Abolish the NFA?

Something is very wrong somewhere when a predominantly agricultural country like the Philippines earns the dubious distinction of being the world’s largest rice exporter and the government agency responsible for ensuring rice self-sufficiency racks up a gargantuan P177-billion debt.

The National Food Authority (NFA) traces its origins to the National Grains Authority (NGA), created in September 1972 with the mission of promoting the integrated growth and development of the grains industry. The NGA supported the palay-production program known as Masagana 99, which   was geared toward rice self-sufficiency. It engaged in massive palay procurement at government support prices, and the country even joined the ranks of rice-exporting countries from 1977 to 1981.

Today the NFA is tasked with ensuring the country’s food security and the stability of supply and price of rice, the staple grain. It does this twofold function through procurement of palay from farmers and their organizations, buffer stocking, processing activities, dispersal of palay and milled rice to strategic locations, and distribution of the staple grain to various marketing outlets at appropriate times of the year. But the NFA is a beleaguered agency, saddled with a huge debt because of anomalous rice imports by the previous administration.

The NFA’s debt was placed at P176.7 billion due to alleged overimportation during the Arroyo administration, where almost 2.5 million metric tons (MMT) of rice were imported in 2010—about three times the country’s requirement. That importation was allegedly overpriced by $60 to $125, compared with benchmark prices set by the Food and Agriculture Organization.

Current NFA Administrator Lito Banayo disclosed recently that the Arroyo administration’s rice imports in 2009, for delivery in 2010, reached 2,250,946 metric tons (MT), or about three times the country’s requirements. The value of the NFA purchases, at an average purchase price of $630 per ton, was $1.418 billion, or, at the current dollar-peso exchange rate, P62.4 billion. That amount is now part of the agency’s P177-billion debt. Prior to the 2009 imports, the NFA had accumulated loans in its previous 37 years of existence amounting to P114. 4 billion.

Banayo said he believes the $630/MT for the previous government’s rice imports amounted to an overprice. In November 2009, he says, when the world market price of rice was $480/MT, the Arroyo administration managed to increase in 33 days of successive international bid tenders their purchase cost to a whopping $692.50 from the same supplier, thus coming up with an average purchase cost of $630/MT for their 2.25 million MMT purchase.

Budget Secretary Florencio Abad suggested recently that the NFA’s functions should be reviewed. He said the NFA’s subsidy function could be absorbed by the Department of Social Welfare and Development, through the Conditional Cash Transfer Program. The function of supporting farmers through its buying program could be done by the private sector, while the agency’s regulatory function on rice trading could be transferred to a unit in the Department of Agriculture. His proposals were viewed as a move to abolish the agency, but he has clarified that no such abolition was in the works.

Sen. Francis Escudero says that while the NFA has long been hobbled by “inefficiency and corruption…this is not yet the proper time to abolish it.” What is needed, he says, is “a policy overhaul, and it must be made more relevant and in tune with the times and its flaws and shortcomings corrected.” Government economic managers should “tap resources that could help stabilize rice prices and aid the agricultural sector to make it self-sufficient.”

Even food-security advocacy groups such as Task Force Food Sovereignty (TFFS) are urging President Aquino to attain rice self-sufficiency with the help of a reformed NFA.  Instead of spending precarious government resources to import rice every year, they say, the government should instead focus on improving local rice production by giving comprehensive support to small farmers and procuring more palay from farmers. It’s a sound suggestion.

Something is very wrong with the NFA if it continues to import rice at volumes far in excess of what we actually need. But we agree with the view that the NFA should stay on, with its policies and priorities overhauled. The agency clearly needs to rid itself of its P177-billion debt burden. It makes no sense to let it go when it still has a lot of very important things to do: protect farmers, ensure affordable rice prices and enable the country to attain rice self-sufficiency.  –The BusinessMirror