Further imperiling Philippine rice

October 29, 2018

by IBON Media

The government’s accelerated move to impose rice tariffs and lift quantitative restrictions on rice imports is touted to ease inflation. It comes with a heavy price in the long-term, however, as it puts in peril the livelihood of millions of Filipino rice farmers. Amid runaway inflation triggered by its regressive tax reform program, the Duterte administration, in an unprecedented and probably Constitutionally questionable move, issued Administrative Order (AO) 13 ahead of the passage of a Rice Tariffication Bill. The President himself even declared that the country can now import as much rice as it wants.

The country’s economic managers point out that while the Rice Tariffication Bill would open the floodgates for cheaper rice that could kill local farmers, it would nevertheless raise revenues from importation to fund the agriculture sector’s competitiveness and to improve farmers’ incomes. This remains to be seen though, since the Philippine government has historically neglected the sector, allocating a mere 5% of the national budget over the last two decades.

Even the quasi-government institution Phililppine Institute for Development Studies (PIDS) projects a 29% decline in rice farmers’ incomes with a Php4-decrease in palay farmgate prices when rice tariffication is implemented. Around 4 million rice farming families will be affected. Even experts attending the recently concluded 5thInternational Rice Congress are giving fair warning that the Philippine government should strike a balance between short-term easing of price increases and long-term impact on farmers’ incomes and eventually again, food prices.

Historical neglect

Farmers continue to suffer the large non-implementation of land reform and utter lack of government support in terms of capital, subsidies, and facilities.

This neglect is bolstered by the country’s accession to the World Trade Organization – Agreement on Agriculture (AOA), which pushes for the liberalized trade of agriculture products and decreased the State’s role in the sector and even in the staple rice industry.

Among the 7-8 of 10 farmers who lack the means to amortize land that is awarded to them, rice farmers are forced to pay land rent under leasehold agreements. Government reports that 3-4 of 10 farmers are forced to enter loans on usurious terms. They also pay rent for threshers and harvesters, and are usually in a cycle of indebtedness to equipment owners, some of whom are also their palay buyers.

The Philippine government’s agriculture expenditure vis a vis total agricultural production has recently fallen below the WTO-allowed percentage of 10% at only 6.3% in 2016 and 7.0% in 2017. Lacking government support for irrigation and palay procurement has also particularly contributed to the sorry state of farmers.

Irrigated lands as of 2017, for instance, cover only 60% of 3.13 million hectares total potentially irrigable areas. Irrigating 100% at the current 4MT per hectare productivity for at least two harvest seasons can yield palay equivalent to around 25.3MT, which translates to 16.4MT of rice based on a 65% recovery rate. This is more than enough to supply the country’s demand for the food staple of roughly 13.1MT as of 2017.

Ruined mandate

The National Food Authority (NFA) has never fulfilled its mandate of procuring 10% of local palay production. From an average 5.4% procurement rate in the 1980s, NFA’s average procurement went down to 1.6% from 2010 to 2017 and even a negligible 0.8% of total local palay production from 2013 to 2017. The Php17 per kilo palay procurement price of the NFA is also too low and has not increased in the last 10 years.

As a result of deregulation, government subsidy for the NFA has also not increased. Its 2017 budget of Php7 billion for food security stabilization or for palay procurement, for example, that can only last 8 days for rice supply, even went down to Php5.9 billion for 2018.

The NFA has resorted to importing rice instead of buying from Filipino farmers. It also reached the point that the agency lent its tax exemption subsidy to private importers, using Php12 billion government tariff revenues. It also diverted its Php5.1 billion Food Security Program funds to pay its debts, contributing further to its low accomplishment rate of 18.6% in 2017, as discovered by the Commission on Audit  (COA).

While private importers get to be subsidized by the government to buy rice from foreign farmers, Filipino rice farmers often borrow from rice traders and big landlords for their capital in rice production and other household expenses. Subsequently, they are forced to sell their produce to traders at low prices even if prevailing prices in the market are high.

Boosting production

Thailand and also Vietnam, from which the Philippines imports rice, subsidize their farmers beyond the WTO-set ceiling. Vietnam pours around US$400 million to US$1 billion to agricultural support, while Thailand spent US$27.7 billion in subsidies to its farmers from 2011-2014. Also, while Philippine rice farms are more productive than Thailand’s, the latter is still able to produce more rice. This is because Thailand continues to expand its rice harvested area — 11.8 million hectares in 2018 — while Philippine rice farms are diminishing — only 4.8 million hectares in the same period — due to plantation expansion.

The Philippine government can increase the share of agriculture in the national budget in order to realize the full potential of Philippine rice productivity and increase farmers’ incomes and livelihood.

In terms of procurement, the NFA needs roughly Php50.56-Php126.4 billion to buy 10-25% of local palay production. This would ensure a buffer stock of sufficient rice supply for 51 to 128 days. At Php20 buying price, this is also estimated to raise the income of Filipino rice farmers by Php12,000 or to Php80,000 from the current Php68,000 gross income from 80 cavans per hectare bought at Php17 per kilo.

Makabayan bloc lawmakers meanwhile recommend Php185 billion for rice industry development to be implemented within three years or about Php61.7 billion annually. The recently-filed House Bill (HB) No. 8512 or Rice Industry Development Act allocates Php25 billion for subsidies to rice production and socialized credit, Php45 billion for irrigation development, Php20 billion for irrigation systems repair and rehabilitation, Php30 billion for post-harvest facilities development, Php50 billion in farm inputs, and Php15 billion for research and development of sustainable agricultural technologies. The Genuine Agrarian Reform Bill or HB 555 estimates Php313 billion or Php62.6 billion annually for five years for land distribution.

Striving to realize the full potential of the Phililppine rice industry will not only inrcease farm productivity and farmers’ incomes. A sufficient, local and government-regulated rice industry means that the country will have no need to import its food staple and can set reasonable and affordable prices. The country may also consider exporting rice again once the revived rice industry begins to reap its gains.

Rice tariffication no guarantee for food security

Government’s projected Php28 billion in annual import revenues under rice tariffication falls very short of the amount needed to develop the local rice industry. Local farmers are also not hopeful that the tariffication earnings will be utilized for their benefit. For instance, Php8.5 billion of the accumulated Php13 billion for the Agriculture Competitiveness and  Enhancement Fund (ACEF) during the Arroyo administration was reportedly lent to borrowers out of political patronage. Dut to run until 2015, the program was suspended in 2010 upon COA reports that its implementation was marred with mismanagement and corruption.

It also is wrong to make farmers’ productivity a precondition to be ready for rice tariffication. Government should have long laid the foundations for Philippine agriculture to be competitive globally.

Long term solutions needed

The underdevelopment of agriculture and the absence of an independent and advanced national industry factor hugely in government’s lack of control over the prices of goods.  Instead of strengthening local production and building local industries, government continues neoliberal polcies that put the Phililppines under foreign dictates and local land monopoly control and domination over land, resources and trade. This counts among other neoliberal policies that allow giant corporations, oligarchs, and cartels to fluorish amid landlessness, depressed wages, privatization of services, and unjust taxes on basic commodities.

To cope with worsening inflation, Filipino farmers have no need for rice tariffication. They need for government to already provide increased and direct budget support in terms of land reform and specifically devoting land for local food production, and free irrigation. Government can also utilize national funds to support price controls. Removing consumption taxes, and repealing the regressive TRAIN is also within government’s control. Additionally, government should persecute and hold cartels accountable.

Parliamentary and other platforms offer a wide range of farmers’ proposals: end land monopoly, distribute land for free, support rural development. These compliment rejecting neoliberal policies and agreements that subject Philippine agriculture to heavy blows. Only then can the country be prepared for any global dealings or trade involving agriculture.