‘Gov’t rice imports to end smuggling’

Lashing out at “dubious farmers’ cooperatives” that have allowed themselves to be used by rice smugglers, National Food Authority (NFA) Administrator Angelito Banayo has suggested that the government regain its monopoly in rice importation.

A return to the government’s monopoly in rice importation could be the answer to rice smuggling in the country, Banayo said.

Banayo said dubious farmers’ cooperatives, that had been given rice import quotas, allowed themselves to be used as legal cover for smuggling, as shown by investigations into recent seizures of large rice shipments in the country’s ports.

“If the NFA were the only one allowed to import, they would not 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’s own policy allotting a greater share to the private sector of the set 500,000 metric tons (MT) of rice imports for 2012.

The NFA Council had decided to bid out the import rights of 380,000 MT to the private sector, divided equally between traders and farmers’ cooperatives. The remaining 120,000 MT 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 MT of rice to 109 farmers’ cooperatives.

The rights to the other 190,000 MT were divided among 19 business entities, which were limited to 10,000 MT of rice per trader.

The farmers’ cooperatives, presumably with limited financial capabilities, were restricted to 2,000 MT per cooperative.

Banayo admitted that the NFA had problems checking on the status and qualifications of the cooperatives.

Start of problems

The problems started because 109 cooperatives were far too many and hard to manage, and the NFA was not able to thoroughly check their “bona fides,” he said.

“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 also admitted that he entertained doubts about the genuineness of some of the farmers’ cooperatives as “they were bidding too high,” considering that the private sector needed to pay tariffs and taxes amounting to millions of pesos for the importations.

“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, because only 12 cooperatives were authorized to import rice. “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.

“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.

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.

“With the 109 cooperatives spread out in Luzon, the 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 two weeks ago.

He described the modus operandi of some rice smugglers: Cooperatives get import papers (memorandum of undertaking) for a certain volume of rice. They hold these papers but try to sneak their shipments past customs at the port. “Then the next time, they will show their memorandum of undertaking. So that means that instead of importing just 500 MT, they were able to import 1,000 MT,” he said.

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 Indian rice valued at P450 million.

“What happened was that the shipment was really intended for Jakarta. It was 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 did have 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, he admitted, were soaring.

Positive spin on smuggling

“Last year, we earned P1.6 billion from 660,000 MT of imports. This year, we profited by P2.63 billion from 380,000 MT. That’s big profits,” Banayo said.

Agriculture Secretary Alcala gave a positive spin on rice 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 smugglers. “I’m not really concerned about that because we’re not doing anything wrong,” he said.

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.”