Havoc

"Food security is national security."

The pandemic that has reached almost every part of the globe other than ice-trapped Antarctica will wreak havoc on the economies of practically every country on earth.

The world’s stock markets are bleeding.  Even in the Philippines, the stock indices show that we are moving to bear territory within the week.  Billions of pesos have been shed.  And all over the wealthier countries, billions of dollars, yen and yuan have been lost.

Fuel prices are down to $50 per barrel, which should be good news for countries which import all their oil requirements. But then, how much of it would a people gripped with fear of travelling, actually consume over the next few months, longer if the Wuhan-originating virus is not contained considerably?

But for the oil-producing countries, $50 per barrel or lower could mean disaster.  In the US of A, where in the time of Obama shale deposits were mined to counter high oil prices, $50 is no longer profitable.  In the Middle East, $50 per barrel is a calamity. This means their oil-dependent economies will shrink, and with it lifestyles that will require less contract workers from countries like ours.

For the world’s second-largest economy, obviously, the impact is tragic.  Not only in terms of lives lost and the cost of caring for the health of the thousands afflicted, but on a formerly high-rolling economy whose factories will be unable to meet the supply chain requirements of other country-economies in the prevailing system of globalization.

Already, the cost of logistics brought about by health checkpoints has brought the price of food up by almost 40 percent in Beijing.  Beef prices have doubled.  Even noodles and rice have registered increased prices.

In the Philippines, tourism is down, and even the earlier decision to promote domestic tourism will not fly.  Aborted in fact before taking off is a gigantic shopping mall sale that was premised on the consumeristic appetites of Filipinos, but has been grounded for health precautionary concerns.

If we hit 8.26 million tourists last year, a record high, we may not even get 6 million incoming arrivals this year.  How many jobs will be lost in this sector?

With supply chains in peril, would not every foreign investor put their investment plans on hold, except for those intrepid few who would have the prescience and daring to look at the crisis as opportunity to be on the ball when things turn around, as surely they will?

I do not want to be a jeremiad of doom, but if the economy was forecast to grow at between 6 to 7 percent this year, we should expect a more realistic 4.5 to 5 percent.

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In previous columns, I worried about the price of rice, our basic food staple.  I have mentioned several reasons:  Central China which is the main locus of the virus pandemic is also the rice basket of a country where  140 tons out of a total 208 million tons are produced each year; Thailand is keeping its export of medium and low-cost varieties down;  Vietnam is doing the same.  To top it all, locusts have swarmed the African horn, which will mean imports of more food from elsewhere to offset devastated fields.  Locusts have also swarmed many parts of India and Pakistan, which would affect 2020 harvests.

My submission is that this will have a negative impact on the Philippines, which imports 10 percent to 15 percent of its rice consumption requirements.  With the world’s rice export so thin at 6 percent to 7 percent of total production, and production expected to hit record lows, that tradable surplus will shrink further.  

If the low palay purchase prices last harvest period (October-November 2019) affected the amount of hectares planted to rice for the summer crop, then we will need to import more to offset the requirements of the lean season, with the private sector which imported 3 million tons last year off-loading its inventories by then.

And the National Food Authority has been stripped of its commercial activities and its import monopoly, leaving poor consumers at the complete mercy of the 2020 high-priced imports of the staple.

Alarmed at what I had written earlier, some friends asked: What could government do? What should government do?

In September of 2017, in a meeting with the President in the presence of DTI Secretary Ramon Lopez and now Senator Bong Go, I told them of my fears about the very, very low NFA inventories, which could create a shortage that would bring about high prices.  The President instructed me to write an executive summary, along with my prescriptions on how to deal with my fears.  I submitted the same that late afternoon, using the Palace computers to type and print out my memo, a copy of which was given to ES Medialdea and then Special Assistant Go.

But the posited solutions in the memo were disregarded by those in charge of rice supply management who, it turned out, were quarreling.  By late 2017, rice prices rose, and by 2018, the upward price movements had created huge problems.  As stated in previous articles, the response of government was the Rice Tarrification Law which tamed prices in 2019.

But the signs for this year are not all that salutary.  While the experts at the castrated National Food Authority know this, they are powerless under the new law and their purely warehousing functions to pro-act to prevent another price spiral.

Still and all, creative thinking on the part of our economic managers could avert a potential shortage, and the corresponding inability of government to respond to calamities in the second half of the year, let alone respond to the daily rice consumption of the poor and low middle class who cannot afford the prices charged by the private sector.

But crisis, or potential crisis, ought to create opportunities for preventive action.

The NFA still has warehouses all over the country, most of them empty but for those where the agency was able to buy palay in the last harvest period.  A pro-active measure where NFA partners with the private sector to ensure adequate supply of low-priced rice can still be done without running afoul of the new law.

But it would require no less than intervention from the very top, to affect the policies of the Financial Investigation and Review Board (FIRB), and a novel public-private partnership between the NFA and the private sector.

Food security, after all, is a national security concern.