Agriculture Reference
In-Depth Information
the current program. The study uses a partial equilibrium model of the rice mar-
ket in the Philippines to estimate the residual inefficiencies of the NFA's reor-
ganization options. Five components of rice market inefficiencies were defined
and estimated based on the model: foregone tariff revenues, consumer sur-
charges, producer losses, excess burden for consumers, and excess burden for
producers. Table 7.6 reproduces AGILE's estimates of program cost.
The government forgoes revenues amounting to Php 3.72 billion a year by
restricting rice importation to NFA. If permits to import rice were auctioned to
the private sector, the government would earn revenues. Alternatively, if rice
imports were liberalized subject to import taxes, tariff revenues would accrue
to the government. Currently, NFA, which is the sole importer of rice in the
country, receives a deferment on tariff payments to the government from its rice
importation activities.
About Php 3.7 billion are lost each year by rice consumers under the cur-
rent program. This loss represents the penalties borne by consumers under
the segmented rice marketing system and nontransparent import regime—
conditions giving rise to imperfect competition in the Philippine rice market.
On a per-unit basis, the penalty is measured by the excess of the actual price of
rice resulting from NFA intervention and import policies over the equilibrium
price of rice in a better-integrated rice marketing system and a tariffs-only im-
port regime. In addition, consumers face an excess burden, that is, losses due to
the policy of protecting rice producers, amounting to Php 4.24 billion each year.
Rice farmers are also penalized by the current NFA intervention system;
Php 3.67 billion in the form of losses from lower farmgate prices plus Php 4.47
billion in excess burden, representing the value of their overproduction (and
consequently lower farm income) because of trade protection. They could re-
ceive higher farmgate prices without NFA price interventions.
From 1995 to 1998, on a yearly basis, the total of these estimated rice mar-
ket inefficiencies ranged from Php 11.95 billion to Php 31.24 billion. On aver-
age, the total loss amounts to Php 22.77 billion a year.
TABLE 7.6 Estimated cost of the National Food Authority's rice price and import
policies, 1996-98 (Php billions)
Cost category
1996
1997
1998
Average
Foregone tariff revenues
4.32
3.25
3.58
3.72
Consumer surcharges
6.44
8.87
4.7
6.67
Producer losses
3.44
4.51
3.05
3.67
Excess burden for consumer
7.63
4.54
0.55
4.24
Excess burden for producer
9.41
3.91
0.07
4.47
Total
31.24
25.08
11.95
22.77
SOURCE : Data from AGILE (2000, Table 4.16).
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