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Re-engineering NFA to be a logistics provider

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Dr. Emil Q. Javier

Dr. Emil Q. Javier

For failing to maintain a sufficient inventory during the lean months leading to a surge in rice prices and localized shortages, there are calls again for the abolition of the National Food Authority (NFA). Since the agency is failing in its mandate and incurring humongous losses anyway (P246 billion from 1981 to 2016), the prescription is to end our agony by shutting down NFA.

End of story? Not quite!

We have gone through this many times before. NFA as the national food security agency has a long, checkered history. But like the mythical phoenix, it keeps rising from the ashes.

It traces its ancestry to the National Rice and Corn Administration (NARIC) which was established in 1936 by the Commonwealth government. NARIC was briefly replaced by the RICDA in 1944 during the Japanese occupation only to be reactivated in 1945 after Liberation.

In 1950, NARIC again briefly gave way to the Price Stabilization Corporation (PRISCO). However, PRISCO lasted only one year as NARIC was once again resurrected. This last incarnation ended in 1962 when NARIC was finally phased out and replaced by the Rice and Corn Administration (RCA).

The RCA lasted for ten years. Immediately after the declaration of Martial Law in 1972, RCA was abolished and the National Grains Authority (NGA) was organized in its place. The NGA was renamed National Food Authority (NFA) in 1981.

Let us not kid ourselves. Administrations rise and fall with the supply and price of rice. No wise President (nor Congress), will allow himself to be caught helpless, God forbid, in case of serious disruptions in the supply of rice globally and domestically. As the saying goes, the buck stops in Malacañang. The assurance that the Filipino-Chinese rice traders in Binondo out of love of country will look after the country’s broader interests in its hour of need is not good enough.

They come with different names and acronyms but all countries in the region have national agencies to look after food security, which for Asian societies usually means access to rice. Should Congress abolish the present NFA, it will certainly invent another to take its place, as Congress had been doing the last 82 years.

Revise NFA Charter

The more realistic solution therefore is not to abolish NFA outright but to revise its charter. NFA should be relieved of its mandate of stabilizing palay farm gate prices to help raise income of farmers and its responsibility to moderate retail prices of rice to help consumers. These objectives are diametrically opposed and conflicting and the root cause of NFA’s continuing losses. NFA is the wrong instrument for these purposes.

NFA’s remit should be limited to: 1) keeping the country’s buffer grain stocks and 2) prepositioning and distributing grains for immediate relief operations after disasters and calamities.

The alternative is to remake NFA as a logistics company which will provide grain procurement, processing, storage and distribution services to government, to farmers and the rice industry at large on a cost plus basis.

With its trained personnel and over 300 warehouses, 87 rice mills, 790 trucks and vehicles, wide assortment of silos, scales and grain processing equipment, and valuable real estate located all over country, NFA will be a formidable logistics company.

In addition to revising its mandate, NFA should be re-engineered to reduce head count by half and to rationalize offices and operations to make it a lean, profitable operation.

This can be done as propounded by Romeo G. David who was the NFA administrator during the term of President Fidel Ramos and is worth considering.

In this business model, NFA will cease to be a trading company and becomes a logistics service provider. NFA will indent/procure and store grains as buffer stock in the amount and timing as ordered by the National Government (NG). However as the stocks will have to be regularly disposed and replenished to keep the supply fresh, their disposition will be determined by the owner (NG). NFA simply bills the national government the cost of procurement, processing, storage and distribution on a cost/plus basis.

In the case of relief food distribution during emergencies and calamities, as before the Department of Social Welfare and Development (DSWD), the Philippine National Red Cross and the local government units (LGUs) may draw stocks from the NFA warehouses but they have to reimburse the NG for value of the grains and the cost of storing them.

Who decides on the buffer stocks

The management of grain buffer stocks, the volume, sourcing and timing of procurement and their eventual disposition, pricing and distribution have technical dimensions but ultimately they are political decisions.

The decision(s) rest with the NFA Council which consists of heads/representatives of relevant agencies and who receive technical advice from an inter-agency working committee. The NFA Council sets policies which the NFA administrator is obliged to implement. This model had been working until the recent debacle. Since obviously they cannot work together, we should change either the head of the NFA Council or the NFA administrator or maybe both. Alternatively we can change the governance model.

The council model diffuses accountability. To remove ambiguities, better that the responsibility be reposed exclusively on the cabinet member closest to the problem who will be directly accountable to the President, who in this case is the Secretary of Agriculture. Since the President cannot be dismissed, if anything goes wrong, the Secretary of Agriculture is always expendable (with due apologies to Secretary Manny Piñol).

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Dr. Emil Q. Javier is a Member of the National Academy of Science and Technology (NAST) and also Chair of the Coalition for Agriculture Modernization in the Philippines (CAMP).
For any feedback, email eqjavier@yahoo.com.

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