Philippines: Rice Self-sufficiency Remains Elusive Thanks to Government Intervention

“The Aquino administration has pledged to make our country self-sufficient in rice in three years. Agricultural Secretary Processo Alcala stresses the seriousness of that goal. But experts are pessimistic.” Recalling those statements from a Manila Times article (entitled “SC’s Farm Conversion Ruling will Boost Rice Self-Sufficiency” [July 14, 2010]), I remember expressing my own skepticism to someone, recently: Who in the world are they (meaning the Philippine government) trying to fool? Again, the article rehashes the same old tired moaning and groaning about how the country went from being a major, self-sufficient rice producer to becoming the world’s largest importer (2008). In an effort, to better understand the matter at hand, I focused my attention at a particular and crucial region:

Nagacadan Rice Terraces (Kiangan, Ifugao), Philippines

Source: Nagacadan Rice Terraces (Kiangan, Ifugao), Philippines
(Photo courtesy of Schubert Ciencia and is licensed under the Creative Commons Attribution 2.0 Generic license.)

Central Luzon is the principal source of rice production for the entire country. Comprised of six provinces (Tarlac, Pampanga, Nueva Ecija, Bulacan, Bataan, and Zambales) and designated as Region Three, it boosts a total geographical area of about 18, 230 sq. kilometers (approximately 7,039 sq. miles) of which a little over two-fifths is arable land (source: Eastern Visayas Information Sharing Network).

Given its topography and climate, Central Luzon appears ideally suited for large-scale, mechanized agriculture, but historically, politics and cultural attitudes have played a significant role in shaping policies that have discouraged any substantial investment in rice production. Agrarian reform,-aimed at improving the lot of landless peasants and imposing severe limits on land ownership in a number of categories, remains highly popular among influential sectors of the population, despite the fact that it deters any major investment in the industry. With severe restrictions on the ownership of grain-producing lands (five hectares-or about 12.56 acres per individual), direct corporate involvement in production is virtually non-existent. To make matters worse, such an issue appears to be completely ignored or seldom addressed by the media. It is in fact, a touchy and sensitive subject, given the popularity and support of agrarian reform programs.

The institution of government price controls on the sale of rice and related necessities creates further distortions in their respective markets, imposing additional income restrictions on small farmers, thus forcing them to rely on subsidies from an already financially-strapped government. In an August 1, 2010 Manila Times article by Rene Q. Bass, editor-in-chief of the newspaper, he noted that the recently-appointed National Food Authority (NFA) chairman Angelito Banayo insisted that his agency was needed to “protect” farmers from “pseudo free market forces,” despite charges of organizational corruption and mismanagement during previous administrations. There is also this accumulation of massive debt by the agency, which now stands at Php 171.6 billion (about USD 3.8 billion). Clearly, the government (and thus the nation’s taxpayers) has paid a high price for providing this “protection” and for managing and implementing seemingly disastrous guidelines related to the importation and sale of rice. After all, as the article clearly indicated, NFA policy also involves reselling the product to the economically disadvantaged at below cost, only to find out later that quantities had fallen into the hands of profiteers who would go on to resell at higher prices. Even so, official retail pricing is also subject to price controls, in accordance with current regulations. That is why the government is now trying to shift away from this aspect of its own policies.

Meanwhile, the newly-appointed Alcala continued to embellish what I consider his seemingly shaky reputation by making further questionable statements such as his vow to smash the “rice cartel” allegedly responsible for maintaining the already high prices of imported rice (as reported in the Philippine Star, August 10, 2010), while conveniently ignoring the fact that the real fault lies with the government, which bought substantial quantities of rice abroad, thus contributing to the spike in world prices. Someone should have reminded these domestic politicians and bureaucrats that there are limits to their manipulation schemes. After all, they do not possess the capacity to orchestrate international market pricing to fit their agenda, whatever that may be.

How journalist Edna Regalado (author of the news article) or anyone for that matter could qualify these statements at face value without providing any thoughtful analysis, is beyond me. In my view, Alcala’s pronouncements have as much credibility as O.J. Simpson vowing to “seek out” the murderer of his ex-wife.

As mentioned previously, the Philippines has had to import massive amounts from abroad-Vietnam, in particular, in order to continue feeding its burgeoning population (currently over 90 million), thanks in part to these policies that discourage increased investment leading to greater productivity in the industry. I think it is not unreasonable to suggest that total rice production in that region could increase significantly with the introduction of extensive, state-of-the-art methods and equipment, but that will never happen unless existing restrictions on land ownership as well as related provisions (such as the entire agrarian reform program) are scrapped completely and replaced with policies that encourage and guarantee the protection of property rights (without interference from so-called social justice advocates) as well as promoting the maximum, efficient use of land.

In comparision,I took a brief look at typical, large-scale rice farming operations in the United States and found a greater, widespread use of machinery (and greater investment per hectare) with far less dependence on human labor. Ah, but there lies one of the major factors as to why efforts at change would be almost impossible to achieve in the Philippines. A large percentage of the population continues to rely on rice farming for their livelihood, even as it remains one of the less productive sectors of the economy, as seen by value of output relative to number of persons, employed. Evidence is clear based on the absence of large, efficiently run farms. In contrast, their counterparts in the United States are often huge, with each utilizing hundreds, if not thousands of hectares. American farmers employ expensive tractors, harvesters, and other equipment (some costing hundreds of thousands of dollars each) which is far beyond the reach of the average Filipino rice farmer, who is limited to five hectares (12.56 acres) of ownership, and is further constrained by price controls. As a result, he or she cannot hope to match the level of quality, the productivity, and output enjoyed by their large, international competitors. Also, the difficulty and inflexibility of being able to transfer land ownership (one cannot sell it to another whose farm holdings would then exceed five hectares) and further restrictions on converting such property for residential use, depresses land prices and effectively discourages the kind of mobility necessary for people to improve their economic and financial status. In other words, government regulations discourage farmers from being able to properly dispose their properties so they could move on to something more productive, using the money from the sale of their land.

Unless the people and the government realize and insist on changes aimed at increased efficiency and productivity, there is and is highly unlikely that the Philippines will ever achieve its stated goal of rice self-sufficiency, again despite the recent, seemingly rosy forecasts by the likes of Secretary Alcala. As I mentioned earlier, the experts referred to in the original Manila Times article I quote from, have expressed less optimism. For example, the U.S. Department of Agriculture estimated that the total 2010 harvest will fall ten percentage points below last year’s results. Meanwhile, Sergio Francisco at the International Rice Research Institute, said that the 2013 goal is simply unrealistic, unless there are noticeable improvements in output (by at least five percentage points per year) and it appears unlikely that such targets will be achieved any time soon.

Imagine what world agricultural productivity would be like if all other countries adopted the Philippine approach across-the-board, promoting the kind of attitudes and policies that have kept the country’s rice production and perhaps other aspects of agriculture, in a seemingly permanent state of economic stagnation.