FEF renews call for rice tariff reduction
The Foundation for Economic Freedom (FEF) has cautioned Congress on plans to amend the provisions of the Rice Tariffication Law (RTL or RA 11203 of 2019), particularly on the restoration of the National Food Authority’s (NFA) power to import rice and engage in rice retail, and instead reiterated its earlier proposal to temporarily reduce the import duty on rice from 35 percent to 10 percent.
“If this measure is adopted, it would lower the landed cost of imported rice and exert downward pressure on its wholesale and retail prices,” said FEF in a press statement Monday, May 13.
FEF enumerated various benefits from the RTL calling as the most significant reform in the rice policy landscape since the 1970s.
According to the group, the law enabled the country to become fully compliant with the international commitment to the World Trade Organization (WTO) and eases the staggering debt that NFA incurred at more than P170 billion as its “buy high and sell low” strategy was a sure formula for bankruptcy. RTL also eliminated rent-seeking activities along the rice value chain from its procurement down to the logistics involved in handling and marketing rice and tamed rice inflation from the period 2019 up to the year 2022 when international rice prices were stable. In addition, FEF said that RTL generated around P80 billion in tariff duties during the years of RTL implementation, which were used to further enhance the productivity of our small rice farmers.
Aside from the temporary tariff reduction on imported rice, FEF said that if there is an urgent justification for importing rice, the implementing rules and regulations (IRR) of the RTL provided that another government entity, the Philippine International Trading Corporation (PITC), which is under the Department of Trade and Industry (DTI), can import all the necessary rice requirement of the country.
“This is a better option because the public perception of the Department of Agriculture (DA) is that it should promote the interest of the cultivators rather than the consumers. DTI is legally mandated to perform the latter function,” the FEEF said.
Another FEF recommendation is for NFA to ramp up procurement of palay from local producers to build the “buffer stock” for emergency situations, which RTL stipulates to be its integral function. Unfortunately, FEF said that NFA’s previous performance in this role leaves much room for improvement. “No one is telling the public the real reason why, though the agency persistently claims that its price stabilization function should be restored by allowing it to import rice and regulate rice retail trading,” it added.
Finally, FEF appealed to legislators and policymakers to consider the results of evaluation studies on how the Rice Competitiveness Enhancement Fund (RCEF) was implemented and how the National Rice Program (which is a much bigger rice productivity program) performed vis-à-vis their task of raising overall the efficiency, productivity, and competitiveness of our rice farmers.
“They should be able to distill lessons and insights learned from these evaluation studies, which adopted rigorous methodologies in analyzing empirical data and evidence. Only then can we have a rationale and scientific approach to addressing the challenges hounding our rice sector,” said FEF.
On the perception that RTL has not arrested the rising rice prices, FEF said that the soaring rice prices were brought about by the exogenous factors, such as the outbreak of the Ukraine-Russian conflict which resulted in the upswing of fuel, fertilizer, and grain prices; the export ban of non-basmati (white) rice by the Indian government which supplies around 40 percent of total global rice export; and more recently, the spreading and intensifying conflict in the Middle East which has placed upward pressure on petrol prices. “Undoubtedly, these factors are beyond the control of RTL,” said FEF.
The proposal in Congress, FEF said, will only reverse all the beneficial reforms in the rice policy framework achieved by the RTL and will reinstate, for the wrong reason – the short-term adverse external events not related to the RTL, the previous framework, which was historically prone to governance vulnerabilities and fiscal unsustainability.
FEF further urged for prudence in distinguishing between the short-term impact of adverse external events not intrinsic to the RTL and the short-term weaknesses in implementation and execution versus the long-term beneficial outcomes of the structural reforms represented by the RTL.
The short-term issues due to external events and issues in execution should be addressed by short-term measures and not by amendments to the RTL.
“If the total rice supply deficit can be addressed in the short term by increased local production, we see no reason why restoring the power of NFA to import rice and to engage in rice retail needs to be permanently embedded in the law to tame the soaring rice prices. But if the rice supply shortage is indeed serious this year because of El Nino, other policy instruments can be applied to satisfactorily address, in a temporary manner, such an extremely urgent challenge,” FEF said.