March 27, 2008

Real crises

There is real danger that rice will soon become a very scarce commodity beginning with the market stalls but eventually, from the dining table of tens of millions of poor Filipinos. This is not to say that this staple food has not become scarce before and is even now beyond the reach of a scandalously huge number of Filipinos.

For the longest time our farmers, especially the poor, who do not own the plots they till, or whose plots are too small they produce only enough income for the family's subsistence, have had great difficulty in ensuring three rice meals a day. This was long before import liberalization and other neoliberal "globalization" policies wreaked havoc on our agricultural sector, especially the rice industry.

Rather than confront the crisis and undertake necessary measures to mitigate it and to prevent its recurrence, the Arroyo administration has promptly acted to cover up the truth behind the crisis -- even denying the crisis exists at all – to deflect criticism and escape responsibility for the looming disaster.

In fact, the rice crisis gives the lie to Mrs. Arroyo’s claim to being a top-notch economic manager. Combined with highest levels of unemployment and underemployment, an increase in the number of poor people and pressure for a new round of price increases in basic commodities, the prospect of rice scarcity alongside steep price hikes is even more threatening to the mistrusted, unpopular Arroyo regime than the Senate investigation into the ZTE National Broadband Network corruption scandal allegedly involving no less than the de facto President and First Gentleman.

The truth is that the current rice crisis is a manifestation of the chronic crisis of the Philippine economy in general and its agricultural sector in particular. For centuries, Philippine agriculture has been characterized by backward production and intense concentration of the means of agricultural production, most especially land, in the hands of big landlords and big traders/middle men.

Such backwardness and absence of genuine agrarian reform have been aggravated by the neoliberal restructuring of agriculture, which has been most intense since the 1990s. They include the WTO-AOA (Agreement on Agriculture), rice import liberalization, privatization of the NFA (National Food Authority), removal of subsidies for irrigation and other agricultural support, land use and crop conversion that prioritized the planting of high value crops for export instead of food, including rice, for domestic consumption, among others.

These have resulted in the substantial erosion of the country’s self-sufficiency and self-reliance in food production. The farm area for palay contracted by 86,606 hectares between 1991 and 2002 as a result of land use conversion, based on the 2002 Census of Agriculture (CA) of the NSO (National Statistics Office). Overall, the country has become a net food importer after decades of surplus food production.

Thus, the current rice crisis can be summed up as the country’s incapacity, because of years of neoliberal agricultural restructuring, to meet domestic requirements through local production amid a situation of tightening global supply of rice.

In the past years, the share of rice imports to the gross domestic supply of rice has been significantly increasing. BAS (Bureau of Agricultural Statistics) data show that from 1990 to 2000, imports comprised an average of 5.9% of the country’s annual gross supply of rice. The figure jumped to 9.7% for the period 2001-2006. In 2005 and 2006, the import ratio was 13%.

For 2008, imports could account for as much as 20% of the country’s rice consumption. This is much higher than the government claim of an 8%-share of rice imports to national rice requirements. The Department of Agriculture (DA) has stated that rice imports this year could reach as high as 2.4 million MT. This volume is equivalent to almost 20% of the country’s average annual rice consumption of around 11.9 million MT.

With such a high degree of dependence on rice imports, the country is definitely facing a serious insecurity in rice supply given the tight situation in the global supply-demand balance for rice. Worse, Vietnam, which in 2006 supplied more than 85% of our rice imports, is itself facing grave concerns on its own supply security. Thus there is no assurance that Vietnam and the country’s other sources like Thailand can deliver. Note also that China, which used to export rice to the Philippines, is now a net rice importer.

Moreover, because of tightening global supply, combined with uncertainties in the US economy that encourage massive speculation in commodities including rice, the price of rice has been soaring. As a consequence, local retail prices have been increasing rapidly.

The NFA has been ineffective in stabilizing rice prices, which is one of its mandates, as it has been substantially weakened by commercialization and privatization efforts of past and present governments. While the government intends to keep NFA rice at P18.25 per kilo, NFA’s limited participation in the local rice market (only 5% according to IBON), which continues to be dominated by a cartel, does not make a dent on overall rice retail prices.

Tight supply and high prices will hurt the poor most. The rich have extra money to buy a big volume of rice, even at unusually high prices, that could meet their families’ need for a couple of months. For most families, however, they buy rice to meet a day’s need, or in many cases, a meal’s need.

The urgency of drastic reforms, both in the short and long term, is highlighted by the fact that the various reasons behind the tightening global supply of rice – climate change, energy insecurity, US recession and the crisis of monopoly capitalism in general – are far too complex to be resolved any time soon. On the other hand, indicators show that they will continue to worsen in the coming years, and thus put even greater pressure on the country’s food security. Changing weather patterns, for instance, will significantly reduce production and yield in the generally backward agricultural systems of the world’s rice producing countries, including the Philippines. The mad rush to shift to biofuels to meet growing energy needs, in particular in the First World, will continue to undermine food production.

To ensure food security, the country needs to be self-reliant and self-sufficient in its food production. Medium to long-term reforms must include the implementation of genuine agrarian reform; substantial and reliable state support to encourage farmers to be more productive; reversal of agriculture liberalization; reversal of NFA privatization/commercialization and strengthening of its mandate to ensure sufficient and accessible supply at affordable prices of food crops; dismantling the rice cartel; and a stop to land use and crop conversion and expansion of domestic food/rice production among others. These policy reforms must start now.

In terms of immediate interventions, Mrs. Arroyo must stop downplaying the crisis and recognize the urgent need for significant state intervention. These should include: centralized procurement of imported rice by the NFA and cancellation of the import licenses of private traders; an increased presence of NFA distribution/retail outlets particularly in areas where poor families are concentrated (urban and rural); an emergency fund that will directly go to rice farmers to subsidize production cost; price control (under RA 7581 or the Price Act, government can impose a price ceiling during times of calamity, disaster or other emergencies.)

Unfortunately, Malacanang is more worried that the rice crisis could further destabilize the government and fuel more protests. So the expedient thing to do is deny, obfuscate and cover-up the crisis. Indeed, old, bad habits die hard. #

*Published in Business World
28-29 March 2008


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