Business World, 18 March 2019


Despite the rice tariffication law or RA 11203, there is a chance rice prices can go up this year if the government fails to manage well the changes it causes. The law is about a month old. But from what I know, it is not implemented yet.

Its implementing rules and regulations had not been issued yet. Those assigned to issue the IRRs — the DA, NEDA, and DBM, particularly the first two — are still exchanging views on few remaining issues like who decides on and how to set the special safeguards duty; how to allocate the minimum access volume of imported rice; or how to implement the spending from the rice competitive enhancement fund or RCEP, amounting to P10 billion yearly.

There is no question that the IRRs must be crafted well to ensure a good implementation of the RTA law. We all have a stake in it, our food security. But I do hope that they issue the IRR next week.

Why? We are now in the middle of March, three and a half months before the start of the rice-lean quarter of the year. If we recall, under the old policy regime the NFA has to have rice stocks worth at least 30 days by July 1 to stabilize rice prices.

But what about the task of making sure we have enough rice to keep rice prices from spiking as we approach the lean months of the year? With the RTA law just about ready to be implemented, the NFA management would no longer consider itself accountable for that task.

If we don’t have adequate rice supply by July, then we are back to the situation we were in 2018. Rice prices went up then because the NFA did not import rice on time.

The RTA law replaces the NFA’s imports with private sector imports of rice. It dismantled the import monopoly of the agency in rice. Any one of us can start a rice import business and the only restrictions we have to comply with in importing rice is that we apply for a sanitary and phyto-sanitary clearance from the Bureau of Plant Industry, and pay the customs duty, which is 35% if rice is imported from the rest of ASEAN.

Policy analysts would easily agree that private sector imports of rice would effectively ensure that the country can have enough rice by July 1 this year under the new law.

If there is enough time to import rice before then, if we manage this change in rules well. But the problem is the Joint Departmental Circular prescribing the IRRs for the RTA law is not issued yet. Private sector importers could not initiate the import business without the IRRs. And the way we are proceeding, we are getting closer to July 1 without adequate rice stocks. By now the rice imports of NFA last year had already been used up or whatever remain of it is not enough for this year’s requirement for stabilizing rice prices. If the change had not happened, by now the NFA should have placed its order to import rice. But it would not do that precisely because the RTA law has changed the rules.

So there is urgency in issuing the IRRs. There is always time to refine the IRRs. Filipinos would certainly not be happy to see the IRRs in April or May 2019, only to find out also that rice prices would start to go up because there is not enough rice in the country today.

Assuming the IRRs are issued next week, the NFA Council, which remains to be a policy-setting body created by Presidential Decree 4 as amended, has a task to do. It should monitor the supply-use situation in rice. With the IRRs issued, the government may have enabled the rice importers to start importing rice, but do we know for sure all these are ready to bring in, analysts estimated, nearly three million metric tons of rice?

I doubt that the figure would happen this year. But even if we import just half of that volume, there should be enough buffer to prevent price speculation by those who have the local rice stocks this year.

In managing this change, the NFA Council or whoever it would deputize to do this should check with the Bureau of Plant Industry the applications for SPS and the respective volume of rice imports. That should give us a first source of information in finding out intended rice imports in the next few months.

Secondly, it should monitor with the Bureau of Customs arrivals of rice imports. This information is crucial, as it gives policy makers the data to update the country’s supply-use table for rice.

A possible shortfall in rice stocks may happen simply because there is transactions cost that the private sector faces in this import business. They may first try out with a smaller volume, and if all of them adopt this precautionary attitude, then import arrivals may not be enough to stabilize rice prices this year.

Fortunately, the RTA law had prescribed for unlimited rice imports from ASEAN at 35%. The rice importers would not see a need for applying from whomever the right to import the minimum access volume. In fact, the ASEAN rice duty is the lowest we have and that facilitates private sector imports from ASEAN.

Compared with other laws, this one is relatively fast. In about a month from President Duterte’s signing into law of the RTA, there is already a very good draft of the IRRs that is being circulated for final comments. If I am not mistaken it is just about ready to be issued. The agencies responsible for the IRRs had worked very hard to meet this deadline, other laws have had much months spent before the authorities issued the IRR.

But let us just suppose some issue divides the NEDA and the DA, delaying the issuance of the IRRs. The NFA Council has the important task to do in coming up with Plan B, now that there is no longer the NFA which carries out this task. I suppose the NFA can still legally import rice for as long as the RTA is not implemented yet due to a delay in coming out with the IRRs. But the agency just has more to worry for now, after the RTA law stripped it of several regulatory powers under PD 4.

The RTA law is a game changer in how we do agricultural development in our country. We had waited for it for nearly a quarter of a century, since 1995 when we applied for special treatment in the WTO. Now that the reform has finally arrived, it can still evaporate into thin air with the government’s mistake in managing the change it causes, and its benefits snatched away from us.