More reactions on rice importation, taxes

One reader who wishes to remain anonymous has sent a letter that certainly merits space in this column. Before he decided to retire and take it easy, he was an active player in the shipping industry and I’ve had the pleasure of working with him in a past project. Like many astute businessmen, the reader always looks for opportunities to improve business processes and systems. In his letter, he suggests new concepts in rice importation. Please read on.

“I thought you might find this of interest as we are again poised to buy rice after the ‘stale’ rice and budgetary problems of the recent past.

“The country can certainly save a lot of money if we import rice different from current practice as follows:

“1) Buy rice on FOB terms instead of CIF.

“2) Buy the grain as paddy (palay), or unmilled rice in bulk, not milled and polished rice in bags.

FOB vs C&F

“Buying on FOB terms will mean we will have to provide the carrier. [We get] substantial savings in freight and incidental logistical expenses in handling the cargo such as stevedoring, agencies, etc. if we control the shipping.

“C&F contract of carriage is usually on liner terms with specified loading and discharging rates. Delays – whether natural (rains, strong winds, etc.) or manmade – are costly.

“Bagged rice is vulnerable to water damage, among others. It is susceptible to spillage due to torn bags. Paddy in bulk is not as vulnerable as it is discharged mechanically with vacuvators or other mechanical means, the conveyance being weather-proof. Water-damaged paddy can be dried but well milled rice rots and gets moldy.

Paddy vs milled rice

“Buying paddy instead of milled rice saves us the value added costs of milling, bagging and expensive storage and benefits our millers, bag suppliers, and local labor.

“By milling rice in the country, we also benefit from the by-products such as bran and pollards that are used by the animal feed industry.

“Paddy is a free flowing grain and with its protective husk, it is safely and easily handled in bulk using mechanical means. Fast and efficient discharging rates means savings in time and money. Further, petty thievery is less experienced with paddy than milled, ready to cook rice.

“Paddy is easier to transport in bigger volumes and if silo space is available at shipside, even more time is saved.

“Paddy stores better than milled rice. We should mill the palay and convey it to the areas where it is needed. It will always be newly milled rice, not stale bagged rice. There will be minimum bagging expenses and further give employment to mills and people in the areas where it is conveyed.

“I wonder if government will even consider these options. No doubt it will mean breaking old habits, learning new skills and perhaps make some interests unhappy.

“They may even tell us that some countries sell rice only on C&F, etc. As ‘the customer is always right,’ we should be able to impose these fair and reasonable conditions.

“We should not be at the mercy of our neighboring rice exporting countries if they cannot modify the sale condition. We can buy paddy in bigger volumes and source it worldwide from as far away as Argentina, Brazil, USA, etc. In using bigger vessels, I am sure the economy of scale will have more than offset the longer journeys.”

Another look at taxation

Our next reader, Philip David Truscott, PhD, has been doing studies on taxes and taxation in the Philippines. Below is his piece.

“I enjoyed your ‘What Pinoys want to hear from P-Noy’ piece. I agree that people want to know how the budget deficit will be handled. I also feel very frustrated that the press is concentrating on rather trivial cases of individual tax evaders.

“Nobody is mentioning the underlying reason for the tax evasion problem. Filipino bureaucrats and politicians go out of their way to block people who try to be honest taxpayers.

“The English-speaking Asia-Pacific countries (Singapore, Hong Kong, Australia and New Zealand) all operate a policy of free business registration. According to World Bank statistics, the cost in these countries is less than one percent of the average income.

“In the Philippines, the cost is 28 percent of average incomes, and somehow we act surprised that there is massive tax evasion. I believe there is a similar differential in the yearly administrative costs of paying Filipino taxes.

“On a separate point I have new statistics on the tax evasion rates for income tax, Pag-IBIG, SSS and PhilHealth, and was wondering if you were interested as a journalist? I am not aware of any other statistical tax evasion estimates that have been published.

“I’m a professor at Ateneo with a background in the computer modeling of tax and social benefit policy. I’ve just spent a year on a research project to create a computer model to simulate the Filipino tax system from the Family Income and Expenditure Survey/Labor Force Survey.

“The computer model was designed to test out possible tax-benefit policy options for the Philippines. The different options and the tax evasion statistics are described in a book entitled ‘Filipino Futures.’ It has quite a lot of unpublished statistics covering non-tax issues that might stimulate your creative juices while writing other stories.

“The main Web site of the book is www.FilipinoFutures.com.”

Collegiate basketball update

As of now three NCAA teams – San Beda Red Lions, San Sebastian-Recoletos Golden Stags and the JRU Heavy Bombers – are assured of seats in the Sweet 16 Finals of the Champions League (PCCL) 2010 Philippine Collegiate Championship games. The fourth slot is still being contested by Mapua Cardinals, Letran Knights and Arellano U Chiefs, with the Cardinals way ahead and poised to clinch the spot within the next couple of games.

The top four UAAP teams – FEU Tamaraws, Ateneo Blue Eagles, Adamson Soaring Falcons and La Salle Green Archers – were the first qualifiers to the Sweet 16 Finals after reaching the final four of the ongoing UAAP competitions.

The National University Bulldogs and the University of the East Warriors, fifth and sixth placers in the UAAP, together with the fifth and sixth placers in the NCAA, will compete in the Luzon-Metro Manila zonal qualifying games to earn seats in the Sweet 16 Finals.

At the conclusion last September 3, 2010 of the PCCL survey on the final rankings in the NCAA, the following were the top choices: first, San Beda; second, San Sebastian; third, JRU; fourth, Mapua; fifth, Arellano U; and sixth, Letran. Let’s see if the fans get it right.

Visit www.CollegiateChampionsLeague.net for more details about the 2010 Philippine Collegiate Championship games.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.