Cartel seeks to kill RTL
The Philippines is now the biggest importer of rice, thus international prices have a lot of bearing on domestic prices.
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Daily TribuneThe Philippines is now the biggest importer of rice, thus international prices have a lot of bearing on domestic prices.
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The powerful rice cartels have launched a well-funded operation to demolish the gains of the Rice Tariffication Law, or RTL, part of which is to stoke rice prices in the market to record highs, to prove that the program is a failure.
The RTL has opened the industry to traders, which means breaking the hold of the monopolists on lucrative importations.
With the dwindling local output and the steady increase in the population, importations have grown. The Philippines is now the biggest importer of rice, thus international prices have a lot of bearing on domestic prices.
A collusion of local syndicates and big global traders primarily from Asian producers Vietnam and Thailand also want to keep the prices high to allow for a higher markup.
An artificial shortage, after India suspended rice exports, resulted in the recent spike in rice prices by about 50 percent.
The imposition of a price ceiling will effectively douse cold water on the racket while the raid on warehouses is expected to flush out hoarded stocks.
After the RTL's passage, rice imports grew significantly, resulting in a rice surplus that stabilized and reduced prices.
Since the second quarter of 2019, immediately after the RTL took effect, rice inflation has been consistently below zero which means prices have decreased.
Since the 1980s, rent-seeking and restrictive trade and regulatory policies made Filipino consumers pay more for a kilogram of rice than any of their neighbors in the region, yet farmers remained the poorest sector in the country.
In 2019, the RTL, which was long opposed by those benefiting from the rice trade, removed quantitative restrictions on rice imports and replaced them with a tariff.
Immediately after the RTL was enacted, there was a sustained and concerted effort to reverse it.
The resistance to the RTL, and the lobbying to revert to the old status quo, were so intense that at certain points it appeared that the law would be suspended.
The biggest impact of the law on the cartels was that it limited the National Food Authority which used to handle importation that enriched both officials in government and the grains syndicates.
The machinations have been evident for years after the RTL was implemented, and positive results have been obtained.
Despite the pandemic, the agriculture sector grew in 2020 and palay production reached 19.44 million metric tons, breaking the country's previous record.
The average price of regular-milled rice fell to as low as P34 to P36 per kilogram, compared to P40 before the RTL.
The call to reverse the law remained strong, with the intent to weaken the government's commitment to the RTL.
Breaking the cartel would be the primary task of the Philippine Competition Commission which said it is now looking into the "middle phase transactions" in the market.
PCC Commissioner Johannes Bernabe said the agency wants to know "if there is a concentration, if there are players who are in a dominant position in certain markets for middle phase transactions."
"Primarily, the ones who have leverage in this value chain appear to be the middlemen. At this point, we don't want to say anyone is liable, or that there are any guilty parties. It's just that in the PCC, it behooves us to try and narrow down who it is we should be prioritizing in terms of examining behavior or conduct," he said.
"That's the basis of this undertaking — we want to understand where that is coming from. Is it because of too much imports or is production too much relative to the demand of the millers? Why have farm gate prices fallen sharply? (It is not as easy as it seems, you have to understand the dynamics. DA has been accumulating information) about that," said Socioeconomic Planning Secretary Arsenio Balisacan, who is also PCC chairperson.
The permanent solution to keeping prices low would be to raise domestic productivity while ensuring a level field by uprooting the cartels that have long manipulated the market.
Such a solution applies not only to rice but to all agricultural products.
