Gov’t economists, not traders, welcome rice tariffication law

5 Feb 2020

The rice tariffication law (RTL) turns one year old on Feb. 14. The government credits the law for giving Filipino consumers access to cheaper rice and for helping to bring down the inflation rate from the high levels of 2018.

Benefits for the farmers have been touted with the creation of the rice competitiveness enhancement fund (RCEF).

The government has been using 2018 data on inflation and retail prices as basis for asserting the success of the RTL. The problem is that prices were unusually high in 2018.

The National Food Authority (NFA) administrator and the NFA Council bickered and ended up failing to import rice in time for the lean months despite expert advice from the rice industry that there was an urgent need to do so.

To put it bluntly, it is misleading to use 2018 data to claim that the government achieved its objective of making rice more affordable through the passage of the RTL.

In fact, prices were already trending downward during the last quarter of 2018 because of the harvest season and the arrival of the delayed rice importation.

Retail prices under RTL are basically the same as during the regime of Quantitative Restriction (QR).

From 2015 to 2017 up to the early part of 2018, the retail price range of well-milled rice was P41-43 per kilo, while for regular-milled rice the range was P36-38 per kilo.

Farmgate prices for palay (dried), on the other hand, is a different matter under RTL. The range was P17-19 per kilo during QR, while it was at P15.82 per kilo under RTL as of the second week of last month.

Unlike other countries, the government did not properly sequence the implementation of the RTL. It liberalized with alacrity without waiting for the RCEF to cascade effectively down to the rice industry.

The situation for the inflation rate is the same as in retail prices. It peaked in September and October 2018 at 6.7 percent. By November and December 2018, it was at 6 percent and 5.1 percent, respectively.

For January, February, March, and April 2019, it was at 4.4 percent, 3.8 percent, 3.3 percent, and 3 percent, respectively.

It was, therefore, already well within the government target of 2-4 percent by the time RTL was signed into law. Lower oil prices and the tightening of the money supply by the Bangko Sentral ng Pilipinas certainly helped. The delay in the passage of the 2019 budget also had an impact as it slowed down the economy.

President Duterte won on a campaign that change is coming. Unfortunately, the RTL could be a change of the wrong kind. Only government economists are upbeat about it, as even traders have lately been complaining about its consequences.

Tariffication by itself is not a problem. But the manner of its implementation has treated farmers as inevitable collateral damage supposedly for the greater good of the more numerous consumers. This requires a serious review by the President, given the unfolding lack of real benefits to both farmers and consumers.

ELIAS JOSE M. INCIONG
President
United Broiler Raisers’ Association
at_inciong@yahoo.com