Arsenio M. Balisacan — Courtesy of Philippine Competition Commission

By Diego Gabriel C. Robles

SOCIOECONOMIC PLANNING Secretary Arsenio M. Balisacan said he is open to increasing the allocation for the P10-billion-a-year Rice Competitiveness Enhancement Fund (RCEF), provided that the use of the funds is well-targeted.

“It’s not just about the amount of money, but also how that money is used, and (identifying) where that problem of low productivity (and) low profitability is coming from,” Mr. Balisacan told reporters after the European Chamber of Commerce of the Philippines (ECCP) luncheon meeting on Thursday.

“If (the problems are) properly understood, then I would not mind putting more money there… It’s not likely that those critical problems and issues are uniform across areas of the country because the situation of farmers differs. There are areas where the problem is really about access to market because they don’t have a decent road. They are isolated in islands or where the market is so far away,” he added.

RCEF is a component of the Rice Tariffication Law of 2019 (Republic Act 11203), which liberalized rice importing to allow private parties to ship in the staple. Importers must pay tariffs of 35% on Southeast Asian grain, and of these tariffs P10 billion a year over six years is set aside for RCEF.

RCEF supports the modernization of the rice industry via mechanization, the promotion of high-yield seed, the dissemination of farming best-practices, and other support activities. Funding for the modernization effort is effectively a quid pro quo for exposing farmers to more foreign competition.

Senator Robinhood Ferdinand C. Padilla last week filed a bill proposing to increase the RCEF allocation to P15 billion annually.

The bill also proposed to set aside “10% of the RCEF… for scholarships, health and other similar benefits for the rice fund beneficiaries,” Mr. Padilla said.

Leonardo A. Lanzona, Director of the Ateneo Center for Economic Research and Development, said the Senate proposal might be contrary to one of the goals of the tariffication law, which is to persuade farmers to switch to higher-value crops.

“The RCEF is intended to assist the affected farmers to shift to more lucrative crops and economic activities,” he said in an e-mail.

“Furthermore, scholarships should be a totally different issue and not tied to RCEF.  Whether or not tariff revenues are generated, the government should have a separate program for scholarships, health and other social protection. These are altogether different goals from RCEF,” he added.

He called RCEF “a necessary measure to address the negative effects of expending trade, particularly imports of rice and other agri products,” though he noted that RCEF funding already has a natural mechanism for expansion, and should grow hand-in-hand with the actual volume of imports.

“The only limits (on funding) should be the volume of imports emerging from the markets, and the associated tariffs from these imports… the concept of the Rice Tariffication Law… is, the sectors of society who benefit from the imports pay for the loss the farmers incur in the form of tariffs The more benefits the consumers receive from the imports, the greater the total tariffs that the farmers should receive.”

Currently, Congress must identify via legislation appropriate uses of the funding should tariffs exceed the P10-billion target.

University of the Philippines Professor Emeritus Rene E. Ofreneo called for a review of the Rice Tariffication Law which he considers a “failure.”

“After the failure of the Rice Tariffication Law and RCEF to stabilize rice production after more than three years, it is time for the Senate to focus on reviewing and overhauling the law,” he said.

Mr. Balisacan also reiterated his support for the ratification of the Regional Comprehensive Economic Partnership (RCEP) as soon as possible to send the right signal to investors.

“If your neighbors are already members and you are not a member, we’re going to lose. Benefits have to be seen from a broader perspective. It shouldn’t be ‘will rice be hit? If so, I don’t want it.’ You know you’ll lose the benefits of the whole exercise,” Mr. Balisacan said during the question-and-answer portion of the ECCP event.

Speaking to reporters on the sidelines, Mr. Balisacan said RCEP has been discussed multiple times in the cabinet, with President Ferdinand R. Marcos, Jr. being in support of the trade deal.

“The President has been briefed about the advantages and disadvantages of the ratification of the RCEP… He is in favor now because he does now see that agriculture is not shown to be adversely affected by the ratification of RCEP,” Mr. Balisacan said.

Mr. Marcos has said he wants a review of the RCEP to determine whether the deal unduly disadvantages agriculture.

In the context of the global disruption to the food supply, “(there is) very strong pressure to go back to this old doctrine of self-sufficiency… We do think that we should, as much as possible, resist those pressures and we should not go back to that. I think there are large opportunities in expanding trade, not only with our neighbors but across other countries,” Mr. Balisacan said.

“There is pressure for protectionism everywhere. The truth is the global economy is still expanding, trade is still ongoing fast. So, if you could identify those areas where we can have a good chance (of being competitive). Trade has changed significantly over the last couple of decades,” he added.

Mr. Balisacan said the trade deal should have been approved “noon pa (a long time ago).”

Kasi tayo na lang ata at Indonesia ang naiwanan (Only the Philippines and Indonesia are left), and Myanmar. In the meantime, we are telling our investors ‘please come in.’ (but the investors reply) ‘Teka muna, ’yung neighbor mo Vietnam nag-iinvite din sa amin, mas klaro ang rules nila sa inyo. Eh di punta na lang kami doon (Wait a minute, your neighbor Vietnam is also inviting us and has clearer rules than you, so maybe we might go there instead.’”

Mr. Ofreneo said that there should be no rush to ratify the RCEP.

“The problem is most farmer organizations are against it. They see mostly the perils and very little opportunity for the farm sector,” he said.

Mr. Ofreneo said the “illegal” attempt to import 300,000 metric tons of sugar last week illustrates how “trade liberalization (is) being used by big importers, smugglers, and corrupt officials to justify unwarranted imports. Local industries are silent because we’re mostly focused on the services sector.”

He was referring to a sugar import order issued in the President’s name, which the Palace asserts was unauthorized by Mr. Marcos.

Mr. Lanzona said he agrees that RCEP must be ratified immediately.

“The goal of trade is to generate more competition, and thus more efficiency and growth. This forces the state to identify areas of comparative advantage or product differentiation and to institute the proper institutions, regulations and incentives to make this happen,” he said.

“However, as in RCEF, the state should use part of benefits and growth generated by trade to compensate the adversely affected sectors. The right combination of taxes and subsidies should do the trick,” he added.