Gov’t to slap higher tax on rice imports

To protect the farmers, the Philippine government has vowed to slap higher tariff on rice imports amid its decision not to extend the quantitative restrictions (QR) on the staple food.

Socioeconomic Planning Secretary Ernesto Pernia said the Philippines will not seek further extension on QR on rice.

This move, according to National Economic and Development Authority (NEDA) Deputy Director General for Policy and Planning Rosemarie Edillon, will be supported by imposing higher tax on imported rice.

QR is an agreement with the World Trade Organization that limits the volume of rice that can be imported by the private sector at 805,200 tons.

"What will happen here is we will be tariffying rice. Because there will be revenues from that tariff, those revenues will be used to increase out support to the agriculture sector. This can be used for a sort of like a CCT [conditional cash transfer] for farmers that would be affected by the removal of the QR," Edillon said.

"Because imported rice is way cheaper now, even if you slap it with a more than 35-percent tariff it would still turn out cheaper," she added.

The QR, which is extended until 2017, is meant to lessen the pressure among local farmers to compete with subsidized, cheaper imported rice that comes from other countries.

But while it is really serving its purpose well, it has been argued before that the special restriction is also making the prices of rice in the country high because there’s not much supply coming in.

Meanwhile, Reuters reported yesterday that NFA is set to accept applications from private traders to import up to 805,200 tons of rice, more than two-thirds of which must come from Thailand and Vietnam.

The agency said traders can ship in up to 293,100 tons each from Thailand and Vietnam, with the rest to come from other countries not later than Feb. 28, 2017.

The additional demand from the Philippines, one of the world's biggest rice buyers, could underpin export prices from the two countries.

Thailand and Vietnam, the world's secondand third-largest rice suppliers after India, last month won supply contracts from the Philippines' NFA for 100,000 tons and 150,000 tons, respectively.

Traders in Vietnam expect Vietnamese rice prices to firm slightly thanks to the potential new demand. Vietnam's small initial deal with the NFA didn't help to lift its export quotations, which stood at multi-month lows given the country's high stocks.

The NFA issued the import guidelines yesterday under which traders are to bring in well milled rice with a quality not lower than 25 percent brokens or any special variety. Shipments will be levied with a 35 percent tariff.

Former Socioeconomic Planning Secretary Arsenio Balisacan even said earlier that QR on rice imports is “very anti-poor.”

“Although the QR gives protection to our farmers, its overall cost on the economy has been so high, especially among the poor because that has led to a double-digit inflation for rice when overall inflation was only 2 percent to 5 percent,” Balisacan, who is now the chairman of Philippine Competition Commission, further said.

Balisacan said imposing a tariff of 30 percent to 40 percent would be enough to protect farmers from imported rice that would come into the country.

Agriculture Secretary Emmanuel Piñol, however, feels differently.

For his part, Piñol said local farmers are not yet prepared to compete with imports.

Meanwhile, Pernia said the economic team of President Rodrigo Duterte already agreed to remove NFA's commercial functions, including importing rice to build up stockpiles.

"It [NFA] would still import rice but really just so that it would have buffer stock in cases when there is a calamity so you need to provide the relief goods and that would be the function of the NFA. It will no longer have commercial functions," Edillon said.

"We would need an amendment to the tariffication act and we would also need an amendment to the NFA charter. As of now, there are advance discussions and broad agreements but this would have to be cemented by way of a law," she added.