THE EXTENSION of reduced tariffs on rice and other key agricultural commodities will help cushion the inflationary impact of the El Niño weather phenomenon, analysts said.

“This will ensure stable, if not lower, prices for these products, particularly during the El Niño next year which will hit our agriculture sector. This move is most welcome,” former Agriculture Undersecretary Fermin D. Adriano said in a Viber message.

President Ferdinand R. Marcos, Jr. last week signed Executive Order (EO) No. 50, which extends the reduced Most Favored Nation (MFN) tariff rates on rice, corn, and pork until Dec. 31, 2024.

The rates for rice imports will be kept at 35% for shipments both within or over the minimum access volume (MAV) quota.

Tariff rates for swine, fresh, chilled or frozen meat are retained at 15% for in-quota and 25% for out-quota imports.

Imports for corn maintained the MFN duty at 5% and 15% for in-quota and out-quota shipments, respectively.

“The present economic condition warrants the continued application of the reduced tariff rates on rice, corn, and meat of swine (fresh, chilled or frozen) to maintain affordable prices for the purpose of ensuring food security, managing inflationary pressures, help augment the supply of basic agricultural commodities in the country, and diversify the country’s market sources,” the EO stated.

There will also be a review of the tariff rates on rice, pork, and corn every six months, it added.

Philippine Chamber of Commerce and Industry President George T. Barcelon said that the lower tariff rates will help tame inflation.

“Extending the tariffs on key food commodities (will help) deal with inflation. That would help somewhat, because of the projected El Niño there could be price increases for these food commodities. I think that’s a good move,” he said via phone call.

In the first 11 months of the year, inflation averaged 6.2%. This was still above the central bank’s 6% full-year forecast and 2-4% target range.

“The reduced MFN tariff rates would help cushion agriculture and food production and supply and eventually price and inflation issues that may be brought by El Niño — a positive impact,” retired Pampanga State Agricultural University professor Roy S. Kempis said in a Viber message.

Mr. Kempis said that domestic production will be adversely affected by the dry weather event, particularly palay (unmilled rice) and corn.

“Supply would be compromised for these crops and eventually rice and feeds; following the value chain, feeds will also be a challenge — which uses corn as an ingredient to the extent of 70% per unit volume or weight, and pork may be more expensive,” he added.

The latest bulletin by the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) showed that a strong El Niño is seen to persist in the country until January 2024.

The weather event increases the likelihood of below-normal rainfall conditions, which could bring dry spells and droughts in some areas of the country.

The state weather bureau also projected that by the end of May 2024, 65 provinces will experience a drought while six will face a dry spell.

PAGASA also reported in its latest crop condition assessment that most of the provinces in Luzon received “inadequate amounts of water required to support both the rice and corn crops.”

FRONTLOADING IMPORTS?
National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan earlier recommended frontloading rice imports to mitigate inflationary pressures.

“Frontloading of imports next year is an act to bring in imported goods for the year at the earliest possible time. Since domestic supply grows as a result of the frontloading, prices tend to go down, thus, inflation is tamed,” Mr. Kempis said.

However, he noted that the scheduling of these frontloaded imports must be consistent with the country’s agricultural production patterns.

“Timing is important such that frontloading happens way before and/or months after domestic production is available for harvesting. This is a way of a counterbalance to have decent farmgate prices for palay, swine, and corn such that rice, pork, and feeds are reasonably priced,” he added.

The reduced tariff rates will also boost free trade and improve the country’s trade relations, Mr. Kempis said.

“The countries from where the Philippines gets its imported rice, pork, and corn are able to export more because Philippine importers find it cheaper to import the commodities involved, from these exporting countries,” he said.

On the other hand, Samahang Industriya ng Agrikultura Executive Director Jayson H. Cainglet said that the extension of lower tariffs will only benefit importers and traders.

“Local producers have nothing to do with the spiraling costs of staples, especially rice. Local traders and even those not usually involved in local production have been scrambling to source palay given the rising global prices of rice,” he said in a Viber message.

“It is this mindset of ‘importation as the only solution’ that has put us in this dire situation. The greatest tragedy of our times is this self-inflicted destruction of our capacity to produce our own food. The folly to rely on the global markets is again exposed as expensive, unreliable, and reckless,” he added.

Mr. Cainglet noted the foregone revenues from these tariff cuts, which could have been used to support the agriculture sector.

“There is a downside though in extending the reduced MFN treatment by the Philippines. Revenue collection primarily from import taxes on the above-said products that are covered by the reduced MFN tariff rates, is consequently reduced,” Mr. Kempis said. 

Mr. Kempis also said that there may be a need for more subsidies and overall government spending to manage the impacts of the weather event.

In 2019, the El Niño caused agricultural damage of up to P8 billion in the Philippines. — Luisa Maria Jacinta C. Jocson

By Luisa Maria Jacinta C. Jocson, Reporter

REFORMS to improve the ease of doing business and the Philippines’ investment environment should be on the top of the agenda for the newly appointed special assistant to the President, analysts said.

The appointment of Frederick D. Go as the head of the Office of the Special Assistant to the President for Investment and Economic Affairs (OSAPIEA) has received widespread support from business groups that believe his private sector experience will be valuable in crafting government policy.

“Under his helm, we expect the full and expedited implementation of reform initiatives which will remove red tape and promote the ease of doing business in the country,” Anti-Red Tape Authority (ARTA) Secretary Ernesto V. Perez said in a Viber message.

American Chamber of Commerce of the Philippines Executive Director Ebb Hinchliffe welcomed Mr. Go’s appointment.

“In my interactions with (Mr. Go), I was encouraged by his desire to remove roadblocks to investment and to doing business in the Philippines,” Mr. Hinchliffe said in a Viber message.

“I am hopeful that this will translate into his new role and in the policies that the government’s economic cluster will pursue,” he added.

Philippine Chamber of Commerce and Industry (PCCI) President George T. Barcelon said that Mr. Go will be “an effective overseer of investment plans for the country.”

“He is a well-seasoned businessman, and he has (experience) on what’s happening in retail business and realty business. The fact is being a businessman, his mindset is on the delivery of what is (best) for the business sector,” he said in a phone interview.

Earlier this month, President Ferdinand R. Marcos, Jr. signed Executive Order No. 49, which creates the OSAPIEA. It aims to “ensure effective integration, coordination and implementation of the various investment and economic policies and programs of the government.”

The special assistant to the President on investment and economic affairs will have the Cabinet-level rank of secretary and serve as chairperson of the Economic Development Group.

Mr. Go is relinquishing his role as president and chief executive officer of Robinsons Land Corp., effective Jan. 8, 2024.

“As a businessman whose leadership was vital in advancing various sectors, he has the advantage of understanding what needs to be prioritized and improved in government investment and economic policies to encourage more local and foreign investments,” ARTA’s Mr. Perez added.

Mr. Perez said he expects Mr. Go to formulate and implement new strategies to attract more investments with the support of the private sector.

“We are ready to assist them as they take the lead in fostering an inclusive, enabling and competitive business environment that will foster more local and foreign investments through our mandate under the Ease of Doing Business law,” he added.

Foreign Buyers Association of the Philippines President Robert M. Young said that since Mr. Go is coming from the private sector, he will be able to easily identify the key issues being faced by various industries.

“Being in the private sector, Secretary Go can relate to the problems in the private sector, of private players… He is a practitioner. Secretary Go will be the right person. We see him as the savior because he can relate to our problems,” he said in a phone call interview.

Mr. Barcelon said addressing high inflation and attracting investments should be among the priority areas that Mr. Go must focus on.

“He is aware that (high) inflation is something that we do not like… on investment, he must look at what key issues that need to be addressed for more investors to come in,” Mr. Barcelon added.

Mr. Young said that Mr. Go should be able to expedite key policies to improve the country’s investment climate.

“We have so many pending matters with the government that are not moving. Some for years and years already,” he said.

Mr. Young cited the Magna Carta for Micro, Small, and Medium Enterprises and policies to lower Customs fees to make exports more competitive, among others.

“I think he can solve all this. He will be able to target these issues. This is urgent because these can generate jobs, it can generate revenues for the Philippine economy,” he added.

Mr. Young also noted that Mr. Go’s position is crucial to coordinate strategies among agencies.

The Foundation for Economic Freedom (FEF) in a statement said that persistent inflation is among the top concerns that Mr. Go must immediately address.

“Mr. Go will only succeed if he can get the different egos of various departments to work together, set a realistic plan with a clear set of priorities and timetable, and marshal the political will, backed by the President, to execute this plan,” the FEF said.

“A coherent economic program and swift execution will boost investor confidence and stimulate the capital markets, which are now in the doldrums,” it added.

Meanwhile, GlobalSource Country Analyst Diwa C. Guinigundo said that Mr. Go must continue the government’s fiscal consolidation path.

“One major challenge to many governments, including the Philippines, is keeping fiscal and debt sustainability especially after the pandemic. Mr. Go’s competence will be tested on how he could orchestrate public policy formulation and execution to achieve economic growth while keeping debt levels manageable, and taxes more progressive than regressive,” he said in a brief dated Dec. 22

Mr. Guinigundo said that Mr. Go will need to keep the fiscal deficit under control, assess big-ticket infrastructure projects with “questionable priority and fiscal feasibility,” and ensure the budget is allocated to priority areas such as education, health, and food security, among others.