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Re-engineering NFA to be a logistics provider

(Second and last part)



Dr. Emil Q. Javier

Dr. Emil Q. Javier


Readers inquired if re-engineering the National Food Authority into a logistics provider will lay to rest our rice problem. The obvious reply is NO. By itself, a reorganized NFA cannot solve our rice problem. Reorganizing NFA is but part of a total package of reforms that will involve other agencies of government, particularly the Department of Agriculture; the private sector; the rice farmers themselves, and the rice consumers, too.

The trigger of the package of reforms is the impending lifting of quantitative restrictions (QRs) on the importation of rice which is a national obligation under the WTO/GATT. However rice imports will be levied a tariff of 35%, in part to protect domestic rice producers and also to generate revenues with which to support farmers.

All along the problem with NFA had been the multiplicity of tasks in its legal mandate, for two of which functions NFA is inefficient, conflicted and sadly, too-corruption prone to perform.

The idea is to rid NFA of its impossible conflicting roles of 1) raising income of rice farmers and 2) improving welfare of consumers with quality, affordable rice. This will relieve NFA of its loss-making local palay procurement program and rice trading activities.

As a logistics organization, NFA will be asked to focus its attention on: 1) holding the country’s grain reserves in case of global gross disruptions in supply and price of rice, and 2) pre-positioning grain supplies for immediate food relief distribution during calamities.

In the new set-up as proposed by Romeo G. David, former NFA administrator during the term of President Fidel V. Ramos, NFA as a logistics provider bills the national government for the service it renders at cost plus a reasonable margin. Thus as a government-owned controlled corporation (GOCC) will no longer need an annual subsidy from Congress.

With its trained personnel, 87 rice mills, 300 warehouses 700 transport vehicles, silos and assorted grain processing facilities and valuable real estate strategically located all over the country, NFA is fully capable of performing these limited roles. By reducing personnel by half and further rationalizing offices and operations, NFA will be profitable according to former NFA Administrator David.

The determination of the volume of the national grain reserves, their sourcing and timing have technical dimensions but ultimately they are political decisions. These should be performed by a cabinet-level inter-agency council (advised by an inter-agency technical body) responsible to the President. The NFA Council should be chaired by the Secretary of Agriculture who will be accountable to the President. Tongue in cheek, should anything happen, since the President cannot be dismissed, the Secretary of Agriculture is always expendable.

The actual importation of the grain reserves could be assigned to NFA itself, the Philippine International Trading Council under DTI, or even the private sector.

Improving incomes of rice farmers

The most obvious solutions are: 1) increasing the primary productivity of the rice farms, and 2) reducing their costs of production. The government should therefore persevere in its current programs of providing research and development support, extension services, affordable credit, irrigation systems and farm-to-market roads which are clearly public goods.

The free distribution of inputs like good seeds, fertilizers, pesticides, farm equipment and post-harvest facilities is another way. However, we have been doing these all these years and they have not really worked. The inputs do not get to the farmers on time, if at all. The inputs are at times of inferior quality and overpriced. Better to provide cash subsidies direct to the farmers with which to buy the inputs as they find appropriate.

Improving welfare of consumers

The larger national concern of food security for ALL FILIPINOS (not just the rice farmers) can be addressed by three complementary measures, namely: 1) creating more employment in industry, services and in agriculture itself, to provide wages with which to buy food, 2) bringing down the cost of domestically produced rice through agronomic intensification in favorable irrigated areas and more mechanization to reduce labor costs, and 3) complementarily the importation of cheap rice from our neighbors in the Region, to cover production shortfalls.

With the lifting of QRs, the government should refrain from being involved in rice trading and allow private sector to import rice provided they pay the required tariff and inform government to allow the government plan availability of grains supplies accordingly.

Temporary relief to rice farmers

The lifting of rice QRs will open the country’s borders to imports of cheaper rice from Vietnam, Thailand and later perhaps from Myanmar when this land- and water-rich neighbor gets its act together.

The cheap rice imports will bring down the retail prices of rice which will be good for consumers, particularly wage earners whose food bills eat up much of their household incomes. This will moderate the demand for higher wages and thereby improve the competitiveness of our industries.

However, the cheap imports will depress the farm gate price of palay which by estimates could mean P20,000 less income per hectare to rice farmers most of whom are poor in the first place.

It is not fair that the whole burden of adjustment to market liberalization will be on the shoulders of rice farmers. However, the conventional approaches of palay price support through procurement by NFA and provision of free seeds, fertilizers, pesticides, farm equipment by the Department of Agriculture had been demonstrated to be inefficient, ineffective and prone to leakages.

Thus, our proposal is for government to explore the alternative approach of direct payments to bonafide rice farmers in the Registry System for Basic Sectors in Agriculture (RSBSA) the data base developed by the Department of Budget and Management to better target government subsidies to those who need them the most. The direct payments to farmers will be based on farmed area as reflected in land titles and/or tax declarations. These subsidies can be sourced from the rice tariffs which by 2022 could amount to P27 billion per year according to studies by the Philippine Institute of Development Studies (PIDS). The direct payments however will not be permanent. They should last for at most ten years to allow the rice farmers who are not able to compete with imports to diversify away from rice into other higher-value enterprises.

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).

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