“With the Quantitative Restriction (QR) on import of rice, expected
to be abolished in July 2017 in the Philippines, it is a need of the hour to
work out an interim strategy to build the capacity of domestic farmers and
other actors to face international competition,” claimed Dr. Roehlano Briones, senior
fellow for the Philippines Institute for Development Studies (PIDS) in the
third National Reference Group meeting held under the CREW project in Manila,
Philippines on 30 October, 14. The objective of the meeting was to discuss the
key findings of the Philippines Diagnostic Country Report (DCR) and crystallize
a national advocacy plan.
Using
the Total Welfare Impact Simulator for Trade (TWIST), a model for economic
surplus analysis, Dr. Briones simulated two scenarios in the rice sector:
first, free trade scenario and second, with the import quota.
For
the free trade scenario, the model suggested that rice imports in 2013 would
have been 3.8 billion tons higher than the actual 404,702 tons. In such a
scenario, the average retail price of rice at P33.70/kg would drop to equal the
border price of P19.8/ kg. Furthermore, the consumer surplus will rise by P178
billion, more than offsetting the P34 billion and P5.6 billion decline in the
producer surplus and the importer’s revenue respectively, resulting in a
consumer surplus of P138 billion (or over US$3 billion).
Whereas,
in the second situation with relaxed import quota, where imports were allowed
to reach 1 million tons against the actual 404,702 tons in 2013, the model
suggests that retail prices would fall by P2.18 per kilogram. Consumer surplus
would go up by P25.7 billion, while producer (farmer) surplus would fall by
P6.6 billion. Importers, on the other hand, would gain by P6 billion. On the
aggregate the economy would benefit by P25 billion.
To
summarize, Dr. Briones explained that pursuing a free trade regime in the rice
sector will lead to an aggregate benefit of over US$3 billion. However, as the
farmers have been protected from international competition and at the same
time, have received limited investment, they are unprepared for liberalization.
Further, along with the farmers, the millers and other members of the rice
value chain are also expected to face losses. Hence, with the expected opening
up of the import market it is essential that the same be done with safety nets
to ensure protection of farmers and other stakeholders. This calls for an
interim strategy that should be the focus of the Philippines government
especially since the QR is likely to not be renewed.
In
the bus transport sector, on the other hand, the bone of contention was cut
throat competition, rather harmful competition in an arterial patch in Metro
Manila, referred to as EDSA (Epifanio de los Santos Avenue). Dr. Sonny Domingo,
PIDS, and researcher for the bus transport sector explained that the loss due
to traffic congestion faced in the Philippines is about P5.5 billion per year.
Furthermore, if an effective decongestion policy is brought in place, the same
will result to a net present value of P13.3 billion in three years and P19.8
billion in six years. “It is crucial to cut vehicular flow of traffic through
traffic management and accomplish infrastructure and competition reforms in the
bus transport sector,” stated Dr. Domingo.
The
sector has suffered a failure in terms of policy implementation and the high
number of operators and buses have made it more difficult to discipline the
sector. Dr. Domingo suggested revisiting the Martial Law where the bus
operators were clubbed into agglomeration in order to make them accountable and
easy to regulate. The agglomeration could have a monopoly in their zones where
they would follow the policy of self-policing. Tony Salvador, IDEALS, confirmed
the idea and mentioned that the same could also include the element of
scheduled franchise licenses, where the licenses would carry the schedule,
station and timings for the buses.
The
meeting concluded with strong take-aways in terms of the advocacy. It was
decided that in the rice sector, a competitiveness package would be chalked out
to prepare the rice chain for international market and the role of National
Food Authority which holds the import monopoly would be revisited. While, in
the case of bus transport sector, it was decided that the probable application
of Marshall Law (1970s) and ways to cut down the number of buses and effective
implementation decongestion rules will be looked. Neha Tomar, CUTS
International remarked that the case of the Philippines was interesting as
while in one sector we are strategically trying to instill healthy competition,
in the other sector, we are trying to translate cut throat competition
regulated competition.
Dr.
Adoracion Navarro, senior research fellow of PIDS, added that in a
congressional hearing to consolidate legislative proposals and bills on
competition policies in Congress she attended, “the emerging consensus is that
the Competition Authority will regulate the exercise of market power.” She added that the authority “will
look into possible abuses by existing monopolies or existing dominant players
in the different industries.” “The possible role of the
Department of Justice-Office on Competition is still being reviewed. There is a view that the
office can evolve into the Competition Authority, but there is also a view that
this might be risky.”
NRG
members agreed that the way to move forward is to create a government body for
competition in the Philippines. “That is the rising consensus,”
Prof. Sta. Ana, Action for Economic Reforms said.
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