POSTSCRIPT / April 14, 2011 / Thusday


Philippine STAR Columnist

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The magic of turning imported rice to gold

WHAT’S THE SCORE?: Do Agriculture Secretary Proceso Alcala and National Food Authority Administrator Angelito Banayo still talk to each other?

I mean when Banayo is back in town from his shopping in nearby countries for megatons of rice to fill a possible shortage in the cereal.

(I understand somebody who looked like Banayo came back from Cambodia and Vietnam recently after looking for large-volume rice.)

Anyway, Alcala may want to have a heart-to-heart talk with his NFA chief before President Noynoy Aquino summons them to find out what is going on and how much.

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STILL BUYING: Banayo announced days ago that the NFA would import 300,000 metric tons of rice on top of what Alcala said was a good harvest and the importations already contracted for.

The NFA is bringing in 200,000 MT in May, while private traders are importing some 660,000 MT set to arrive in June, according to sources.

Months ago, soon after President Aquino handed him the NFA goldmine as part of the spoils of war, Banayo announced that there was no need to import rice since government bodegas were bursting with so much rice that some of it was already rotting.

Then days ago the never-say-die Banayo came back to announce that he would import 300,000 MT in addition to 200,000 MT already on the way.

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ALCALA SAYS NO: But Alcala is insisting there was no need to import additional 300,000 MT this year.

“That is his (Banayo’s) personal opinion but not the opinion of the government,” the secretary told media. “Even I myself cannot say that there is such a need, although I am the chairman of the NFA Council.”

He said the country’s rice inventory was very good since the harvest in the first quarter was better than expected.

“You may go around the country and you will see that everyone is harvesting palay,” he said. “The farmers are saying they have a good harvest and we are anticipating that they will exceed the projection of 7.6 million MT for the dry season cropping.”

Alcala said the government expects at least 7.6 MT for this year’s dry season cropping, or a 15-percent increase compared to last year’s 6.6 MT. He said the total projected harvest for 2011 was at least 17.46 MT.

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FALSE ALARM: But some NFA habitués laughed at Alcala’s projections. They said the secretary must have been reading only the Luzon reports since the harvest in Mindanao and the Visayas, they claimed, had not been as good.

Still, Malacañang belied press reports that the President had been warned of an impending rice or food crisis. Alcala said the false story might have been planted by a cartel to tighten its grip on the rice market.

The reports warning of a food-related security problem were attributed to the National Intelligence Coordinating Agency, but that office denied being the source of such dire assessment.

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HOCUS-POCUS: Malacañang, the agriculture department and the NFA better review their data and make a full adjusted report before senators or congressmen add to the confusion by launching inquiries in aid of publicity.

Some lawmakers are intrigued by reports that a recent rice shipment was actually bought at $430/MT but that the government paid $480/MT.

Note the intriguing mathematics: After somebody pockets the alleged overprice, he could still make a killing by remilling and rebagging the rice. Each ton of the imported rice translates into 20 bags (without NFA markings) of 50 kilos each.

Remilled to look first class, the rebagged rice could be sold at P1,800/bag if passed off as dinorado, or even P2,000/bag if passable as sinandomeng. Compare that price with the P1,040/bag landed cost.

I refuse to believe that President Aquino knows this hocus-pocus, otherwise he would have cut off the sticky fingers of somebody already.

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CREDIT CAP: The Bangko Sentral ng Pilipinas stands firm on its position that letting market forces determine pricing serves public interest best and is the most effective way of allocating credit.

This view does not jibe with a number of bills in the House of Representatives seeking to put a cap on credit card interest rates.

In a position paper submitted to the House, the BSP said: “Setting interest rate ceilings will fuel the moral hazard and adverse selection problems that underpin a credit rationing framework.

“These problems are likely to be exacerbated in an economy such as the Philippines since information asymmetry is endemic even under more normal market conditions.”

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COMPETITION: The BSP says in effect that the re-imposition of interest rate ceilings would mean more stringent requirements in credit card applications. Such credit facility would no longer be readily available — and unregulated black market lending could flourish.

Credit cards fall under the category of unsecured loan. Rates are affected not only by the cost of securing the credit facility but also by the cost of refinancing funds advanced as a result of the transaction.

A market-based interest rate policy fosters healthy competition among financial firms, including credit card companies. It does not only attract depositors, it also encourages borrowers to take on debt.

When business responds to market forces, competition sets in. There will not be healthy rivalry once rates are pre-set.

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(First published in the Philippine STAR of April 14, 2011)

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