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Saturday, September 21, 2019

Ex-Cabinet official goes against the grain on rice importations

WHILE the 10-point economic agenda of the Duterte administration is highly commendable to many, an economist sees some gaps that may hamper the Philippines’ path toward sustained prosperity.

In an interview, Cielito Habito, economist and former socioeconomic planning secretary during the presidency of Fidel Ramos (1992-1998), said one of the weak spots of the Philippines is its current policy on quantitative restrictions on rice imports.

“We have a trade policy that gives the National Food Authority (NFA) a monopoly on rice imports and the effect on that is that rice in the Philippines is twice as expensive (as that in neighboring countries in Southeast Asia). The impact on that on the poor is tremendous,” he said in an interview on the sidelines of the Bangko Sentral ng Pilipinas’ (BSP) Gearing Up for External Competitiveness forum in Cebu City Marriott Hotel yesterday.

A quantitative restriction or QR is a special advantage granted by the World Trade Organization (WTO) to the Philippines, which was initially intended to allow local farmers to catch up on rice production by setting a limit on the amount of rice that can be imported.

Lifting it, however, would translate to a free flow of rice imports to the Philippines without a minimum access volume (MAV). Most of the country’s economic managers believe this will translate to lower prices of rice. Others, however, maintain that this will put local farmers at a disadvantage.

With the QR now, the MAV is set at 850,000 metric tons.

The QR will expire on June 30. The WTO previously allowed the Philippines to extend the deadline for the QR twice. First, it was extended in 2005 for 10 years, and when the 2015 deadline came, the government requested for another two years extension.

For Habito, lifting the QR would mean more affordable rice.

Vietnam, which has the lowest production cost for rice, has an average market price of P21 per kilogram. In the Philippines, the cheapest rice varieties cost around P35 per kilogram.

“Most Cabinet members have recognized that QR should be removed. But there is a law that needs to be amended to do that,” the economist added.

Extreme positions

Another challenge to this administration is its tax reform proposal, which has met opposition from some members of Congress. Among the most controversial provisos, so far, is the removal of tax exemptions on cooperatives.

Habito said that since the Department of Finance proposes to lower the income tax to 20 percent, it is only proper that the government removes some tax exemptions on some sectors.

Another challenge, he said, is the Duterte administration’s tendency to take “extreme positions” in labor, with the issue of ending contractualization, as well as on the environment. Duterte’s appointee to head the environment department, Gina Lopez, has been rejected by the Commission on Appointments.

“Government policymaking is a balancing act. You cannot be in extreme positions,” the former Cabinet official advised.

He said there was no need for Cabinet secretaries with different positions to disagree publicly. For instance, Socioeconomic Planning Secretary Ernesto Pernia supports the lifting of the QR on rice, while Agriculture Secretary Manny Piñol wants another extension.

Instead, Habito advised these officials discuss these matters in private so as not to confuse the public.

Generally, however, prospects for the Philippine economy remain bright. In the end, Habito said, it is the implementation of the government’s socio-economic agenda, especially on infrastructure development, that matters most.
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