The aftermath of the Rice Tariffication Law

Just over six months ago, the President signed into law the Rice Tariffication Law, with effect on March 5, including the implementing rules and regulations. Following a spike in the prices of rice in the second and third quarters of 2018.

Since that time, with the prodding of the President, our lawmakers have labored on the bill that would seek to make imported rice available at all times to complement the local supply. Simply put, the law removes the quotas and barriers to the importation of rice that was previously the sole jurisdiction of the National Food Authority (NFA). Therefore, any Tom, Dick and Harry can import rice without seeking permits from the NFA, which has long been the subject of massive graft and corruption, as would-be importers sought to curry favor with the NFA to be able to import and sell to the domestic market rice imports. The law also inhibits the smuggling of rice, mostly done through our vulnerable Mindanao backdoor, since the law tremendously reduces the massive profits that smuggling provides.

The law also minimizes the cartelization of rice distribution, as the tariffs are standardized-35% if imported from ASEAN nations,

40% from nonASEAN countries, provided imports are below 350,000 metric tons and 180% if imported from non-ASEAN nations and are above the 350,000 metric ton limit. The tariffs raised from the imports will fund a Rice Competitiveness Enhancement Fund which are aimed at boosting rice production from harvest to storage and for the pursuit of scholarly research aimed at boosting and improving rice production and availability.

The Philippines, already with some of the highest diabetes rates in Asia, as a result of traditionally conditioned rice consumption, has long been a laggard in rice production, this despite the efforts of the International Rice Research Institute (IRRI) in UP Los Baños, whose international efforts have enabled Thai, Vietnamese, and Indonesian rice production to boost rice production to the stage where they have surplus to export.

It is precisely the artificial barriers that the Philippines has created that have stunted the growth of rice production efficiency. The government has spent billions in rice subsidies which have lulled local growers into a false sense of complacency. This is also an admission of the abject failure of the land reform program, which over 50 years or so has failed to meet its avowed goal of rice self-sufficiency.

There will be an impact on our rice growers who will now have to shape up to international competition. To ameliorate the situation, however, the Rice Competitiveness Enhancement Fund is to be created by the law. This fund is in addition to the billions of pesos worth of low-cost funds made available to the agricultural sector by both government and private sector financial institutions, which have pre-dated the Rice Tariffication Law.

As an independent director in a financial institution that has lent billions of pesos to the agricultural sector, I am aware of the need of financial institutions to focus on the agricultural sector, of which rice production is an important part. Crop production loans, farm machinery loans and milling and storage bridge financing loans are now available at reasonable rates of interest due to the overall liquidity and stability of the monetary system as governed by the Bangko Sentral ng Pilipinas.

Though our domestic rice farmers may be forced to compete in the open markets, it says a lot that I prefer our domestic rice which has a quality rating and can compete with foreign brands that come with a premium, because of the tariffs. We have domestic rice brands that compare favorably with imported ones, especially those grown and milled in Central Luzon. Our farmers can also shift to specialty rice like malagkit and upland rice, which come at a premium but are worth the price.

While the farmers may be in a competitive environment, the law has made the National Food Authority virtually obsolete except for providing buffer stocks for food security. But this is a pittance compared with the granting of licenses to importers which was the chief source of graft and corruption. The ball is now in the hands of the Bureau of Customs to impose the tariffs. Whether we have exchanged one devil for another is yet to be seen.

In the meantime, the price of rice seems to have currently stabilized.