Aquino, Justin T.

Cinco, John Michael Y.

The rice industry and the local farmers are expected to be affected for better or worse and
they are embracing it by the rice tarrification law or Republic Act of 11203. The law entitled as
“An act liberalizing the importation, exploration and trading of rice lifting for purpose the
quantitative import restriction on the rice and for the other purposes” was signed by President
Rodrigo Roa Duterte on February 14, 2019. Duterte declared the issue as “urgent” because of the
need to improve the availability of rice in the country to reduce the price of the rice due to rice
caused the rice to P70 kg last year. The implementation of the rice is a burden for the local farmers
that will lead them to sell their farm lands.

According to the rice competitiveness enhancement fund(RCEF) a fund from the tariff
revenue of rice imports will be use to provide an intervention and support to the farmers to further
strengthen and develop the rice industry, the fund will be allocated to the different rice producing
sectors as follows 50% will be provide for the development, Propagation and promotion of inned
rice seeds under the sector other Philippines will be given the 10% of the fund to lead to the
farmers will have minimal tae of the interest: and the agricultural trading institute(ATI) and
technical education skill development will be given 10% of the fund to teach on farmers to rice
crop, production , modern rice farming techniques seeds population farm mechanization. The law
will lower the prices in the market and resolve the inflation by importing a lot of rice from the
other countries.

The Filipino local farmers are horribly affected by law that will make them to compete to
the cheap prices of the imported rice. Private traders will force to buy low because they will have
to compete not only with the cheap price of imported rice bt also with the NFA rice. They will
hesitate to buy “palay” at fair rice price. The local farmers income is in threat and forcing them to
sell their “palay: to the government at the very low price.

The law kills the livelihood of our farmers by importing a lot of rice from the other
countries and because of importing, the Pilipino farmers are really struggling because price is just
P7 per kilo and around 24.4 million of farmers become poorer because of this law. Sen. Pangilinan
said that “rice farmers all over the country have made the same conclusion: at this point,
unrestricted rice imports without the immediate support for the rice farmers is killing them and the
industry and this can lead for the famers to sell their farm land.

Our local farmer from Pangasinan, Gorgonio “Miguel” Ferrer is struggling due to the
implementation of the rice tarrification law. He might sell his farm lands because he can only earn
a profit of P183.96 per day. Famers in the local earn less as farm gate prices of “palay” can drop
as low as P7 per kilo from P12 per kilo. Ferrer askes “kaya bang makabuhay ng isang pamilya and
ganito? Mapapag-aral ba ang aking mga anak? Sinong gugustuhin magpatuloy na mag-saka kapag
ganito paiiralin ng namumuno?” This kind of situation will lead to the local farmers to sell their
farmlands.
 The rice tarrification law tend to resolve the inflation, even though it resolved the issue of
inflation it result into another problem, this law gives a lot of negative impact to our farmers, yes
we can give a lot of benefits in the rice tarrification law, but in a long period of time. Pilipino
farmers are suffering because of this law. “It is ironic that farmers are the one who feeds the nation
and yet they cannot feed themselves,” feeding said, this law kills the livelihood of our local and
poor becomes poorer and the worse is that Pilipino farmers sells their land farmland. Our country
is not yet ready to act before it’s too late, if this law will continue the act we might wake up that
there are a lot of farmers who sells their lands because of struggling.

Tobias, A. M. (2019). The Philippine Rice Tarrification Law: Implications and Issues. Retrieved
from https://www.bworldonline.com/farmers-complain-release-of-nfa-stocks-will-depress-
prices/

Business World. (2019 September 16). Farmers Complain Release of NFA Stocks will Depress
Prices. Retrieved from http://ap.fftc.agnet.org/ap_db.php?id=960&print=1

Business World. (2019 September. Understanding Rice Tarrification. Retrieved from

The Philippine rice sector has always been the center of government agricultural policies. The
focal points of the policies revolve around promoting food self-sufficiency, providing high
income to rice farmers while making prices affordable to the consuming public. The accession to
WTO provided for the revision of the quantitative restrictions (QRs) and reduce tariff protection.
Rice was exempted from tariffication. The Philippines opened up imports on rice under a
minimum access volume (MAV) which is in operation equivalent to QRs. The QR regime
mandated for conversion into tariff protection from 2005- 2012 and a waiver to maintain QR up
to June 30, 2017. The Philippines’ membership to the WTO for 24 years aimed to counter the
impact of the expected influx of cheap rice imports. The Rice Tariffication Law signed into law
by President Rodrigo Duterte on February 14, 2019 amends the Agricultural Tariffication Act of
1996 that imposed tariff to agricultural imports except for rice. The law was prompted because
of the surging inflation of rice price during the last quarter of 2018 after the rice stocks of NFA
ran out. As Filipinos continue to struggle with inflation, the government found ways to temper
rising inflation.

Overview of Philippine rice industry

The Philippines became self-sufficient in rice in the 1970s and was a rice exporter to neighboring
countries such as Indonesia, China, and Myanmar. However, with the rapid increase in
population and limited land resources to produce the total rice requirement, the country slowly
turned into a net rice importer. The Philippines is the second largest rice importer in the world
next to China (Simeon, 2019). In 2017, the country imports rice mainly from Vietnam (52%) and
Thailand (29%) (Santiago, 2019).

Rice is a highly political commodity because it is the country’s main staple. It has always been
the center of government agricultural policies. The focal points of the policies revolve around
promoting food self-sufficiency, providing high income to rice farmers while making prices
affordable to the consuming public (Tobias et al., 2011)

The Philippines in the WTO

In 1995, the Philippines acceded to the WTO with the premise of revising QRs and reduce tariff
protection. Rice, however, was exempted from tariffication. The Philippines opened up imports
on rice under a minimum access volume (MAV) which is in operation equivalent to Quantitative
Restrictions (QRs). The QR regime of the Philippines was mandated for conversion into tariff
protection. The country obtained a special treatment for rice up to 2005, which was later on
extended until 2012. The Philippines has been applying for extensions of QR on rice since 1995.
Eventually, the Philippines acquired a waiver to maintain QR up to June 30, 2017.

The Philippines’ membership to WTO for 24 years aimed to counter the impact of the expected
influx of cheap rice imports. The country apparently has been extending protection primarily to
safeguard the local rice farmers from increased competition of imported rice. Another reason the
 Philippines had been pushing for a two-year extension of the restriction is to achieve rice self-
sufficiency by 2020. However, given that QR on rice shall be retained, consumers shall continue
to bear the burden of overpriced rice, with the poorest households bearing the burden. Based on
the 2012 Family Income and Expenditure Survey, the richest 20% of households only devote 3%
of their spending on rice while poorer income groups tend to allocate greater share for rice
(PIDS, 2012).

THE RICE TARIFFICATION LAW

The Rice Tariffication Law titled “An Act liberalizing the importation, exportation, and trading
of rice, lifting for the purpose the quantitative import restriction on rice, and for other purposes”
was signed into law by President Rodrigo Roa Duterte on February 14, 2019. This is also known
as the Rice Liberalization Act or Republic Act No. 11203, which amends the Agricultural
Tariffication Act of 1996 that imposed tariff to agricultural imports except for rice. Primarily, the
law aims to lift the quantitative restriction (QR) on rice imports and replace it with a general
tariff. The Agricultural Tariffication Act of 1996 served as the Philippine government’s
compliance to our obligation to WTO, lifting QRs and imposing tariff to agricultural products.
The law aims to protect local farmers from the entry of more imported rice into the country
through the imposition of 35% tariff on rice coming from member-countries of the Association
of Southeast Asian Nations (ASEAN) like Thailand and Vietnam. For non-ASEAN countries,
40% tariff is imposed. The collected tariffs will be used to fund mass irrigation, warehousing,
and rice research.

Objectives of the tariffication law

1. Fulfill our international commitment when we joined the World Trade Organization in 1995.
Replace the QR on rice with another form of protection that is more transparent and generate
revenues to support the sector – or a tariff.
2. Ensure the availability of rice in the domestic market for the accessibility of greater majority of
the population by allowing more private traders (big or small) to participate in importing rice.
3. Lower domestic rice prices to levels that would be affordable to greater majority of the
population.
4. Make domestic market function effectively and efficiently with much reduced/no government
intervention.
5. Provide farmers equivalent protection with the imposition of 35 % or higher tariff rates on rice
imports and preferential assistance to rice farmers, adversely affected by tariffication.
6. Provide opportunity for farmers to earn more in the world market. The law also lifted the
restriction on rice exports to encourage farmers to produce much better quality heirloom/
traditional rice geared to exports.

Key provisions of the rice tariffication act

1. Tariffication. Tariffs are set at 35% tariff rate on all rice imports from ASEAN countries, and a
50% tariff on all imports from non-ASEAN countries.
2. Lifting of quantitative restriction on imports and exports. Removal of the QR will also
increase imports and depress “palay” prices.
3. Powers of the President. Upon the recommendation of NEDA and as advised by the National
Food Authority Council (NFAC), the President “may increase, reduce, revise or adjust existing
rates of import duty up to the bound rate” of rice tariffs. In case of “imminent or forecasted
shortage,” the draft IRR provides that the President may allow the importation of rice at a lower
applied tariff “for a limited period and/or specified volume” to address the situation.
4. Creation of the Rice Competitiveness Enhancement Fund (RCEF). A fund that will be
created from tariff revenues of rice imports and will be used to directly support rice farmers and
fund innovative undertakings of the government to further strengthen the rice industry. It aims to
provide key interventions to support farmers and enhance their competitiveness and profitability,
including farm machinery and equipment to improve farm operations, rice seed development,
propagation, and promotion, expanded rice credit, and extension services. The RCEF will be
allocated to rice producing areas and earmarked as follows:
1. 50% will go to the Philippine Center for Postharvest Development and Modernization
(PhilMech) to provide farmers with rice farm machineries and equipment;
2. 30% will be released to the Philippine Rice Research Institute (PhilRice) to be used for the
development, propagation and promotion of inbred rice seeds to rice farmers and the
organization of rice farmers into seed growers’ associations engaged in seed production and
trade;
3. 10% will be made available in the form of credit facility with minimal interest rates and with
minimum collateral requirements to rice farmers and cooperatives to be managed by the Land
Bank of the Philippines and the Development Bank of the Philippines; and
4. 10% will be set aside to fund extension services by PhilMech, Agricultural Training Institute
(ATI), and the Technical Education and Skills Development Authority (TESDA) for teaching
skills on rice crop production, modern rice farming techniques, seed production, farm
mechanization, and knowledge/ technology transfer through farm schools nationwide.
5. Rice industry road map. The Department of Agriculture (DA), together with relevant agencies,
will have to formulate a Rice Industry Roadmap to spell out the critical interventions that need to
be put in place to assist the small rice farmers, especially those that will be most affected by the
tariffication. DA Secretary Emmanuel Piñol issued Special Order No. 358 which created a
National Rice Roadmap Team.
6. Issuance of Sanitary and Phytosanitary Import Clearance for Rice for the Sole
Purpose. The law allows unlimited importation of rice as long as private sector traders secure a
phytosanitary permit from the Bureau of Plant Industry and pay the 35% tariff for shipments
from neighbors in Southeast Asia. This covers even rice importation for the purposes of donation
during calamities and emergency situations. In these instances, the agency/office/organization or
private entities, if they are based in the Philippines, will be required to secure phytosanitary
import clearances (SPSIC).
7. National Single Window Program. A proposed measure the setting up of a single window
system for rice by the Bureau of Customs to address rice smuggling.
8. Exclusion and transfer of the regulatory function of the National Food Authority (NFA) to
the Bureau of Plant Industry (BPI). NFA will retain its power to maintain a rice buffer stock
which will be used in emergency situations and to sustain the government's disaster relief
programs. Rice for this purpose will be sourced solely from local farmers.
9. Special Rice Safeguard. The Implementing Rules and Guidelines (IRR) provides for a Special
Rice Safeguard to help protect local rice farmers from sudden or extreme price volatilities. These
will be imposed in accordance with RA 8800 or the Safeguard Measures Act and its IRR.
10. Priority beneficiaries of mechanization. There are 1,100 producing towns that have been
identified as priority beneficiaries of mechanization in the form of tractors, transplanters,
harvesters, dryers, and rice milling equipment.
11. Rice Farmer Financial Assistance program. Focuses on rice farmers, cooperatives, and
associations adversely affected by rice tariffication. Also allocates tariff revenues in excess of
Php10 billion to the Rice Farmer Financial Assistance program to compensate rice farmers who
will lose income as a result of the measure. A portion of the excess tariff will be allocated to
titling rice lands, expanded crop insurance, and crop diversification program.

Rice tariffication and inflation

The newly approved Rice Tariffication Law, approved by Congress on November 2018, will
remove the National Food Authority’s (NFA) power to import and distribute cheaper rice. With
Senator Cynthia Villar as the principal author, the measure was prepared jointly by the
Committees on Agriculture and Food, on Ways and Means, and on Finance. It is in substitution
of Senate Bill Nos. 1476, 1689, 1839, taking into consideration Proposed Senate Resolution Nos.
143, 146 and House Bill No. 7735, with Senators Ralph Recto, Leila De Lima, Joel Villanueva,
Risa Hontiveros, Grace Poe, Sherwin Gatchalian and Cynthia Villar as authors.

Pres. Rodrigo Duterte signed into law the Rice Tariffication Bill which was imposed recently on
March 5, 2019. The law was prompted because of the surging inflation of rice price during the
last quarter of 2018 after the rice stocks of NFA ran out. Further, according to Philippine
Statistics Authority (PSA) data, rice was the number one contributor to inflation in September
2018, while food items in the consumption basket accounted for more than half of the inflation
rate in the same month. Consumers bought regular-milled rice at an average price of Php
37.89/kg (US$ 0.72/kg) and well-milled rice at Php 41.93/kg (US$ 0.80/kg). Prices of rice have
continued to go up since then. Farmers enjoyed the highest buying price for “palay” which was
recorded at Php 22.00/kg. The rise in rice prices, both at the farm-gate and retail levels,
contributed significantly to inflation. As Filipinos continue to struggle with inflation, the
government found ways to temper rising inflation. One way of doing it is by passing the Rice
Tariffication Bill.

On the other hand, according to the National Economic and Development Authority (NEDA),
rice tariffication will directly benefit farmers and the poor through lower rice prices and
increased government assistance to the agricultural sector. The newly-signed law provides for
the establishment of the Rice Competitiveness Enhancement Fund (RCEF), which will pipe in
 Php10 billion (US$ 190.84) annually to the rice sector for the next six years. The RCEF is
allocated for the procurement of farm machinery and equipment, rice development, propagation
and promotion, as well as expanded rice credit and extension services.

Meanwhile, the NEDA is taking the lead in crafting the Implementing Rules and Guidelines
(IRR) of the Rice Tariffication Law along with the Department of Budget and Management,
Department of Agriculture, and other concerned government agencies to ensure the country’s
smooth transition to a new rice regime. This draft IRR takes into account the feedback and
concerns brought up by various stakeholders during the drafting of the bill and after it was signed
into law.

The following sections present the objectives, key provisions and possible implications and
issues associated with the enactment of the Rice Tariffication Law.

Effects of rice tariffication

Positive

1. Lower retail prices for consumers. Possible savings for the consumers as it allows no limit in
terms of the volume of imports which will eventually stabilize prices. However, in the long run,
the economy could benefit more from the adoption of import tariffs than implementation of QRS
which limit the entry of commodities and may lead to unstable prices.
2. Address the rice shortage. Would address the urgent need to improve availability of rice in the
country, prevent artificial rice shortages, reduce the prices of rice in the market, and curtail
corruption and cartel domination in the rice industry.
3. Lower inflation rates. The law will also reduce government's role in rice importation and lead
to more rice imports by the private sector, thus, lowering rice prices and help tame inflation.
4. Interventions to support rice farmers. RCEF will provide key interventions to support farmers
and enhance their competitiveness and profitability, including farm machinery and equipment to
improve farm operations, rice seed development, propagation, and promotion, expanded rice
credit, and extension services. Likewise, it will open up a window for farmers to export and
contribute to the world market.

Negative

1. New law lacks safety nets for Filipino farmers. Farmer groups clamor that the new law will
make them compete with cheap rice imports, making them more penniless. Measures should be
in place to ensure that Filipino farmers will not suffer with the rice tariffication law and that
"safety nets" are available for farmers. While it has its good points, the lack of government
regulation worries stakeholders.
2. Potential displacement of farmers, NFA employees, accredited NFA retailers, rice millers
and rice by-product producers. Aside from the obvious displacement of rice farmers, NFA
employees, and some 90,000 accredited NFA rice retailers nationwide, the deregulation of rice
 imports goes beyond the industry. Some of the businesses and industries that will be affected by
liberalized rice importation includes the following:
1. Millers. There are around 6,600 registered rice millers all over the country, employing 55,000
workers. Industry stakeholders, in a position paper, said that a complete milling facility costs
from Php 30 million (US$572,519.08) to Php 50 million (US$954,198.47)1 . This would place
the value of the whole industry itself at Php200 billion (US$ 3.82 billion) to Php300 billion (US$
5.73) ( (Orly Manuntag, Confideartion of Grains Retailers Association of the Philippines).
2. Animal feeds and beer industry. A by-product of the rice milling process, the rice bran is used
for making animal and aquaculture feeds. A shortage in local unhusked rice production would
also mean there would be a drop in its by-product. If feed mills produce less, it would cause a
possible increase in the prices of pork and chicken which use rice bran as major ingredient for its
feeds. Another by-product which comes from the milling process is the brewer's rice or “binlid”
which is used in manufacturing alcoholic drinks, particularly beer.
3. Biomass, construction industry. A drop in local rice output will also mean a decrease in rice
hull, which is used as fuel for biomass furnaces used in the provinces to provide electricity. Rice
hulls are also used as a binder for cement and land fillers (Orly Manuntag, Confideartion of
Grains Retailers Association of the Philippines).
3. Enable cartels of the rice trade and will throw poor sectors into a worsened state of hunger.
There is no guarantee that retail rice prices will be lower in the long run with unhampered
importation. Relying on rice imports makes the country vulnerable to higher world market prices
as well as to rice production and export decisions of other countries. In 2008, for instance,
Vietnam, India and Pakistan restricted their rice exports amid rising global rice prices. Thailand
also raised the idea of creating a global rice cartel similar to that for oil exporting countries.

Some salient issues on rice tariffication

1. Rice imports are cheaper than domestically produced rice. Under a free market, the market price
of rice will decline with the influx of cheaper rice imports.
2. Liberalizing rice imports will help, but will not solve the Philippines' inflation problem.
3. Tariff are set at 35% tariff rate on all rice imports from ASEAN countries, and a 40% tariff on all
imports from non-ASEAN countries. However, some experts claim these tariff rates are still too
high, and lower rates (10% to 20%) might be more feasible in keeping with the central goal of
making rice more affordable for Filipinos. While this will result in imported rice becoming more
expensive, the flood of imported grains will still threaten local produce and worse, affects the
farmers.
4. To ensure that the rice to be imported will not be infested by pathogens or pests
like bukbok (weevils), the new law requires that all private players secure “sanitary and
phytosanitary import clearances” from BPI before they can import. Past experience tells us that
this could be prone to abuse (Dr. Ramon Clarete, University of the Philippines School of
Economics).
5. The Rice Fund will be put to better use if it were focused instead on improving rice farmers’
access to credit and crop insurance (Dr. Emil Q. Javier, National Academy of Science and
Technology).

CONCLUSION AND RECOMMENDATION

Much has been said on the ratification of the Rice Tariffication Act. However, the main concern
is the negative impact of the rice tariffication law on local farmers, saying that the “over supply”
of cheap rice could adversely affect them following its implementation. On the other hand, the
law is seen to help expand the access of Filipinos to cheap rice that in return will prevent
inflation pitch brought in large part by the supply. Nevertheless, the core concern of the
government should be on how to prevent 2.4 million rice farmers and farm workers from getting
poorer because of the implementation of the new law. Although special key provisions are
already laid out to protect the farmers and the consumers, the focus is on the proper
implementation so that everyone should benefit from the law.

The newly-signed law provides for the establishment of the Rice Competitiveness Enhancement
Fund (RCEF), which will pipe in Php10 billion (US$ 190.84 million) annually to the rice sector
for the next six years. The RCEF is allocated for the procurement of farm machinery and
equipment, rice development, propagation and promotion, as well as expanded rice credit and
extension services. RCEF is a package of support programs to help the farmers and serve as
safeguard to cushion the sudden effects of inflation. However, it is imperative that DA to
strongly support the local rice industry and diligently perform its mandated functions in
identifying eligible beneficiaries which include farmers, other farm workers, rice cooperatives
and associations. Most importantly, in crafting the IRR, research and development should be
highlighted since it has been proven to help develop improved technologies and increase
farmers’ income.
First, we present a historical background.

The Philippines, being a member of the World Trade Organization (WTO) since 1995, has to
comply with its rules that entail the elimination of trade barriers, nevertheless, the Philippines
was granted an exemption from the removal of its quotas on rice importation. This exemption
was originally meant to expire in 2004, but was extended until 2014, and further stretched till the
passage of the Rice Tariffication Law in early 2019.

The long regime of quantitative restrictions, ostensibly to protect farmers, had severe costs. For
one thing, the protection meant that the Philippines had to compromise other sensitive economic
sectors by opening them up to more competition. For another thing, quantitative restrictions bred
massive corruption, created an ineffective and incompetent import monopoly, and imposed a
disincentive on farmers, beset with inefficiencies, to shape up. The government became lax and
felt no pressing need to enhance our farmers’ productivity since it relied on the import quota to
shield farmers from competition.

Because of the failure of agricultural modernization due to poor institutions and weak policies,
including the short-sighted quantitative restrictions on rice, the country’s agricultural production
has stagnated. In terms of efficiency and productivity, the Philippines has lagged behind its
ASEAN counterparts such as Vietnam and Thailand. Our farmers incur higher costs of
production and hence could not compete with the more efficient rice-producing farmers from
Vietnam or Thailand. The ultimate effect has been the deterioration of the well-being of our
farmers.

Worse, those who suffered the economic burden of the quantitative restrictions were the whole
Filipino population (for we are all consumers including the farmers themselves who in the main
are net consumers).

A consequence of the import quota was higher food prices. Higher rice prices heavily
contributed to over-all inflation. This was most pronounced in the inflation spike in 2018. The
main culprit was the surge in rice prices, resulting from the mismanagement of imports that
resulted in a rice shortage. Rice makes up for about 10% of the consumer basket. For the poorest
Filipinos, rice accounts for about 23% of its total consumption spending.

But the unusual rise in inflation in 2018, which many critics mistakenly blamed on the effects of
the comprehensive tax reform package, became an opportunity to introduce a hard reform. The
higher-than expected inflation was triggered principally by the unwarranted spike in rice prices,
resulting from the mismanagement of imports to meet supply. This forced the hand of
government to remove the quantitative restrictions and shift to the tariffication of rice imports.
Tariffication is still a form of protection. The high tariff (35% of declared value) drives up the
price of imports and the revenue derived from the tariff is earmarked to benefit farmers. The
Rice Tariffication Law’s also provides funding of P10 billion to provide seeds, mechanization,
technical assistance, and credit. Any amount above P10 billion that can be generated from the
tariff can be used for cash transfers and other forms of financial assistance to the farmers.

In other words, the law still maintains a significant degree of trade protection, but it does not
impose the supply bottlenecks and institutional monopolies. Moreover, it has created a
significant budget to enhance the productivity and well-being of rice farmers.

What was supposed to be a limited period of quantitative restrictions had a short-term objective
of giving time for local rice producers to become more efficient and productive. But after a
generation of an import-quota regime, the intended goal of making our rice industry competitive
and improving rice farmers’s income has not been realized.

Rice tariffication is thus a most significant reform. However, because the country’s reliance on
the quantitative restrictions lasted so long, the farmers face hard adjustments in the early
implementation of the reform, the so-called transition pains.

Imports have significantly increased. The country is projected to import about 2.4 million metric
tons of rice in 2019. The retail prices of rice have fallen greatly, relative to 2018 prices, and
prices are anticipated to go down further. This is good for the consumers, but rice farmers face
an enormous challenge.

Two problems have arisen. First, retail prices have not fallen as much as farm-gate prices have.
This suggests a role for the Department of Trade and Industry and Philippine Competition
Commission to investigate whether there is market power at the wholesale/trader segment.

Second, the price drop in farm-gate prices has now reached at- or below-cost levels for many rice
farmers, and this certainly threatens their livelihood. The Rice Competitiveness Enhancement
Program (RCEP) provisions for seeds and mechanization, among others, will benefit farmers by
reducing their production costs, increasing their farm yields, and ultimately raising incomes.
However, these gains are expected to be realized in the medium term. But the short term is very
critical.

Here, we present a proposal to address the immediate problems.

The cash transfer, similar to the 4Ps, with the sole condition being that the beneficiary is a rice
farmer, is absolutely necessary. The transfer should give the farmers income relief while the Rice
Competitiveness Enhancement Program is still being rolled out. Cash transfers, together with the
zero-interest loans that the Department of Agriculture (DA) has introduced, have an immediate,
tangible, and direct impact on the farmers.
We estimate that of the two million rice farmers, about 600,000 to 700,000 are vulnerable (are
impoverished or at risk of poverty). A cash transfer of P5,000 per farmer per year would cost
about P3 billion to P3.5 billion, excluding administrative costs. But we can go farther than that
by providing cash transfers to all farmers owning rice land of two hectares and below. They
constitute 1.7 million farmers of the Philippine total of two million rice farmers. After all, all
small rice farmers need the support to adjusting to the new policy regime.

There is enough fiscal space for a cash transfer of P5,000 for a cropping season (the amount is
based on a study done by the Philippine Institute for Development Studies or PIDS) to be given
to the 1.7 million rice farmers. This amount per farmer perhaps is quite generous, especially
given that there will be other interventions for rice farmers. Hence, the amount can still be
reduced reasonably. Be that as it may, the total amount for such unconditional transfer to cover
1.7 million farmers is P8.5 billion. This is a small price to pay for the reform.

The Department of Social Welfare and Development (DSWD) is in the best position to do the
transfers. It has the experience and lessons, the logistics and the infrastructure.

The next question is where to get the P8.5 billion. The revenue from tariffication is projected to
reach P15 billion, thus freeing P5 billion for cash transfers. Perhaps the remaining P3.5 billion
(excluding the administrative costs) can be obtained from the government’s unprogrammed
funds?

Simultaneous with this, funds for seeds, credit, and mechanization should be disbursed soonest.
Planting season has begun.

Admittedly, the law’s current formulation is rigid. While financial assistance can be funded, it is
conditioned on tariff collections exceeding P10 billion. As it stands, collections are projected to
reach P15 billion and Congress ought to consider advancing these funds towards the rice farmers
in need.

Another task is to update the existing registry and targeting systems such as the DA’s Registry
System for Basic Sectors in Agriculture or RSBSA and the DSWD’s Listahanan.

We also welcome the DA’s introduction of no-interest loans amounting to P15,000 for every
farmer and payable in eight years. It is a form of cash transfer. Farmers can repay these loans,
given the long period of repayment and given a well-designed system of monitoring and
enforcement.

On top of this, the National Food Authority (NFA) should aggressively buy rice from local
producers, especially in the areas with depressed prices. Such buying can influence higher prices
towards alleviating the impact on farmers of low palay prices. The NFA, too, must be quick in
disposing older stock, even at a cheap price to supplement their aggressive buying. This will not
only result in freeing space for NFA to buy more local rice, but will also benefit consumers
through lower prices of rice. Local government units and other government agencies must
likewise be involved in buying local rice for their constituents to contribute to the over-all effort.

Rice tariffication is ultimately to the benefit of the whole people, but we must act quickly to
safeguard the welfare of Filipino rice farmers.
With the Rice Tariffication Bill (Senate Bill No. 1998) recently enacted into law by President
Rodrigo Duterte, as confirmed by Presidential Spokesperson Salvador Panelo, the rice
economy and its local farmers are expected to be affected, for better or worse, and they’re
bracing for the impact.
Here’s everything you need to know about the Rice Tariffication Law or Republic Act 11203.
When was it signed? Duterte signed the bill into law on Feb. 15, according to the Official
Gazette, and the law will take effect on Mar. 5, according to the Department of Finance. The
law’s implementing rules and regulations will be enacted on Mar. 3.
Why was it signed? Since October 2018, Duterte declared the issue as “urgent” due to price
hikes that caused rice to hit P70 per kilo last year. Finance Undersecretary Tony Lambino
predicts that the law will cut rice prices by P7 per kilo. Bangko Sentral ng Pilipinas projects that
this will also cut inflation by 0.6 percent.
What does Duterte have to say? There is a need “to address the urgent need to improve
availability of rice in the country, to prevent artificial rice shortage, reduce the prices of rice in
the market, and curtail the prevalence of corruption and cartel domination in the rice industry.”
What will the law do? The law essentially allows for the liberalization of rice imports. It will
remove the previously placed quota on rice imports, permitting traders to import a near-unlimited
quantity of rice.
How will it work? In the basic rules of economy, the law of supply and demand will dictate
market prices. By allowing more competitors to enter the rice market, the law will lower the
price of rice by increasing supply.
How much are the tariffs? Thirty-five percent from the Association of Southeast Asian
Nations (ASEAN); 40 percent from non-ASEAN countries if imports are below 350,000 metric
tons; and 180 percent if imports are from non-ASEAN countries and above 350,000 metric tons.
Where will the tariffs go? The taxes will go to a Rice Competitiveness Enhancement Fund
(RCEF), which will allocate the revenue to programs for mass irrigation, rice storage, and
research initiatives.
Who will it impact? Local farmers are expected to be impacted the most as the removal of
quantitative restrictions will pit them against foreign competitors. The National Food Authority
(NFA) will also be directly affected as the law will remove various functions from their role in
food importation and distribution.
How will local farmers be compensated? The RCEF is expected to allocate P10
billion annually to the support of Filipino rice farmers over a six-year period. This will be done
through the following fund allocations: 50 percent on rice farm machinery and equipment, rice
cooperatives, and local government units; 30 percent on rice seed development, propagation, and
promotion; 10 percent on rice credit assistance; and 10 percent to rice extension services.
Is it a good move in the long run? Technically, it will prevent price hikes in the future as
competition is a healthy component for the economy. Senate Committee on Agriculture and
Food Chairperson Cynthia Villar concurs, “With the expiration of the quantitative restriction on
rice importation, this is a very important piece of legislation, which will help our farmers
improve their profitability and competitiveness.”
Also in favor of competition, Panelo insists the liberalization of the rice market will promote
production. “Well, ‘pag ni-liberalize mo naman eh magkakaroon ng competition in the market.
So magpapababaan sila ng presyo, otherwise hindi sila mabibili, hindi ba? Kaya nga—law of
supply and demand iyan eh,” he said.
What do the farmers have to say? Kilusan ng Magbubukid ng Pilipinas considers the law as a
“death warrant” to the local rice industry as it would open the floodgates to foreign industries
that would overpower or “wipe out” local rice farmers. KMP estimates that 500,000 of a total of
2.4 million rice farmers will be negatively impacted by the law. The organization states that only
through investing and boosting local production will the Philippines achieve stable rice prices
and supply.
What does NFA have to say? With restrictions removed, NFA will lose its power and functions
in rice importation. Their role will now be limited to maintaining a buffer stock of rice for
emergency situations. They will not be permitted to manage the licensing of importers and
traders. Some 400 NFA employees are expected to be laid off as the law will also move NFA
under the Department of Agriculture.
What does this mean for the agriculture industry now? Now that it has been rendered a law,
expect the aftermath of its implementation to come in the following months. Local farmers will
be affected by the introduction of more foreign competitors and how they fare in the face of that
competition will depend on the RCEF that the law has put into place.
Farmers complain release of NFA stocks will depress prices

September 16, 2019 | 12:03 am

FARMERS said the government’s plan to release imported palay into the market threatens to
weaken prices further for palay, or unmilled rice, the form in which they sell their produce to
traders.

“There is already a big glut in the market because of the large volume of cheap rice imported by
private traders. This glut is the main reason why palay prices are going down. Flooding the
market with NFA rice will just worsen the glut,” Federation of Free Farmers National Manager
Raul Q. Montemayor said in a statement.

The government announced plans to release 3.6 million bags of imported rice from its reserves,
in a bid to bring retail prices more in line with what it considers to be fair consumer price given
the low cost of imported grain.

The palay farmgate price has been falling since the passage of the Rice Tariffication Act, which
liberalized rice imports by private traders. Access to cheap foreign grain has made traders
reluctant to buy domestic palay, softening the market for domestic products and leaving the
government scrambling to implement palay purchasing schemes at better — than-market prices
that provide breathing room for farmers.

On the retail side, consumer prices have remained persistently high despite the decline in
acquisition price for imported rice and palay, prompting the Department of Agriculture (DA) to
order releases of inventory from the reserves.

The freeing up of warehouse space at the National Food Authority (NFA) is expected to
encourage more buying at the NFA support price for farmers, which has been raised to P19 from
P17. The NFA’s purchasing budget has also been raised to about P22.5 billion.

According to the Philippine Statistics Authority (PSA), the average farmgate price of palay fell
4.4% year-on-year during the fifth week of August to P16.68 per kilogram (kg). Some reports
have indicated that traders are offering as little as P7 in some rice-growing provinces.

On Sept. 12, Agriculture Secretary William D. Dar said that the NFA Council approved at a
Sept. 10 meeting the release of 3.6 million bags of imported rice onto the market until early
October to increase supply and keep retail prices low.
The measure targets “price manipulators” and “hoarders” who have kept retail prices high
despite the drop in the value of imported rice and palay.

The NFA inventory release will be sold at P25 per kilo at wholesale and P27 retail.

Mr. Montemayor said that the timing of the release coincides with the harvest this month and
will serve to depress prices amid high levels of supply.

“Private traders will be the ones who will buy most of the palay, and they will be forced to buy
low because they will have to compete not only with the cheap imported price plus now also the
P27 NFA rice,” he said.

The Rice Tariffication Law was enacted in response to the inflation crisis of 2018, with the
government making a bet that consumer prices will fall with the entry of more imported rice. The
traders then turned reluctant to buy palay at fair prices, threatening a collapse in farmer incomes
and forcing the government to step up palay purchasing, roping in local governments to engage
in palay purchasing. — Vincent Mariel P. Galang