Agriculture, industry officials exchanging roles
If the officials of the Department of Agriculture exchanged roles with those of the Department of Trade and Industry for a month, our country may benefit from the cross-pollination. This can be seen during the current pork crisis.Since I was an undersecretary of both DA and DTI, I had the unique privilege of seeing the advantages of both departments. When I became Secretary of Presidential Flagship Programs and Projects, I saw the synergy when both departments worked together. DA professionals are outstanding in communication and commitment. How they could convince authorities to allocate 40 percent of the 2021 DA budget to rice which contributes only 20 percent of agriculture production value is a feat in itself. More impressive is their commitment in braving dangerous situations caused by calamities to help small farmers and fisherfolk. But when it comes to trade and tariffs, DTI has the edge. For the pork crisis, DTI must share its expertise with DA to work more effectively in solving th pork crisis.
In the area of trade, the DA has chosen to stop profiteering through the P270-300 a kilo pork price ceiling. This is to combat profiteering prices that would go up to P440 a kilo.However, because of certain constraints, the DA has to use a consultative and data collection system that was limited in scope. The DTI has been doing this price range determination exercise for over 20 years now. For disclosure purposes, I was the main executive branch member for the formulation of the Price Act, the National Price Coordinating Council and the suggested retail price (SRP) mechanism. To arrive at the SRP, DTI assembles key stakeholders in a product’s supply and value chain. For pork, these would be hog raisers, viajeros, processors and market vendors. They would come prepared with their own researched information and cross check with each other during the meeting. They would generally come to a consensus with DA guidance. The government, however, would have the final say.
If this had been done, the price range might have been P330-360, instead of P270-300. At that range, more than half the retailers selling above P360 would probably comply, especially with the price tag rule enforced. Those who sell above P360 will be given a chance to explain, and not penalized if they had valid reasons like higher transport costs or rental fees. The product would not disappear, because the stake holders themselves helped determine the prices with government guidance. At the same time, prices would go down and the remaining profiteers punished.
In the area of tariffs, the DTI would study carefully the behavior of importers at different tariff levels. They would then determine the right action depending on a thorough analysis of the expected behavior from the tariff level. For the pork crisis,it has been recommended that we significantly decrease pork tariffs. This is done to motivate the importation of 400,000 tons of pork to fill the supply gap. But is this an appropriate solution?
Here is an analysis:
A kilo of imported pork delivered to a Metro Manila market is P184 for an in-quota 30 percent MAV rate, and P197 for an out-quota 40 percent MAV rate. This is 16 percent and 12 percent lower than the price of local pork, if retailers wish to sell at the low price ceiling of P270. These import price advantages and the large volume needed are sufficient reasons for the desired importation to take place. If the tariff cuts are approved, the importers’ profits will be excessive. A kilo of imported pork will be P151 for in-quota and P164 for out-quota. These are exceedingly large price advantages (32 percent and 18 percent respectively) given to the importers. This will discourage local production and linvestments for expansion that we need badly.
The government will forego revenue of P11.8 billion, which can be used to support an increase in local supply. Among the alternatives proposed are insurance for Africa swine fever (ASF) casualties, loans with condonation clauses for ASF incidents, more testing procedures, truck wash facilities, and improved monitoring and management.
As taxpayers, we are not conscious of turf issues that might prevent the desired synergies from collaboration and cross pollination of skills among complementary departments. The DA and DTI are moving toward this improved collaboration. This will be a valuable strategy to use during this pork crisis and the future challenges that lie ahead for us.
The author is Agriwatch chair, former Secretary of Presidential Programs and Projects, and former undersecretary of DA and DTI. Contact is [email protected]
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