[PHOTO AT LEFT - Quezon City residents fall in line while armed soldiers guard the distribution of National Food Authority rice to densely populated areas and poor communities in Metro Manila. Photo By Boy Santos]

CLARK, PAMPANGA, April 5, 2008 (STAR) By Paolo Romero – The government has allocated P48.7 billion in emergency budgetary support, loans and grants to the agriculture and fisheries sectors to ensure the country’s food security, President Arroyo said yesterday amid alarm bells over the reported tightening of global food supply.

In her speech at the Food Summit held at the Fontana Convention Center here, Mrs. Arroyo also announced that she would appoint a deputy ombudsman at the Department of Agriculture (DA) to rein in graft and corruption in the lucrative rice and food trade.

She said the multibillion-peso food security allocation was clustered into six packages dubbed “FIELDS,” which stands for fertilizer, irrigation and infrastructure, education and extension, loans and insurance, dryers and other post-harvest facilities, and seeds.

“Since the global situation became apparent many months ago, I have been committed to helping increase and stabilize the supply of rice, as well as to deliver targeted subsidies to the poor who are most directly affected by the global price rises,” the President said.

“We must work harder to grow and breed what we need,” she said, pointing out that half the planet depends on rice but stocks are at their lowest since the mid-1970s when Bangladesh suffered a terrible famine.

She warned that rice production this year is expected to be below the global consumption level of 430 million metric tons (MT).

For the last seven years, she said the government has been spending P20 billion a year from budget and off-budget sources on the agriculture sector.

The massive funding, Agriculture Secretary Arthur Yap said, should prove to critics that the administration was not “business as usual” in the face of the tightening food supply.

On new constructions, Mrs. Arroyo said the government is encouraging small irrigation systems, except for the large ones that it has already committed to, like Kabulnan, Balintingon, Malmar and San Roque.

She said the government will spend P6 billion a year on irrigation and P6 billion on infrastructure, including farm-to-market roads, roll-on-roll-off ferry ports, and no-frills airports for agricultural cargo.

For extension and education, Mrs. Arroyo said she recognizes the importance of continuous training of farmers and fisherfolk on new technology, so she instructed the DA to continuously implement programs and interventions with close cooperation from the Department of the Interior and Local Government, and the local government units as well as the Department of Science and Technology, aimed at training more trainors and technicians on new technology for dissemination to farmers.

She said she is taking up the offer of state universities and colleges in their extension-related activities to provide more funds for training of farmers and fisherfolk on new and emerging technology.

“Some P2 billion in research and development, P1 billion in capability building, P1 billion in trainors and technicians and P1 billion in the agricultural and fisheries education system will be allocated,” the Chief Executive said.

She directed Yap to monitor the banks’ compliance to the Agri-Agra law, which mandates banks to allocate a specific portion of their resources for agricultural credit.

However, to allow farmers to have access to all this formal credit, she asked Congress to enact a law making farmland acceptable as loan collateral.

She said the South Korean government, through the Asian Development Bank, is making available as much as $300 million in grants and official development assistance for the country’s agricultural sector.

The total funding for the food security initiatives was on top of the P5 billion available to farmers from the Land Bank of the Philippines, she said.

Yap said that of the announced funding, only P11.5 billion – for fertilizer, seeds and training – can be considered as truly fresh as the others were already being implemented.

She said she has prohibited officials from dealing with fertilizer brokers and agents. They can only deal with official distributors in the regions and provinces.

The DA, National Food Authority (NFA) and National Bureau of Investigation shall strictly monitor rice deliveries and investigate cases of hoarding, price manipulation and other illegal activities, she said.

“We are holding officials accountable that have been found to be corrupt and conniving with unscrupulous traders. We are letting the chips fall where they may as investigations are concluded and friend and foe alike are brought to account for their actions,” Mrs. Arroyo said.

She pointed out that she had earlier directed the DA and NFA to cancel the existing licenses of rice traders, retailers and bodegas and they have to apply all over again for accreditation.

Upon arriving at the convention center, she sent off several trucks loaded with vegetables, rice and other farm produce as part of the government’s food caravan to be deployed to depressed areas.

Not too many options

Finance Secretary Margarito Teves, however, said the Arroyo administration might have little choice but to import rice as soon as possible and increase its price subsidy to dampen speculations that have triggered a surge in domestic prices.

Cutting the tariff rate on imported rice would be useless considering the daily increase in prices which would still result in higher prices in the retail market, according to Teves.

“Every day we are not making the decision to bring this supply in, the market speculates that we have a short supply,” he said. “If we decide to use the tariff rate structure to address the price issue, we will not have time to go through the process anyway.”

More importantly, Teves said import prices have gone up so high that it would make little difference even if the government decided to cut the tariff rate down to zero.

“At $700 per metric ton, even a zero tariff rate would still place the retail price at around P34 per kilo,” Teves said. As of press time, however, rice prices have gone over $780 per metric ton in the world market.

“We don’t have too many options right now to make it cheaper for consumers,” he said.

Teves explained that the government only had until the 21st of the month to adjust the tariff, and that leaves no time to conduct the public consultations and hearings required by law.

He said the adjustment of the tariff structure on rice imports could be considered only as a long-term solution for future supply problems to make the mechanism more automatic and transparent.

Teves said economic officials could consider the possibility of imposing a “sliding tariff” on imported rice to address periodic supply shortages that trigger hoarding and price surges in the domestic market.

According to Teves, one option was the tariff scheme originally suggested by the World Bank where the tariff rate would be adjusted automatically based on specific triggering factors.

He said the formula was similar to the tariff rate scheme applied on oil and oil products, although he said government officials were aware that the rice situation was radically different.

At present, imported rice is covered by a 50 percent tariff rate, the maximum allowed under the World Trade Organization (WTO) rules.

He said the main concern was to bring in imported rice to help dampen public speculations that escalate whenever traders perceive a shortage in supply.

“You have to decide very quickly how best to bring in rice because if you prolong it and you don’t make the decision quickly, each day there’s pressure on the prices,” Teves said.

In the end, he said, indicators show that it would still be more practical to immediately import rice even at 50 percent tariff because of the major concern of just having the grain in stock.

‘Get your act together’

But senators have a different take on the matter as they urged the government to study plans to lower the tariff on imported rice and weigh its benefits against possible adverse effects on local farmers in terms of the country’s self-sufficiency.

“Slashed tariff on imported rice is a good temporary remedy if it brings down rice prices substantially. But it also encourages importation as policy instead of self-sufficiency. Local farmers will suffer most,” Senate Minority Leader Aquilino Pimentel Jr. said.

Sen. Pia Cayetano expressed apprehension that the tariff cut is counter-productive to local farmers.

“Slashing of tariff is counter productive to local farmers, and will only encourage smuggling through a series of misdeclarations. A long-term sustainable rice production program is long overdue,” she said.

Cayetano also batted for the need to provide funding for capital equipment, adding that subsidy to farmers should be a priority.

Sen. Manuel Roxas II, for his part, said the government should overturn the rice problem into an opportunity to map out plans for a long-term food security program for the country.

Roxas, chairman of the Senate committee on trade and commerce, criticized President Arroyo and her allies and urged them to get their act together to be able to address the problem effectively.

He said the government’s supply deal from Vietnam for 1.5 million MT of rice – to cost roughly P40-46 billion at prevailing prices – symbolizes government’s neglect of the agriculture sector.

Roxas added that the importation of rice will benefit farmers in Vietnam while local farmers continue to bear the brunt of high fertilizer and transport costs as well as insufficient financial and technical assistance from the government.

He also challenged Mrs. Arroyo to lead the people by supporting a temporary suspension of the 12 percent EVAT on oil which would provide immediate and substantial relief to all Filipinos, including farmers, fisherfolk and the transport sector.

“The Food Summit should have been convened long before the DA’s admonition for the people to start eating brown rice or half-a-cup of rice. The government was obviously caught flat-footed by the shooting up of rice prices in the world market and we now see an adrenaline rush among executives to come up with abrupt measures,” Roxas said.

Mindanao’s potential

In the meantime, Speaker Prospero Nograles said an early release of Mindanao’s 30 percent share from the P1.227-trillion national budget for 2008 can help ease the looming rice shortage.

The Speaker said the only way to stabilize the prices of food products is to increase production by maximizing Mindanao’s potential as an agricultural hub, which congressmen dubbed as the country’s food basket.

The budgetary provision for the region was committed by President Arroyo upon the recommendation of Mindanao congressmen led by Nograles, who was a majority leader then, during the deliberation of the 2008 General Appropriations Act.

Nograles clarified, however, that reports of a looming food shortage are “exaggerated” although he observed that soaring prices of various food products are apparently “getting out of control.”

On the other hand, the NFA has imported 1.6 million bags of rice from Thailand and Vietnam to meet the rice requirements of Central Mindanao, some parts of Southern Mindanao and the Autonomous Region in Muslim Mindanao.

This development coincided with reports that exporters from Vietnam will seek government permission to bid at the Philippines rice tender later this month despite a government ban on new rice deals through June.

Vietnam has extended a ban on rice sales until June to help stabilize domestic food prices as it tries to tame double-digit inflation.

The Communist-run Southeast Asian country plans to cut rice exports by 22 percent this year in an anti-inflation battle that threatens to drive up prices and heighten supply security fears across Asia for the staple food of about 3 billion people.

Rising populations and economic growth means that the world is already eating more grain than it harvests. – Marianne Go, Des Ferriols, Shiela Crisostomo, Fred Languido, Ramil Bajo, Cesar Ramirez, Ric Sapnu, Jess Diaz

Chief News Editor: Sol Jose Vanzi

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