"The sooner this happens, the better."
Along with the Foundation for Economic Freedom, I urge President Duterte to sign the bill on rice tariffication immediately. The bill, aptly entitled “An Act Liberalizing the Importation, Exportation, and Trading of Rice, Lifting for the Purpose the Quantitative Import Restriction on Rice, and for Other Purposes,” will be the most far-reaching reform in the history of rice policy. For decades, the interventionist-socialist strategy has been tried, tested, and has repeatedly failed.
Since 1972, we have given the National Food Authority the function of controlling rice importation, trade, processing, and logistics. We gave NFA the authority to borrow with taxpayer guarantee. What did we get out of this policy? An expensive staple, out of reach of the poor. An epidemic of malnutrition that stunts the future of our children. Recurrent rice price crises that fuel the fire of inflation. A debt that has ballooned to P150 billion of net liabilities. Rampant corruption from plundering the value chain, beginning from procurement of palay from fake traders; overpricing of imports in scandalous government-to-government deals; briberies from imported rice smuggling; diversion of low-priced NFA rice to the market-priced rice; and jacking up the same market price by import quotas. And for all these, the rice industry remains mired in backwardness and inefficiency.
The bill deals with the root cause of the problem—unwarranted government intervention and socialism. By liberalizing the industry, the syndicate controlling the value chain will now be nullified by free entry and competition—including entry and competition from foreign rice suppliers. By leaving trading and storage in the hands of traders, competing actively in a free market, investors can best judge when to buy low and sell high—curing the problem of gluts during harvest, and releasing stocks during lean periods. They are the best judge because they will have skin in the game—they are the ones to make money when they judge right; and will lose when they judge wrong. No taxpayer will be left holding the bag.
Detractors of the bill point to the harm liberalization will bring the rice industry; as well as the vulnerability of consumers to the vagaries of the market, and the greed of a local marketing cartel.
But the bill strikes a balance with generous safeguards. For one, rice trade remains far from free; a high tariff of at least 35 percent remains for ASEAN rice, and higher rates outside ASEAN. This affords ample protection for the domestic industry, though far less than under the status quo. A Rice Competitiveness Enhancement Fund is established, effectively financed by rice import tariffs (with a guaranteed minimum amount of 10 billion pesos from the Treasury); this provides safety nets for affected farmers. NFA, though no longer a regulator, is tasked with maintaining a national buffer stock, precisely to address emergency situations and support disaster relief. And lastly, combinations in restraint of trade are illegal under the Philippine Competition Act; by the same Act, the task of dealing with anti-competitive practices is assigned not to the compromised NFA, but to where it belongs—to the Philippine Competition Commission.
The time for timid half-measures is over. It is now the time for bold and confident steps. Change is coming for the rice industry, Mr. President. The sooner you make it happen, the better.
eric.jurado@gmail.com
