Agriculture Reference
In-Depth Information
Back to Rice and Corn
During the first half of the 1980s, while the country was reeling from the sec-
ond world oil price shock, debt service and fiscal deficit increased. In 1984, the
peso depreciated substantively and the economy contracted. These events cre-
ated a favorable economic environment for reforms. The depreciation of the
peso decreased NFA's income even as its clients demanded more of its services
because of the crisis. The flour millers, increasingly dissatisfied with NFA's mo-
nopoly control over import, advocated taking back the right to import wheat.
They found important allies among policy think tanks and donors. Because of
the economic crisis, the government was open to ideas that would get the econ-
omy out of depression. In 1985, in need of foreign exchange to manage its for-
eign debt, the government agreed with the Asian Development Bank to end both
the
Kadiwa
program and the wheat import monopoly of NFA. Political support
for the program weakened as the Marcos government became increasingly iso-
lated. In 1986, the government was overthrown following a peaceful “people
power” revolution on the streets in Manila.
The reforms in 1985 brought the agency back to where it had been 10 years
earlier, when it traded only in grain. Although the financial problem associated
with running the
Kadiwa
program dissipated, the reforms took away from the
agency one of its important sources of income, wheat imports. The national
government stepped in and increased its recurring subsidy to the agency, but
this supplement was inadequate. NFA's major source of income was now its
business from importing rice. However, during periods of high world prices for
rice or when the peso depreciated, the agency had to resort more heavily to debt
to continue its operations. NFA borrowed from commercial banks to pay for its
corporate deficit, and the national government allowed NFA to accumulate debt
with guarantees on the agency's short-term papers.
From Rice and Corn to Sugar and Back to Rolling Stores
In 1991, the failure of the General Agreement on Tariffs and Trade to conclude
an agreement aimed at converting quantitative import restrictions into ordinary
customs duties for certain imports led the Philippine government to unilaterally
continue its import liberalization program in 1992. Thus, sugar imports were
stripped of nontariff measures and given initially higher tariffs, which had to be
reduced over 3 years, ending in 1995. In early 1996, sugar producers succeeded
in getting the Philippine Congress to increase import duties on sugar. As news
about this decision spread, sugar imports surged while import duties were low.
Importers stocked up in anticipation of higher import duties, and by the second
half of 1996, the country had overstocked and domestic prices sharply fell.
Sugar producers then asked the government to intervene and procure sugar di-
rectly from them to stabilize prices. In 1997, the government gave in under pres-
sure and instructed NFA to stabilize sugar prices with domestic procurement.
