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Why buck what works?

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Marvin A. Tort

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In some cases, people get away with doing questionable things because they cannot be made accountable for them. And knowing that they can get away with it, they wreak havoc with impunity. They are emboldened by the fact that, at the end of the day, the rewards for their misdeed far outweigh the potential risks or penalties — if there will be any at all.

It is thus easy enough for a supposed farmers’ group, for instance, to make public their accusation that imported rice are being smuggled into the country — or being undervalued to avoid higher taxes — without presenting any evidence or proof. In the same manner, it is fairly easy for media to spread the story. It is, after all, a scandal.

But, if, eventually, the accusation is proved to be false, will the accusers bother to apologize? Will they take time to explain why they made the accusation in the first place and elaborate on their agenda? Will media also publicize their apology and agenda? Will media bother to promote fair play by admitting that it, too made a mistake in spreading the accusation?

The Federation of Free Farmers (FFF) is alleging that rice importers have connived with suppliers abroad to undervalue rice imports, which have since been liberalized or allowed in commercial quantities as long as proper tariffs are paid. By undervaluing importations, the FFF claims that rice importers had so far shortchanged the government of about P5 billion. The allegation also insinuates corruption.

This matters to the FFF as only tariffs in excess of P10 billion per year go to assistance programs for rice farmers affected by rice imports. Of course, lower tariff collection imperils whatever funding is supposed to go to these programs. Undervaluation also artificially lowers the price of imported rice, which in effect also depresses farm gate prices or the buying price for local rice.

However, their only evidence to prove smuggling is their own computation of tariffs that should have been collected, based on data from their sources abroad — which, they claim, do not match government data. Other than this, there has been no documentary or other factual evidence to show that undervaluation — thus smuggling — and under-collection has been going on.




Frankly, there is no doubt in my mind that there is some smuggling going on, in one form or the other. But this is simply on the notion that smuggling occurs, whether for rice or other commodities. This, I consider, is a fact of life in this part of the world. But to the extent that it is rampant as far as rice is concerned? I need proof — and not just statements — to believe that.

Beyond the smuggling allegation, my greater concern is what has happened to the rice supply, and prices, as well as inflation since rice importation was deregulated. There are far more local consumers than local rice farmers, who are consumers themselves, and using tariffs to replace quantity restrictions for imported rice has more to do with feeding them than agriculture.

If importers undervalued imported rice — declared acquisition cost at lower than actual with the connivance of exporters or foreign suppliers — just so they can save on tariffs, then wouldn’t they lose money? Importers would be forced to pass off imported rice to traders, and consumers, at below cost, too. Does this make sense? Won’t they aim to maximize and not minimize profits?

As a consumer, frankly, I prefer cheap over expensive rice. And if undervaluation makes my rice cheaper, I would prefer to get a “direct” benefit from the situation — lower rice prices — rather than the “indirect” benefit of tariffs and taxes being used to finance welfare and farmer assistance programs. Yes, this is the selfish way of looking at things. But, by going the “indirect” way, there is always the risk that tariffs will just end up in the pockets of the corrupt.

Of course, this is not to say that we should condone smuggling. Right is right, and wrong is wrong. If importers are smuggling and/or undervaluing importations, then they should be investigated and prosecuted. However, proper investigation requires evidence and proof. In the case of the FFF, they are simply teasing authorities and the public. Why end at public allegations? Why not produce evidence, or, better yet, file cases against the importers?

Moving on to what is factual as opposed to what is simply alleged, allow me to share a July 9 Bloomberg report on the rice situation: “Philippine rice prices have retreated from last year’s record highs after the Southeast Asian nation scrapped import quotas for the first time in nearly a quarter-century. The staple grain retailed for P38.65 ($0.75) per kilogram last month, down 15% from its peak in September 2018 when typhoons and pests decimated local harvests and forced government to look abroad for supply. June inflation fell to its slowest pace in two years as a result, boosting odds the Bangko Sentral ng Pilipinas could further slash the interest rates it hiked during the height of the rice shortage last year.”

If the FFF agenda is to again demonize the transition to rice tariffs, then that might find resonance with rice farmers opposed to it. But, in my opinion, it gains little traction with the general public, the consumers, who, like the farmers, struggled with low supply and high rice prices last year.

The aim is to improve the rice supply, from whatever source. Ensuring a stable supply to meet demand will also stabilize prices. Food security trumps hunger, and makes poverty a bit more bearable. To be honest, I can live with some undervaluation and lower tariff collection. I may even tolerate some corruption. As long as rice remains available and affordable.

 

Marvin Tort is a former managing editor of Businessworld, and a former chairman of the Philippines Press Council.

matort@yahoo.com

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