DA to review conditions attached to ADB loan

The Department of Agriculture and the National Food Authority (NFA) will review the recommendations of the Asian Development Bank (ADB) under the $175-million Grains Sector Development Program (GSDP).

DA sources said Agriculture Secretary Edgardo Angara has formed a team that will review ADB’s recommendations and conditionalities under the GSDP.

The sources said the study will include a re-assessment of the operations of the NFA to identify the areas in which the grains trading agency has been incurring heavy losses.

The sources said the move is in line with the conditions attached to the $175-million GSDP loan which is scheduled for release in four tranches.

One of ADB’s conditions is for the government to open up the grains sector and for the NFA to relinquish its monopoly on grains importation and turn this over to the private sector.

The sources said the team tasked to undertake the review is meeting this week to set the parameters of the review.

With the NFA now back under the supervision of the DA, Angara said he wants NFA’s grains distribution and trading activities rationalized to trim the agency’s losses, targetting to shave trading losses to less than P2 billion annually starting next year.

Currently, the agency is incurring yearly losses of about P2.5 billion from its buying and selling operations of rice, sugar and corn.

At the same time, Angara said a review of the GSDP is needed to further streamline NFA’s operations and still be able to meet the critical conditionalities of the ADB-funded project.

Among the changes called for by the loan signed earlier this year is for the NFA to peg its procurement price at current levels and eliminate cash incentives granted to farmers; increase its selling price close to market prices; limit its procurement volumes, both local and imported, to what is needed to build its 30-day buffer stock; lift quantitative restrictions on rice imports; divest itself of activities and services that have nothing to do with rice and corn; adopt tariffs on rice imports based on FOB instead of C & F price; and privatize its grains trading functions.

ADB’s conditionalities however, have been highly criticized. For one, privatizing NFA’s trading functions, according to sectors opposing it, will clip NFA’s stabilization capability and eventually this will end up with big time grains traders taking majority ownership and control of NFA’s extensive facilities, which practically means cartelizing a very strategic rice industry.

Moreover, the recommendation for NFA to divest itself of assets and activities that don’t involve the stabilization of prices and supply of rice and corn, will mean terminating activities such as the rolling stores, sari-sari stores and the Palengke ng Bayan set up nationwide under the Enhanced Retail Access Program (ERAP) to ensure poor consumers, especially in remote and depressed areas, can buy low priced basic food items.