Tuesday, April 29, 2008

On the food crisis: Poor and hungry cannot afford to wait, World Bank President says

Friends, please allow me to publish this statement by World Bank president Robert B. Zoellick after a meeting in Berne, Switzerland of the United Nations System Chief Executives Board for Coordination (April 29 2008).

The next few weeks are critical for addressing the food crisis. For 2 billion people, high food prices are now a matter of daily struggle, sacrifice and for too many, even survival. We estimate that already some 100 million people may have been pushed into poverty as a result of high prices over the last 2 years. This is not a natural disaster. Make no mistake, there is nothing natural about this. But for millions of people it is a disaster.

Donors must act now to support the WFP’s call for some $755 million to meet emergency needs. Roughly $475 million has been pledged, but pledges won’t feed hungry mouths. Donors must put their money on the table, and give WFP maximum flexibility – with a minimum of earmarking – to target the most urgent needs.

This crisis isn’t over once emergency needs are addressed, as critical as those are. Though we have seen wheat prices fall over the last few days, rice and corn prices are likely to remain high, and wheat relatively so. The international community needs to commit to working together to respond with policy initiatives, so that this year’s crisis doesn’t become a generation’s fact of life. Already hunger and malnutrition, are the underlying causes of death of over 3.5 million children every year, robbing the future potential of many millions more.

Many donors, governments and international agencies have plans and policies. Over the last days we have seen pledges of financial support. The key now is to work together so that we can have an integrated international response.

So I thank the Secretary General for convening this session of UN Chief Executives to help organize the UN response.

Ministers from over 150 countries have endorsed a New Deal for Global Food Policy. We must turn these words into action.

As we discussed here in Berne, a New Deal must embrace a short, medium and long-term response: support for safety nets such as school feeding, food for work, and conditional cash transfer programs; increased agricultural production; a better understanding of the impact of biofuels and action on the trade front to reduce distorting subsidies, and trade barriers.

The World Bank Group will work with the UN agencies represented here to identify countries most in need so that, with others, we can provide concessional financing and other support. We are already working closely with the IMF and regional development banks, to integrate our work.

At the World Bank Group, we are exploring with our Board the creation of a rapid financing facility for grant support to especially fragile, poor countries and quicker, more flexible financing for others. To address supply issues, we are doubling our lending for agriculture in Africa over the next year to $800 million.

We are urging countries not to use export bans. These controls encourage hoarding, drive up prices and hurt the poorest people around the world who are struggling to feed themselves.
Ukraine set a good example last week by lifting restrictions on exports of grains. This had an immediate effect by lowering prices in the markets. Others can do the same.

As we co-ordinate action, we must bring in the private sector and agri-business.
These are all critical issues for international action that must be fleshed out in the coming weeks so that millions do not find themselves in this same position next year.

But first and foremost donors must act now to meet the emergency and raise the $750 million for the WFP. The world can afford this. The poor and hungry cannot.

Wednesday, April 09, 2008

Rice supply crisis: another policy swindle?!

I thought all along the government has lifted the quantitative restrictions for rice, thus allowing the private sector to import the commodity whenever they want and at whatever quantity provided the appropriate tariffs are paid. Now, based on Business Mirror reports, its seems Malacanang is simply telling the private sector to import what is allowed under the minimum access volume (MAV). See http://www.abs-cbnnews.com/storyPage.aspx?storyId=114569. Crazy!

The fact is that the MAVs have been there all along and no one dared importing much lately simply because tariff is high (50%). Who would be encouraged to import rice that are already expensive in the world market and pay 50% on top of it, thus making the landed ones so expensive? If I’m the importer, I’ll wait for local prices to really move up the heavens before I even thought about availing of the MAVs. That’s what is happening now.

So the supposed policy pronouncement about “allowing the private sector to import rice” was a bogus one—a deception. Or probably it was real, only that government, as usual, simply backtracked, nay backslided. My goodness! Now, the private sector is saying they will only import rice at zero tariff, and given the government’s very slow decision making process, we might end up having those imported rice landing our shores when the farmers are already harvesting their palay. Some of them has actually started harvesting now. That will be tragedy.

But that’s the tragedy about maintaining the QR on rice. Unless, we remove it and replace it with tariffs, a low one if necessary, all these problems about supply shortages will always be there no matter how much rice stocks are available out there in the global marketplace. Timing is important and historically, government bureaucrats always act when its too late. Solution: we need to remove the QR, replace it with tariff, and if necessary a low one. And of course, we need to rev up our production capacity.

Tuesday, April 08, 2008

"Rice crisis": this palay seeds subsidy could be counterproductive!

Government is set to give a P1,500 subsidy per bag of hybrid rice during the wet season (May-Oct) this year supposedly to boost rice production. Hmmm, sounds good at the surface, but I have this feeling this subsidy might actually stunt the growth of the rice seed industry in the long run, an industry that you need to nurture if we want to have a vibrant rice industry. How?

One effect is corruption. Under the government’s rice subsidy program, farmers only pay about half the price or P1100 per bag per hectare for a hybrid seeds that’s supposedly would cost P2,600 since the government, through the Department of Agriculture, provides the subsidy amounting to P1500 per bag per hectare. So farmers get cheaper seeds, right?

Yes, but it doesn’t follow that the seeds will be there when he needs it. Why?

This is how the whole thing works: the seeds are distributed by the municipal agricultural officers (MAO). They also serve as conduit of the government subsidy amounting to P1500 per bag. Once the farmers give the “farmers equity” or his payment for the seeds that comes from his pocket to the MAO, he gets the seeds, and the seeds producers/suppliers then collects the payment—P1100 from the farmer and P1500 subsidy per bag from the government through the MAO/LGU—totaling P2600 per bag per hectare.

But in reality, many of these MAOs, once they got the cash both from the farmers or the money from government subsidy simply keep the money. That's why I heard anyway from lots of seeds producers all over the country. And sometimes, the subsidy money is not there so the seed producers ended up collecting nothing. Many of the seed producers these days still have collectibles worth millions of pesos from the MAO/LGUs from the last crop. Now, they are being requested to provide the seeds again for a government programs that has not been up to date in payments. Do you think they will deliver the seeds this time? Your guess is as good as mine.

This subsidy program is so complicated that it’s so prone to corruption!

Monday, April 07, 2008

Rice crisis: why are we not mobilizing Ding Panganiban or Dr Emil Javier?

So by the looks of it, it seems that President Arroyo has finally come to her senses. Based on reports from the Inquirer, the private sector can now import rice, although the government still maintains high tariffs for it. High tariff for rice means we are likely to continue having expensive rice, but that policy move is good enough to remove the discretion of bureaucrats in rice importation. In the past, only the NFA could import rice, giving only small volumes to the private sector to bring in grains through “minimum access” importation. If I’m not mistaken, the new policy changes all that, thus allowing everybody else to bring in rice. Traders would be discouraged to hoard, since any sign of “scarcity” (through hoarding or real scarcity) would immediately trigger others to import from global sources.

Having said that, there’s no substitute for an honest-to-goodness government program for rice increased production. We need to because global stocks are low; the Chinese, the Indians, and the Indonesians have been buying lots of grains in the world market. And why don’t we tap the experts in our midst? Ding Panganiban for instance is the best when it comes to expertise in rice production. So is Dr. Emil Javier, Asia’s foremost agriculturist. Why is the government not mobilizing their expertise?

Thursday, April 03, 2008

"Rice crisis": government is doing everything except the right thing

Oh this rice crisis! It seems to me that the government is doing everything except the right thing: threatening economic saboteurs and hoarders, raising palay price buying subsidy, and more funds for the DA, I suppose. These are fine, except that they are not going to address the supposed “rice shortages.”

Rice shortages certainly has speculative element into it, especially in such a time when global food prices are rising. And speculations are necessarily rife in a policy environment where government restricts the global trade in such a political commodity either through quantitative restrictions or very high tariffs—which we do. Maintaining such protection system for rice makes us vulnerable to speculators who are inclined to hoard when buffer stocks are low or going down, and they will pounce on every opportunity, knowing that the government or bureaucracy would always act (say import) when its too late. That’s what is happening right now. For all we know, those guys from the NFA might even be collaborating with those hoarders to make a fast buck out of the situation. I’m speculating here, but that’s highly possible given the culture of corruption in the bureaucracy.

Solution: Why not open up the Philippines to global trade in rice? Why not reform the NFA? That’s the only way one could prevent hoarders from hoarding knowing that imports would always come at the right time when someone starts the nasty business of hoarding rice. An open trading regime should effectively deal with the speculative element that distorts prices.

You might say freer trade in rice might cause the collapse of the entire Philippine rice industry. That’s crap. The fact is that even right now, even under the current policy environment, lots of rice farmers especially in Mindanao are shifting to the more profitable crop like bananas and other high-value crops. Smart farmers, shall I say! There’s no sense planting something that won’t make you real money.

Under a freer rice trade environment, lots of farmers are going to adopt shift to high value crops. That’s good for them. But many are also going to stay in rice business but are going to innovate to lower their cost. Some might just focus on planting those fancy varieties that command high prices in the local market.

More on this next blog post.