This is an unsustainable design. It requires tons of subsidies not only to play around with supply and demand but also to underwrite transport and storage costs. Furthermore, when calamity strikes, government asks the NFA to release rice stocks for the stricken areas.
As expected, the NFA is buried in debt. It can procure rice from abroad only by means of special allocations from government. If the NFA, with its flawed design, were a private corporation, no one will lend money to it. It was designed to go bankrupt.
All previous subsidy-driven government operations ate up public revenues in huge quantity and went bankrupt nevertheless. When government tried to control oil prices through a mechanism called the Oil Price Stabilization Fund, it ended up losing billions in precious taxpayer money. When government subsidized power rates for political expediency, the National Power Corp. almost single-handedly brought about the severe debt crisis of the eighties.
We should have liberalized the rice trade long ago, consistent with the terms of our membership in the World Trade Organization. But because rice is considered such an explosive political commodity, we yielded concessions that decimated other economic sectors in order to delay the onset of free rice trade.
Today, we are obliged to use tariffs instead of quantitative restrictions on rice trading. However, the law required to shift to a new rice tariff regime has not been enacted.
The NFA has failed - as it was designed to do.
The agency could no longer participate in palay purchasing. As a matter of policy, it is limited to paying a maximum of P17 per kilo of palay. Yesterday, the price of palay at farm gate was running at around P24 per kilo.
A few days ago, it was reported that NFA rice stocks have completely run out. Although government has ordered the agency to purchase rice from abroad, deliveries will happen late June at the earliest.
In the meantime, with the NFA losing the ability to fool around with supply and demand, rice prices are bound to rise. Until a law creating a tariff regime is finally enacted by our distracted Congress, rice prices will be volatile.
Thanks to our farmers (the few who persist) and the irrepressible rice smugglers, there is no danger of rice shortages in the foreseeable future. Rice miller and trader Joji Co put it most succinctly: the only thing that has disappeared is 'NFA price.' This is the illusory price of P28 per kilo made possible only by heavy public subsidies. It is a price that has no relationship with economic reality.
Senator Grace Poe, the face of evaporating NFA stocks, has called for the resignation of the agency's administrator. That might be a good idea, considering all the incompetence and corruption that marred this agency.
But that is not the final solution.
We need to move quickly to abolish the badly designed NFA and establish a tariff regime for rice trading. In place of the NFA, we might organize a new agency with the sole responsibility to overseeing buffer stocks of the commodity to guard against shortages in the event of large calamities.
Screwing around with market forces has been an expensive proposition - and the monopoly over procurement of the vital commodity has been a magnet for corruption on an unspeakable scale. As far as rice is concerned, it is time for a regime change.
The National Economic and Development Authority (NEDA) advanced its timetable for our advancement to the status of an upper middle-income country. Originally estimated to happen in 2022, our economic planners now think we could cross the threshold by next year.
Our gross national income (GNI) per capita has been improving at a rate better than expected. Last year, our GNI per capita rose by 6.5 percent, closely approximating our GDP growth.
This should be good news for all Filipinos - but only if national income is more evenly distributed than it is now. Until we achieve real progress in building a more inclusive national economy, the rich will be richer and the poor only slightly less so.
The World Bank defines upper middle-income economies as those having GNI per capita of $4,036. We are apparently approaching that threshold, with GDP growth expected to hit 7 percent or better from this year onwards. The Duterte administration's aggressive infrastructure investment program is expected to dramatically improve employment rates as well as stimulate economic activity.
President Duterte's reconfigured foreign policy has reaped early rewards in the form of unexpected inflows of official development assistance from China, Japan and South Korea. We are also tracking dramatic improvements in foreign direct investments that could create a renaissance in our industrial base.
Under present WB definitions, a high-income country must have a GNI per capita of over $12,455. Our economic plans estimate that we will reach that threshold by 2040, or roughly a generation from now. If we somehow over-perform on our GDP growth performance, we could reach that point earlier.
All the rosy growth projections, of course, assume there will be no major disruption in the economic emergence of East and Southeast Asia. Should a full-scale trade war happens, as Donald Trump seems to be attempting to precipitate, all the bright projections are off.