NO FREE LUNCH

We need rifles, not shotguns

By: Cielito F. Habito | 12:32 AM July 15th, 2016

I’ve been writing much lately about rice, and agriculture in general, because what we’ve been doing wrong all along on that commodity and that sector has wrought an inordinate amount of damage on our economy and on our people through the years.

What have we been doing wrong? I will just discuss three things here, even as I could name much more. First, we have for too long insulated the domestic rice market from the international market for the commodity by tightly controlling imports via the National Food Authority (NFA). Second, we have persisted with a highly expensive, distortive and yet ultimately ineffective “buy high, sell low” policy on rice—that is, buy high from farmers but sell low to poor consumers. Third, and largely resulting from the second, we’ve spent far too much taxpayer money—an estimated two-thirds of the Department of Agriculture’s commodity budget—on a commodity that contributes less than one-fifth of our agricultural GDP.

What wrong have these done to us? On the first, Filipinos pay about twice as much for rice as they need to, something I’ve already written much about in my last two columns. And this has inordinately hurt our poor and impaired our people’s food security, while hurting the rest of the economy in the process. Over time, the high price shield seemingly lulled the government into complacency in its task of helping rice farmers become as productive and cost-competitive as their counterparts in our exporting neighbors. On the second matter, scholarly analyses have long shown that the “buy high from the farmers” policy has actually had little impact on poor farmers. This is because total NFA purchases account for only around 7 percent of production, while a large part of the subsidy leaked to better-off farmers and nondeserving traders. On the other hand, the same studies have shown that the “sell low to (poor) consumers” policy has also had little consequence on the welfare of the poor. This is because NFA rice accounts for only about 11 percent of total rice purchases, while again subject to high leakage of the subsidy to the nonpoor who don’t need it. And on the third issue, we have ended up neglecting the commodities on which the poorest of Filipinos depend, namely coconut and fisheries, giving them way too little attention and budget—in the case of coconut, even the least. And yet from the last data available, we had more coconut farms (1.4 million) than rice farms (1.35 million) nationwide, with roughly similar total land areas planted.

But wait, there’s more. What we’ve done wrong in rice and agriculture goes well beyond agriculture and rice policy. Consider this: Over the years, Filipino rice farmers have received farm gate prices that are on the average 47 percent of the wholesale price for their commodity, based on United Nations Food and Agriculture Organization data. That is, Filipino rice farmers ultimately receive less than half the value that their product sells for at wholesale. For Thailand, the same ratio is 63 percent, while India had 62 percent and

China 94 percent (the last indicates a sizable subsidy to farmers). In short, Thai, Indian and Chinese rice farmers can obtain a far greater share of the final price of their products than Filipino farmers are able to. In our neighborhood, only Indonesia has a ratio similar to ours, suggesting that our being archipelagic countries may have great bearing on the issue. Margins between wholesale and farm gate prices are indeed bound to be larger where it’s more costly to transport the product across the country, from surplus to deficit regions.

But for the longest time, we have allowed the situation to persist where it is cheaper to transport grain to Manila from Bangkok, or even California, than from Mindanao, due to inordinately high domestic shipping costs. Any wonder why smuggling rice is so attractive, when on the basis of shipping costs alone, bringing rice into Zamboanga from Cambodia makes more business sense than bringing it in from Nueva Ecija or Iloilo, even assuming equal production costs? Lack of competition in domestic shipping has traditionally been blamed for this anomaly, but our Constitution prevents us from overcoming age-old cabotage restrictions because our law defines domestic cargo shipping as a public utility, hence barred from foreign ownership.

An important solution might be to further improve and widen the coverage of the interisland roll-on-roll-off trucking network (the original Ro-Ro, before it became a political tagline), but this won’t make the problem go away.

Yes, the domestic shipping industry is important and strategic, but we should be helping it more directly, rather than protecting it in a way that hurts everyone else in the process, not just rice. Alas, our policy environment is replete with such “shotgun” policies that inflict much collateral damage to the rest of the economy and society, when we should be using focused “rifle” policies instead. The misguided rice policies I’ve listed do exactly the same thing; they are essentially shotgun policies that should be replaced with more targeted policy interventions so that the rest of the economy need not be dragged down.

Truly, the Department of Agriculture, and equally importantly, our local governments, need to clean up their act to finally get the farm sector from dragging the rest of the economy down. I believe Agriculture Secretary Manny Piñol and Interior and Local Government Secretary Mike Sueño are determined to work on it. On this, I will repeat a favorite quote from Albert Einstein. He defined insanity as doing the same things over and over, and expecting different results.

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Source: www.opinion.inquirer.net