Correcting flaws of rice law’s year 1
BIZLINKS - Rey Gamboa (The Philippine Star) - August 8, 2019 - 12:00am

The first year of the Rice Tariffication Act, passed last February, should be regarded as an opportunity to check on loopholes, recommend remedies, and further strengthen the whole rice import and export liberalization process to protect our farmers from more worries and losses.

More importantly, the Department of Agriculture (DA) should complete on this first year the groundwork to facilitate the disbursement of the Rice Competitive Enhancement Fund (RCEF) that would give rice farmers the much-needed inputs to improve their production.

Despite the statement of Sen. Cynthia Villar that the problem is not in the law itself, but rather in the implementation, Congress still has an oversight responsibility to see to it that the rice import liberalization law will be carried out without fuss.

Definitely, in the first six months of the rice liberalization law coming into effect, a number of problem areas have come to fore.

Missing ‘advance’ support

Just recently, Sen. Villar called for an investigation on an initial P5 billion released by the government in December to assist farmer in anticipation of the President’s signing of the rice tariffication bill into law.   

Supposedly, only P1 billion had been distributed to farmers through the Agricultural Credit Policy Council, the Land Bank of the Philippines and the Development Bank of the Philippines. The balance of P4 billion, apparently, has not reached rice farmers yet.

The DA is arguing that since the P5 billion was released by the Department of Budget and Management (DBM) in December, it could not yet be covered by the Rice Tariffication Act. The DBM, on the other hand, says that the money was already part of the RCEF.

Whatever the result of the ensuing investigation, what is clear is that rice farmers received only one-fifth of the promised advanced support that would have helped them prepare for the influx of rice imports.

Clearly, the bulk of the P5 billion did not trickle down to the two million rice farmers affected by the flood of rice importations. This should serve as a lesson for the eventual disbursement of the P10 billion coming from tariffs collected from rice importation.

We don’t want to see the DBM releasing P10 billion this year – or even more – only to find out next year that very little of the money actually was able to reach farming communities earmarked for RCEF support.

Technical smuggling

If we are to take seriously the extrapolation of the Federation of Free Farmers (FFF) on the 1.43 million metric tons of rice importations since the passage of the Rice Tariffication Law, the P5.9 billion that the Bureau of Customs (BOC) had reportedly collected is too small, giving rise to the possibility of an under-declaration of the imported commodity.

The FFF argues that the imported rice was valued lower to evade paying higher import taxes. Based on the BOC report, the landed cost of imported rice was only at $227 per metric ton, when it should at least have been $391. This amounted to a tax leak for the government of at least P4.24 billion.

The BOC has declared that it will look into the farmer group’s allegations, but this simple response raises questions of how unprepared the government collecting agency is, as well as the Department of Finance (DOF), to answer a simple speculative question raised by the FFF.

We’d like to hear from the BOC and its supervising agency, the DOF, just where exactly does the FFF’s allegation come from, and to debunk it if falsely construed. On the other hand, if there is indeed some form of technical smuggling happening, let heads roll and cheaters penalized.

Safety nets

The IRR for the Rice Tariffication Law contains a number of provisions that should provide safety nets in times when there are emergency cases, like when there is a forecasted shortage or when import averages exceed a three-year period.

With imports surging more than four times compared to the previous year’s period, there should be a cap on importation and a consequent increase in the tariffs slapped on excess imports to protect Filipino farmers from the deluge.

Already, farmgate prices have dropped to levels where farmers say they will be unable to recover for the spent cost of seeds, fertilizers, and pesticides. At this point, the National Food Authority should be actively purchasing local rice to keep farmgate prices up.

Understandably, the government is under pressure to collect at least P10 billion a year from rice importation so that it can support the needs of the six-year funding requirement as stipulated in the Rice Tariffication Law, especially if no technical smuggling had happened.

Herein is the need to keep a tight watch on balancing importation by rice traders, keeping local farmgate prices at reasonable levels that will not let farmers lose their shirts, and still ensuring that there is adequate supply of rice in the market.

Transparency and accountability

The Rice Tariffication Law’s IRR also states that the DA should be transparent in its management of the RCEF, mainly through its website. We look forward to seeing this immediately, together with a truly workable rice industry roadmap.

Similarly, the public wants to know how the Philippine Center for Post Harvest Development and Modernization (PhilMech) will spend the P5 billion that is allocated them by the law to provide rice farm machineries and equipment to farmers.

The same goes to how the Philippine Rice Research Institute (PhilRice), which will get P3 billion a year for the development, propagation, and promotion of inbred rice seeds, and the organization of rice farmers into seed growers associations, will spend the money.

The LBP and DBP should also detail how they will manage the P1-billion credit window for farmers, while PhilMech, the Agricultural Training Institute (ATI), and the Technical Education and Skills Development Authority (TESDA) should already announce training for farmers.

The DA, under the helm of new DA Secretary William Dar, must work doubly harder to ensure the future of the country’s rice industry, and to improve rice self-sufficiency to levels that will not make the Philippines a disruptor in global rice supply and demand.

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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 reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net.

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