High production cost encourages rice smuggling: agency

MANILA, Philippines (Xinhua) - Combating rice smuggling would be difficult if the cost of producing the crop would remain high, economists from state-run Philippine Rice Research Institute ( PHILRICE) said today.

PHILRICE, an agency under the Philippine Department of Agriculture, said long-term solutions, and not just legal remedies, are needed to stop rice smuggling in the country.

Dr. Flordeliza Bordey and Aileen Litonjua, PHILRICE economists, said the prospect of raking-in high profits owing to the large difference between the world and domestic price of rice drives rampant smuggling in the country.

"Domestic price of rice had been higher, as much as 75 percent, than the world price since 2000. Although the gap closed in 2008, price differential widened again to 30 percent in 2012," they said.

Bordey said the huge price difference can be attributed to rice trade policies of the government and higher production cost of rice in the Philippines compared to those sold by exporting countries.

"Rice smuggling is only a symptom of a worse disease-the inability to compete," she said.

They also cited studies which show that smuggling tends to be more rampant in markets with high import duties and quantitative trade restrictions.

The Philippines is one of the few countries which has been allowed by the World Trade Organization to restrict the entry of imported rice via the quantitative restriction (QR). Manila is seeking to extend the application of the QR for another five years or until 2017.