance decide to stop
exporting rice to prioritize food for their citizens as Thailand, Vietnam and India did in 2008. The
Philippines is also competing against countries like China and Malaysia which can easily outbid the
country for rice bought on global markets.

As it is, Thai rice exports are expected to substantially contract this year due to the country’s depleted
government stocks, according to a recent United States Department of Agriculture (USDA) grains world
market and trade report. Thai rice prices are also expected to remain high as the Thai baht strengthens.
Foreign exchange movements also play a factor since rice imports are paid in dollars. The peso has been
falling against the US dollar since 2013 and will likely keep falling as the country’s trade and current
account deficits widen. This is a creeping rise in imported rice prices.

Squeezing local rice production

Local rice production will be squeezed by the entry of more rice from abroad. At current global rice
market prices, imported rice can potentially be sold as low as Php33 per kilo versus prevailing local
prices of Php40-44 per kilo. This is enough incentive for ever profit-seeking traders to choose to import
rather than buy locally.

Rice farmers are doubly beleaguered. Their production costs have risen from the new and added oil
excise taxes of the Tax Reform for Acceleration and Inclusion (TRAIN). According to peasant group
Kilusang Magbubukid ng Pilipinas, a farmer uses 600 liters of diesel per hectare for land preparation and
irrigation during harvest season. The group estimated that the first tranche of the excise levy alone will
cost a farmer Php1,500 more in 2018, and Php2,700 more in 2019, and Php3,600 in 2020, or a total of
Php7,800 for three consecutive years. Farmers are already facing lower buying prices for their palay
under rice tariffication.

Poor consumers are also at risk of losing the truly affordable Php27 per kilo National Food Authority
(NFA) rice. The government and so-called economic managers argue that rice prices should be
determined by the free market which is magically making rice cheaper — which means that the
subsidized NFA rice will likely also be lost.

Rice traders, on the other hand, are the greatest beneficiaries of rice tariffication. Cheaper rice from
abroad will let them increase their mark-ups on the rice they sell. They were already smuggling millions
of tons in rice under the regime of quantitative restrictions — liberalization will let them smuggle in
even more.

Too little, too late

Short-sighted free market thinkers will argue that this will drive local rice farmers to produce more
efficiently and become more competitive. The rice tariffication law for instance promises Php10 billion
annually to develop the local rice industry.
 In the real world, that is too little and too late. Domestic rice troubles are mainly due to long-standing
government neglect of the agriculture sector. Rice farmers should not be blackmailed by denying them
much-needed support unless they agree to liberalization.

But Php10 billion is nothing compared to the estimated Php61 billion needed annually to truly develop
domestic rice farming to be competitive, as proposed by House Bill 8512 or the Rice Industry
Development Act of the Makabayan party-list bloc.

It is also much less than the some US$1.1 billion annually that Vietnam supports its rice industry with,
the US$4.4 billion of Thailand, the US$12 billion of India and the US$16 billion of Japan. India for
instance sharply increased rice production by increasing the government’s minimum procurement price
of rice, like the NFA was doing before the new law removed its commercial functions and regulatory
powers.

And the Php10 billion is worth even less since it is only being given now that the domestic rice market
has already been opened up. The government should have provided much more support for much
longer and, especially, long before even considering opening up to cheap rice imports from abroad.

The government should not pit consumers against farmers who have a common interest in a sufficient
supply of affordable domestic rice. Their interests converge in a domestic rice industry that is protected
and supported by the government to ensure rice self-sufficiency. – IBON Features

NFA employees oppose rice tariffication law

Gregorio, X. (n.d.). NFA employees oppose rice tariffication law. Retrieved February 26, 2019,

from http://cnnphilippines.com/news/2019/02/18/NFA-employees-rice-tariffication.html

By Xave Gregorio, CNN Philippines

Updated 17:57 PM PHT Mon, February 18, 2019

Metro Manila (CNN Philippines, February 18) — Employees of the National Food Authority (NFA)

donned black on Monday in protest of the new law which removes import limits on rice and

strips off the agency's regulatory powers.

Speaking to NFA employees during the agency's flag raising ceremony, NFA officer in charge

Tomas Escarez said the rice tariffication law "broke the hearts of millions of Filipino farmers,

consumers, small grains businessmen, and employees who rely on NFA for support, livelihood,

affordable rice, food safety, food security and order in the grains industry."

However, Escarez told NFA employees they will keep their jobs.

"The NFA management assures you, our hardworking, dedicated, highly competent professional

employees, that no one will be adversely affected by this Act," said Escarez in a speech that was

read to NFA employees nationwide.

He assured employees that the NFA will fight for the "best deal" for them, the farmers and

consumers in drafting the implementing rules and regulations (IRR) of the rice tariffication law.

He also said the NFA has created a Change Management Team which will handle the transition to

whatever role the agency would get once this is defined under the IRR.

"Whatever role will be given to us, we must accept wholeheartedly, change gears, but still provide

the best brand of service that NFA has always been known for," Escarez said.
The law removed from the NFA its power to implement negotiable warehouse receipts for grains,

inspect grains for inventory, register, license and supervise warehouses and mills, and to regulate

the grains trade.

It retains the power to maintain a rice buffer stock which will be used in emergency situations and to

sustain the government's disaster relief programs. Rice for this purpose will be sourced solely

from local farmers.

"Buffer stocking and local procurement are still major responsibilities that require a lot of manpower

and logistics to handle," Escarez said.

Meanwhile, the NFA Council has instructed the NFA to submit a restructuring plan within 30 days,

instead of its original proposal of 180 days.

"Our objective in liberalizing rice imports is to bring down the costs of the staple. Our price is 50

percent higher than the others, including Singapore, which does not produce rice. Will it take us

180 days to effect a reduction in the cost of living our the people?" Finance Secretary Carlos

Dominguez was quoted as saying in a statement about the Council's meeting on Monday.

Dominguez also proposed that funds be freed up as a result of the NFA's restructuring to support

local farmers while the ₱10-billion a year Rice Competitiveness Enhancement Fund is still being

set up.

The Finance department said new duties on imported rice will be implemented beginning March 3.
Farmers and rice retailer groups have criticized the law, with the Kilusan ng Magbubukid ng

Pilipinas even calling it a "death warrant" for the rice industry.

Malacañang assured farmers they will have safeguards that will benefit them. The law contains a

provision earmarking ₱10-billion every year for six years to assist farmers.

CNN Philippines Digital Producer Alyssa Rola contributed to this report.

Rice price hikes seen with tariffication bill

Olea, R. V. (2019, January 20). Rice price hikes seen with tariffication bill. Retrieved February 26, 2019,
from https://www.bulatlat.com/2019/01/20/rice-price-hikes-seen-with-tariffication-bill/

Price increases are to be expected as the country’s staple food will be solely at the hands of the profit-oriented
private sector.

By RONALYN V. OLEA
Bulatlat.com
MANILA – Farmers, rice millers and employees of the National Food Authority (NFA) warned consumers of more
expensive rice if President Rodrigo Duterte signs the rice tariffication bill.

This bill removes the quantitative restrictions on imported rice and replaces them with a 35-percent tariff for
ASEAN member-nations and 50 percent for non-ASEAN members. It is expected to be signed by Duterte soon.

Under the bill, NFA will no longer supply low-priced rice to the local market. This will affect the 10 million
consumers of the P27-per kilo NFA rice, according to Maximo Torda, president of the NFA Central Office
Employees Association. The NFA rice is 40-percent cheaper than the average price of well-milled rice pegged
at P45.40 as of December 2018.
Torda debunked government’s claim that importing rice will bring down prices. For the past 54 years, NFA data
show that imported rice was not at all affordable. In fact, from 1961 to 1994 (before the Philippines ratified the
General Agreement on Tariff and Trade-World Trade Organization or GATT-WTO), domestic rice was cheaper
than imported rice in a total of 14 years.

Independent think-tank IBON Foundation has also raised the same concerns, saying that as a result of importation
rice prices have continued to rise. From 2008 to 2010, the country imported an annual average of 2.2 million metric
tons of rice but the price continued to increase at an annual average of P1.20 per kilo until 2016.
IBON Foundation stressed the danger of being dependent on unsteady global rice supply. Only six percent of global
rice production is sold in the world market. Rice-exporting countries also occasionally issue export bans to ensure
their local supply.

Profit for big business

Price increases are to be expected as the country’s staple food will be solely at the hands of the profit-oriented
private sector, consumer group Bantay Bigas said in a statement.
State-run Philippine Institute for Development Studies (PIDS) projected that with the removal of quantitative
restrictions on rice, imports will be doubled from an average of 2.2 million metric tons in 2017 to 4.4 million metric
tons by 2020.
A Business World report said that 174 companies have so far filed applications to import 1.16 million metric tons of
rice. Among those intending to import big volumes of rice include Purerice Milling and Processing Corp., Muslim
Christian Alliance MPC, Pinguiaman Farmers MPC, AJ Developers and Multi Operation Technical High
Environment Resources, Inc. and Pengins General Merchandise.
Multi-million San Miguel Corporation (SMC) has also announced its plan of importing rice.
No safety nets for Filipino farmers
With the impending influx of imported rice, Filipino farmers cannot compete.

Joseph Canlas, vice chairperson of Kilusang Magbubukid ng Pilipinas (KMP) and chairperson of Alyansa ng
Magbubukid sa Gitnang Luson (AMGL), feared, “How can landless farmers compete and survive in this cutthroat
situation where the biggest players include the likes of SMC?”

A 2016 study by the Philippine Rice Research Institute (PhilRice) shows the deleterious effects of the removal of
quantitative restrictions on imported rice. The Philippines has higher production cost at P12.41 per kilo in 2016
compared with Thailand (P8.85), Vietnam (P6.53) and Indonesia (P8.87).
A May 2018 case study by Amihan revealed that a landless rice farmer in Nueva Ecija spends P82,930 per hectare
for production. Net income is only P740 as a large chunk of the gross income goes to land rent and loan interest.

Based on the same study, a rice farmer tilling his or her own land does not also earn that much. Net income per
harvest is only about P251 per day.

The Philippines’ gross marketing margin (i.e., different between wholesale price and farmgate price) in milled rice
equivalent is also higher at P9.06 per kilo compared to Thailand (P5.27), Vietnam (P4.55) and Indonesia (P5.61),
according to PhilRice’s 2016 study.

This is not at all surprising as the Philippine government has neglected the agriculture sector. Agriculture
expenditures accounted for only five percent of the national budget over the last two decades, according to IBON
Foundation.
On the contrary, Thailand and Vietnam subsidize their farmers beyond the ceiling set by the WTO. IBON
Foundation’s research shows that Vietnam provided around US$400 million to US$1 billion for agricultural support,
while Thailand spent US$27.7 billion in subsidies to its farmers from 2011 to 2014.

With tariff on rice, PIDS projected that farm gate and retail prices may decrease by P4.56 per kilo and P6.97 per
kilo, respectively.
Proponents of the rice tarrification boast of the Rice Competitiveness Enhancement Fund (RCEF) or the rice fund
consisting of an annual appropriation of P10 billion under the national budget, which they said would protect the
local rice industry and improve their productivity and competitiveness.

Farmers are not at all optimistic.

Edwin Paraluman, chairperson of the Philippine Farmers Advisory Board, told Bulatlat that RCEF would not
provide direct benefit to the farmers.
Under the bill, 50 percent will go to Philmec for the purchase of farm equipment; 30 percent to the PhilRice, 10
percent to the Agricultural Training Institute (ATI)/Technical Education and Skills Development Authority
(TESDA) and another 10 percent to the Land Bank of the Philippines (LBP) and Development Bank of the
Philippines (DBP) for loans.

Paraluman said Philmec’s farm machineries would go to favored farmers’ organizations while availing loans would
entail a lot of requirements.

“If the fund will not go directly to farmers, it’s useless,” Paraluman. “There’s no government subsidy in palay
production.”
Meanwhile, Cathy Estavillo of Bantay Bigas predicted RCEF would be another Agricultural Competitiveness
Enhancement Fund (Acef), a special fund supposedly created to protect the farmers after the country ratified the
GATT-WTO. Acef was plagued with corruption, with the Commission on Audit ordering its suspension. A 2014
report by ABS-CBN revealed that Acef was also used for political patronage during the term of former President
Gloria Macapagal-Arroyo.
Estavillo said that like Acef, landlords and big rice traders are set to benefit from RCEF.

“Duterte’s signature on the Rice Tariffication Bill would be the start of the beginning of the end of the local rice
industry,” Canlas said. “It’s like the killing blow to the already ailing rice industry. Once the massive rice imports
start coming in, the local rice industry will be knocked out in no time.”

Rice tariffication bill includes support for Filipino farmers —Sen. Villar

Legaspi, A. (2018, November 16). Rice tariffication bill includes support for Filipino farmers -Sen. Villar.
Retrieved from https://www.gmanetwork.com/news/money/economy/674982/rice-tariffication-bill-
includes-support-for-filipino-farmers-sen-villar/story/

Farmers who will bear the brunt of imported rice once the rice tariffication bill is enacted will get a
package of support under the measure, Senator Cynthia Villar said Friday.

This support package of support is incorporated in the bill to make sure that Filipino farmers will have a
fighting chance against farmers of neighboring countries, said Villar, chairperson of the Senate
agriculture and food committee and principal sponsor of the bill.

Inexpensive rice is expected to flood the market once the law is in place.

Senate Bill 1998 seeks to lift quantitative restrictions on rice and allow private traders to import the
commodity from countries of their choice.

“I will not agree na mag-liberalize ang importation na walang tulong sa farmer kasi talo talaga tayo. Talo
tayo ng Vietnam at Thailand in terms of competitiveness. So we have to help our farmers to be
competitive as soon as possible,” the senator said in a statement.

“That’s why we need additional funds and programs to help our farmers mechanize and ultimately
lower the cost of producing palay,” she added.

The bill creates the Rice Competitiveness Enhancement Fund or Rice Fund consisting of an annual
appropriation of P10 billion for the next six years after the measure has been approved.

The Rice Fund will be allocated to rice producing areas and earmarked as follows:
50 percent to the Philippine Center for PostHarvest Development and Mechanization (PhilMech) as
grant in aid of eligible farmers’ associations, registered rice cooperatives and local government units

30 percent to the Philippine Rice Research Institute (PhilRice) for developing, propagating, and
promoting inbred rice seeds and organizing rice farmers into seed growers associations and
cooperatives

10 percent to a credit facility with minimal interest rates and collateral requirements managed by Land
Bank of the Philippines and Development Bank of the Philippines for rice farmers and cooperatives

10 percent to PhilMech, PhilRice, Agricultural Training Institute (ATI), and Technical Education and Skills
Development Authority (TESDA) for teaching skills in rice production, modern rice farming, seed
production, farm mechanization, and knowledge and technology transfer through farm schools
nationwide

Seventy percent of the skills training fund will go to TESDA and 10 percent each to ATI, PhilRice, and
PhilMech.

Villar said the bill focuses on rice farmers, cooperatives, and associations adversely affected by rice
tariffication.

The bill also allocates tariff revenues in excess of P10 billion to the Rice Farmer Financial Assistance
program to compensate rice farmers who will lose income as a result of the measure.

A portion of the excess tariff will be allocated to titling rice lands, expanded crop insurance, and crop
diversification program.

Senate President Pro Tempore Ralph Recto earlier said senators made sure that the bill will mandate all
duties collected from imported rice be plowed back to farmers.

“The result is a 100-percent plowback rate. Everything will be returned to the farmers. They will get all
the dividends to compensate for their losses, which I think will never be enough,” Recto said. —VDS,
GMA News

Potential Effects of RA 11203 (Philippine Rice Tariffication)

By Caesar B. Cororaton, Krista Danielle S. Yu and Marites M. Tiongco

School of Economics, De La Salle University

Bw_mark. (n.d.). Potential Effects of RA 11203 (Philippine Rice Tariffication). Retrieved from
https://www.bworldonline.com/potential-effects-of-ra-11203-philippine-rice-tariffication/

AFTER 24 YEARS since the Philippines was granted approval in 1995 by the World Trade Organization
(WTO) to impose quantitative restriction (QR) on rice importation into the country, the government
finally eliminated the quota system on rice importation through the passage of RA 11203. The law,
which was recently signed, will be implemented on March 5, 2019. One of the key features of RA 11203
is the replacement of the rice importation quota system with tariffs. In the new law, the following tariffs
apply:

(i) 35% if rice was imported from within ASEAN

(ii) 40% if within the minimum access volume (MAV) of 350,000 metric tons for imports coming from
countries outside of ASEAN

(iii) 180% if above the MAV and from a non-ASEAN country.

The Philippine government expects to generate additional tariff revenue of P10 billion as a result of the
tariffication of the rice quota. This amount is expected to be allocated to assist rice farmers who will be
negatively affected by the expected increase in the inflow of cheaper rice imports of similar quality
(Class C or 25% broken) into the country.

The objective of this short note is to present our simulation results of the potential economic impact of
RA 11203 on rice farmers, rice imports, consumer prices, Filipino consumers, government tariff revenue,
and poverty. The simulation was conducted using a Philippine economic model. We considered two
scenarios involving a complete elimination of QR: (i) without tariff replacement on rice imports; and (ii)
with rice tariffs in RA 11203. The simulations were compared to the base case where the QR on rice
importation is retained.

1. In the case of QR elimination with no tariff replacement, the volume of inflows of cheaper rice will
increase by 92.7%, displacing local palay production by 5.9%. The price of local palay will also decline by
2.9%. Overall, the value of local palay production will decrease by P35.1 billion as a result of the drop in
both the volume of production and prices. Because there are no tariffs to replace the quota,
government revenue will drop by P1.3 billion.
2. If the elimination of the QR is replaced with tariffs stated in RA 11203, the volume of inflows of
cheaper rice imports increase at significantly lower rate of 8.1 %. The drop in palay price is also
considerably smaller at 0.2%. Overall, the value of local palay production will decline by P2.7 billion.
Because of the tariffs imposed on rice imports, government tariff revenue will increase by P18.9 billion,
significantly larger than the estimates of the government.

3. In both cases, the elimination of the rice QR will result in lower domestic prices of rice, which in turn
leads to higher volume of rice consumption. The value of rice consumption however will decline by P2.1
billion despite the increase in the volume of rice consumption largely because of the decrease in the
domestic prices of rice as a result of the tariffication of rice QR.

4. In both cases, the tariffication of the QR will result in lower inflation. The reduction in the overall price
is larger in the case of no tariff replacement, mainly because tariffs are additional taxes on consumption.
Across decile income groups, however, the decline in consumer prices is higher in lower income groups
largely because these groups have relatively higher expenditure share on rice in their consumption
basket. Cororaton and Yu (2019) have noted that 20.2% of consumption of poor households is on rice as
compared to 10.9% of consumption of non-poor.

5. Both cases are poverty-reducing. The number of poor who will be lifted out of poverty is considerably
higher in the first case at 409,956 compared to 38,060 for the second case mainly because of the higher
reduction in consumer prices. However, the negative effects on palay farmers are significantly higher in
the first case with no tariff replacement compared to the case with tariffs under RA 11203.

The rice QR system which lasted for 24 years generated sizable pure economic rent that went directly to
the pockets of select few. It is about time to tariffy the rent and redistribute these to the rice farmers
who will be negatively affected by the influx of cheaper imported rice. The higher expected increase in
government tariff revenue generated through RA 11203 will be more than enough to assist palay
farmers and may be used by the government to increase the assistance to palay farmers through direct
income support or through productivity assistance, e.g., the development of improved rice varieties that
can withstand and adapt to rapid changes in weather conditions, in addition to the programmes
specified under the Rice Competitiveness Enhancement Fund.

All told, the implementation of RA 11203 was a right policy move by the government to correct the
distortion created by the rice QR that puts heavy burden on poor.

Caesar B. Cororaton is a Senior Research Fellow at the Global Issues Initiative of the Virginia Polytechnic
Institute and State University. He has been working on global economic modeling focusing on regional
trade agreements, country-level modeling focusing on policy reforms and poverty, and community-level
modeling focusing on impact evaluation of policy interventions.

Krista Danielle S. Yu is an associate professor and research fellow in the School of Economics of De La
Salle University. Her research activities centers on the development of quantitative models for disaster
risk and vulnerability analyses, as well as on the economic impact of natural disasters. In 2016, she was
recognized by Thomson Reuters as the Philippines Promising Star in Economics and Business. In 2017,
she received the National Academy of Science and Technology Outstanding Young Scientist Award in the
field of Economics.

Marites M. Tiongco is a Full Professor and Dean of the School of Economics at the De La Salle University
in Manila, Philippines. Her research work focus on the impact of human and social capital on
development and poverty, and on the economics of agricultural development with emphasis on critical
natural resources and policy issues as they affect food security, food and water safety along the value
chain, market access of smallholder producers, agricultural health and productivity, climate change
mitigation and adaptation, and environmental sustainability.