Rice overimported in last 3 years of Gloria Macapagal-Arroyo | Inquirer News

Rice overimported in last 3 years of Gloria Macapagal-Arroyo

(Last of two parts)

MANILA, Philippines—The Philippine government overestimated the yearly rice consumption by every Filipino, leading to overimportation in the last three years of the Gloria Macapagal-Arroyo administration.


An audit team tapped by the National Food Authority (NFA) to review its rice importation program, debt and losses said the agency’s private sector-financed importations from 2008 to 2010 amounted to “legalized smuggling” by favored groups.

The private importers consisted of 10 groups from Pangasinan province and eight traders from Cebu province.


When the interagency committee on rice and white corn, headed by then Agriculture Secretary Arthur Yap, met in 2009 to discuss the importation for 2010, no questions were raised on the estimate of the Bureau of Agricultural Statistics (BAS) that the per capita consumption between 2006 and 2009 jumped 8.5 percent to 128.8 kilograms.

The number was used as basis to compute the rice requirement for 2010, the year the Philippines imported 2.4 million metric tons (MT) of rice, making it the world’s largest importer of the grain.

Had the committee checked the BAS figures, the rice consumption figure for 2010 could have been adjusted to a more reasonable level of 120 kg a year, BAS’ updated per capita estimate that it released in July 2010, the audit team said.

“This per capita difference of 8.8 kg multiplied by the projected 2010 population of 93.034 million would result in an over-quantity of MT for 2010 importation of 818,000 MT,” said a report prepared by the three-member audit team.

Mismanaged inventories

The NFA’s mismanaged inventories also contributed to overimportation and surging rice prices, especially in 2008.

The report said there were months when the NFA stockpile went below the mandated buffer periods.


“From January 2000 to July 2010, there were 27 out of 127 months (or 21 percent) where the NFA stocks went below 15 days. Moreover, these near-stock-out occurrences were consecutive strings of 15 months (from February 2007 to April 2008) and 7 months (from Oct. 4 to April 5),” the report said.

The NFA’s rice inventory beginning July also went below its mandated target of 30 days in 2001, 2008, 2009 and 2010.

FAO warning

The longest near-stock-out in 2007-2008 was crucial as this was the time the UN Food and Agriculture Organization (FAO) was issuing warnings on a possible food crisis and huge jumps in prices due to crop shortfalls, natural calamities and the global financial crisis.

Despite these warnings, the NFA did not act to ensure that the country had a sufficient rice buffer, allowing traders, who were waiting for news of the low supply of NFA rice, to increase prices in early 2008.

Data from the Department of Agriculture showed that the price of rice in 2007 hovered between P20 and P25 a kilo. In 2008, the retail price jumped to between P34 and P40 a kilo.

The retail price of well-milled rice averaged P38.37 a kilo in June 2008, up by 13.89 percent from the previous month’s price and by 57.38 percent from the level in June 2007, according to the BAS.

Buying binge

Because of the global rice shortage in 2008 that affected supplies in the country, the NFA went on a buying binge the following year, NFA Administrator Angelito Banayo said recently. “The NFA overbought,” he said.

The trading agency imported more rice, culminating in the 2.4 million MT delivery for 2010, which the FAO said was one of the highest rice importation volumes on record.

This resulted in a supply glut that hurt not only NFA sales but also the prices of palay (unmilled rice) sold by farmers.

“The beginning-July stock [in 2009] was overdone, i.e. in excess of 17 days over the 90-day optimum national inventory. This overhang in the market dampened NFA sales volume and likewise dampened palay prices during the fourth quarter harvest,” the report said.

Corruption in the private sector importation, mistakes in consumption estimates, mismanagement of stocks and the unfortunate timing of rice purchases contributed to overpricing and the NFA’s debts over the years, the report said.

P33-B overprice

The audit noted that in the past 10 years, the NFA bought rice way beyond the benchmarks issued by the FAO.

“From years 2000-2010, the total (overprice) against the aforementioned benchmarks was $714 million or an (overprice) of $60/MT on a total purchase tonnage of 11.8 million MT valued at $4.8 billion,” the report said.

It said the last three years of the Gloria Macapagal-Arroyo administration saw the biggest overprice of imported NFA rice, which averaged $125/MT, or more than double the overprice of $60/MT for the whole of 2000-2010.

P182-B loss

The cumulative overprice during the period was P33 billion, nearly 20 percent of the NFA’s trading loss of P182 billion, the report said.

Mismanagement extended to NFA loans and investments, causing huge debts and losses.

To be able to import rice, the agency borrowed heavily from government financial institutions like the Development Bank of the Philippines, Land Bank of the Philippines and Philippine Veterans Bank from 2003 to 2005. As of 2010, the NFA government-guaranteed debt stood at P176.8 billion, the report said.

Losses in state bonds

But the loans were not used for rice purchases alone. The audit report said the NFA invested P16.5 billion in government bonds maturing in seven years.

The report said the NFA had to borrow periodically to pay the interests for the loans without getting an interest from its investments in zero-coupons.

Before the bonds matured, the NFA sold them to Land Bank of the Philippines. “It appears that NFA lost P1.3 billion to P3.3 billion from such investment on top of front-end fees to financial advisers,” the report said.

It also noted that the liquidation of the NFA bonds led to the restructuring of loans, which more than doubled from P16.5 billion to P35 billion.

Padded arranger fees

The report said the NFA also overpaid the “arranger fees” that totaled P230 million to the Land Bank and a private finance firm, ONL Consultants Inc.

ONL Consultants, also the financial adviser of the bankrupt Quedan and Rural Credit Guarantee Corp. (Quedancor), was the arranger for NFA transactions with Development Bank of the Philippines and Land Bank and was paid “2 percent for some loans.”

The report said the payment was way beyond the ceiling set by the government that even the Bangko Sentral ng Pilipinas (BSP) took notice.

The BSP, according to the report, told the NFA that arranger fees should “not exceed 1 percent but NFA actually paid 2 percent for some loans. By comparison, the consortium of banks that arranged NFA’s P18 billion long-term loans in 2009 charged only .0005 percent in arranger fee.”

It was not the first time that ONL Consultants, founded by Norberto Ong, was embroiled in a financial deal that turned out to be disadvantageous to the government.

ONL Consultants was the arranger of Quedancor’s P3-billion loan with Land Bank in 2004 for which it was paid P100 million, the report said.

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TAGS: Graft & Corruption, Rice problem
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