Can rice farmers handle rice importation?

When President Arroyo announced in July last year that farmers would be allowed to import rice, everyone thought it was a good proposition, a wise political decision. But not the rice farmers who view the importation as simply another problem since the imported stocks pose a serious competition to locally grown rice, if not properly controlled as clearly shown by rampant smuggling.

This was the consensus that came out among farmers and traders in a recent forum organized by the Philippine Agricultural Journalists Inc. (PAJ) and sponsored by Philip Morris Phils.

Farmer leaders Rafael Mariano of the militant Kilusang Magbubukid ng Pilipinas and Sonny Domingo of KAMMPI, an affiliate of Kilos-Saka – one of the groups that helped put Arroyo into the presidency – are not convinced and see some hidden agenda instead. They are one in saying that allowing farmers to engage in rice importation will just open up the local market to flooding and, worse, to even more widespread smuggling.

Even Joji Co, president of the Philippine Confederation of Grains Associations, a group long accused of operating as a cartel, suggested that the status quo – or the National Food Authority (NFA) exclusively importing rice – be maintained since it is common knowledge that no farmer group, however big, can really handle such capital-intensive undertaking.

Despite such vehement opposition, the NFA, which was recently transferred to the office of the President from the Department of Agriculture (DA) will go through with the liberalized rice regime, because as Administrator Anthony R. A Abad says, we are just loyal; soldiers who have to follow orders from the president."

Besides what needs to be done is empower the farmers to plant more rice, through urgent interventions and support, and not merely giving them a bite of the import pie" Co said.

He further noted that if the objection to the rice liberalization policy is so intense, why should government still push through with it. "Why not ask President Arroyo to maintain the current scheme of things, then sit down with all the stakeholders in the rice industry and come up with holistic and long-lasting plan for the sector."

When the legality of the new rice policy was questioned at the forum, Abad explained that the agency is administratively tasked with determining its rice importation program." Under its charter, the NFA has the mandate to decide, by itself, whether or not to allow other parties to import rice," he said.

Smuggling

Domingo argued that if smuggling has been going on even under the tight watch of the NFA, how much worse will the problem become if importation is left in the hands of the farmers? To this, Abad and his deputy Gregorio Tan readily agree since they said, "enforcement on customs laws is rather weak and NFA does not have any enforcement function."

It will be recalled that last November, the NFA and the Bureau of Customs forged an agreement whereby BOC, upon confiscation of smuggled goods, including rice, will ask permission from the NFA to use its warehouse for the safekeeping of the goods.

The agreement, however, remains good only on paper as no one is really making an effort to implement it, observed Abad and Tan. Only recently the NFA complained against the BOC’s lack of effort to coordinate the safekeeping of some 65,000 bags of contraband rice in Cebu. The merchandize simply disappeared. Other seized rice stocks have regularly disappeared which deprive the government of import duties, penalties and surcharges.

Import options

Under the guideline drawn up by the NFA governing council, chaired by Agriculture Secretary Leonardo Q. Montemayor during its Jan. 21 meeting, an eight-member accreditation committee (four from government, three from farmer groups and one from civil society) will be crated to come up with a set of criteria for accrediting farmer groups to import rice. The government members are those from LandBank, Quedan and Rural Credit Guarantee Corp., DA and the Cooperative Development Authority. Representatives from farmer groups and civil society will be recommended by Montemayor as chairman of the NFA council.

Initially options for importation are: accredited farmer groups will finance the importation and sell the grains locally. The importing groups will enter into financial arrangement through purchase order from their buyers or opening letters of credit for their importation. The volume that they cannot finance can be pooled together and NFA will consolidate this in importation volume for buffer stocking. The farmer groups will sell the grains in the local market or the NFA will have the blanket authority to import the whole required volume and the farmers will pay the NFA.

Removal of QRs

When the Philippines acceded to the policy of the World Trade Organization (WTO) in 1995, it also committed itself to remove all forms of barriers to free trade, including quantitative restriction or QRs (inbound quotas for all items), destroying tariff walls and other measures to improve market access for goods coming from other countries.

But the country sought to delay inclusion of rice – a highly sensitive commodity – from the list of items to be allowed free entry into the country. It got permission to impose QRs (subjected to tariff of 50 percent) until 2004 so that local farmers are amply protected.

Mariano, however, voiced his suspicion that allowing farmers to import rice is just a ploy and a prelude to the breakdown of the QRs on rice so that important restrictions for rice will be completely lifted for freer trade on this commodity. "Liberalizing importation of rice by farmers is just an excuse to remove the QRs even way before the 2004 deadline," he said.

Tan said that NFA will provide safety nets to ensure against dumping and further smuggling of rice in the country. "We are not going to import beyond the volumes to be allowed by the President, on the recommendation of the DA inter agency committee on rice. Also, "we will not be handling allocations to farmer groups without diligence on our part, we will have to determine their capacity to import on the basis of their networth for the first five years," Tan stressed.

Prelude to NFA’s privatization

Liberalizing rice imports, according to Mariano, is a concession by the Arroyo administration to the Asian Development Bank (ADB) from which it is seeking the release of $175 million in loans for the sector under the Grains Sector Development Program.

The ADB imposed three condionalities on the loan program. These are: the removal of the 50-centavo subsidy to farmer cooperatives (pegged in the support price of palay). Another is the privatization of NFA – a politically risky option. Still another is a legislation to liberalize the sector by removing the commercial functions of NFA and making it just a regulatory body. These conditions have not been complied with, which is why the second and third tranches of the loan program have been delayed.

Observes Mariano: NFA has been getting less and less budgetary support from the National Government – last year, it got only P1 billion, barely enough for its operations) and removing its monopoly over rice importation is but another step to paralyze it and make it a losing proposition. When this happens, what other option is there but for the government to privatize the NFA?

The GSDP and other loan programs before it have already posed much uncertainty in the NFA bureaucratic structures that strikes and work slowdowns have weighed down its operations for decades. People are saying, removing the 50-centavo subsidy on palaysupport price to small farmers will not sit well with Montemayor, a peasant leader prior to becoming a lawmaker and now Agriculture secretary.