It stinks but it’s not the garlic

The sudden spiraling of garlic retail prices to over P350 a kilo sparked a Senate hearing but doubts have been expressed that anything significant was uncovered despite the headlines afterwards. A reader sent me this reaction that I found interesting and rather plausible:

“Hindi lalabas sa Senate hearing ang tunay na dahilan sa pag taas ng presyo ng bawang dahil sangkot ang mga kausap nila sa hearing. Alangan na isangkot nila ang sarili nila.

“Sumobra na ang katakawan ng DA-BPI at sa Customs din dahil daw sa increased risk with the new commissioner. Eh nag tatakipan ang traders at nililinlang ang attention ng publico.

“Ang tinuturo nila ang middleman at retailers para malihis sa kanila ang init at inaantay na lang lumipas ang problema. Malaking pera ang pinag uusapan dito sa loob nag DA-BPI, Customs at brokers!”

Hmm… something stinks and it isn’t the garlic. Then again, maybe Food Security Chief Kiko Pangilinan already knows what is going on there. Supposedly, no one can import garlic without an import authority from the Bureau of Plant Industry (BPI). Is this why the Director of the BPI was replaced last week?

While the relieved official denied his relief had anything to do with the garlic problem, the timing is suspicious. It came while the administration is trying to clean up its act on the garlic price explosion. Could he be a scapegoat sacrificed to give the public the impression the administration is doing something?

The need for an import authority for garlic or any other agricultural commodity for that matter ought to be scrapped. It seems to be at the root of our current problems not just with garlic and rice but other food essentials as well. This practice breeds corruption.

The import restriction policy had long been justified as a means to help our farmers who will be unable to compete with imports that are a lot cheaper even if duties are imposed. But decades of such protection have not made our farmers any more competitive.

Without denying the need to help our farmers, there is also the need to help our consumers. Somehow, our food consumers who are mostly in the urban areas have been sacrificed with higher food costs. That would have been okay as a temporary measure to help our farmers but this situation cannot go on forever. Food claims a big portion, as much as half in some cases, of the urban consumer’s disposable income.

High food costs for our urban based workers translate to higher labor cost that is a strong contributing factor to our lack of industrial competitiveness. Lower food costs resulting in lower labor costs have been big factors in Thailand being able to industrialize faster than us over the last three decades.

Faster industrialization provides a country like ours (or Thailand) the ability to create entry level jobs for workers moving out of the farms. More job creation means a greater ability to lift more people out of poverty.

If we want to help our farmers, it will have to be more in terms of direct government support rather than import restriction. Farm to market infrastructure, technology, fertilizer and marketing support funded from duties imposed on imported farm products are perhaps going to be more effective in helping farmers than current import restrictions.

How Taiwan became a world class producer of garlic, vegetables and other farm products is not a secret. Indeed, Filipino agriculturists from UP Los Banos helped them, the most notable of them is former UP President Emil Javier. Is it so difficult for the Department of Agriculture to use UP Los Banos technology to make our garlic and other farmers competitive?

In any case, the current system of requiring an import  authority from the Bureau of Plant Industry is obviously not working. Worse, it is at the root of corruption in the bureaucracy and as what happened over the past month, resulted in an abrupt rise in garlic prices.

Any observer can quickly see the failure of DA/BPI to properly plan importations anyway, a justification for the import authority they issue. They have the demand and supply statistics that have not really changed much through the years. They know the harvest months to avoid landing those imports and the lean months when the imports are sorely needed. So, what happened?

Either they are sleeping on the job or there is some criminal collusion among bureaucrats and traders to cause such a high price that amounts to profiteering. Whatever it is, it only proves the system not only doesn’t work, it stinks.

Indeed, the e-mail writer also revealed the practice of using import permits several times, which negates the value of such a restriction. One other means of paying lower taxes the e-mail writer pointed out, is to pay the 40 percent tax under protest. Then, once they complete the volume they want, they show a Bill of Lading saying the cargo was shipped at -3 degrees C or below freezing and the tax is just five percent. It is a bad situation begging for reforms and hopefully, our officials are ready to clean things up for good.

With imports accounting for over 80 percent of our garlic demand, a better system is to open up importation to whoever may want to do so. Charge them duties that can be used initially to subsidize local producers so they can compete in the market.

When market forces are allowed to work, an equilibrium will happen that works for everyone’s good. It is when government interferes in a way that is also corruption ridden that bad situations like what we have now happen.

Our situation now is so ridiculous. Because of the extraordinarily high price of garlic in the local market, it has become a popular “pasalubong” among Filipinos coming home from Qatar, a media report indicated.

Filipinos from Qatar are now bringing garlic home in their suitcases and balikbayan boxes. Garlic in Qatar only cost P72 per kilo, way lower than the P300 to P400 per kilo in Metro Manila markets. And I don’t suppose they grow garlic in Qatar.

Sen Cynthia Villar, chair of the Senate committee on agriculture and food said the production cost of local garlic P40 per kilo while imported garlic is pegged at P17 per kilo. That’s a far cry from over P350 a kilo in our markets now.

For now, we can only hope market forces will provide us relief from high prices. The reader who e-mailed me also observed that prices have now started to go down. The reader wrote that sale of garlic is now very poor. Retailers are afraid to buy more than what they can sell during the day. They expect the price to tumble.

Kiko Pangilinan told me that they are reviewing similar policies for rice that has caused similar problems lately. According to Kiko, they are convening on July 16 a 2 year strategic planning session for the NFA to precisely review import restriction policies.

Secretaries Purisima, Balisacan, Domingo, Governor Tetangco and the Presidents of Landbank and DBP will all be there, Sec Pangilinan said, so they can discuss and adopt key reform measures for the NFA. A Technical Working Group composed of reps of these agencies are now preparing the ground work for the workshop.

Sec Kiko said they will also be doing two-year strategic planning workshops for the NIA, the PCA and FPA at about the same time beginning July 12 to July 20 so that all the agencies under him responsible for food security are on the same page when it comes to targets and deliverables.

If P-Noy doesn’t see it yet, he will have to give agriculture policies a lot more attention in the next few months. Indeed, he must provide harassed housewives reeling from high food prices some relief in the next week or two.

Policymakers may be busy covering their asses on DAP and PDAF but unless something happens to arrest fast rising food prices, there will be increased dissatisfaction among our masa that will be difficult to ignore.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco