NO other than Finance Secretary Carlos Dominguez 3rd stated it very clearly: the Rice Tariffication Law (RTL), or Republic Act 11203, is a “game changer” that lowered the retail price of rice and funded more programs to modernize the country’s rice industry.
“The RTL was finally achieved after more than 30 years of failed attempts under previous administrations. The law opened up the Philippine rice market and in turn, lowered the price of the country’s staple food for more than 100 million Filipinos,” Secretary Dominguez said in his presentation during the during the Philippine Economic Briefing held on April 5, 2022 at the Philippine International Convention Center.
The RTL was primarily authored by Senator Cynthia Villar, the chairman of the Senate Committee on Food and Agriculture.
To recall, the Philippines joined the World Trade Organization (WTO) on January 1, 1995, and committed to liberalize the trade of various products. However, rice was initially exempted from the country’s agreement of the WTO and the Philippine government was able to lobby for an extension several times with the last one given until 2019.
“Rice is no longer the main contributor to our overall inflation rate. The RTL ensures that farmers benefit directly by providing at least P10 billion each year for mechanization, high-quality seeds, access to credit, and training,” he said.
According to the latest inflation report from the Philippine Statistics Authority (PSA), the rice inflation in February this year as -0.02, showing that the price of rice at the retail level has been stable.
At the retail level, the price of regular milled rice declined from its peak of P45 per kilo (kg) in 2018 to an average of P37 per kg from January to December 2021, benefiting millions of Filipino consumers especially those from the poor households.
This, in turn, helped tame rice inflation from a high of 6 percent in 2018 to an average of negative 2 percent from 2019 to 2021. This was very crucial during the Covid-19 pandemic as the incomes of many households were affected by social and economic restrictions.
This clearly shows that under the quantitative restriction regime when rice import volumes were were determined by the government, the retail price of rice was higher.
Shift to a new paradigm
Besides generating more funds for the government’s rice industry programs, and taming rice inflation, the RTL paved the way for a new paradigm to be adopted by the local rice industry or to make it more competitive vis-a-vis its counterparts in Southeast Asia.
Hence, the RTL provided the appropriate policy framework in catalyzing the transformation of the rice subsector from one that is focused mainly on attaining rice self-sufficiency to one that is based on a competitive rice import-substituting industry.
The RTL also provides that collections in excess of the P10 billion for the Rice Competitiveness Enhancement Fund (RCEF) be allocated as cash assistance for rice farmers affected by rice imports, and to enable farmers to shift to cultivating more profitable crops.
The National Economic and Development Authority and the International Food Policy Research Institute said that farmers who found palay farming no longer profitable due to rice imports shifted to commodities that had export potential, mainly fruits and vegetables, feed meals, oils and oilseeds, particularly relating to coconut oil and products.
“With less profitable palay farming moving out of this business activity, more agriculture resources like land, labor, and capital will be freed and allocated efficiently (following price signals [both domestic and external]), to more profitable production ventures that demonstrate competitive advantage,” the report titled “Philippine Rice Tariffication Law – A Midterm Review: Challenges and Opportunities,” stated.
Since taking effect in early 2019, the RTL has generated P46.6 billion from rice import tariffs. This, according to Dominguez, himself a former Agriculture secretary, also relieved the government of having to provide hefty annual subsidies for the National Food Authority (NFA) to procure palay in an effort to control the retail price of rice. (Special Features, The Manila Times)