MANILA, April 7, 2008 (STAR) By Paolo Romero - Amid a continued global tightening of food supply, President Arroyo’s top economic adviser warned of a “food price crisis” in the country possibly lasting until 2010 that would drain government coffers and jeopardize critical objectives of wiping out hunger.

Albay Gov. Joey Salceda said wrong policy coupled with climate change, rapid population growth and increasing incomes of developing countries might make the country vulnerable to food crises in the long term.

“The food price crisis is here and now, and till early 2010,” Salceda told the Cabinet at a meeting.

Salceda pointed out that global prices of corn have gone up by 88 percent since September 2006 and increased by 19 percent since January this year alone.

He also said world prices of rice have risen by 54 percent since April 2007 and 24 percent more in January.

The price of coconut oil in the world market has soared by 96 percent since April 2007, and 27 percent since January 2008.

The price of soybean, he said, shot up by 103 percent in April 2007, 24 percent more since January of this year, while soybean meal prices climbed by 85 percent in April and 18 percent since January.

World wheat prices increased 149 percent since April and 50 percent since December 2007.

Salceda said rice is a global commodity and its price is largely dictated by global markets “and mutated to some extent by domestic state policies.”

Salceda predicted that if present trends continue and no drastic interventions are made, inflation could average over six percent this year.

“Cost pressures are significantly exogenous, global and widespread beyond just rice. With limited fiscal space, government alone can not absorb them,” he said.

Salceda said the Philippines was the world’s biggest importer of rice last year, yet the country had a rice deficit of 1.3 million metric tons to 1.6 million MT.

Salceda stressed the government should make efforts to normalize the buffer stock of the National Food Authority, “which has fallen to dangerous levels constrained by the NFA’s cash deficits.”

He said global grain stocks are at their lowest in 26 years and the bulk of such stocks are held by China and India.

In the medium term, ongoing competition between food security and energy independence in land use as well as commodity use, and the withdrawal of state subsidies for agriculture under the World Trade Organization (WTO) impinge on food supply, Salceda said.

Food accounts for 59.6 percent of expenditure by the bottom 80 percent of the country’s population while rice accounts for 28.8 percent of the poor’s budget, he pointed out.

Salceda suggested 14 policy moves that President Arroyo should implement to sustain the economy and prevent runaway food prices without jeopardizing the government’s fiscal health.

He said the government must import 2.1 million MT of rice to ensure supply at least for the year.

Salceda also proposed the increase in NFA domestic palay stock by purchasing it at P3 per sack.

Among other proposals, Salceda pushed for a 10-percent wage increase through the regional wage boards;

• Increase food subsidy via food stamps, LGU-operated or NFA-supervised outlets, intensified food-for-school and conditional cash transfers of Department of Social Welfare Development (DSWD);

• Allow duty-free importation of agricultural inputs and include agricultural projects in the government’s investment priorities program;

• Impose a moratorium on the Department of Agrarian Reform conversion of agricultural lands;

• Augment the Department of Agriculture’s budget by P17 billion;

• Work out a National Land Use Plan with Congress;

• Immediately release the Internal Revenue Allotment of local government units but the funds should be earmarked for agricultural production or food subsidy;

• Gradually reduce NFA’s importation in 2009;

• Allow private sector participation in future NFA importation;

• Maintain a 90-day strategic reserve and rebuild NFA stocks from 15 days to 30 days;

• Implement a three-year financial rehabilitation of the NFA and legislative restructuring of the agency by 2010.

Salceda said the DSWD rice and cash subsidies should reach 4.7 million families living below the poverty threshold.

“Aside from the need for social protection to poor families, there is growing national consensus on providing relief to the middle class,” Salceda said.

Salceda noted 84 percent of households buy rice. “AB class is only about 10 percent of total households. So, rice being a basic necessity is good proxy instrument for providing assistance to the poor and relief to the middle class,” he said.

Salceda added an eight to 10 percent in wage adjustments “looks feasible given recent trends in corporate profits.”


President Arroyo has announced an ambitious multi-billion-peso plan to overhaul the country’s agricultural sector to cope with the rising world price of food, particularly rice.

NFA spokesman Rex Estoperez said the country will target 92 percent self-sufficiency in rice this year and 98 percent by 2010 as part of the plan.

This will be accomplished by restoring irrigation and post-harvest facilities, according to Estoperez, spokesman of the NFA tasked with importing rice and monitoring the rice market.

Estoperez, however, did not say how self-sufficient the Philippines was in rice but experts have previously estimated it at between 85 to 90 percent.

Speaking in an interview with ABS-CBN television, Estoperez said Mrs. Arroyo had been upgrading the agriculture sector even earlier but the increase in population and the global rise in food prices had forced the government to step up its work.

He said that even with increased rice production, the country would still need to import, adding that it was still more expensive to produce rice in an archipelagic country like the Philippines compared with those with large land masses like Thailand and Vietnam.

The government has previously announced plans to import 1.5 million tons of the staple cereal this year and has the capacity to import up to 2.7 million tons if needed.

Mrs. Arroyo on Friday unveiled a plan to increase food production through increased spending on fertilizer, irrigation and infrastructure, education and research, credits for farmers, and distribution of higher-yielding seeds.

She did not give a total for how much would be spent and even local newspapers gave differing figures ranging from P36.5 billion ($874 million) to P48.7 billion.

Mrs. Arroyo had said some of the funds would come from government financial institutions, foreign aid and multilateral institutions such as the Asian Development Bank.

She said she hoped spending for these programs would not jeopardize her target of balancing the budget this year.

“We are close to balancing the budget. We will try to balance the budget even with all the expenditures we will have to make,” she said.

The country is one of the world’s biggest importers of rice and not even increases in local production have been able to meet the demand of the growing 90-million-strong population.

In 2007, Manila imported 1.871 million tons of rice, mostly from Vietnam with a little from Thailand.

Policy changes

Former President Fidel Ramos said the “rice crisis” should have been mitigated if the government fully utilized the various water systems constructed during his tenure to irrigate the farmlands in Luzon.

Ramos mentioned the San Roque Dam, Pantabangan and the Angat-Umiray water impounding systems, which could provided enough water to allow two harvest of rice a year, and the remaining months for planting vegetables.

But too much politics has hindered the opening of the San Roque Dam, which could have irrigated 87,000 hectares of farmlands in Northern Luzon, he said.

“Until now, the water in the dam has not been released because there is too much politics,” Ramos lamented during an airport press conference shortly before he left abroad to head a delegation for a three-day business conference in Dongguan, China.

Ramos said the San Roque Dam was constructed under Japan’s Official Development Assistance (ODA) program but the counterpart fund was not released due to too much politics.

Ramos said the Pantabangan Dam, constructed during the Marcos regime, had been rehabilitated and it connects the Casicnan and Umiray rivers by a 26-kilometer tunnel to provide water for 100,000 hectares of farmlands in Nueva Ecija, Pampanga and Bulacan.

At the same time, Ramos pointed to the Angat-Umiray project which was also finished but was not fully utilized by the government’s failure to implement the irrigation aspect in the agricultural sector.

Ramos said water is a commodity that should be paid by those who benefit from it economically.

“One of the most important factors in agriculture is irrigation,” Ramos said.

He lamented the lack of focus by the administration to utilize existing water supply systems to provide much needed irrigation to farmlands.

“I hope that (the administration would focus) on the irrigation component of our existing water conservation system and infrastructures,” Ramos said.

The former president said the government’s subsidy on rice is “a double-bladed weapon” that might backfire.

Ramos downplayed reports equating the rice shortage to population increase.

“It does not equate with population growth,” he said, “Because it would mean that our population grew four times during the last 10 years.”

“The population issues, of course, must also be revisited because the government has prohibited artificial family planning methods to be supported by the budget and therefore this is a very big withdrawal of support to the poorest families especially those in the countryside.”

Ramos said the United Nations and the USAID withdrew the usual multi-million dollar support for population and family planning programs because it has been a useless effort.

“Because we are going contrary to what is being practiced in the most Catholic countries in the world, like Italy, Spain, Portugal, France, Austria, Ireland, which is enjoying a population growth rate of less than one percent,” he said.

Ramos said the country’s birthrate is three times of those countries mentioned, “so that this infringes on all of these new problems that we are now encountering including rice, and potable water.”

Because of this disparity, Ramos said there is a need for lawmakers to examine the policy of rice importation.

Ramos also lamented the conversion of farmlands into subdivisions and industrial zones.

He said the government should revisit its land-use policy and prohibit the conversion of arable lands to commercial and industrial use. -With Rudy Santos

Chief News Editor: Sol Jose Vanzi

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