Strengthening The Local Rice Industry

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Published by the Peoples Development Institute

91 Madasalin Street, Brgy. Teachers’ Village East,
Diliman, Quezon City, Philippines
Tel. No. (632) 351-7553

Copyright of the RICE IMPORTATION IS NOT THE SOLUTION,

Strengthening The Local Rice Industry Is More Sustainable by Peoples
Development Institute

Copyright of the individual works remain with their respective authors.

All rights reserved.

No part of this book may be reproduced in any form or by any means
without the permission of the copyright owner and the publisher.

Lay-out: Ramon T. Ayco, Sr.

Set in Times New Roman Txt LT Std, pt. 12
Cover Photo: a rice farmer by Ramon T. Ayco Sr.
and rice importation by news.abs-cbn.com from google.com

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Published in the Philippines

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We, the undersigned representatives of farmer

organizations and cause-oriented groups, hereby
present our position on issues relating to the removal
of quantitative restrictions (QR) on rice imports, and
particularly on legislative proposals on the QR removal
currently being deliberated upon in Congress:

1) We strongly advise that the removal of the QRs

on rice imports should be handled carefully and
prudently given the current un-competitiveness
of large numbers of rice farmers against
cheaper imports and the dangers of relying
excessively on imports for the food security of
the country. During the series of consultations
on the QR issue, a majority of farmers and
stakeholders emphasized the need for continued
protection of the rice sector while the needed
competitiveness-enhancing measures are put
in place by the government. Accordingly, it is
important to adopt the following strategies in
crafting the bills on the lifting of rice QRs:

a. Preserve as many policy tools and options

as possible, and introduce effective safety
nets, to protect local farmers in the event of
market disruptions, price volatility, private
sector/rice cartel manipulation, and other
contingencies following the removal of
QRs; and

b. Introduce innovative and more effective

programs for rice farmers, and provide
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the sustained budgetary support for such

programs, with the objective of enhancing
the competitiveness of local farmers,
increasing their profitability, and ensuring
the long-term sustainability and productivity
of our farms.

2) We firmly believe that the bound tariff rate

for rice imports should be set at the maximum
possible rate allowed by GATT-UR regulations
which we affirmed when we joined the World
Trade Organization (WTO). In this regard,
we support the 180% bound tariff rate being
proposed by the House legislative version and
the Department of Agriculture.

A high bound rate will allow the government to

more freely adjust actual or applied tariff rates
depending on market and other conditions. It
could be adjusted to a much lower rate if import
prices are very high, or increased to a level not
exceeding 180% when import prices are very
low. Applied tariffs can be set and adjusted
through Congress or, as proposed by several
bills, by the President in response to market
emergencies and other contingencies and when
Congress is not in session.

If the bound rate is set to a very low level, such

as 40% as proposed by some of our economic
managers, government will not be able to
impose a tariff higher than 40% even if the
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situation warrants it. Further, if and when the

WTO members eventually agree to further
reduce tariff rates, we will be forced to start our
reduction from a relatively low tariff level. This
will increasingly restrict our ability to protect
our local farmers from cheap imports.

There is therefore nothing to lose by setting

our bound tariff to a high level. We therefore
urge the government and legislators to adopt
a prudent and judicious strategy of employing
the highest possible bound rate so that it can
preserve its policy space to react effectively to
future and emerging marketing conditions.

We recognize that most of our rice imports

will come from ASEAN countries, particularly
Thailand and Vietnam, with whom we have
committed to impose a special tariff of only
35%. We urge the government to review
this commitment and, if deemed necessary,
negotiate for an adjustment in our tariff on rice
imports. It is worth noting that countries like
Japan and South Korea, which are much more
economically advanced than the Philippines,
have set their rice tariffs to very high levels of
778% and 513% respectively.

3) We believe that the NFA should be retained,

particularly its buffer stocking functions, to
ensure that stocks will be available in case of
calamities and emergencies. In this regard,
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there should be a legislated mandate for NFA to

maintain a certain volume of buffer stocks. We
also firmly believe that NFA should continue to
license importers, in order to prevent disorderly
manipulation of stocks and allow for a smooth
transition to rice trade liberalization.

We support calls for reforms within the NFA to

obviate reported anomalies, such as the alleged
diversion of stocks to commercial outlets, rigged
bidding for import contracts, and improper
disposition of stocks. However, the purported
corruption within the agency should not be used as
an excuse to dismantle the agency, which exercises
a very vital role in the food security of the country.

At the same time, we recognize the need to

reduce the losses of the agency while making its
interventions more strategic and effective. For
example, NFA’s distribution of subsidized rice
need not be conducted nationwide and could
be concentrated in poor and depressed areas.
NFA could procure from farmers at competitive
prices by periodically conducting auctions to
replenish its buffer stocks, instead of buying at
fixed prices. NFA could also develop services
that will plug gaps in the value chain, such as
by giving farmers access to its post-harvest and
marketing facilities, or developing a trading
system that will allow farmers to store their
produce in NFA warehouses and sell them
electronically to buyers in various parts of the
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country. Steps could also be taken to reduce

the operating costs of the agency and generate
revenues from services without necessarily
engaging in costly market intervention.

4) We fully support proposals to establish a Rice

Competitiveness Enhancement Fund (RCEF) to be
funded from tariffs collected on rice imports. This
will provide the DA with additional resources to
expand and intensify its programs to improve the
competitiveness and profitability of rice farmers as
the rice market is liberalized. Additionally, the fund
can be used to provide farmers with safety nets in
the event of natural calamities, market disruptions
and personal emergencies.

We support proposals to entrust the fund to

the DA, through the DA Secretary, who shall
formulate the guidelines and policies for the
usage of the fund in consultation with the
private stakeholders through the Philippine
Council for Agriculture and Fisheries (PCAF).
We propose the creation of a special PCAF
committee for this purpose which shall also
undertake private sector monitoring of projects
funded by the RCEF and and the DA in general,
and participate in the annual budgeting exercise
for RCEF. Funds from the RCEF should be
allocated for this participative process.

We are well aware of the problems that continue

to hound the Agricultural Competitiveness
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Enhancement Fund (ACEF) and we understand

the reasons why some legislators have opted to
pre-allocate specific percentages of RCEF for
specified support activities, or limit the amounts
that can be accessed by individual farmers or
farmer organizations. On the other hand, we
also feel that sufficient flexibility should be
allowed for RCEF usage so that the fund can
adequately fill up budgetary gaps or respond to
changing priorities as they emerge. One option
would be to pre-allocate say 80% of the fund to
key programs while leaving the balance of 20%
free to be used to augment program budgets
when deemed necessary.

We support proposals to use the funds for credit,

farm mechanization, postharvest facilities,
and research and development, and extension.
At the same time, we propose the following
additional options for the use of the RCEF:

a. Common service facilities and programs

that will have wide sectoral or geographic
impact, in addition to loans and projects that
benefit only individual farmers and farmer
organizations. These could include large
grains processing centers, laboratories for
soil and leaf analysis, machinery pools, and
an electronic trading system for grains;

b. Social protection programs for farmers

and their families that could include life
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insurance, pension, medical care and

hospitalization, maternity benefits and
educational assistance, and safety nets that
will help farmers cope with, and recover
from, calamities and personal emergencies;

c. In addition to simplified and accessible

credit for farmers, schemes that will reduce
the cost of borrowing and the risks of
lending institutions, such as subsidized crop
insurance, loan guarantees, reduced interest
fees, and early warning systems that will
provide both lenders and borrowers timely
information of impending climatic and other
natural disturbances;

d. Programs to help rice farmers diversify their

crops and income sources and not rely solely
on rice farming, and to provide assistance
to farmers who may decide or are forced to
leave rice farming to migrate to other crops
and/or livelihoods; and
e. Social preparation and organization of
rice farmers into strong and self-reliant
associations.

We believe that the RCEF, together with the

earmarking of rice import tariffs, should be
retained for as long as necessary and until such
time that local rice farmers can compete with
imports on a sustainable basis. An initial ten
(10) year life span for RCEF could be adopted,
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with the understanding that a thorough review

will be conducted before its expiry, and with
the option to extend its life span if deemed
necessary after the review.

We support proposals to immediately augment

the budget of the DA to fast-track important
competitiveness-enhancing programs while the
RCEF is still being set up and tariff collections
have yet to be accumulated. There is no reason
why the government should wait to QRs to be
lifted before acting on the threats that farmers
face from cheaper imports.

5) We support the calls for the early

implementation of the national single window
system for imports, together with the adoption
of more effective measures to curb smuggling
of rice, including technical smuggling,
misdeclaration and undervaluation of rice
imports. We propose that all confiscated rice
imports be turned over to the NFA and not be
disposed of through public auction.

6) We also support moves to designate rice as a

special safeguard (SSG) product in the WTO
so that we will have the option to impose
additional remedial tariffs on rice imports in
the event of an abnormal surge in imports
or a major depression in import prices. We
further urge the government to put in place an
effective trade remedy system that will allow us
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to impose countervailing duties on subsidized

imports or anti-dumping duties on exports of
foreign companies that sell rice below the price
they normally charge in their home market.

7) We would like to respectfully request Congress

to undertake more substantive and extensive
consultations with stakeholders, particularly
rice farmer organizations, before finalizing and
enacting legislation on the rice QR.

8) We view with concern the deliberate effort of

certain sectors and government policymakers
to put a large part of the blame for the current
inflation uptick on the high prices of rice which
have allegedly resulted from the continued
imposition of QRs on rice imports.

First of all, the increase in rice prices was due

to the refusal of members of the NFA Council
to allow the NFA management to undertake
timely rice imports. When the NFA ran out
of subsidized rice stocks, the demand for
commercial stocks increased and triggered the
escalation in rice prices.

Secondly, the increase in rice prices mirrors

the rise in palay farmgate prices and could well
reflect the cumulative increase in the prices of
seeds, fertilizers and pesticides, and labor, plus
the inflationary impacts of the TRAIN law. It
would be patently unfair to now ask the farmers
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to sacrifice and absorb the burden brought about

by higher production costs. It should also be
unjust to offset the inflationary effects of the
TRAIN law by asking farmers to accept lower
prices for their products.

Thirdly, there is no assurance that rice prices

will go down significantly once the rice trade
is liberalized through the removal of QRs.
Importers will maximize their profits and sell at
the highest price they can, even if they bought
the rice for a very cheap price abroad. Hoarding,
price manipulation and cartelized trading will
not disappear; in fact, there is every possibility
that a large portion of the rice trade will be
taken over by well-financed speculators who
will instigate sudden movements in rice prices
in order to make a quick profit, regardless of its
effect on consumers. Further, a sudden surge in
the demand for rice imports from the Philippines
will invariably lead to higher international market
prices for rice, particularly because of the limited
volume of traded rice in the global market. If
large rice consuming countries like China and
Indonesia suddenly decide to import rice, the
Philippines might not even be able to source
enough rice from its traditional suppliers.

Finally, government planners should undertake

a deeper and more comprehensive analysis of
the effects of rice trade liberalization, so that the
necessary contingency measures can be put in
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place before the QRs are removed. At present,

government planners are simply claiming that
the QR removal will allow more and cheaper
imports to come in, leading to lower prices of rice
for consumers. However, their analysis does not
measure the long-run effects on rice farmers who
will then have to absorb lower prices for their
products, and on rural communities that will be
affected correspondingly. The reduction in farm
incomes may also spur the conversion of rice
lands to non-agricultural uses and irreversibly
threaten the long-term food security of the
country. Also, the whole rice market chain will
be affected as millers, traders, truckers, and other
service providers could be dislocated by the
influx of massive volumes of rice imports that
will displace local produce.

In conclusion, we contend that rice importation is not

the solution to the problems confronting the rice sector
in the Philippines, nor will it address the long-term food
security concerns of the country. Lifting the QRs on
rice imports is not the panacea to inflation or high rice
prices, as some economic planners have persistently
claimed. Making sustained investments in our rice
industry so that our rice farmers have a decent income
and livelihood and can compete with producers in other
countries, in a way that preserves the productivity of
our farms, is the only sustainable solution. It is the
solution that should have been done many years ago,
but has now become even more urgent as we liberalize
our rice market.
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RAUL MONTEMAYOR
Federation of Free Farmers (FFF)

OMI ROYANDOYAN
Centro Saka

BONG INCIONG
Alyansa Agrikultura

HAZEL TANCHULING
Rice Watch Action Network (R1)

JAIME TADEO
PARAGOS Pilipinas

MANUEL ROSARIO
PKSK

ELVIRA BALADAD
Policy and Legislative Advocacy Group
On Food Security and Peasants’ Rights

AMPARA MICIANO
Pambansang Koalisyon ng
Kababaihan sa Kanayunan (PKKK)

ARZE GLIPO
Integrated Rural Development Foundation

DAVID SANTOS
Ka Tribu ug ang Lasang Foundation

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OSI REYES
Cacao/Coffee Alliance

RIA TEVES
National Food Coalition

JANSEPT GERONIMO
Katarungan

MALOU CUETO-TAPIA
Rights Network

JUN PASCUA
PKMM

FR. EDU CARIGUEZ

National Social Action Secretariat (NASSA)

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