Structural reforms needed to stop agri smuggling

One may give the Aquino administration passing marks for keeping the economy grinding at its enviable six percent rate for the last six years. Or for bringing jobs to our unemployed by nurturing the business process outsourcing industry. Or pursuing its 4P commitment by reaching out to the poorest sectors of society, or restructuring the educational system by retraining teachers, building more classrooms and aligning to global K-12 standards.

Well, there’s a relatively good long list of accomplishment that really deserves a sincere pat on the back.

On the other hand, there’s a relatively lengthy list also of things that had not been done, starting from Day 1 of the current dispensation. And some of this would have mattered significantly to boosting further the nation’s and its people’s well-being.

One of this is agriculture. A mortal sin, if it can be said. It is the neglect of the welfare and livelihood of millions of farmers and fishermen, as well as industries related to the sector. Given the proper attention, Philippine agriculture may even have boosted significantly the economy’s performance scores.

Anti-smuggling bill

Going to the last months of the Aquino government, Congress passed a bill that sought to penalize large-scale agricultural smuggling. It proposed to make such crime as an act of economic sabotage, punishable through hefty fines and up to life imprisonment for the guilty.

The bill just needs the signature of the president to make it into a law. While there are indeed benefits to ramping up penalties for those found guilty of indulging in huge volumes of smuggling of agricultural products, it is not the be-all and end-all of our agricultural sector’s woes.

The problem with these kinds of laws is the need to first catch the guilty party, and then put the suspected offender through the justice system. Now, we both know how apprehension of guilty parties and the wheels of justice in this country work: slow and flawed.

We have so many celebrated (read: headline-hogging) stories of smugglers who are still roaming freely and whose misdeeds are now half-forgotten by the public. Of course, we keep faith that one day, law enforcement and justice will be carried out quickly against those who err.

Negative effect of trade barriers

Notwithstanding the prospect of the bill being signed into law, agriculture experts are saying that what is more important than a law penalizing smuggling is the restructuring of the current agricultural system such that imports become less competitive — or conversely, and correctly, for Philippine agriculture to be more competitive.

The logic is irrefutable: If our agricultural products like rice were produced at levels that were competitively priced to those produced by Thailand, Vietnam and India, then smuggling would die a natural death.

The case of rice — which accounts for half of the estimated billions of pesos lost to smuggling — is a good subject to discuss. Because Vietnam and Thailand are able to produce their unmilled rice at P5 and P8 per kilogram, respectively, the Philippines with its P10-P11 per kg production cost becomes a magnet for unscrupulous traders.

This is already happening even with the temporary protective barriers of quantitative restrictions (QR) on rice. Currently, imported rice is slapped a 40 percent in-quota tariff, and 50 percent if the importation is beyond the agreed quota.

However, this high tariff structure has only exacerbated smuggling so much so that new studies are showing that the quantitative trade restrictions being observed by the Philippines and other developing nations are not helping the intended beneficiaries of these protective import strictures.

In fact, the studies point out the integration of the Philippines in the ASEAN community will force the government to remove the protective trade barriers, and which will consequently result in the reduction of smuggling.

Improved competitiveness

But before the trade walls on agricultural products are completely brought down, the Philippine government must move quickly and decisively to improve the competitiveness of our farm and fisheries produce.

The most popular suggestion on how to do this is to encourage farmers to modernize their production. Mechanizing the harvesting and threshing of rice, for example, is seen as one basic remedy to the currently high production prices.

Using high quality inbred and hybrid seeds is also earnestly recommended to increase yields and reduce production costs. Diversifying farm produce, while having limited on reducing the high production cost of palay (unhatched rice), will help farmers improve their income from the land.

But the crucial move would be an agricultural program that provides government support — from land preparation to planting to harvesting and to marketing. This support will come in various ways including the modernization of the irrigation and farm-to-market roads, as well as subsidies for training, seeds, implements, fertilizers, and pesticides.

According to the Samahan ng Industriya ng Agrikultura, an organization of at least 33 farmer groups, agribusiness operators, and party-list groups, the value of smuggled rice during the last five years grew 161 percent from P31.9 billion to P51.36 billion.

The total value of agricultural commodities smuggled into the country, on the other hand, was estimated at P182 billion including pork, sugar, chicken, onions, carrots and garlic.

The amount would have been a great help to the agricultural sector in boosting their competitiveness, and consequently, providing a real barrier for their survival against the onslaught of agricultural produce from other countries.

At the same time, this would have boosted the country’s agricultural production and secure the nation’s food supply.

Let’s hope the new government that will come in by June this year will be able to provide the correct remedies for our ailing agricultural sector. While it will be nice to know there are new laws that make large-scale smuggling of agricultural products a treasonous activity, it would be better if these smugglers have no reason to indulge in such crimes.

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