Philippines Caught in Rice Squeeze
Complicated Blend of Economic Factors Requires Government Action, Experts Warn

By Blaine Harden
Washington Post Foreign Service
Saturday, April 12, 2008; A01

MANILA, April 11 -- More than anywhere else in Asia, the soaring price of rice has become a good-vs.-evil drama in the Philippines, one of the world's largest importers of rice.

Traders who fiddle with the price of the nation's all-important staple now face life in prison. Police are raiding warehouses in search of hoarders. Soldiers and police have been mobilized to help sell government-subsidized rice to the poor.

"Anyone caught stealing rice from the people, we will seek to throw in jail," President Gloria Macapagal Arroyo warned this week, as part of her high-profile crackdown on rice cheaters.

For all of Arroyo's theatrics in recent days, the fundamental reasons behind the recent spike in rice prices -- in the Philippines and across the world -- are neither new nor part of a morality play.

As experts have been warning for years, the cost of growing rice -- thanks to much higher fuel and fertilizer prices -- has been rising faster than the price paid by consumers. At the same time, yields on rice farms have leveled off, as spending on agricultural research has declined. And consumption of imported rice has increased sharply, especially in Africa.

Something had to give. The world price of rice has jumped by close to 80 percent since January 2007. Not all of that increase has yet been felt by consumers here, but retail rice prices are up by 20 to 30 percent, and prices paid to Filipino farmers for their spring crop have jumped by as much as 50 percent.

"The price of rice is going to stay high," said Robert S. Zeigler, director general of the Philippines-based International Rice Research Institute.

Governments, though, can almost certainly guarantee an abundant long-term supply of rice in most of Asia, according to Zeigler and many other experts. "We can deal with these challenges, if we have good government policies and long-term investment," Zeigler said.

As explained by rice researchers and farm economists, the solutions are as simple as better maintenance of irrigation ditches and as complicated as developing a new generation of fast-growing rice.

But in the Philippines, at least so far, the government has made few commitments to long-term solutions. It is confronting the rice crisis with moves that grab headlines: threats of lifetime prison sentences, warehouse raids and troop deployments.

A Perverse Effect

In international trade, rice is an unusual grain. About 7 percent of world production is sold across borders, far less than wheat or corn.

In most Asian countries, the bulk of the crop is kept at home, because rice is much more than a mere food. It is a strategic, riot-preventing political resource -- an emotionally resonant symbol of plentitude and proud self-reliance.

Thanks to a research-driven surge in rice yields that was part of the Green Revolution of the 1960s, rice symbolism across Asia has never been so good, at least until last month.

The largest rice-eating nations -- China and India -- usually grow more than enough for domestic consumption.

Even the Philippines, which buys 7 percent of total world rice imports, produces about 90 percent of the rice its 90 million people need. The amount of land planted in rice is at record levels here, and the crop has increased annually for years.

The pan-Asian surge in rice yields, though, has had a perverse effect. It convinced many governments that they no longer needed to invest in research and extension services aimed at improving harvests.

As a result, spending on those programs has been stagnant or falling for 15 years. The International Rice Research Institute has lost half its funding over that time, Zeigler said. He added that the U.S. Agency for International Development has this year zeroed out its funding for the institute.

An Import-Export Divide

Membership in Asia's separate and unequal rice clubs -- importers and exporters -- is determined by relative amounts of land and water.

The standout exporters are Thailand, Vietnam and Cambodia, which have fertile river deltas with land and climate that are nearly perfect for rice cultivation. At the other extreme are countries such as Indonesia, Malaysia and the Philippines. These island nations have limited land area, transport complications, problems with typhoons and long histories as importers of rice.

Thanks to the recent surge in prices and the resulting alarm among Asian governments, rice researchers and farm economists say that long-term prospects for research-driven increases in rice yields in Southeast Asia as a whole are excellent, given the region's natural advantages.

But rice self-sufficiency in a nation such as the Philippines is a much taller order -- one that is defied by history, weather and a population growth rate that is among the highest in Asia.

"Over the past 100 years, no matter what we do, we have almost always been importing rice," said Rolando Dy, executive director of the Center for Food and Agribusiness at Manila's University of Asia in the Pacific.

Imports for the Poor

To work toward the symbolically important but geographically unrealistic goal of rice self-sufficiency, the Philippine government has a long, costly and ultimately unsuccessful history of limiting imports.

The professed goal is to motivate Philippine farmers -- with higher prices in a protected market -- to grow as much rice as they can.

For nearly a century, this has meant that Filipino consumers have paid higher prices for rice than people in countries where the grain is grown more efficiently. Still, local farmers are falling further and further behind the rice-consuming demands of a country where the poor eat far more rice per capita than the rich or middle class and are by far the fastest-growing segment of the population.

To head off potential rice riots, the government reigns as the primary buyer of imported rice. Its official policy is to sell the imports to the poor at a price they can afford.

Jesus Foncardas, an unemployed father of five in Manila, was one of tens of thousands of Filipinos who queued up this week to buy subsidized rice from the National Food Authority. Its price is about 20 cents a pound, half the price of rice in stores.

"We used to ignore this government rice, but the price of rice in the stores has gone up so much," said Foncardas, 57. "I had to stand in line for a half-hour to buy from the government."

While government-imported rice is supposed to be for the poor, getting it to the poor at a price they can afford has proved difficult.

For decades, unscrupulous traders have bought this rice at the subsidized price, then repackaged and resold it at the higher market price, pocketing a handsome profit. "The system promotes corruption, with bureaucrats in the National Food Authority in cahoots with the traders," said Dy, the professor of agribusiness.

To end this pattern of corruption, Arroyo suspended the licenses this spring of thousands of retailers to sell subsidized rice in shops across the country. She ordered the National Food Authority to sell it, from government stalls and from churchyards across the country.

"I am leading the charge to crack down on any form of corruption," Arroyo said this week.

Her government has also instructed fast-food restaurants to halve servings of rice and advised Filipinos to save their rice leftovers.

So far, the most visible human consequences of Arroyo's charge are long lines of poor people standing in the hot sun in front of a limited number of the new government-run outlets, waiting to buy small quantities of the subsidized staple that the government insists is not now in short supply.

Televised images of poor people in lines "create the impression of severe shortage, consumer panic and an administration that seems to be losing control of the situation," according to an editorial Friday in the Business Mirror, the country's leading economic newspaper.

Farmers 'Making a Jackpot'

Outside of Manila, on the small farms where nearly all of the country's rice is grown and harvested by hand, the spike in rice prices has arrived in time for the April dry-season harvest.

"We are making a jackpot on this," said Sesinando Masajo, 74, who recently sold most of his crop at a price 55 percent higher than what he was paid in October.

He said he has begun buying fertilizer for the rainy-season crop in the fall. He is also considering planting a third rice crop this year.

"I would describe rice farmers as being very happy," he said.

Economists and rice researchers expect that higher farm prices should by autumn result in a sharp increase in rice production across Asia.

For the Philippine government to take maximum advantage of the market incentives, it should invest in irrigation maintenance, provide more farmers with hybrid seeds and repair potholes in farm-to-market roads, according to several experts at local universities and at the International Rice Research Institute. Whether the government, which has neglected these issues for years, will now invest in them is not yet clear.

Masajo, for one, applauds all these ideas. He would also like the government to get out of the price-regulation business.

"I don't like government control," he said. "It is like martial law. You can be pushed around."