WELCOME REMARKS ERNESTO M. PERNIA Secretary of Socioeconomic Planning

#ASKNEDA Media Briefing

February 28, 2019 | 1:00 PM| NEDA Board Room

Friends from the media,

Colleagues from NEDA,

Ladies and gentlemen, good day.

I would like to welcome everyone to our second #AskNEDA (read: hashtag AskNEDA) media briefing for 2019. We are only in the first quarter of the year, but as you have seen, we are already welcoming several successes, in terms of policy reforms.   One of them, at the top of our legislative agenda, is the Rice Tariffication Act or Republic Act 11203.

Indeed, this is a historic measure for the agriculture sector, which for the longest time has been lagging behind and slowing the pace of the country’s economic growth. In 2018, the sector slumped to a growth of 0.8 percent from 4.0 percent in 2017, with production of palay contracting by 1.0 percent.  

This newly enacted law amends the Agricultural Tariffication Act of 1996 and paves the way for a new rice regime. The signing serves as a headstart that will certainly drive the sector towards its long overdue reform.

First, allow me to share its historical context to help us better understand rice tariffication.  In 1995, the Philippines joined the World Trade Organization (WTO) at the time when it was starting few trade reforms to establish a larger market and free up flow of goods and services across countries in the world. The Philippines, along with Japan and Korea, however, was permitted to impose quantitative restriction or QR solely on rice under the “special treatment” clause of Annex 5 of the WTO Agreement on Agriculture to give rice farmers time to further develop and become competitive.

Since 1995, the Philippine government had been repeatedly requesting for extensions of the WTO waiver on the special treatment. In other words, we have postponed rice tariffication for a generation– 24 years.  Japan opened its rice import market through tariffication in 1999 while Korea did the same in 2015.

But apart from fulfilling our agreement with the WTO, rice tariffication has always been a priority agricultural policy reform of past administrations, not just the Duterte administration. It would significantly enhance food security in the country and provide safeguard mechanisms to protect rice farmers.

Looking back, past administrations had their share of rice crises— rice stocks had plummeted and rice prices had soared to the detriment of rice farmers and consumers. Over the years, domestic rice prices have been persistently high, with Filipinos paying twice as much for rice compared with other countries. During these times, the poor, including farmers themselves, get hurt the most.  You have heard us say it many times: tariffying rice will reduce prices of rice in the market and accordingly, the country’s overall inflation rate.

Rice tariffication is pro-farmer as much as it is pro-consumer and pro-poor. The law sets in motion reforms in the NFA, which has been ineffective in its price stabilization function. Ensuring a reasonable return to farmers’ investment in rice cultivation and providing low prices for consumers are NFA’s mandates. But NFA’s functions barely made a dent in the rice market. Its palay procurement program had also been too small to influence farm-gate prices.  From 2000 to 2017, the average share of actual NFA palay procurement to the total rice production every year was only 1.89 percent.  As you know, every time NFA imports rice, it uses government funds. NFA has accumulated debt to the tune of Php 146 billion. Liberalizing the rice market means the private sector would bear the cost of importation.

The NFA’s price stabilization function marginally benefitted farmers in terms of bigger net incomes as compared to the net incomes gained by the middlemen and traders. While farm-gate palay prices have been increasing, the rate of increase has been slower than that of retail prices. Also, from 1990 to 2018, the price gap between farm-gate price and retail price has also widened. It is the big millers and traders who have been benefitting more than the small rice farmers.

With the rice tariffication law, the rice sector is assured of financial support through the Rice Competitive Enhancement Fund or RCEF, amounting to Php10 billion annually for the next six years. This will supplement the existing support that the agriculture sector has been normally getting.  If the tariff revenues exceed PhP10 billion in any given year, the excess revenue will be earmarked for the additional services in the agriculture sector. Through the RCEF, support through farm machinery and equipment, rice seed development, propagation and promotion, expanded rice credit, and extension services is guaranteed.

Overall, rice tariffication, as crucial as it is, is only one of the policies of the government’s agricultural development and employment strategy. All agencies in the agricultural sector have the responsibility in implementing the strategies in the Philippine Development Plan 2017-2022. We still have a long way to go in making the sector grow sustainably and resilient to disasters.

My esteemed colleagues with me here, Undersecretary Rosemarie Edillon and Assistant Secretary Mercedita Sombilla, will discuss RCEF and other mitigating measures in full detail. They will also talk about the Rice Industry Roadmap, which will be crafted by NEDA and concerned agencies, once the law takes effect on March 5.

In closing, let me emphasize that this much-awaited reform is a crucial step in our efforts to achieve our food security goals. We would like those in the agricultural sector to have better income and employment opportunities and provide a matatag, maginhawa, at panatay na buhay for everyone– a life free from hunger and poverty. 

Thank you very much and good afternoon.