Agriculture Reference
In-Depth Information
Policy Options
The analysis of the previous sections suggests that, although the NFA has made
profits out of imports in some years, it has not been able to achieve the stated ob-
jectives, and the costs of its operation have been high and increasing. Several stud-
ies have suggested various reforms, which boil down to seven specific suggestions:
1. limiting food security programs to rice only—both for stabilization and for
targeted SSN programs,
2. stabilizing prices within a band and adjusting the level of imports for this
purpose,
3. creating programs for disaster and food emergency mitigation,
4. targeting intervention for the poor,
5. creating a regulatory agency, separate from NFA, to perform relevant reg-
ulatory functions for food security purposes,
6. changing farmers' assistance from price support to an appropriate trade
protection and strategic public investment (to increase productivity and re-
duce transaction costs), and
7. privatizing NFA's trading functions.
Shifing Focus to Rice Only
Shifting policy focus to rice only needs further discussion. There are at least
four convincing reasons to focus on rice. First, food preferences are not uniform
across various income groups. As Bouis (1991) demonstrates, at lower levels of
per capita income, people consume calorie-intensive foods, such as rice. How-
ever, as incomes increase, diet becomes increasingly diversified into alternative
sources of calories, as well as into sources of other nutrients. Thus, as long as
food security of the poor is the main policy objective, only rice should be the
policy focus. Given the low per capita incomes in the country, and consequently,
the relatively high demand for calories, only a disruption in the supply of rice
is critical to overall food security.
Second, given the tastes of Filipinos, rice qualifies as the single most im-
portant staple food. Although there are Cebuano-speaking Filipinos in the south
who prefer white corn grits, they readily switch to rice if there is a shortage of
white corn. That is, there cannot be a food security crisis, as long as rice sup-
ply is adequate, even if imports were restricted. Unfortunately, the reverse is not
true in the Philippines. In other words, shortfalls in rice supply while rice im-
ports remain restricted cannot be met with white corn supply.
Finally, like any other developing country, the price elasticity of demand
for rice in the Philippines is low, and poor consumers spend a large share of
their income on rice. Therefore, any fluctuation in price of rice tends to induce
shifts in aggregate expenditure (Islam and Thomas 1996). In the Philippines,
consumers spend about 17 percent of their household budgets on cereals on the
