Editorials:

Illustration by Jimbo Albano

Subsidies for ‘rice self-sufficiency’ won’t work

CAN the Philippines achieve self-sufficiency in rice by 2010?

Some experts say that would be tough given that the country is archipelagic and doesn’t have extensive river systems to support massive irrigation networks necessary to expand rice production on a grand scale. Countries on the Mekong River like Vietnam and Thailand have this advantage. That explains why they are now the world’s leading rice exporters.

Still, that doesn’t erode in any way the urgency of producing more rice within Philippine borders, given recent trends toward rice-export cartelization, rising demand for cereals and grains from rapidly growing China and India and the low volume of grains being traded in world markets. The Philippines currently imports about 10 percent of its current requirements. It would be nice if that gap could be reduced to a significant degree.

There should be funds for research to develop new and better rice technologies. But we could actually raise rice productivity now by just maximizing current technologies. Immediately, we should have greater use of high-yielding varieties (either open pollinated varieties or hybrids)—something that the Chinese did to stave off hunger. Sources in the seeds industry say about 60 percent of China’s rice lands are now planted to hybrids, the reason they don’t seem to lose sleep over the supposed global “rice crisis.”

While targeting rice self-sufficiency is desirable, that can never be achieved the way the Department of Agriculture (DA) is doing things right now. The department’s way so far has been through government subsidy on seeds. But it’s an open secret among farmers and seeds producers that this program is a total mess.

Recently, the DA programmed more than 350,000 hectares of irrigated lands for hybrids and more than a million rain-fed areas for certified seeds (open pollinated varieties) to boost rice production. But it’s likely that less than half of such targets would be achieved. Why? Seeds producers have yet to receive payments for the seeds they delivered last year. Many of them are not likely to supply the government with high-yielding seeds, knowing they won’t get paid again.

Because of the 50-percent government subsidy, the farmer needs to pay only half the amount to the municipal agricultural officer (MAO) for him to bring the seeds home. When seeds producers come to collect payment, the MAOs are supposed to turn over the “farmer’s equity” plus the government subsidy for him to get the whole payment for the seeds delivered (P2,600 to P3,500 per 16- to 20-kilogram bag for hybrids and P1,400 per 40-kg bag for certified seeds or open pollinated varieties). There are widespread complaints now about the MAOs—having the farmer’s money and the government counterpart in his possession—not turning over the money to seeds producers, citing thousands of reasons: the release of subsidy has been delayed or not released at all, the seeds “have low germination rate,” etc. Seeds producers suspect many of them or their mayors may have actually pocketed the money.

The development of a vibrant private sector- led seeds industry is crucial in attaining rice self-sufficiency. And yet, government subsidy actually tends to hurt the local seeds industry. It’s because when the government dangles the money for seeds procurement, fly-by-night operators bent on making a fast buck join the fray, many of them delivering low-quality seeds. Complaints about “low germination rates” and bad seeds stem from this policy, thus discouraging the farmers from using high-yielding seeds next time around. As a result, the local market for high-yielding varieties shrinks, and rice productivity suffers.

The best policy is to do away with the subsidy and allow the rice-seeds producers to develop the rice-seeds market for themselves. Seeds producers who are directly selling to farmers are not likely to sell bad seeds knowing they are going to lose business if their seeds are lousy. Sans the subsidy, seeds producers would have more incentives to invest in research and development (R&D) or to innovate on existing ones just to get the farmers’ patronage, thus helping catalyze technological change in the rural sector.

We repeat: subsidies won’t work; taxpayers’ money will just be dissipated in corruption, bureaucratic inefficiency and waste. The still-unresolved Joc-joc Bolante multibillion-peso fertilizer scam should be a constant reminder of that. People’s money, with proper oversight, would be better spent on rural infrastructure, irrigation, R&D, market information, extension and rural development, in general.

CAN the Philippines achieve self-sufficiency in rice by 2010?

Some experts say that would be tough given that the country is archipelagic and doesn’t have extensive river systems to support massive irrigation networks necessary to expand rice production on a grand scale. Countries on the Mekong River like Vietnam and Thailand have this advantage. That explains why they are now the world’s leading rice exporters.

Of all the queer things that have happened to the Philippines since it was renamed for the King of Spain by Miguel Lopez de Legazpi in 1565, the queerest of them all has been the near-disappearance of homegrown rice from the local market.

Global trade in agriculture is unfair, skewed in favor of rich countries and against the poor.

Huge domestic support and export subsidies provided by developed countries to their farmers render the farm products of developing countries uncompetitive.

Outside the Box: Get out of the PSE now

There is nothing good to say about the trading on the Philippine Stock Exchange.

Stock prices should trade with what stock analysts call the fundamentals of the corporation. Earnings and further prospects being positive should translate into higher share prices. There is nothing in the corporate world or in the macroeconomic picture that is negative enough for us to see stock prices at current low levels or to justify that prices should do lower.

Omerta: Winston ‘take-no-crap’ Garcia

Winston Garcia, the well-loved president-general manager of the Government Service Insurance System (GSIS), is bluntly saying it is time for a change in the control and management of the Manila Electric Co. (Meralco).

William Pesek: Asia getting fed up with Bernanke’s rate cuts

Chalongphob Sussangkarn knows a thing or two about volatile currency markets.

Until February, he was the finance minister of Thailand, which, over the last decade, saw its currency plunge too low and surge too high. Yesterday I bumped into Chalongphob at a Madrid hotel as he grappled anew with the vagaries of exchange rates—this time as a consumer exchanging dollars.