Agriculture Reference
In-Depth Information
TABLE 7.9 Evaluation of options to divest the marketing assets of the National Food Authority
Divestment through:
Restricted sale
Unrestricted sale
One corporation
Several
Individual
Bundled
Indicator
on “as-is” basis
corporations
assets
assets
Level of government
intervention
High
High
High
Low
Level of government
budgetary support
High
Medium to high
Low
Low
Privatization proceeds
Low
Medium to high
Low
High
Level of market competition
Low
Low to medium
High
High
NFA's monopoly control of the import of rice. Available estimates suggest that
about Php 3.72 billion are foregone each year for granting import monopoly to
NFA; and quite the opposite would have happened, had government liberalized
the trade. The loss to consumers is of similar magnitude (Php 3.7 billion). Adding
up the components of these costs, estimated yearly costs of rice market ineffi-
ciencies range from Php 11.95 billion to Php 31.24 billion during 1995-98.
The spiraling direct and indirect costs of continuing price stabilization has
prompted discussions to reform the current policies. Reviewing available options,
the government's role should now be limited to (1) stabilizing prices within a
broad band, with WTO-compatible adjustable tariffs and private-sector partici-
pation; (2) providing targeted SSN programs for the poor; (3) managing emer-
gencies or natural disaster related income shocks; and (4) providing assistance to
farmers in alternative ways. It has also been argued that, once these reforms are
undertaken, NFA might become a nonfunctioning entity that has to be disman-
tled. Examining the pros and cons of various divestment options, we conclude
that selling NFA's fixed assets in bundles might be the most viable option for the
government to adopt—as it is likely to increase competition, reduce government's
involvement, lower costs, and improve overall efficiency of the rice markets.
References
ADB (Asian Development Bank). 1999. Report and recommendation of the president to
the Board of Governors on proposed loans and technical assistance grant to the
Republic of the Philippines for the Grains Sector Development Program (GDSP).
Manila: ADB.
———. 2000. Rural Asia: Beyond the Green Revolution. Manila: Philippines.
AGILE (Accelerated Growth, Investment and Liberalization with Equity). 2000. Strate-
gic reorganization of the National Food Authority for the next millennium. Report
to the National Food Authority and USAID, Manila. Mimeo.
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