Agriculture Reference
In-Depth Information
their respective levels of a year before. About 67 percent of observed annual
changes in monthly prices fall within plus or minus 10 percent. All these obser-
vations falling within the range of plus or minus 10 percent are likely to be tol-
erated. The observations corresponding to the period when the country was in
the midst of a rice shortage crisis were outside this range.
Emergency and Disaster Mitigation
PUBLIC RICE BUFFER STOCKS AS INSURANCE FOR CONTINGENT FAILURE OF
THE SCHEME
. Concerns have been raised that the proposed scheme may not
be effective without using domestic buffer stocks when dealing with market
failures, because of inadequate data on rice production, consumption, and in-
ventories as well as the failure of private sector (the holders of import licenses)
to import stocks required to stabilize prices within the band. The likelihood that
any of these problems shall occur is high, considering the politicized nature of
decisionmaking concerning rice imports.
Responses to these concerns may include continuing the effort of improv-
ing the government's capability of gathering relevant rice statistics and analyz-
ing them. Furthermore, an important feature of the proposed changes to the
price stabilization scheme is to establish a process for determining the method,
agents, and conditions used to make decisions about rice imports. Once this
process has been subjected to public discussion and adopted as amended in con-
sultative meetings, the implementation of such ought to be free of recurrent de-
bate on whether the statistics or the analysis thereof is correct. If the govern-
ment commits a mistake while following the procedure, then the mistake may
be dealt with appropriately on an ex-post instead of an ex-ante basis.
A good example is the experience of the country in 1995, when the gov-
ernment decided that there was adequate rice production and thus determined
not to import rice. At the same time, domestic rice procurement was low in 1994,
such that buffer stocks were critically low. By the second quarter of 1995, rice
prices sharply increased. The government reversed itself and decided to import
rice, but it was too late—prices had already jumped to an unacceptable level.
Although the important role for public buffer stocks as a contingency
against failure of the proposed stabilization scheme with trade is recognized,
creating a government corporation for managing such stocks is unnecessary. An
alternative is to engage the services of a company to maintain the appropriate
level of stocks. Concerns are raised that such a company may be unreliable in
complying with the terms of its contract. Although a breach of contract is pos-
sible, it does not warrant having a government corporation as backup. Clearly
one can think of similar situations—as in defense-related services or procure-
ment—involving important national concerns, yet the government trusts private
companies to do good business.
RICE CONTINGENT FUND FOR EXTRAORDINARY SITUATIONS
. An extraor-
dinary situation involves the disruption of the normal flow of rice to and from
