Consensus reached over NFA reform
By Melissa Luz T. Lopez, Reporter | Posted on August 29, 2016
A PLAN to strip the National Food Authority (NFA) of the power to buy and sell rice has now taken a concrete shape, with economic managers of the Duterte administration arriving at a consensus that the grains agency must stay as a regulator.
Under the plan, the NFA will stop importing rice bought at a high cost from overseas but sold locally at low prices — a long-time practice that bloated the agency’s debt, the Socioeconomic Planning chief said. Instead, rice importation will be left to private traders but under tight watch by the NFA whose primary mandate is to ensure the country has ample buffer stock.
“Our collective decision — to be proposed to the President and I’m sure he will like it — is to remove the proprietary and commercial activity of NFA and focus on its core function of regulation,” Mr. Pernia told reporters late last week in an interview at his office in Pasig City.
“They’re (NFA) not going to be engaged in buying and selling, and they will just focus on regulation and ensure adequate buffer stock. They should have a buffer stock.”
“We’re trying to push it now because it has to be done, otherwise the bleeding will continue.”
Apart from Mr. Pernia, others in the meeting were officials from the departments of Finance, Agriculture, and Budget and Management.
Last week, Finance chief Carlos G. Dominguez III also said other government-owned and -controlled corporations will undergo restructuring, particularly to delineate regulatory and commercial functions to make state-run firms compete less with private businesses.
The planned NFA reform would arrest the ballooning debt of the agency — currently around P165 billion — given its practice of buying high and selling low.
“The imported rice is always cheaper than homegrown rice, it’s very expensive to grow rice in our country,” the Cabinet official said.
“It’s a good time to do it now, because President Duterte has strong support in Congress… Many things have to be done now that he still has that large political capital.”
NFA rice is being sold at P27 per kilogram for regular milled rice, and P32 per kilogram for well-milled rice.
The agency ended with an P871.884-billion loss in 2015, data from its Web site showed.
Rolando T. Dy, executive director of the Center for Food and Agribusiness of the University of Asia & the Pacific, said of the beefed-up plan: “It is the right way. Reform is long overdue.”
“Removal of commercial function means less losses from buy palay high and sell rice low. NFA can be a profitable logistics agency by leasing facilities to farmers and traders on fee-based basis. NFA can earn from management fee from the buffer stock function,” Mr. Dy toldBusinessWorld.
Roehlano M. Briones, senior research fellow at the Philippine Institute for Development Studies, likewise agreed.
“Combined with trade liberalization, this means cheaper rice and fair competition in rice marketing. It will reduce fiscal burden under the existing scheme,” Mr. Briones said.
AMENDING THE CHARTER
“NFA has certain assets that can be sold, assets all over the country, land and buildings, so those can be liquidated or sold to partly pay for the debt,” Mr. Pernia added when asked if the national government is ready to absorb the liabilities of the state-run firm.
He clarified that the Cabinet’s decision was still “preliminary,” as the plan must still be approved by the President and will need an accompanying law that amends the NFA’s charter.
The NFA serves as the government body to stabilize the supply and price of rice, the country’s staple. To do so, it must maintain a 30-day stock during the lean season and a 15-day buffer at any given time.
The Philippines is primarily an agricultural economy, but is also the world’s third-biggest rice importer.
Weeks before taking office, Agriculture Secretary Emmanuel F. Piñol said last May that he will ban private firms from importing rice to stop rampant smuggling, and will instead entirely relegate that task to the NFA. Mr. Piñol later backtracked on that statement and clarified he will allow private traders to import the grain after all.
The NFA regulates rice importation by issuing permits and allocations to private traders through auctions. However, some importers have said that such a practice has been abused, with permits being recycled, sold, or awarded only to “favored” players.
“There’ll be a lot of objections, marami ring gusto i-maintain ang NFA because it is a milking cow (but there are advocates for keeping the NFA because it is a milking cow),” Mr. Pernia said.
Efforts to amend the NFA Charter were revived during the 16th Congress, with lawmakers proposing to increase the agency’s capital to P20 billion from P5 billion to subsidize rice prices for poor consumers. The proposed legislation also directed the national government to absorb the agency’s losses. However, the bill did not see past committee level.
Currently, the country imports additional stocks through government-to-government transactions. The Executive last week gave the green light to import 250,000 metric tons of the grain from Vietnam, Thailand, and Cambodia to boost local buffer stocks, Reuters reported.
This forms part of a total of 1 million tons of rice through next year, taking advantage of low prices in Vietnam and Thailand as the government eyes to beef up its buffers.
The Philippines imported about 1.8 million tons of rice last year. — with inputs fromJCL
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