For NFA, import restrictions effectively deter smuggling

Import restrictions remain a key deterrent to the smuggling of milled rice, despite global efforts to further break down international trade barriers, according to the National Food Authority.

“The solution to smuggling is to keep imposing tariffs and the requirement of import permits for private-sector importers,” NFA spokesperson Rex Estoperez said during a forum organized by the Philippine Agricultural Journalists held last Friday.

“This is not for the NFA’s benefit, but for the farmers who are the most affected” by the continued influx of contraband grains, he explained.

Estoperez also announced that the agency would bid out on April 15 contracts for a total of 800,000 metric tons (MT) of the staple grain.

By law, organizations that will ship in rice from abroad are required to secure import permits from the NFA.

On many occasions, the Bureau of Customs seized and detained rice shipments that came in without the permits from the NFA. In other cases, legitimate permits were misused to bring in more than the allowed volume.

Based on the Philippines’ commitments with the World Trade Organization, the country is allowed yearly imports of at least 350,000 MT. Of this minimum volume, some 160,000 MT may be allocated to private importers.

For cargos of this volume, importers must pay a 40-percent levy. For volumes in excess of the quota, the tariff is 50 percent.

Even then, the government through the NFA—which is exempt from the tariff—has always found it necessary to import more than the so-called minimum access volume.

Estoperez said this year’s planned import volume would be the highest since the 2.4 million MT shipped in four years ago. Last year, the NFA purchased a total of 750,000 MT through two separate bids.

However, for the Philippine Rice Research Institute, the long-term solution to the problem of smuggling is to lower the cost of producing rice locally.

According to Flordeliza Bordey, senior science research specialist at PhilRice, Filipino farmers spend P10 to P11 to produce a kilo of palay.

Bordey said farmers in Vietnam spend only P5 to P6 to produce a kilo. In Thailand, the cost is about P8 per kilo of paddy rice.

“The long-term solution is for domestic cost of production to be competitive,” Bordey said.

In a report issued last January, PhilRice said the domestic price of milled rice was always higher than the world price from 2000 to 2012, except in 2008. In 2000, the price of local rice was 75 percent higher at $402 per ton than foreign rice at $230.

This refers to a comparison of the wholesale price of domestic well-milled rice and the landed price of Thairice. PhilRice cites data from the International Rice Research Institute, the Bureau of Agricultural Statistics and the Bangko Sentral ng Pilipinas.

The price difference slowly narrowed until 2008 when Thai rice fetched $677 a ton against $674 for local rice.

But the gap widened again in 2012 when local rice reached $777 a ton—30 percent higher than that for imported rice.

In an earlier interview, Agriculture Secretary Proceso J. Alcala said that the high cost of farm labor and the high cost of financing were two major reasons why growing local rice was more expensive.

“We can address this problem by the mechanization of farms,” Alcala said. “We also need to be able to provide greater access to funds with lower interest.”

He added that farmers would also benefit from key infrastructure, including post-harvest facilities and farm-to-market roads.