Butterfly effect: How rice tariffication bill affects everyone

Conversations about rice are a national conversation

by Anna Gabriela A. Mogato, Rappler, Feb 13, 2019

MANILA, Philippines – It will be like domino tiles falling one after the other. While the rice tarrification bill will directly affect the rice industry, other businesses which make use of byproducts from rice will inevitably also feel its consequences.

The rice tariffication bill, or Senate Bill 1998, which will allow uninhibited rice importation, is due to be signed into law by President Rodrigo Duterte on Friday, February 15. Only a presidential veto can stop the bill from becoming law. (READ: Duterte open to changes in rice tariffication bill)

By removing the quantitative restrictions, imported rice coming from Southeast Asian countries will be slapped with a 35% tariff, while imported rice coming from other countries will be imposed a higher tariff rate. (READ: Higher inflation in 2019 if rice tariffication not passed – Diokno)

While this will result in imported rice becoming more expensive, the flood of imported grains will still threaten local produce.

Orly Manuntag, spokesperson of the Confederation of Grains Retailers Association of the Philippines Incorporated (Grecon), told Rappler that there will undoubtedly be a spillover effect on other sectors if the rice tariffication bill becomes law without amendments.

Grecon, along with other representatives of various sectors in the industry, got an audience with Duterte and other economic managers last week, and was able to air grievances about the bill.

While it has its good points, the lack of government regulation worries stakeholders.

Aside from the obvious displacement of rice farmers, National Food Authority (NFA) employees, and some 90,000 accredited NFA rice retailers nationwide, Manuntag said the deregulation of rice imports goes beyond the industry.

Here are the businesses and industries that will be affected by liberalized rice importation:

Millers

There are around 6,600 registered rice millers all over the country, employing 55,000 workers. Industry stakeholders, in a position paper, said that a complete milling facility costs from P30 million to P50 million. This would place the value of the whole industry itself at P200 billion to P300 billion.

“This whopping amount is primarily sourced from commercial bank borrowings with corresponding interest charges,” the position paper read.

However, Manuntag noted that taking out these loans will be meaningless if the mills will not be used at all.

“Where will the millers bring their facilities if they can’t buy unhusked rice from the farmers because these farmers refused to plant rice anymore?” he said in Filipino.

Should there be no local unmilled rice left for millers to process, the worst case scenario would be the millers defaulting on their bank loans.

Animal feeds and beer industry

A byproduct of the rice milling process, the rice bran is used for making animal and aquaculture feeds. A shortage in local unhusked rice production would also mean there would be a drop in byproduct.

Manuntag said that if feedmills produce less, it would cause an increase in the prices of pork and chicken.

The latest report from the Philippine Statistics Authority showed that livestock production during the months of October to December 2018 alone was worth P91.9 billion, while poultry production during the same time period amounted to P60.7 billion.

Another byproduct which comes from the milling process is the brewer’s rice or binlid, which is used in manufacturing alcoholic drinks, particularly beer.

Biomass, construction industry

A drop in local rice output will also mean a decrease in rice hull, which is used as fuel for biomass furnaces used in the provinces to provide electricity. Rice hulls are also used as a binder for cement and land fillers.

“[W]e have a lot of biomass energy facilities all over the Philippines. There are some who depend on biomass and if it fails to provide energy, then the electricity rates will rise,” Manuntag said.

What now?

In an ambush interview last Friday, February 8, Agriculture Secretary Emmanuel Piñol told reporters that while the Department of Agriculture (DA) cannot appeal in behalf of the industry, they were ordered by Duterte to collate the stakeholders’ requests.

Other government agencies tasked to simplify the rice industry’s request were the Department of Finance, the National Economic and Development Authority, and the Department of Trade and Industry.

But this does not give assurances that there will be changes made in the bill even after all the pleas from the private sector.

“[I]t will [still] be the President’s call. I don’t want to second-guess what action he will take,” Piñol said.

“But having said that he’s willing to listen, I would assume that he’s willing to consider some changes as to how those changes will be implemented, that’s up to him.”

The position paper, which contains the stakeholders’ proposals, was submitted on Monday, February 11.

Both the government and the stakeholders know that the lifting of the quantitative restrictions on rice imports has long been due, but how the law will allow it – and protect the interests of those affected by it – is being contested.

“[Lifting the import restrictions] is our commitment to the [World Trade Organization] but we are just asking for a little more study on the total deregulation…especially for the stability of the buying price of the palay,” Piñol said on Tuesday, February 12, during a chance interview after a meeting with sugar industry stakeholders who are also facing possible deregulation in sugar imports.

Piñol was referring to the NFA’s possible inability to sustain its function of buying from farmers as it cannot make borrowings anymore for its procurement program.

“Because right now, the buying price for palay dropped at P14 to P15 [per kilo]. You have to understand that if the buying price for palay drops, it is also a headache for DA because the farmers will get mad,” he added.

With a few days left before the deadline, there is nothing to do but wait for Duterte’s decision.

“We did our best to convey to the President the appeal of the Filipino people. [A]ng pag-uusap sa bigas ang pag-uusap ng sambayanang Pilipino,” Manuntag said. (Conversations about rice are a national conversation.)

“We are confident that we will be listened to, but if nothing changes, hindi kami nagkulang (we did not lack in anything). We tried our best.” – Rappler.com