When Congress unanimously voted for the passage of the Rice Tariffication Law, it envisioned making rice readily accessible to the general public. Making rice accessible means securing sufficient supply and stable prices of the national staple in the market. When inflation hit the country at the tail end of 2018, the instinct of the legislators was to act quickly to address the elephant in the room: rice shortage. Republic Act No. 11203 made rice more accessible to the general public by liberalizing rice importation in lieu of the regime of quantitative restrictions. Although overdue, the reform was necessary to dismantle the National Food Authority’s monopoly over rice trading activities and to make the protection of the rice sector more transparent via tariffs.
The dip in consumer prices was pronounced. This meant that even during the height of COVID-19, food prices (particularly rice prices) were stable.
The law did not only attempt to address some systemic flaws, but it also supported the local rice industry through the creation of the RCEP. Revenues derived from importation fund the implementation of the Rice Competitiveness Enhancement Program (RCEP). With annual allocations pegged at PhP10 billion, beneficiaries are assisted through the provision of seeds, farm technologies, financing, capacity building, and amid plummeting farmgate prices, cash transfers. Farmers generally did receive expected benefits from the Rice Fund. On net, however, farmers did not perceive the benefits as being commensurate with the losses incurred from falling prices. This fact remains a hanging deliverable for the Congress, the Department of Agriculture and its attached agencies, and the private sector.
Suffice to say, the Rice Tariffication Law is not a silver bullet. The RTL, despite its significance, is not a “be-all, end-all” solution to the age-old problems that beset the rice sector. The removal of quantitative restrictions, hand in hand with the tariffication of rice imports, as enshrined in the RTL, are undeniably both disruptive and transformative. This is but the first necessary step to improve rice production and efficiency. The second step is ensuring its effective implementation and that beneficiaries of support programs are correctly targeted and duly attended to.
The devil is in the details, to wit:
- Rice farmers were adversely affected by low farm gate prices of palay A dip in farm gate prices was observed for the year 2019, but eventually recovered going into 2020. At the onset of the COVID-19 pandemic, farm gate prices even rose to pre-pandemic levels. Notice that dips in prices follow a very seasonal pattern, even before RTL and COVID-19. Due to an absence of drying equipment and facilities, some farmers sold wet palay of varying quality. As a consequence, farmers do not have much bargaining power when negotiating prices with traders. Something that RTL also lacks is a reliable forecast that farmers could rely on in predicting the seasonal trends in farm gate prices and import arrivals. We cannot emphasize enough the role of data in this context. Information on cost of production is crucial in order to evaluate the impact of RCEP on farmers’ income and welfare. The large initial capital cost of farming, paired with the fall in prices, resulted in meager to breakeven profits. Cash flow is a recurring concern.
- RCEP beneficiaries reported mixed feedback on delivery of the program
The impact on rice farmers must be acknowledged, however. The income losses were primarily recorded in 2019, and seem to have been largely transitory. Prices now seem to have normalized, albeit at a lower level than before.
The recommended solution to help the farmers, considering these developments, is to provide direct cash transfers, while boosting their productivity and profit margins through the timely and effective delivery of the RCEP.
As we strive to make the RTL work, multiple concerns have been raised regarding the targeting, timeliness, scope, and effectiveness of many of the RCEP components:
- Delayed initial roll-out and inconsistent targeting due to gaps in the Registry System for Basic Sectors in Agriculture;
- Missed or late delivery of seeds, which were often inappropriate with the current wet/dry season, meant inefficient and unutilized resources;
- Despite the slow roll-out of mechanization, farmers did eventually receive machineries which helped in their yields. However, a needs-based approach to its provision has to be further advocated;
- High cost of fertilizers is a growing concern, an important production input left unsubsidized under RCEF, and;
- Improved, yet generally insufficient, access to financing through favorable loans and aid. Rule 13.13 of the Law’s implementing rules and regulations mandates the setting up of the Rice Fund Impact Monitoring System (RFIMS) in order to monitor the impact of the implementation of RCEP on the farmers’ welfare. Implementation of such reforms must continuously be data-driven. We have yet to get information if the DA has established the RFIMS, which should have been put in place after a year of the issuance of the RTL’s IRR.
3. Farmers expressed concern over the sustainability and profitability of the industry
Evaluating the policy in a general sense, RTL helped to make prices more affordable. In the context of COVID-19, low and stable rice prices meant that less families would have to go hungry when faced with the uncertainty of a global pandemic. The policy seems to have met its objective for the general population. However, such a narrative isn’t observed for the agriculture sector and its stakeholders just yet.
Declining growth in the value of production in agriculture, specifically in palay from 2017 onwards, shows that even before RTL, the Rice Sector and Agriculture as a whole were already experiencing problems. This is directly tied to the rising prices in 2018. When RTL was passed, our rice sector was already experiencing negative growth.
After the first few months of the RTL’s implementation, we can see that growth rebounded. In fact, in 2020, the year that COVID-19 hit hard, the economy experienced staggering declines while agriculture remained steady and showed resilience and the rice industry actually experienced positive growth.
The RCEP has demonstrated its potential by injecting direct support to the rice sector. This is something that we ought to sustain, and whatever amendments we might want to consider should be in line with the objective of further improving the strategies and spirit of the law.
4. Cooperatives play a crucial role in supporting rice farmers and tiding them over constraints Cooperatives are good at consolidating the farmers’ produce and are better at negotiating with traders than any individual farmer on their own.
Through support programs cascaded through farmer cooperatives/associations (FCA), members leverage from the benefits of scale economies which are best observed in consolidated production clusters and farmer-members. To incentivize and strengthen cooperativization, the Department of Agriculture should explore ways to provide economic benefits for the membership of farmers in cooperatives that engage in capital financing and marketing support. Many of the close-knit cooperatives also extend assistance during times of financial constraint. Farmers also benefit from entrepreneurial, financial, and skills training.
Cooperatives should also be encouraged to participate in policy discussions, specifically in setting the parameters in measuring “impact.” This encourages unity and collaboration among policymakers and stakeholders for a systemic analysis on the impact of government interventions for the rice sector. Otherwise, there will always be a debate on whether a program is beneficial to the farmers and consumers or not.
The above recommendations are within the bounds of the Rice Tariffication Law. Overall, the reform is a win by itself. However, it is a policy doomed to fail when policymakers turn a blind eye on the binding constraints that the RTL left unaddressed. For this, other complementary policies like a second look at the teeth of the Philippine Competition Commission to go after marketing cartels, an amendment of the NFA Charter to fine tune its role given the new policy environment, and putting the National Irrigation Administration under DA are urgently needed to complement the reform that RTL started. Hopefully, this will protect farmers from welfare losses while securing welfare gains for our consumers.