• Being taken for a ride

    DEMAND AND SUPPLY By Boo Chanco
    (The Philippine Star) July 2, 2014
     

    P-Noy doesn’t believe the sudden increase in prices was caused by production and supply problems. He told reporters in Iloilo that Agriculture officials told him they suspect a possible conspiracy among dealers of garlic and rice to create a shortage in the market and drive up prices.

    This hoarding conspiracy excuse is overused. Agriculture officials resort to it every time prices shoot up because they had been sleeping on their jobs. I cannot believe the President fell for one of the oldest excuses in the book.

    Why? P-Noy said what he said in Iloilo because (a) he wants to protect the reputation of his administration. It is clear his Agri officials didn’t plan early enough for the expected lean months for rice and other commodities. They were deluded about their self sufficiency claims.

    The failure of his Agriculture secretary is his failure too, unless he fires him for the failure. P-Noy most likely knows things are not right so he decided to split the Agri chief’s job into two, giving the problematic portions to Kiko Pangilinan but didn’t have the heart to fire Agri Sec Procy Alcala. That’s not good enough and P-Noy knows it. So, he must look for an excuse and a conspiracy theory sounds like headline material.

    Another possible explanation is that (b) P-Noy actually believes the excuse of Mr Alcala but that would make him look pretty gullible, not too intelligent and would explain a lot of the failures in his watch.

    Still, another explanation is that (c) P-Noy has absolutely no respect for media so that when he is asked about a burning issue of the day, he says what sounds like front page material even if he honestly thinks what he is saying is bullshit. From his experience, what he says always lands in the front page, even if it makes no sense.

    Consider the bullshit in this quote from P-Noy on the rapid rise in the prices of rice, garlic and other principal household commodities: “Did the supply come short? Some are saying that there’s more than enough supply, but there seems to be a suspicion—I repeat suspicion—that there’s a conspiracy to keep the prices high, especially that of garlic,” he said in an interview in Iloilo City aired over state-run dzRB.

    P-Noy then said the same conspiracy was suspected among dealers of rice which he said has caused an “artificial shortage” of the staple. “Someone is taking advantage of the situation, and I repeat, this is a suspicion. While there is sufficient supply, there’s none in the market. It seems that they noticed a low supply of the NFA, and they probably thought this was the right time to increase prices.”

    How can anyone say “while there is sufficient supply, there is none in the market?” Supply is either there in the market or not there. If it is being hoarded in some warehouse, it is still his government’s duty to flush it out. In other words, there is no escaping the fact that it is his responsibility through his Agriculture secretary to make sure the market has adequate supply to keep prices reasonable.

    And if P-Noy had been listening to his Economics Planning Secretary Arsi Balisacan, he must realize by now that bad policies are also responsible for the horrible situation of high prices giving Filipino housewives daily migraine. Having the right policy should have flushed out all those supposed hoarded stocks faster than an NBI and police raid could.

    Hoarders are business people who don’t want to lose money. They know their economics better than a President who was taught Economics 101 by his predecessor, former President Arroyo, in Ateneo. This time, he can justifiably blame GMA for his failure to grasp basic economic concepts.

    The cost of failure that resulted in higher prices is significant to our economy. The Bangko Sentral said it sees inflation ramping up in June closer to the government’s full-year target of five percent due to elevated prices of food, education, and transportation. Inflation hit 4.5 percent last May, the highest since Nov 2011. DBS, a Singaporean bank, sees Q3 inflation accelerating above five percent. Labor will be asking for wage hikes, further reducing price competitiveness of our industries.

    If Alcala and his boys were doing their jobs or were capable of doing their jobs, there were signs out there early on of this impending price shocker. In rice, data from the Philippine Statistical Authority show that as of May 1, the NFA’s stock had dwindled to 14 days of national consumption.

    The NFA is mandated to maintain a buffer stock based on a national consumption rate of 34,000 metric tons daily. Based on the government’s measure of rice self-sufficiency, supply must exceed yearly demand by 90 days’ worth of buffer stock.

    So now we have a crisis that should have been avoidable. Kiko Pangilinan, P-Noy’s newly appointed agri troubleshooter, announced that importing a million tons to flood the market and force the prices down is the administration’s solution to recent rice price surges. This action plan, assuming government is able to pull it off beyond press releases, may be too late to make a difference.

    P-Noy said the hoarders may have noticed NFA’s buffer stock is low, effectively admitting that Alcala and his NFA chief goofed. They made wrong rice demand and supply projections. As a consequence, NFA didn’t import enough rice to satisfy what is required and made its decision to import far too late for the stocks to arrive and serve its price mitigation purpose.

    P-Noy, Sec. Balisacan and Sec .Pangilinan must go for a long term response, and that means a drastic policy change. Late last week, there was hope that finally, our government is ready for needed changes in our rice policy.

    Secretary Balisacan told Bloomberg that the administration is considering a change in standing policy and allow a free market where private traders can import as much rice as they want. Balisacan explained this is needed to battle record-high domestic prices and limit losses at NFA. “We need to get our trade policy right to address rising rice prices,” Bloomberg quotes Balisacan.

    Our approach in restricting rice imports without an adequate assurance that local rice production would be sufficient to meet demand was the main factor that led to higher prices,” he explained. Government, Balisacan said, would instead collect tariffs on the imports.

    But now, Pangilinan is saying that the administration will continue the ban on private rice imports that Alcala and his resigned NFA chief imposed. This is against the recommendation of government’s own economists at PIDS and NEDA.

    Keeping government’s failed policy on rice will show P-Noy doesn’t have the balls to do the right thing instead of the politically expedient thing. If he is to risk his political capital, this change in rice policy is a far better issue to choose than denying Nora Aunor national artist status.

    It is time for the political leadership of this country to listen to what government economists have been saying: let the private sector do the importing. The DA-NFA can then use the 50-percent import duty to improve rice varieties, irrigation, fertilizers, harvests, and post-harvest facilities and techniques to improve income of farmers that may eventually lead to self-sufficiency.

    In any case, there is urgency in reversing the policy that has mired NFA in heavy debts through the years. Again, as I reported here last Friday, Bloomberg estimates that NFA debts by 2016 may be 2x the national defense budget this year if there is no policy change.

    On a flight back from Japan last week, P-Noy was reported to have said that based on reports from the Agri department, “I guess it is not the vast majority that is getting affected.”

    How can he say most Filipinos are not affected by the hike in prices? P-Noy must be out of touch with the Filipino people’s needs if he believes his Agri chief on this one. Or he had too much saki while in Japan.

    It is a pity some Cabinet members are making a fool of P-Noy with their false stories and excuses. Worse, P-Noy seems to believe them based on what he is saying and the lack of appropriate action to set things right.

    Sen Serge Osmena, who spearheaded P-Noy’s 2010 campaign said it all for us folks who had high hopes for Ninoy’s son. Serge denounced what he called the NPAs or the non performing assets in the Cabinet and P-Noy himself, a lousy manager.

    P-Noy is obviously being taken for a ride by his boys and he seems to be okay with it. Hay naku talaga!