Agriculture Reference
In-Depth Information
excess stocks are the result of over-importation. This practice creates un-
certainties that translate into price instability.
2. As far as sales of rice are concerned, NFA operates like a private trader. It
adopts a quota system to limit the release of rice during periods of low in-
ventory and an open sale system to speed up the sale when the stocks are
huge. It also facilitates the movement of low-grade or substandard rice
stocks by selling these stocks in combination with good stocks. This prac-
tice might be in the interests of NFA, but such intervention creates strong
disincentives for private-sector investments in the rice sector.
3. What is probably of greater concern is whether the sale of low-priced rice
reaches the targeted individuals. According to available studies, only 50
percent of the subsidies normally reach the intended beneficiaries (Ba-
lisacan 1995; Subbarao, Ahmed, and Teklu 1996).
Taking all these factors together, the costs of public distribution translate
into large costs to the government. For example, since 1986, NFA's net operat-
ing loss has fluctuated from nearly Php 387 million in 1990 to more than Php
2.3 billion in 1992. Only in 1996 when the NFA imported rice did it post a net
operating profit of Php 1.2 billion (Clarete et al. 1998).
A recent work (Roumasset 1999)
4
points out that the NFA's pricing poli-
cies have not prevented the public from paying relatively high rice prices and
farmers from receiving less than the trade protection implied by current poli-
cies. Although price stabilization cannot be given full or even the largest part
of the blame, the irony is that the Philippines—projected to be a shining suc-
cess story 25 years earlier—has been an underachieving economy (ADB 2000).
Its agricultural growth rate has been below average for the region (3.0 percent
annually during 1967-95 compared to 3.8 percent for the region, and only 2.2
percent annually during 1982-95 compared to 4.4 percent for the region). This
performance, however, has not translated, in contrast to many of its neighbors,
into significant increases in growth of GDP (1.9 percent annual increase in
GDP during 1980-95 and a miserable -0.4 percent annual increase in GDP
per capita—the lowest rate in the region and the only country with a negative per
capita rate) and reduction in overall poverty.
Program Costs
A study by the United States Agency for International Development-funded
program AGILE (AGILE 2000) attempted to quantify the losses to society of
4. This report was commissioned by the Accelerated Growth, Investment, and Liberaliza-
tion with Equity (AGILE) program, which provided technical assistance to NFA for exploring op-
tions for reorganizing the agency. AGILE is financed out of a grant made by the U.S. Agency for
International Development to the Philippine government.
