NEDA bats for competitive rice tariff after QR lifting

22.11.2016

The removal of the special tax treatment on rice imports is a “major strategy in bringing down the country’s poverty incidence to between 13 to 15 percent” by the end of the Duterte administration in 2022, the National Economic and Development Authority (NEDA) said.

In a recent interview, NEDA deputy director general Rosemarie Edillon said imposing a competitive tariff on rice imports after the expiration of the quantitative restriction (QR) next year would significantly reduce the cost of the staple that eats up 20 percent of the budget of the poor.

At the same time, it would enable the agricultural sector to transition to the production of more high-value crops, she said.

“If we remove the QR, that would lead to lower prices of rice and many of the poor are net rice consumers. On the part of the producers, that actually induces them to more efficiently allocate their resources,” said Edillon.

Many rice famers, she said, are attracted to plant rice even if their lands are not suitable to the crop because of the high support price.

“If they can transition to high-value crops they would earn more. So instead of imposing a QR, we will impose tariff so there would be revenues that may be plowed back into the sector in the form of technical assistance for crop and income diversification,” she said.

NEDA projects additional revenues of P15 billion annually from duties on rice imports assuming a tariff rate of around 35 percent – consistent with the tariff on rice imports within ASEAN – is imposed.

Allowing free importation of rice would mean less domestic production because of competition but this does not mean the government would abandon the provision of support to rice farmers entirely, said Edillon.

“We are looking at provinces that can really compete under a new regime. What the government will do is to implement productivity-enhancing strategies in these areas to increase production,” she said.

“We don’t mind less production. What we are looking at more is the bottom line, that more farmers will graduate from poverty. Right now, they can sell rice at a high price but the production cost is also very high. That is the reason they can’t compete,” she added.

The extended QR, which would lapse in June 2017, is meant to protect the livelihood of Filipino rice farmers while they are strengthening their production capability. This extension was borne out of two years of negotiations with the World Trade Organization (WTO) and various member countries under the Aquino administration.

Through the QR, the Philippines imposes a high tariff of 35 percent on imported rice, the volume of which has been restricted to 805, 200 metric tons (MT). Importing outside the QR is even more expensive as inbound shipments would be levied a duty of 40 to 50 percent.

To fill the supply gap, the National Food Authority (NFA) imports rice through tenders and intervenes in the market by selling the staple at a cheaper price.

There is already consensus in the economic cluster of the Duterte Cabinet to remove the QR but the Department of Agriculture is still firmly against it.

“It would be a high-level Cabinet discussion. We are preparing the necessary technical data for that. It is now in the economic cluster but it has to be raised to Cabinet level,” she said.

The removal of the special tax treatment on rice is among NEDA’s main strategies for lowering the poverty incidence in the country by the end of Duterte’s term.

The government is raising its target for the reduction of poverty incidence to between 13 to 15 percent by the end of Duterte’s term in 2022 from the previous target of 17 percent. This would be driven by rural and regional development coupled with addressing the capacity constraints in other economic sectors.


philstar

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