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THERE are proposals being broached to privatize the
rice trading function of the National Food Authority. These are not
new. Sen. Edgardo Angara wants to keep the NFA but only for
“implementing the rice and corn support policy which serves the
country’s buffer stock in case of emergency and calamity.” The
trading functions of the NFA, he said, should be turned over to the
private sector, which, without any government restrictions, would do
a much better job in stabilizing rice prices and in the long run
eliminate corruption, hoarding and smuggling.
House Bill 794, “The Rice
Privatization Act,” wants to revoke the power to import rice given
to the NFA under Presidential Decree 1770. The bill intends to
reduce, if not liquidate, the increasing debt stock of the NFA
which, according to Angara, is on pace to hit P136 billion by 2010.
A number of farmer groups and
NGOs oppose the NFA privatization proposal. Lifting rice importation
restrictions, they say, would discourage local farmers from planting
rice and would work against the goal of self-sufficiency. They also
say that the government’s dependence on imports is what has
bankrupted local farmers to begin with, and is one of the primary
reasons why there are concerns about rice stocks right now.
I agree with these farmers groups
inasmuch as the best way to attain food security, or for that
matter, rice security, is self-sufficiency in domestic production.
Importation is a way to attain food security if you can’t produce
your own rice, which isn’t the case with the Philippines, an
agricultural country that is quite capable of producing and even
marginally exporting rice, as has been proven by past experience.
Besides, as I said in the last column, importation can only work if
there is enough supply in the international market. With current and
expected shortages in grains, it’s getting more and more expensive
for a cash-depleted government to import rice.
But as I see it, the goal of rice
self-sufficiency does not necessarily conflict with the proposal to
privatize rice trading. The government should continue to pour
investments into irrigation, farm-to-market roads and implement
other infrastructure and policy support for domestic rice
production—and it can do this while stepping out of rice trading
which has only bred corruption and has indebted the government.
We should take a second look at
this issue of price stabilization, which is one of the main
objectives of government intervention through the NFA in the
foodgrain sector. Reduced government intervention in the marketing
system, as proven in the experience of other countries, has not had
adverse effects in the prices of commodities. The concern that
elimination of price support policies such as NFA procurement of
rice and privatizing rice trade might flood the country with
imported rice and lower farm-gate rice prices to the detriment of
local farmers is a serious issue, yes, but right now, as we see it,
domestic demand should be capable of sustaining prices that won’t
adversely affect farmers’ incomes.
The most important aspect of
liberalizing rice trading is the opportunity to destroy the rice
cartels. Most local rice farmers are at the mercy of rice traders
who enjoy the perks and privileges afforded them by their ties to
high ranking government officials (or their relatives). These rice
cartels get to see most of the profits coming from domestic rice
production because they can dictate at what prices to buy and sell
rice. Local farmers, most of the time, don’t get to see any
profits at all, and even become heavily indebted to these traders.
That’s why they turn to other agricultural crops which are more
profitable (and less political) or even get out of farming
altogether.
These rice cartels can operate
because of government restrictions. In the absence of government
interference and intervention, the market system would ultimately
decide the volume of rice importation, and I believe, lessen price
variability and moderate fluctuations in rice prices.
Besides, the government cannot
really afford to continue importing rice at a loss. This is simply
not sustainable. How many more years can we buy rice at high prices
and sell at low prices before we bankrupt public coffers?
Because the rice scarcity or the
rice price crisis is potentially politically dangerous, the
Macapagal administration might not have much of a choice but to keep
on buying high and selling low.
But like I said, it doesn’t
have to be an “either-or” proposition. It could be both: pursue
the policy and infrastructure reforms to boost domestic rice
production, pour in those investments in the agricultural sector,
and at the same time, break the monopoly in rice trading. It might
be not only the right thing but the only thing it could do.
ernestboyherrera@yahoo.com
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