NFA cannot be dissolved – study

Government policy-makers have determined that the National Food Authority (NFA) cannot be dissolved but policy decisions have to be made by Congress to address the biggest financial bleeder in the fiscal sector.

Following the rescue of the National Power Corp. (Napocor), the Department of Finance said the NFA was the government’s biggest loser, generating losses of over P16 billion in 2006, up dramatically from P10 billion in 2005.

There was an initial push for the dissolution of the poorly-funded agency that mandated to regulate the domestic farm prices of palay and the market prices of rice but finance officials said the momentum has shifted to the other direction.

According to the Finance Undersecretary Jeremias Pol Jr. who heads the DOF’s Corporate Affairs Group, an Australian-funded study had concluded that even deciding to keep NFA intact would still require some sorting out of policy.

"NFA has to exist, it’s not viable for it not to," Pol said. "It’s unrealistic to do away with it but even if that is a given, we still need to work on policy."

At the cabinet level of the Development Budget Coordination Committee (DBCC), Pol said there was an ongoing policy review to settle the question of food security.

"Right now, it is being discussed whether food security is equivalent to rice self-sufficiency," he said. "The future direction of the NFA would emanate from that policy decision."

Pol said it would be up to the DBCC and ultimately, Congress, to determine whether the NFA should be split into two different agencies to separate its regulatory and marketing functions.

This meant, however, that the policy of subsidizing the fluctuations in domestic palay and rice prices would stay, implying continued losses for the government since it would have to increase this budget in order for the subsidy to work.

In the meantime, Pol said there were immediate steps that need to be taken to improve the operation efficiency and transparency of the NFA, with the end-view of reducing its impact on the push for a balanced budget by 2008.

Pol said the Australian-funded study came up with a long list of steps that could be taken which were now being evaluated by an inter-agency technical group.

"One major issue is that, admittedly, there are a lot of factors that are beyond the control of the NFA, such as the world market prices of rice and the market forces themselves that are at work in this very small international market," he said. "We need to separate which are immediate and which are long term."