Philippines hungry for rice investment
By Prime Sarmiento

Asia Times Online, August 21, 2008

MANILA - When the price of rice nearly doubled to about 90 US cents per kilo two months ago, Liza Valino put cheaper substitutes such as bananas and sweet potatoes on the table to feed her 10-strong family. No one was satisfied.

"Rice is more filling. It doesn't matter if we have fish or vegetables ... if there's rice, we feel more satisfied," she said. In the end, Valino, a manicurist, decided to spend more on rice and less on other food items.

Rice is a staple in the Philippines, with the national daily consumption at 33,000 tonnes, accounting on average for 20% of the daily household budget. Apart from being the main source of carbohydrates, rice creates what anthropologists refer to as "the physiological sensation of satiety". For most Filipinos, no meal is complete without rice.

The Valinos are among thousands of Filipino families that have had to cut down on their food spending to cope with rising prices. A nationwide survey conducted in July by Pulse Asia revealed two in three Filipino households are consuming less or spending less on food and one in four households is talking about cutting down on rice consumption.

As the country enters the third quarter of the year, the traditional lean season, the demand for rice has turned urgent with escalating prices of the staple turning into a highly emotional and politically charged issue.

Philippine government officials are scrambling for means to alleviate this rice hunger, mainly through expensive imports and administrative measures.

Over the past two months, President Gloria Macapagal-Arroyo's government has imported 2 million tonnes of rice, sold subsidized rice at 25 pesos (US$0.55 cents) a kilo, cracked down on rice hoarders, issued a moratorium on agricultural land conversions and urged fast-food restaurants to offer half-portions of rice.

The measures have apparently failed to mollify a frustrated populace. Arroyo's net satisfaction rating tumbled to 21%, according to the second quarter 2008 Social Weather Survey, the lowest rating that any Philippine president has had since 1989.

Turning increasingly unpopular, however, is only one of Arroyo's worries. The Philippines is now the world's largest rice importer, and for the past 10 years it has been procuring between 1 million to 2 million tonnes each year - equivalent to 10% of its total consumption.

The government cannot afford to continuously rely on imports to satisfy a basic need of its people. As Jessica Reyes Cantos, lead convener of the advocacy group Rice Watch and Action Network (R1), notes: "We can't rely on rice imports because what will happen to us if rice exporters decide not to sell? Can we force them to sell rice to us?"

That risk is high because the global rice market is thin, with only 7% of harvested rice traded. Exporters such as Thailand, Vietnam and China also have rice-eating populations and will not hesitate to cap exports to protect their domestic consumers. Early this year, Cambodia, Egypt, India, Pakistan and Vietnam stopped exports as tight supply threatened food security.

Several factors helped to drive prices to a 20-year high of $1,000 a tonne. These include widespread diversion of paddy lands to cash crops and/or residential sites; weather that damaged rice crops in Southeast Asia; rising wheat prices, which pushed some major bread consumers to shift to rice, and higher demand from the fast-growing Chinese and Indian economies.

Philippine Agriculture Secretary Arthur Yap recently vowed that the country will be self-sufficient in rice by 2010. His predecessors had made similar pronouncements yet never achieved that goal, not least because of geographical factors.

"The Philippines is fighting a battle against nature that its [rice] exporting neighbors are spared," according to the report published by the Philippines-based International Rice Research Institute, in 2006. An archipelagic country with a limited land base, the Philippines can only spare 4 million hectares for rice cultivation. It is on the eastern edge of the Asian continent, making it part of the typhoon belt and rice farming a risky venture.

Compared with that, Thailand and Vietnam have clear geographical advantages. They have far more arable land, are not located in the typhoon belt and can draw on the Mekong River to sustain their rice fields.

In an online discussion held last month, World Bank economist Will Martin noted that "improvements in production technology can play a big role in reducing the problem [of rice shortage in the Philippines] and generally appear to have very high returns that can raise economic growth". Other experts say that unless the government funds and implements policies in favor of improved irrigation and scientific farming, self-sufficiency will remain a dream.

Investing in agricultural infrastructure is vital. Trinidad Domingo, president of the National Coalition of Rural Women, believes that irrigation will be a big help to rice farmers as this will allow them to plant rice even in the dry season. Rainfed agriculture can only produce a single harvest a year, she points out.

"Instead of spending a lot of money to import rice the government should use it to support Filipino farmers," Domingo says. The Philippines is expected to import 2.7 million tonnes of rice this year and R1 has estimated that for this year's rice imports the government has to spend 58.7 billion pesos.

The Philippines has 3.1 million hectares of irrigatable lands; of this only 46% is irrigated, according to the National Irrigation Administration.

"Investments for rural infrastructure development and other support services have dwindled from 0.24% of the country's gross value added agriculture (GVA) in 1995-1999 to a mere 0.07% in 2000-2005. This is particularly true for irrigation, which contributes about 25% of rice production increase. This meagre investment in the rice sub-sector has affected its production performance and weakened its competitive position in the world market vis-a-vis the other Southeast Asian countries," says a 2006 research paper prepared by Arsenio M Balisacan, director of the Philippines-based Southeast Asian Regional Center for Graduate Study and Research in Agriculture, and Leocadio S Sebastian, former executive director of the Philippines Rice Research Institute.

Fermin Adriano, a Manila-based economist who has done several studies on the Philippine farm sector, estimates that the government needs to spend at least 40 billion pesos each year on building new irrigation facilities and maintaining existing ones. Current spending on this head is less than half that amount.

Given the scarce resources, R1's Cantos proposes that the agriculture department avoids investing in large projects such as dams. "It can just repair and rehabilitate existing facilities or spend on small-scale communal irrigation systems."

Another worthwhile measure is investment in research and development (R&D). "There is strong evidence that the returns from investments in research and development in developing country agriculture are extremely high. R&D can help improve farmers' incomes, while helping hold down the price of staple foods to consumers," according to the bank's Martin.

Balisacan and Sebastian's study showed that for the past 10 years investments in agricultural research only accounted for 0.1% of the country's GVA. "This is far below the 1% level recommended for developing countries and very much lower than the 2-3% observed in many countries," the study said. The authors recommended that more funds be used to develop high quality and improved seeds, integrated crop management, crop management practices and expanded outreach work to disseminate new knowledge and technologies.

The Philippine government cannot afford to give up trying to boost rice production if it is to feed its more than 80 million population, which is expanding at 2.3% rate per year. "The government needs to take charge because rice is strategic to the life of the nation," Adriano says. Government intervention means putting money into infrastructure and research and such investments will assure farmers that they have the support they need to continue planting rice, he said.

(Inter Press Service)






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