The smell of rotten rice, again?

After announcing and insisting at the start of P-Noy’s term that we will have rice self-sufficiency by about this time, Agriculture Secretary Procy Alcala is now saying we have to import as much as 800,000 metric tons of rice this year. As expected and according to script, the excuse for this failure to meet his own boast is bad weather.

Oo nga naman. Who can deny Super Typhoon Yolanda and the other natural calamities we experienced last year? It is as if typhoons shouldn’t be assumed in a country like ours by any agricultural planner with a half functioning brain.

Indeed, I do not understand why Sec Procy boasted about rice self-sufficiency at all. Many economists, including the current NEDA chief, have been saying that rice self sufficiency may not be a correct objective because it will keep our farmers poor. 

 Anyway, because of kayabangan, another Agriculture secretary bites the dust. Then again, I suspect Sec Procy never believed his self-sufficiency pronouncement but said it because it looked like a good thing to say… politically.

Old hands in the rice trade say that no Agriculture official will want to change the current system. Things are just too profitable for many influential folks every time NFA imports rice. Daang Matuwid be damned!

The announcement to import 800,000 metric tons of rice seems to be the signal it is business as usual. Or maybe, the people trusted by P-Noy at the agri department are so stupid as to not realize that such an announcement works against the national interest. It moved international rice prices up in the past.

 The Philippines is the world’s largest importer of rice. We were accused during the Arroyo watch of provoking the sudden meteoric increase in the world price of rice in 2008. Our government was criticized abroad for destabilizing a trading system that had exhibited such resilience over the last two decades.

It will be recalled that world rice prices trebled within less than four months and reached a 30-year inflation-adjusted high in the second quarter of 2008. The crisis, according to an expert, was manmade, not the result of natural developments. Indeed, one expert observed, “the rice crisis occurred during a period of record world production and not especially tight stock levels.”

That is apparently the situation again today. Bumper harvests elsewhere have built a global rice glut, but prices in the Philippines have climbed around four percent in the last three months. Isn’t that a sign of inept management by NFA and the Agriculture department?

That 800,000 metric ton figure is supposedly only the start. The rice trading community is talking of the need to import as much as 2 million metric tons after the Agriculture department missed its self-sufficiency target. That should be embarrassing enough to elicit resignations if officials who promised self sufficiency had any shame.

Our bureaucrats are also blaming the dwindling of local supplies on a supposedly effective government drive against rice smugglers. That’s how to explain failure of policy and failure of execution to end up painting a positive picture.

I am told that everything starts with the framing of the TOR or terms of reference before bidding where the winner is identified. The pre-chosen winner moves to get price commitment from rice exporters before any public announcement. The announcement of an intention to import a large volume moves international prices up. The higher price is, of course, what we pay and the difference in prices is what makes everyone happy at the expense of the Filipino taxpayers.

This results in over P10 billion in national government subsidy to NFA. That covers the cost of overpriced imports which may be higher than local consumer rice market price, losses from rotten/spoiled rice that was not released to avoid flooding the market and dampening farmgate rice prices plus bank interest charges.

Knowledgeable sources tell me that by ordinary measures NFA can now be considered bankrupt. It only enjoys loans facilities because of National government guarantee. LBP, DOF and BSP are represented on the NFA Council Board and know the facts, but allow the situation to go unchecked.

A policy brief prepared by the Senate Economic Planning office dated December 2010 covered the problems and policy issues concerning NFA that should have been addressed by now. I wonder if any senator is even aware of it, much less, read it and done something about it.

The Senate paper observed “In 2009, the NFA contributed P27.03 billion or 10.8 percent of the P251.5 billion consolidated public sector deficit for that year. As such, there is a need to re-examine the NFA to determine whether the benefits gained from its continued operation justifies the considerable funding it receives from the national government.”

The Senate report continues: “The NFA has been eating up an increasing amount of public resources. In the period between 2003 and 2008, government spending on NFA programs, on the average, surpassed spending on agrarian reform, research and development (i.e., DOST and SUCs), and extension services (LGUs).”

Worse, “since its revenues (including subsidies from national government) are not sufficient to cover its operating costs, the deficit is funded by borrowings. The year 2008 is a case in point. When the world price of rice peaked that year, the NFA necessarily had to borrow and rely more on subsidy support to be able to expand its procurement program.

“While a cap on foreign loans was set at $500 million, there is no ceiling on domestic borrowings. Increased cost of borrowing and the rolling over of debt resulted in the escalation of NFA’s debt stock over the years.

“In 2009, NFA’s debt had shot up to P155.6 billion. As of May 2010, NFA’s debt was recorded at P171.6 billion. This is a far cry from the 2000 debt level of P20.9 billion.

“Any debt incurred by the NFA is automatically and unconditionally guaranteed by the national government as primary obligator.” Indeed the accumulation of NFA debt guaranteed by DoF will never be paid back.

There are many policy issues that P-Noy himself must think carefully about on how to handle NFA. It has obviously failed in its objective to help the Filipino farmer given that most of them remain dirt poor and their productivity low.

Do we need the NFA to get involved in rice importations and lose money in the process? Maybe not. The fact that there is so much rice smuggling means there is enough private sector interest to make government participation superfluous.

We can also no longer legally impose quantitative restrictions on rice imports under ASEAN trade rules after our requested extensions to be exempted from the rules expired. Our own DOJ says so. We have to help our farmers by some other ways.

But rice is a complicated business because it is politically sensitive. There may be a need for a minimum government presence in terms of maintaining a buffer stock. Then again, petroleum is politically sensitive too but the private sector is handling that quite well.

I get the impression there are enough studies on NFA and the rice situation. What we lack are policy decisions to address obvious problems. This seems to be a job for Congress and the Executive branch working together.

But my guess is nothing good will happen because messy as the situation is today, it makes a lot of people happy. In fact, the messier it is, the better for politicians and their cronies.

P-Noy, for his part, seems happy enough his good name is shielded from the potential scandals. But he should step in because he is president and is obligated to clean up the mess.

Old friends

The cat is out of the bag. Bobby Ongpin’s world seems to be imploding. The PSE is taking steps to delist Ongpin flagship Alphaland for what it calls repeated disclosure violations. Ramon Ang resigned from the board of Alphaland and PhilWeb, both firms where Bobby Ongpin is king. Interesting…

There had been this impression that the two are bosom buddies, inseparable business partners. Announced reason for resignation is Ang’s lack of time. Sounds like BS to me. 

I suspect a difference in styles led to the parting of ways. RSA only wants to make friends. Bobby Ongpin is an avid collector of enemies.

In other words, RSA must have come to the conclusion that he doesn’t want any part of Ongpin’s current self inflicted problems, nor share his collection of enemies. Being associated with Bobby now would be bad for RSA’s own business, a reputational risk.

I am sure it isn’t over for Bobby Ongpin just yet. It would be interesting to see how the maestro bounces back. It should be awe inspiring!

Boo Chanco’s e-mail address isbchanco@gmail.com. Follow him on Twitter @boochanco