Reforming the NFA is doable

BIZLINKS - Rey Gamboa - The Philippine Star

After any fire or other calamity, there is always a need to rebuild. Of course, it is better to rebuild with the aim of preventing a recurrence of the disaster, or to minimize any potential destruction if such disaster is not entirely preventable.

The same can be said of the National Food Authority (NFA). We need meaningful policy reforms that will take away the perennial demons plaguing it and its stakeholders so that these will be weeded out in its entirety.

For more than four decades now, the NFA has been harangued by a variety of issues, among them allegations of corruption in the international and local trade of grains, most especially rice.

The basic mandate of the NFA is to ensure food security for the country and a stable supply and price of rice. Recently, under EO 165, the NFA and three other agencies were reassigned to the Office of the President, with oversight responsibilities for the four agencies given to Francis Pangilinan in the newly-created post of Presidential Assistant for Food Security and Agricultural Modernization.

Let’s hope that under this new expanded set-up, the newly appointed presidential assistant will find the wisdom to find solutions to the problem of food security and the much needed modernization of the Philippine agricultural landscape.

For this column, here are a few suggestions for consideration as a better system for the NFA is developed:

Rice for relief work

There are problems that are complex that may need sophisticated measures. But there are also some that are simple, and therefore require less complex solutions. One such has to do with the NFA’s role as a social safety net for the poor and calamity-afflicted.

For this primordial purpose, let the NFA-imported long-grain, well-milled 25-percent brokens rice be delivered straight to the agencies involved in disaster preparedness and response work such as the Department of Social Welfare and Development and National Disaster Risk Reduction Management Council.

The NFA can determine warehouses where the rice could be withdrawn whenever there is a calamity. The DSWD, NDRRMC and other accredited socially-oriented institutions (e.g., schools, church organizations, and foundations) may simply procure rice from the designated warehouses.

The best part of this scheme is that rice will be transferred (or sold) at the current socialized wholesale price of P25/kg. The operations in these warehouses should be made transparent to ensure that there are always enough stocks for emergencies, and that only those accredited will be able to withdraw at the socialized price.

Two-tiered pricing

To cater to the sector outside the aforementioned socially-targeted sector, the NFA should strengthen its participation in the commercial sector through its NFA-accredited outlets on two price-tiered levels.

First, the NFA sells its imported long-grain, well-milled 15 percent brokens rice to its accredited retailers at P32/kg; and secondly, the NFA sells its locally-procured (palay) and well-milled five percent brokens rice to its accredited wholesaler at competitive prices prevailing in the rice market.

In the current market where NFA rice is sold to accredited retailers at discounted prices, i.e., P27/kg, there is a lot of scope for corruption since private rice traders are tempted to hoard these cheap rice and sell at much higher spreads.

This existing situation is also the reason why socialized rice is rarely available to the poor. Or if there is any available, these are mostly those that had been left in the bodegas for too long or damaged by water during storage or transport.

‘Socialized’ pricing

Should the NFA release imported rice at P32/kg to its accredited retailers, opportunistic businessmen will not become interested in going after rice sold at “socialized” prices since the profit spread will become too small to make a good income.

This example not only demonstrates good Economics 101 at work, but it also reduces the temptation for businessmen to “hunt” for opportunities where they can buy at the lowest price possible and sell at the highest price possible.

A review of how effective the trade of NFA accredited retailers is should be next on the agenda to determine if there is really a sizeable market for the kind of rice sold in these outlets.

There may be other ways to bring affordable rice to the poor without exposing the NFA to corruption. Since the DWSD has a better feel of who the needy sectors of communities are, they could be in a better position to propose something.

Support local farmers thru vigorous commercial market participation

The NFA has always been mandated to support local farmers by buying palay (unhusked rice) at a higher price during the harvest months when market prices are lower because of the temporary supply surplus situation. Let the NFA concentrate on this task.

Presently, rice farmers are forced to sell at the lower palay traders’ farm-to-gate buying price because the NFA is not around. This kind of system only drives them further into poverty especially with the rise in the cost of fertilizers and pesticides.

By vigorously participating in the commercial market, the NFA will be in a better position to deal with the vagaries of local rice trade, help the local farmers, and at the same time will hopefully be better removed from the temptation of corruption.

In the end, this simplification of role may help stop the massive economic hemorrhage caused by corruption and the structurally defective rice trading system of the NFA.

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Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.

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