Questions of Policies
What rice crisis? (Part 2)
By Honesto General
Philippine Daily Inquirer
First Posted 03:33:00 04/30/2008
Filed Under: rice problem, Graft & Corruption, Government offices & agencies
Under its basic policy of buying rice high and selling it low, the National Food Authority (NFA) is mandated by law to lose money—taxpayers’ money. That is what a subsidy is all about.
But the NFA loses far, far more of taxpayers’ money than it should.
Here’s how those tens of billions of pesos in losses and debts are racked up. A well-connected trader brings a truckload of domestic rice at the front gate of an NFA facility. The NFA buys a truckload at the high price. Then, the same truckload is sold to the same trader at the rear gate at the low price.
The same truckload shows up at the front gate again. And again, the NFA buys the truckload at the high price. Then again, the same trader buys the truckload at the rear gate at the low price. This ring-around-the-rosy can go on forever.
Each transaction is properly documented and impossible to post-audit, especially if the resident auditor is in on the scam.
In fact, no truckload of rice is needed for the scam. Purchase orders, invoices, bank checks and receipts can be filled out, signed, countersigned and okayed without a single grain of rice ever going through the front gate.
Importing rice is another huge scam. Watching rice grow is no fun, but there are fortunes to be made by well-connected characters when the government imports rice.
It is true that the NFA, being a government agency and the sole importer, saves the Filipino consumer a lot of money because the imported rice is sold at cost. On the other hand, a private importer would have to make a profit on his landed cost.
But the NFA has to go through a trader in the foreign country. Even in the United States, the NFA cannot buy rice directly from the grower. The NFA has to go through a trader. It is this trader that can pay hefty commissions to the well-connected Filipino character lurking in the shadows.
This means that the rice imported by the NFA is not necessarily cheap. In fact, it may be more expensive than the rice that a private importer may bring in.
Oh, sure, the NFA can go through a public bidding. But, a public bidding, here and abroad, can be rigged.
Then, there is the technical smuggling. An order for 10-percent broken rice is paid for, but what is actually delivered is the cheaper 25-percent broken rice. Anyway, who knows the difference?
Is it not possible that the real reason for the importation is not so much to fill up the supposed shortfall in production but to earn those huge commissions?
The root of the problem is this: Whenever the government heavily intervenes in the buying and selling of products and services in an open and free market, prices will go up, mainly because the government is very inefficient. And that inefficiency is paid for with taxpayers’ money.
So, what do we consumers have to do? I will repeat what I said last week. If your budget can take it, buy only the commercial rice. Buy as much as you need. Do not scrimp. Large institutional buyers such as restaurants, hotels, company canteens, even government agencies like the SSS should buy commercial rice with abandon.
The demand will force the retailers to order replacement stock from wholesalers, who will, in turn, encourage farmers to plant more rice. In the end, prices will settle down to more reasonable levels.
In other words, let us leave the cheap NFA rice only to those who cannot afford commercial rice.
There are forces in a free market that even the government should not and cannot control.
(Conclusion next week)
Previous columns:
What rice crisis? – 4/23/08
New veterans law: Thanks for nothing – 4/16/08
How to sell your car – 4/10/08
GSIS vs teachers (Part 2) – 04/02/08
Dysfunctional education – 3/26/08
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