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Proposal to Cut NFA Powers Hit

22 April 2008 No Comment

RICE IMPORTS DON’T SPELL CHEAPER PRICES; GOV’T URGED TO STRENGTHEN LOCAL RICE SECTOR INSTEAD

As government continues to turn to importation as remedy for the current rice crisis, this time with the proposal to further cut the powers of NFA and increase private importation, research group IBON reminds the administration that rice imports, based on experience, do not result in lower-priced rice.

Decades of importation has proven that imported rice are not sold at cheaper prices because private importers have the monopoly over pricing and trading, while government has withdrawn support for marketing and distribution. The NFA’s reduced role in palay procurement and rice trading, including setting price ceilings left farmers and consumers at the mercy of traders. Data shows that the monopoly of the rice market is increasing, with only 2,968 rice dealers and wholesalers as of 2006 compared to 21,000 in 1986. Meanwhile, NFA procurement is only at 0.5% and distribution rate is only 6% of total production.

Prices are even likely to be driven up by the recent decision to remove the 300,000 metric ton quota on private sector rice imports because it paves the way for profiteering. The government says that the NFA will remain the “importer on record” so private sector importers will not have to pay the current 50% tariff and will instead just be charged a P2-3 “importation service fee” which, the agriculture secretary was quoted as saying, “(reduces) the tariff to about around maybe 10%”. The NFA will also supposedly determine import volumes.

Under this scheme, rice bought abroad at US$700 per ton could be sold at as much as P35.40 per kilo or higher – broken down into P29.40 import cost (at an exchange rate of P42 per US$1), P3 NFA import fee, P3 storage and distribution cost. This amount does not yet include traders’ mark-up. If rice is bought abroad at US$1,000 then its domestic price could rise to as much as P48 per kilo or higher with traders’ mark up.

The worst hit are the poorest four-fifths of Filipinos trying to live off P110 or much less each day and for whom food takes up half to over two-thirds of their expenses. As it is they have already seen their real incomes fall by 5%-13% in the period 2000-2006. Majority of these number are the rice farmers who are pushed more into bankruptcy with the flooding of imported rice in the market amid sufficient local production of palay.

If we are to ever going to get out of this crisis, the government should in the short term, start expanding land area planted to rice, increase the NFA’s local rice procurement to 25% to 30% so it can effectively influence rice prices in the market, provide sufficient production and price subsidies to farmers, and rescind its commitments to further liberalize agriculture. (end)

IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.

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