NFA boss blames some farmers’ cooperatives for rice smuggling
MANILA, Philippines—A return to the government’s monopoly in rice importation could be the key to unlocking the problem of rice smuggling in the Philippines, according to National Food Authority (NFA) Administrator Angelito Banayo.
He blamed dubious farmers’ cooperatives “who allowed themselves to be taken advantage of” for the unscrupulous use of NFA’s rice import permits as legal cover for smuggling, following recent seizures of large rice shipments in the country’s ports.
“If the NFA only will be allowed to import, they won’t be able to smuggle anymore,” Banayo said. He urged the NFA Council to heed recommendations by lawmakers to scrap the policy allowing “private grains businessmen” to import rice.
In an interview, Banayo said the smuggling problem stemmed from the government allotting a greater share to the private sector of the 500,000 metric tons of rice set for importation in 2012.
The NFA Council decided to bid out the import rights for 380,000 tons to the private sector, divided equally between traders and farmers’ cooperatives. The remaining 120,000 tons was to be bought by the NFA from countries with which it had purchase agreements, such as Vietnam and Thailand.
After bidding procedures in May, the NFA Council, led by Agriculture Secretary Proceso Alcala and other representatives from the financial sector, including the departments of finance, and trade and industry, awarded rice import permits for 190,000 tons to 109 farmers’ cooperatives.
The rights to the other 190,000 tons were divided among 19 business entities, which were limited to 10,000 tons per trader. The farmers’ cooperatives, presumably with limited financial capability, were restricted to only 2,000 tons per cooperative, thus, accounting for the bigger number of them.
The problems started because 109 cooperatives were far too many and hard to manage, and the NFA experienced trouble checking their “bona fides.”
“We could only rely on the documents they presented and which were certified by other government agencies, such the BIR (Bureau of Internal Revenue) and the NBI (National Bureau of Investigation),” he said.
Banayo admitted he entertained doubts about the genuineness of some of the farmers’ cooperatives as “they were bidding too high,” considering that the private-sector bidders also needed to pay tariff/duties and taxes amounting to millions of pesos for the importation.
“But it was not as if I could just stop the bidding based on those doubts,” he said, noting that the winning bids were advantageous to the government.
This was not the case in 2011, he said.
“Last year, the Philippines was allowed to import 860,000 tons, of which 200,000 toons was bought by the NFA. The 660,000 was shouldered by the private sector,” he said.
Of the 660,000 tons, only 60,000 tons was divided among 12 farmers’ cooperatives, and the rest was apportioned among the traders.
“So with a maximum limit of 5,000 tons per cooperative, only 12 cooperatives were given import permits. So we were able to check their bona fides. It was a very manageable number. We were able to visit their offices and personally check if they were real organizations,” Banayo said.
He said he had argued against giving a greater share of the rice permits to the farmers’ cooperatives when the NFA Council was deliberating on how to divide the rice importation pie for the private sector.
“This can be seen in the minutes of the NFA Council’s meeting. I kept saying, ‘What’s the financial capability of a farmers’ cooperative?’” Banayo said.
But he recalled the explanation of the president of the Federation of Farmers. “He said they get financiers. If they can’t get loans from the banks, they go to the retailers,” he said.
“I can understand that because that is how commodities are traded in the country and elsewhere. If I were a sugar trader, and I want to buy sugar from Bukidnon, and I don’t have enough money, I go to this retailer, or that retailer, asking for advance for the sugar I’m going to sell them,” he said.
“That’s the same thing for rice,” he said. Or at least, it was supposed to be.
“With the 109 cooperatives spread out in Luzon, Visayas and Mindanao, some unscrupulous smugglers were able to come in, and some of the farmers cooperatives allowed themselves to be used,” Banayo said.
“That’s what happened in Albay,” he said, referring to the government’s seizure of P200 million worth of undocumented rice imports aboard a Vietnamese vessel that arrived in Legazpi City, Albay, two weeks ago.
He described the modus operandi of some rice smugglers.
“What happens is like this: they (importers) are supposed to secure a memorandum of undertaking from us after the ship leaves the port in Vietnam. When the ship gets here, they have 30 days to produce the import papers,” he said.
But instead of getting the memorandum of undertaking (which would subtract the imports from their quota) from the NFA, “they hold out in case they can sneak past customs at the port,” Banayo said.
“Then the next time, they will show their memorandum of undertaking. So that means instead of importing just 500 tons, they were able to import 1,000 tons,” he said.
Banayo said he did not know of any similar problem involving traders.
He said some other incidents in the news were not actually smuggling, referring to the case at the Subic Bay Freeport in Zambales in August, when customs officials seized a shipment of nearly a thousand containers of rice from India valued at P450 million.
“Now, with what happened in Subic, that’s not smuggling. What happened was that shipment was really intended for Jakarta. It’s not intended to be smuggled here. But when Jakarta rejected it, maybe somebody tried to sell it. Maybe somebody tried to buy it from them,” he said.
For all the problems caused by smuggling, Banayo said it at least carried some “side benefits.”
“Our price of rice has been very stable. In fact it’s been almost stationary, like a difference of only P1 or so,” he said. NFA profits also went soaring. “Last year, we earned P1.6 billion from 660,000 tons of imports. This year, we profited P2.63 billion from 380,000 tons. That’s big profit,” Banayo said.
Agriculture Secretary Alcala also made a positive spin on smuggling in an earlier interview. “If there is smuggled rice coming in, that will only add to our stocks. Our stocks will become more stable,” he said.
Alcala said rice smuggling was a symptom of the larger problem of local rice farmers not being competitive enough. “The reason it’s so inviting to smuggle here is that it is so cheap overseas. The return is higher there. We need to be more aggressive in lowering the cost of production,” he added.
Banayo shrugged off allegations that the NFA was in cahoots with the illegal smugglers. “I’m not really concerned about that because we’re not doing anything wrong,” he said.
He added that he did not wish to pin the blame on other government agencies more directly involved in the interception of smuggled rice shipments, such as the Bureau of Customs.
In the end, he said, “smuggling is not really my concern. My primary concern is to make sure that we never run out of rice,” he said.
He said the NFA had learned some lessons from the smuggling controversies. “This has also been to our good. We’re learning. We know now what loopholes need to be plugged by next year,” he said.