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Disruptive private sector investments in rice production

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Teresa S. Abesamis-125

Grassroots & Governance

Disruptive private sector investments in rice production

There is a great deal of rahrahrah these days for the magic of rice tariffication as the latest bright idea to bring down the price of rice and end the constant threat of rice-shortages from the decades of rice importation control through quota restrictions by the National Food Authority. Rice tariffication is also proposed as a magic wand to help improve the incomes of our beleaguered and aging (average age is 57) rice farmers.

I am wary about this idea as it could be just another simplistic proposal to the highly complex rice productivity problem of our country. Well-meaning legislators are proposing the use of the government’s projected rice tariff incomes (ranging from 40% to 100%) as support to farmers in terms of irrigation, free or subsidized certified seedlings, fertilizers, equipment, milling and warehousing facilities, etc. As we should know by now, whenever government goes into subsidies like this, the lengthy logistical chain gets hindered, complicated, or corrupted along the way, thus depleting the resources that actually reach if at all, the intended beneficiaries. Keep in mind the billions of pesos lost out of the PDAF. Besides, have we considered how the foreign rice suppliers will respond to radical increases in tariffs? They have other markets where tariffs might be lower! We could end up with tragic rice shortages!

The modest pay scales of our bureaucrats and their lifestyle aspirations are too far apart; and, in many cases, politicians and bureaucrats separately or together tend to supplement their incomes by using their access to resources for their own benefit. Some of the money actually gets invested in laudable things like better education and high tech equipment for their children; but it does not, alas, reach the intended beneficiaries.

Having spent much of my earlier years in the private sector, including multinationals, I can’t help thinking that we certainly could use the disciplines of efficiency, effectiveness, and accountability, all of which are measurable in the private sector, if our huge corporations were to risk a little of their billions of pesos in constantly growing easy profits into agribusiness ventures in partnership with producers. Tax incentives could be provided for initiatives into the business.

I have read about an impressive model in Vietnam, a communist country, where a private entrepreneur successfully invested in rice as an agribusiness with a little help from the government. Huyn van Thorn, a dynamic entrepreneur managed to persuade the government to invest in an agribusiness joint venture with him starting with provision of land for research. The An Giang Plant Protection Joint Stock Company started out as a supplier of rice production inputs (chemicals, seeds and fertilizers) supplied on generous credit terms by Syngenta, (a merger between Swiss firms Ciba Geigy and Novartis).

Eventually, An Giang went into backward and forward integration following support from the Vietnamese government’s Agriculture and Rural Development Department. It began to supply technical services by hiring agricultural technicians to provide technical, organization, and environmentally healthy orientation to farmers who produced rice. An Giang also acquired combine harvesters (for efficient mechanized harvesting and threshing) and trained young people to operate them thus providing new jobs to the children of the aging farmers. An Giang also provided milling and warehousing services payable upon sale of the rice outputs, which up to that point still belonged to the rice farmers. Because An Giang offered competitive buying prices, the farmers, who still had the option to sell in the open market, chose to sell their milled rice to An Giang which began to open markets in Asia and all the way to Africa. The success of An Giang so attracted the interest of Standard Chartered Bank of England that it actually invested $90 million in exchange for 34% share in the company.

farmer

The Philippines abounds with business management graduates locally and abroad. If the huge corporations were to invest in agribusiness as a service to the country, as well as for profit, they should be willing invest in some feasibility studies to begin with, including learning trips to neighboring Vietnam and the United States (home of the global brands Sunkist and Ocean Spray cooperatives, as well as US Wheat Associates, Inc.) which is supported to facilitate global marketing by US government policies such as PL480 which enables wheat buyers to buy at subsidized credit rates. There are also countries worth learning from like the Netherlands where a flower farmers’ cooperative owns Rabobank, one of the largest infrastructure financing banks in the world.

We seem to keep repeating our mistakes, or tweaking agricultural policies and programs a little here and there. It has been said that doing the same things over and over again and getting the same lousy results is a form of idiocy.

We need to find answers to fundamental questions such as: can we expect our dwindling farms to continue producing rice? Should we consider shifting from cheap rice to high ends like red, brown and black, or glutinous rice? Why are we importing vegetables? Can’t we massively and rapidly train our farmers to intercrop vegetables on their rice and coconut farms?

We are still thinking agriculture, and therefore production. Why don’t we think agribusiness? Why don’t we consider shifting from trying to get farmers to produce more; but rather how to make them prosperous?

When Carlos Dominguez was Secretary of Agriculture, I heard that he had defined his department’s objective as: “To make the Filipino farmer prosperous.” Perhaps he can now help push this kind of thinking by sharing some insights on why it didn’t happen.

 

Teresa S. Abesamis is a former professor at the Asian Institute of Management and an independent development management consultant.

tsabesamis0114@yahoo.com





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