Last Thursday, Agriculture Secretary Cito Lorenzo announced "the government is seriously considering a ‘free-for-all’ policy on rice importation by allowing the private sector – mainly farmers and traders – to bring in rice in unlimited volumes." The President, according to Lorenzo, wants as much as possible to lift the limits imposed on rice imports such as volume restrictions.
Cito gives the impression that anyone is now free to import rice provided the importers pay the 10-percent value-added tax, the 50-percent tariff and to ensure the imports will come in during the lean months from July to September when local rice supply is tight. This is good news for consumers who will effectively get a non-wage bonus from the lower world price of rice. Then again, depending on the implementing rules, this could be another bureaucratic ruse that will allow politicians to oblige their rent-seeking patrons who have cartelized the rice trade.
This is why I am not sure Cito’s announcement is as good as it seems. It doesn’t sound like full deregulation to me, which means, marginal rice farmers will still not be encouraged to think of planting some other crops. It is just as well because I haven’t heard of any safety net program that would help farmers cope with any change. It is criminal to leave our marginal rice farmers on the lurch with a change in policy.
Still, this change, if I understood it correctly, is a welcome if a small step to reform our rice policies. Some weeks ago, there was this foreign news agency report about an economist from the International Rice Research Institute (IRRI) who said in so many words that maybe self sufficiency requires more investment than it is worth. "Despite playing a key role in Asia’s Green Revolution," David Dawe said, "the Philippines may never attain rice sufficiency and could be better off importing cereals."
The IRRI economist told reporters "self sufficiency has a cost if you want to do it and in the case of the Philippines that cost is borne by the poor. As an economist, I would say that the Philippines would be slightly richer if it didn’t focus on self sufficiency."
Dawe said arable land is in short supply in the Philippines where only 30 percent is planted to rice. The soil itself is "more suited to growing coconuts and maize" and lacking the major river systems and rainfall patterns available for the heavily water-dependent crop in such areas as Bangladesh, Thailand and Vietnam. "God made that land for growing rice," Dawe said.
Not wanting to take his word for it, I turned to my agri-business guru, Dr. Rolly Dy of the University of Asia and the Pacific. He agrees. "Mr, David Dawe has a point. There is a cost to self-sufficiency. And it can be high. Given scarce government resources, rational choice of projects/programs is imperative. The economics of rice irrigation is not that great. Constructing new systems, particularly large ones (i.e. over 1,000 hectares) may not be viable. Rehabilitation of existing irrigation systems, particularly communal (small) systems, is generally okay but not always outstanding."
Dr. Dy observed that if the irrigation is high cost (say, over P150,000 per hectare), it is imperative to look at very high yield regime (from certified seeds and hybrids), high cropping intensity and/or crop diversification, meaning irrigated non-rice agriculture or planting tree crops. But these are easier said than done. Marketing is critical with crop diversification. For trees like mango, long term financing is at best inadequate.
No wonder, Dr. Dy points out, small farmers prefer planting rice no matter how uneconomical. For one, it is not perishable, it can be stored and it can be eaten if unsold. Farmers are rational. They plant after taking into account their resources and risks.
According to Dr. Dy, crop diversification (very successful in Thailand) requires good marketing infrastructure (e.g. good logistics) and live buyers. Sadly, the poor quality of our roads add to the marketing costs. The politics of rice has, Dr. Dy believes, contributed in part to the neglect of other sectors and industries such as corn, coconut, sugarcane, fruit trees, aquaculture, oil palm, etc.
"The drive for self-sufficiency has somehow clouded sound investment decisions," Dr. Dy said. "This country has 36,000 kilometers of coastline, but we lagged behind in aquaculture development. Mindanao has lands suitable to oil palm, and yet we import palm oil."
Still, while it is important for us to make sure we always have enough rice to feed our people, it is also equally important to make sure that it is affordable. The high cost of rice is a burden to the budgets of poor families. For those consuming at least one and a half 50-kg bags of rice a month, rice purchases can be as much as a third of take home income. That’s a lot of money.
Dr. Dy points out a strategic implication to this situation. "High food prices will drive wage demands. High wages will make labor-intensive industries uncompetitive. As a result, investors prefer to locate in low wage countries, assuming all other factors constant. According to a noted economist Dr. Bruce Tolentino, retail rice price in Vietnam is only half the price of Philippine rice because of the higher yield and lower logistics cost."
Bet you our politicians have never thought of this problem in this light. This is why we always hear platitudes about the need for rice self sufficiency. The only politician I know who has questioned this traditional rice strategy is Sen. Serge Osmeña. In today’s world, we have to question conventional wisdom and think in terms of what we can do most competitively in a borderless world market for all goods and services.
Briefly on the India topic if it’s not too late. As an international development volunteer from the States, of an Indian background and currently working in Dumaguete City, it would be important to note that India’s preeminence in the high-tech arena can be partly attributed to the British occupation of India for a period of several decades.
Mind you, the reason that India is in the position that its in, is due to the high capabilities of the hundreds of thousands of engineering graduates that come from the various universities and colleges everywhere. The educational system present in India is considered to be one of the best in the world and is largely a product of the British emphasis and influence on education, intellectual development and discipline.
The fact that the country, despite it being considered a 3rd world country, has been able to produce several Nobel Prize Winners in the 20th century, among them Sir C.V. Raman for Physics, Har Gobindh Korana for Medicine, Dr. S. Chandrashekar for Physics and Dr. Sen for Economics speaks highly of the educational aptitude of the Indians and the importance that the English had in education.
The common denominator for all of them was the strict educational regime in the math and science that was instituted by the British. Many of the educators from England came from esteemed colleges and universities such as Oxford, Cambridge and Imperial University. The human and technology transfer that has resulted over the century has been critical in the development and aptitude of Indians worldwide. Over the years, this has translated into remarkable achievements in areas as medicine, technology, entrepreneurship and the arts that are all symbols of pride for Indians all over.
His answer: He is the only fool on earth who looks for problems in a place, where most people find pleasure.
Boo Chanco’s e-mail address is bchanco@bayantel.com.ph