Truly help the farmers

Real reform to help the farmers is hopefully at hand. The bill ending NFA regulatory hold on rice importation had been sent to Malacañang for the President’s signature. But there are strong moves led by the agriculture secretary to have the bill vetoed by the President.

That’s strange. It was the President who certified that bill to Congress for enactment into law. How can the President now veto a bill he asked Congress to pass?

This is another good test of the President’s political will to introduce reforms no other President had the guts to do. When the price of rice to consumers spiked considerably last year, the President saw the wisdom of trying a new approach because the old one doesn’t work. 

For decades now, the farmers have been used by vested interests to justify continued restrictions on rice importations. Keeping a policy many experienced economists have been saying is flawed has cost taxpayers dearly.

The measure now waiting for the President’s signature introduces a tariff on rice imports instead of the tight regulation by the National Food Authority or NFA. This means anyone can now import rice and the inefficiency and corruption associated with NFA rice importations will be things of the past.

Of course, the NFA led by the agriculture secretary opposes the measure. It means loss of power that in the past had been monetized by bureaucrats and their favorite traders. Money is to be made not just on commissions, but also on the logistics of importing rice.

The usual excuse for the import restrictions is the need to protect the local rice farmers who are unable to produce at a cost that’s competitive in the region. The fact that our farmers remain terribly poor for the half century this restriction existed should mean we need to try something new.

The other side of this policy is that the rice consumers are sacrificed. The price of rice that urban consumers pay in this country is twice or more than what consumers in our regional neighbors pay. 

That’s why the cost of labor here is among the highest in the region. Yet, there is always labor unrest about salary increases. As a result, we have been left behind the industrialization train that other ASEAN countries, including formerly war torn Vietnam, enjoy. 

We must have very stupid agriculture officials who insist we continue with a policy that has not worked for decades. Surely, they cannot expect that same policy to miraculously work this time around. Keeping the status quo is untenable. Any reasonable person will try something new.

Proof that there is something wrong with the rice demand and supply balance under the current system is the prevalence of rice smugglers. Smugglers can make a profit after paying off customs and other officials, proving the system is so obviously broken. 

Indeed, we may even owe the smugglers some gratitude for stabilizing the price of rice by infusing more supply. Strangely, the smugglers are performing a public service.

Last year, our inflation rate spiked beyond the expectations of our officials. New tax laws were blamed, but that is only a small part of the story. 

Skyrocketing food prices is the bigger reason for high inflation. Cost of food is a major part of the consumer basket. The poorer you are, the bigger the share of food in your budget. And the agriculture secretary, a former sportswriter and weekend farmer, wanted the removal of food items in the consumer basket as a solution. Hay naku!!! Where does the President get such clueless people in his Cabinet?

The failure of the NFA to provide buffer stock, its main mandate, caused the price of rice to go beyond the means of lower income Filipinos. Not only that, the NFA administrator even caused the spike of rice prices because he showed empty bodegas to media reporters.

Of course, rice traders took advantage. We probably had enough rice stocks nationwide, but if these are kept by hoarders, the people suffer.

What does this new law mean to the consumer? Simply, prices should be more aligned with the price of rice in the ASEAN region. There will be competition among private traders to the point that the old practices, including hoarding, will no longer work.

Consumers can benefit from economies of scale and new technology in handling. Ramon Ang of San Miguel said they would definitely get into the business once the tariffication law is passed and signed by the President.

I am not sure the new law allows it, but San Miguel wants to import paddy rice, not milled rice. Not only is this cheaper, but there will be additional local value added in milling the rice here. San Miguel can also use the byproducts of milling in their animal feeds business. 

San Miguel will import the paddy rice in bulk, not in sacks, making the transport costs cheaper. They will be able to import at the time of the year when prices are lower because they can store the rice for a long time in their modern facilities with no danger of bukbok or any deterioration in quality.

The other good thing with San Miguel and the bigger companies getting into the rice business is that it will take the rice trade out of the shadows of Divisoria traders.... out of the underground economy. Right taxes will be paid and it is easier for government to check on actual stocks.

And yes, they will also buy from local farmers as the opportunity allows.

For the consumer, the change means lower cost of food and better fed workers for industry. This translates to more competitive labor costs that will finally fuel our industrial growth.

The joint statement of business groups in support of the rice tariffication bill sums it up well for the consumer: it will free them “of food supply apprehension and provided with price stability at an affordable level. This measure will address those concerns through free and open competition.”

For the farmers, the tariff that will be collected on rice imports will be set aside in a special fund that will be used to help them modernize and be more competitive. 

Contrary to what those opposing the measure say, rice farmers will be accorded protection from unfair competition through the import tariff duty of 35 percent on imported rice. 

Farmers will also be given essential support services and facilities from irrigation, better seedlings, modern growing and efficient harvesting technology, safe agricultural chemicals and post harvest facilities  by the government to make them more productive and increase rural income. 

But we have to keep a sharp eye on the agriculture department to see to it the money is not dissipated on corrupt projects like what happened during the Arroyo and Aquino administrations.

The rice tariffication measure is a win-win bonanza for all concerned, except the corrupt bureaucrats and their favorite traders. Unless the President wants to risk another rice price crisis, he ought to follow the recommendation of his economic managers and sign that bill right away. Our farmers and consumers must finally get real help from their government.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco