CO-SPONSORSHIP SPEECH: RICE TARIFFICATION ACT

CO-SPONSORSHIP SPEECH: RICE TARIFFICATION ACT

Co-Sponsorship Speech

Senate Bill No. 1998 / Committee Report No. 440

AN ACT REPLACING THE QUANTITATIVE IMPORT RESTRICTIONS ON RICE WITH TARIFFS, LIFTING THE QUANTITATIVE EXPORT RESTRICTIONS ON RICE, AND CREATING THE RICE COMPETITIVENESS ENHANCEMENT FUND, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 8178, AS AMENDED BY REPUBLIC ACT NO. 9496, AND AS FURTHER AMENDED BY REPUBLIC ACT NO. 10848, AND FOR OTHER PURPOSES

September 18, 2018

Session Hall, Senate of the Philippines

 

Delivered by HON. WIN GATCHALIAN, Senator of the Republic:

 

Mr. President, in addition to the worthy insights offered by the principal sponsor and other co-sponsors of Senate Bill 1998, allow me to add my own insights – primarily focused on how this important rice tariffication measure will benefit Filipino consumers by driving down the market price of quality rice.

The current state of the law greatly restricts the flow of imported rice into our country. The National Food Authority holds a tight grip over the rice trade through its power to regulate rice imports, as well as its power to issue import licenses to private traders. This frustratingly dysfunctional regime on the importation of rice into the Philippines has resulted in an anti-consumer status quo for decades.

Simply put, Filipino consumers have had to spend more money at the market for lower quality rice. An unfortunate example of this anti-consumer status quo is the recent bukbok rice incident. In addition, tight import regulations have rendered the market unable to adapt to sudden supply and demand fluctuations, thus resulting in frequent rice shortages over the years.

Mr. President, it is sadly ironic to see such a dismal, dysfunctional state of affairs concerning rice – which is the most essential Filipino staple food. However, for the poorest 30 percent of households in terms of income, this state of affairs is not just ironic – it poses a real threat to their food security.

According to June 2018 data culled from the Philippine Statistics Authority, households in the bottom 30 percent spend 22.69% of their income – almost one-fourth of their money – on rice alone. By comparison, the average household spends less than half of this amount on rice – or 9.59% of their income, to be exact.

Now, one of the major drivers behind the record inflation we have been experiencing is the rising prices of essential foodstuffs, including rice. Thus, considering the significantly larger share of rice in the poor CPI, it is not surprising that, according to PSA CPI statistics, the adjusted year-on-year inflation rate for the bottom 30 percent in June 2018 of 6.59% was significantly greater than the 5.2% headline inflation rate. Indeed, the increase in rice prices from June 2017 to June 2018 contributed 1.16% of the entire 6.59% poor inflation rate – which is large for a single commodity.­

Clearly, then, the dysfunctional state of the rice market is taking its toll on the poor by exacerbating the burden of inflation and making it harder for them to put enough rice on their plates. In this context, it is clear why the executive and legislative branches have come together to expedite the passage of this legislation. Abolishing quantitative restrictions on rice and replacing them with a reasonable tariffication scheme will increase the supply of quality and affordable rice in local retail markets and provide consumer savings to families suffering under the burden of rising food inflation. To illustrate, I have prepared some computations.

PSA data show that as of August 28, 2018, the average price of regular milled rice (RMR) on the market was 42 pesos per kilogram. Now, most of our imported rice is sourced from our ASEAN neighbors, Thailand and Vietnam. Under this bill, the default tariff on ASEAN rice imports would be set at a preferential rate of 35%.

At the 35% tariff rate, the projected market price of regular quality Thai rice (or 25% broken) would be 30.02 pesos per kilogram, and 28.59 pesos per kilogram for regular quality Vietnamese rice. Thus, at the regular tariff rate, consumers would save as much as 13.41 pesos per kilogram compared to the current average market price. For an average family consuming 450 kilograms of rice per year, this would result in annual savings of 6,034.50 pesos. This would be enough to buy more than 4 fifty-kilogram sacks of Vietnamese rice at the new lower price.

At this point, I must mention that the creation of a tariffication system on rice practically eliminates the need for a body such as the NFA. Therefore, in order to further strengthen the domestic rice market for consumers and farmers alike, it is my intention to file in due time a bill to abolish the National Food Authority.

In sum, Mr. President, Senate Bill 1998 is a strong counter-inflationary measure which is poised to provide immediate relief to Filipino consumers by saving them thousands of pesos per year on rice. These savings can be applied to other basic necessities, such as transportation, education, and medicine, among others. Most importantly, this bill will strengthen food security among poor and near poor families by helping them put enough rice on their plates to keep their stomachs full and happy.

Considering the immense benefits of this timely measure, Mr. President, I join the principal sponsor, Senator Cynthia Villar, and my fellow co-sponsors in pushing for the immediate passage of this legislation. It is time to fix the dysfunctional state of the Philippine rice sector and finally bring down the criminally-high market price of rice to reasonable levels.

Thank you. Mr. President.