How to discourage rice smuggling

MANILA, Philippines – How can rice smuggling be stopped in the Philippines?

Make domestic rice prices competitive with the prices of imported rice. Strictly implement government policies governing rice trade. These can go a long way in solving smuggling problems in the industry, experts said on Friday, March 28.

Rice smuggling persists because rice prices, pushed up by production costs, are higher compared to neighboring Southeast Asian countries, Philippine Rice Research Institute (PhilRIce) socioeconomic researcher Dr Flordeliza Bordey said.

Whereas labor accounts for 50% of rice production costs in the Philippines, this is lower in other countries where more farms are mechanized. Speaking during a forum on rice smuggling hosted by the Philippine Agricultural Journalists (PAJ) in Quezon City Friday, Bordey said expenses on other farm inputs such as irrigation and fertilizer should also be lowered to reduce the cost of local rice production.

In the Philippines, the production cost of palay per kilogram is pegged at P10 to P11, double the cost in Vietnam. In Thailand, the production cost per kilogram of unmilled rice is pegged at P8. Because of these lower costs, both countries are able to export their rice at lower prices.

Because of the difference in local and foreign rice, smugglers are emboldened to profit from cheap foreign rice, taking advantage of the confusion in the country’s rice importation policy.

The Philippines is asking the World Trade Organization (WTO) to be allowed to increase its tariff on rice imports until 2017 to help it build the production capability of farmers. The country’s quantitative restriction on rice imports expired in June 2012. Following this, rice importers are arguing that they no longer need to secure import permits from the National Food Authority (NFA) as long as they pay the mandatory taxes.

By 2015, free trade will be enforced in ASEAN and tariffs on rice imports will be lowered to 35%.

The Philippine commitment to the WTO requires it to allow 350,000 metric tons of rice to enter the Philippine market under the Minimum Access Volume (MAV) scheme either as government-to-government tender or as country-specific quotas (CSQ).

Imports under the MAV are levied a duty of 40%, while a duty of 50% percent is levied for out-quota imports.

Clarify policies

Bordey said government should clarify policies. “Because negotiations are still ongoing, this (policy) is not clear and rice smugglers use this as an excuse.”  

NFA spokesman Rex Estoperez said that even if the QR extension is still on appeal, import permits are still required for rice imports. He was categorical in saying that all importations must have a permit. 

Bordey said unregulated importation harms domestic prices of rice both at the producer and consumer levels.

The NFA buys only 5% of the domestic palay produce at the support level and turns to the foreign rice market for buffer stocking during lean months.

The NFA buys clean and dry palay at P17/kg, with additional incentives such as graduated delivery fee up to a maximum P0.50 per kg; a drying incentive fee of P0.20/kg; and Cooperative Development Incentive Fund assistance of P0.30/kg.

Bordey said the NFA must build up its buffer stock to stabilize domestic rice prices.

“If supply of NFA rice is low, the private sector can hold their stocks and raise prices. If NFA stocks are high, the private sector will keep prices stable,” she said. – Rappler.com