27 May 2008

RICE ISSUE

OVERVIEW

• International media and analysts have pointed to the Philippines’
high volume tenders as perhaps the key factor in driving up the global price
of rice in recent months.

• There are reports that the Philippines has not been able to secure
adequate rice supplies from the international market as a result of high
prices and low supply, sparking further speculation that the Philippines may
face food shortages in the longer-term.

• The Philippines has been repeatedly mentioned in larger articles
on issues related to food shortage together with such countries as Haiti ,
India and Colombia , which have been more severely impacted by the global
food crisis, including riots and political instability. There have also been
inaccurate reports claiming that food riots have taken place in the
Philippines . (*Note: These inaccurate reports are being corrected through
Letters to the Editor that are being sent from government officials in
Manila to those media outlets)

• The international financial community and media are focused on the
impact that measures taken by the Government to address the rise in food
prices will have on its fiscal position, and more specifically, its ability
to balance the budget this year. \

PHILIPPINE GOVERNMENT’S ACTION/RESPONSE

• President Gloria Macapagal-Arroyo and her Administration have been
working tirelessly to address challenges arising from the slowdown in the
global economy combined with the spike in high oil and food prices. These
global forces are causing real difficulties for the poor in the Philippines
but the Government is doing everything in its power to ensure that our
country’s food supplies remain stable and the Philippine economy remains
resilient and growing.

• The Government’s focus has been on: 1) ensuring adequate supplies
of rice and other foodstuffs through both domestic production and
importation – which has essentially been done with current rice supplies
expected to meet our domestic requirements for the foreseeable future; 2)
supporting distribution of rice to all parts of the country through a range
of mechanisms including active cooperation with churches, mosques, and
schools; and 3) enforcing regulations regarding the sale and distribution of
rice and cracking down on corruption that can impact the supply,
distribution, and price of rice. Through the efforts of both the public and
non-governmental sectors, the Government is meeting this challenge.

• At the end of the day, this is a global problem and we must work
together both at home and abroad to resolve it. That is why the Government
is working with the International Rice Research Institute (IRRI) to explore
ways of meeting the future needs for rice in the Philippines and that of
other rice-producing countries. These efforts range from ensuring that
farmers are aware of and can use the latest techniques in rice production to
making sure that social safety nets are in place for those poor people who
are affected by this challenge. The Government will work closely with the
IRRI to improve agriculture practices and related infrastructure, enhance
the ability of Philippine farmers to utilize hybrid rice varieties more
effectively and develop programs to better train our country’s farmers. This
will help address our country’s food needs in the longer-term.

RECENT COMMENTS OF PRESIDENT ARROYO ON THE ISSUE

• “On food, we have been working on agricultural modernization, from
the development of new hybrids -- which we have been working with the IRRI,
for instance. I just came from there today - to see how their new
innovations can be rolled out. To unprecedented investments in
irrigation-1.4 million hectares, never seen before in history. And to
dramatic increases in loans, four-fold as a matter of fact, to help our
farmers purchase better equipment.” (Speech during the General Assembly and
Induction of Officers of the Federation of Philippine Industries and
Launching of the FPI-FFCCCII Advocacy “Buy Pinoy-Buy Local”, May 5, 2008)

• “If we’re to go into the market again it’s for buffer stocks so
that’s why it’s a “take it or leave it” situation as far as NFA is
concerned. In other words, we can take it or we can leave it, depending on
how the prices are. We are managing the issue the best way possible through
our three-step program to contain price and prevent a crisis. FAO named 36
countries in a rice crisis. Certainly, the Philippines is not one of them.
FAO has said that too.” (Speech during the General Assembly and Induction of
Officers of the Federation of Philippine Industries and Launching of the
FPI-FFCCCII Advocacy “Buy Pinoy-Buy Local”, May 5, 2008)

• “If we’re to go into the market again, it’s for buffer stocks. So
that’s why it’s a ‘take it or leave it’ situation as far as NFA (National
Food Authority) is concerned. In other words, we can take it or we can leave
it (rice from other countries), depending on how the prices are.” (Speech at
the Federation of Philippine Industries, May 2, 2008)

• “I’ve seen this coming for some time now, certainly before the
world took notice. That is why we were reaching out to Thailand and Vietnam
for rice supply long before the headlines. So don’t be alarmed by today’s
headlines -- both Thailand and Vietnam and other neighbors elsewhere have
already concluded contracts with us of 1.2 million metric tons -- enough to
cover the 10 percent differential between our production and our
consumption.” (Speech at the Federation of Philippine Industries, May 2,
2008)

• "Our first obligation and commitment is to put food on every table
in the Philippines . Rice is a global issue and has deeply impacted the
Philippines . We are taking strong, swift decisive action to make sure it
doesn't become a crisis, with singular focus on mitigating price to the best
of our ability… "We will continue to work with our neighbors in the region
to secure rice supply. We will work with nations of the world to share best
practices and best ideas to make sure this is a one-time global event…With
this base of new-found economic stability, we are in a much better position
to weather these economic and price pressures than ever before. That does
not mean that it lessens the pain on our poor when rice and gas prices
increase, but we are able to help ease this burden." (Remarks at the
fellowship meeting of the Association of Generals and Flag Officers, April
18, 2008)

QUESTIONS AND RESPONSES ON THE RICE ISSUE

Q: What is your response to claims that efforts by the Philippines ’ to
secure larger rice supplies are driving international rice prices higher?

A: First and foremost, our job is to put food on the table for average
Filipinos hurt by the surge in the price of rise on the global market. And
our government is doing that. Remember, commodities of all types are going
through a tremendous boom worldwide: rice, gold, copper, oil, to name a few.
What is happening now with rice and global prices is a once in a millennium
global crisis and something we all must work to resolve. The fact is that
the Philippines has always been a major purchaser of rice in the
international markets because it has been more cost effective to do so than
to invest in our own self-sufficiency. With prices high, the economics of
self-sufficiency change. In the near term, we will do everything in our
power to provide for the immediate needs of our people. However, given the
recent shift in the price of this important commodity, we are also focusing
our long-term efforts on further raising our self-sufficiency in rice
production, which currently stands at more than 90 percent. This will ensure
we are able to meet the future needs for rice in our country and strengthen
food stability and security in the longer term.

Q: Is it true that the Philippines has not been able to secure its target
level of rice supply in the international market due to high prices and rice
shortage around the world?

A: No. In fact, the Philippines has a secure supply of rice. The purchases
that the Government will be making are to build up the country’s buffer
stocks, which is its normal policy. Any rice the Government purchases moving
forward in the coming months will be used towards increasing our reserves.

Q: What is the Government doing to prevent a food crisis in the Philippines
? Is the Government worried about food shortages in the longer term?

A: First, let me be clear: the situation with rice and food in general is
very serious throughout the world, but the Government has worked hard to
ensure it isn’t a crisis in the Philippines . Our first order of business is
to help provide targeted, subsidized relief to the very poor who have been
bit by rising prices. Overall, the Government’s policy for ensuring food
stability in the Philippines is based on a three-step program that focuses
on: 1) ensuring adequate supplies of rice and other foodstuffs through both
domestic production and importation – which has essentially been done with
current rice supplies expected to meet our requirements for the year; 2)
supporting distribution of rice to all parts of our country through a range
of mechanisms including active cooperation with churches, mosques, and
schools; and 3) enforcing regulations regarding the sale and distribution of
rice and cracking down on corruption that can impact the supply,
distribution, and price of rice.
The Government is also working to ensure a stable food supply in the
longer-term by enhancing the domestic production of rice, among other crops,
to further raise self-sufficiency in rice production beyond the current
level of more than 90 percent. It is working with such organizations as IRRI
to explore ways of meeting the future needs for rice in the Philippines as
well as that of other rice-producing countries. These efforts will help
prevent any global food crisis in the longer-term.


Q: How will the current rice crisis impact the Government’s finances? What
is the impact on the budget deficit and will the Government still be able to
achieve a balanced budget this year?

A: The President and her Administration remain firmly committed to achieving
a balanced budget. Fiscal discipline has been central to Philippine economic
growth and revenue generation and has contributed to the best economy in 31
years and we are committed to continuing the same responsible policies that
made that possible. These are two of the reasons why we don’t consider this
situation a crisis in the Philippines , it is a challenge we are
successfully addressing.

The slowdown in the global economy combined with the spike in high oil and
food prices is very much on the minds of economic managers and the
President. These global forces are causing real difficulties for the poor in
the Philippines . The government is doing everything in its power to put
food on the table while continuing to invest in human and physical
infrastructure and maintaining fiscal discipline. The President has stated
that she is constantly reviewing these demands in light of her desire to
also balance the budget. The Government is confident it will strike the
appropriate balance in meeting these objectives in a way that maintains
fiscal discipline while also seeing to the real needs of its people.

Q: Why hasn’t the Philippines achieved self-sufficiency in rice production
all these years, given it is one of the world’s largest consumers of the
grain? How will the Philippines achieve self-sufficiency now if it has not
been able to do so in the past?

A: We have never sought to be fully self-sufficient in the past as it has
always been more cost effective to purchase rice from the international
market. The goal of self-sufficiency has historically been much more costly
than relying on the efficiency of the global marketplace. It should also be
noted that as an island nation, we do not have enormous swaths of delta for
rice production as do Vietnam and Thailand , for instance. That has made us
more productive rice farmers – the most productive in Asia .

Having said that, the Philippines is already more than 90 percent
self-sufficient and, in the face of the rising international price of this
important commodity, the Government is working with international
organizations such as the International Rice Research Institute (IRRI) to
explore ways of meeting the future needs for rice in the Philippines. The
Government is focused on maximizing the productivity of domestic rice
farmers by introducing measures to improve agriculture practices, enhance
the ability to utilize rice varieties more effectively, promote rice
breeding, build training capacity and encourage the adoption of the modern
techniques in crop establishment, among other measures. This will help us
achieve a higher level of self-sufficiency.

Q: Has the Philippines really fulfilled its rice requirements for the year?
If that is the case, why is the Government still seeking to purchase such a
large volume from the international market? Is the Government afraid of a
global food shortage?

A: Yes, we have met our near-term supply targets and are confident we will
have a strong Summer harvest, which will further strengthen our stocks. The
Government’s three-phase plan is in effect and it is working. The first
phase, to secure supply, has been accomplished for the foreseeable future.
The second phase, to ensure proper distribution throughout the country
through a joint effort with government, churches and the faith community,
and schools, is also achieving its goals. Finally, the Government is making
it very clear that it will come down hard on anyone caught manipulating the
market by cheating or massive hoarding and this is also working. As a matter
of prudence, however, weather is always an unpredictable factor and to
address this, the Government will continue to strengthen its buffer stock
this year through purchases made in the international marketplace as the
appropriate opportunities arise.

Q: Did the Philippines withdraw the tender on May 5 because the government
expects rice prices to fall, or did the Philippines withdraw the tender for
technical reasons: that Vietnam did not post a bid bond and so there was
only one bid on the table that was not even opened?

The Philippines currently has a sufficient supply of rice and is only
looking to import supplies to further strengthen our reserves. Given this
flexibility, the Government will only purchase from the international market
when the price and other terms are suitable, and in this instance, the
Government decided to defer the process and to wait for a better price.

Q: How much of a problem is hoarding in the Philippines ? Have any legal
charges actually been brought against anyone in court accusing them of
hoarding?

The Government is making sure it doesn't become a problem which is why the
President has insisted from day one that the Government makes clear that no
manipulation will occur to cheat the people out of rice. Cracking down on
rice hoarders has been a major part of the Government’s efforts to enforce
regulations regarding the sale and distribution of rice and by acting early
on, it has been able to deter hoarding practices. The Department of
Agriculture has been working closely with the National Food Authority and
National Bureau of Investigation to ensure that unscrupulous vendors who
hoard rice and gouge prices are prosecuted accordingly and they have
successfully filed several cases against these hoarders.