EconomyEditor's PickMarcos orders extension of tariff cuts until yearend

January 4, 2023
A STORE ATTENDANT carries a sack of rice at a storage facility in Marikina City. — PHILIPPINE STAR/WALTER BOLLOZOS

By Kyle Aristophere T. Atienza and Ashley Erika O. Jose, Reporters

SOME agricultural stakeholders expressed dismay over President Ferdinand R. Marcos, Jr.’s executive order extending lower tariffs on pork, rice, corn and coal, saying the previous order failed to lower prices.

Signed by Mr. Marcos on Dec. 29 and released on Wednesday, EO No. 10 kept the lower tariff rates for pork at 15% (in-quota) and 25% (out-quota), corn at 5% (in-quota) and 15% (out-quota), and rice at 35% (in-quota and out-quota) until Dec. 31.

Coal will remain at zero duty beyond Dec. 31, but will be reviewed semestrally.

There’s a need to extend the lower tariff rates to “maintain affordable prices for the purpose of ensuring food security, help augment the supply of basic agricultural commodities in the country, reduce the cost of electricity, and diversify the country’s market sources,” Mr. Marcos said in the order.

Raul Q. Montemayor, chairman of the Federation of Free Farmers, said only traders and importers would benefit from the latest order since the previous EO had failed to lower rice prices.

“The retail prices of both regular and well-milled rice in the National Capital Region actually increased since the tariff reduction originally took effect in June 2021,” he said in a Viber message.

Despite lower tariffs, Mr. Montemayor noted the Philippines had failed to diversify its sources of rice, as it continued to rely on Southeast Asian countries, particularly Vietnam.

“The previous EO failed to bring down food prices. It has only affected our farmers and reduced the income of our government,” Jayson H. Cainglet, executive director of the Samahang Industriya ng Agrikultura, said in a Viber message.

“Government data would show that cold storages for pork imports are overflowing beyond their capacity. Week in and week out, we have 110 million plus kilos, the biggest recorded stocks of pork imports,” he added.

PRICES TO STABILIZEThe Department of Agriculture (DA) on Wednesday defended the EO, saying it is necessary to stabilize prices and ensure there is enough farm supply.

“The extension (of lower tariffs) is necessary because the volume of production, especially for pork, has not really increased that much to fill up the gaps of the demand. We are still very much deficient and if that is the case, prices will continue to go up,” Agriculture Undersecretary Mercidita A. Sombilla told reporters on Wednesday.

For the government to temper the high prices of agricultural commodities, Ms. Sombilla said the only option is to import.

“Not to exceed what we really need, but to import enough so that we are able to fill up whatever deficits we have and hopefully to reduce prices,” she said.

Former Agriculture Undersecretary Fermin D. Adriano said the reduced tariffs are good since the Philippines can import rice from other countries like India and Pakistan, which were previously slapped with a 50% tariff.

In a Viber message, Mr. Adriano also noted that cheap corn imports are needed to bring down prices of pork and poultry products.

The Meat Importers and Traders Association urged the government to make the lower corn tariff permanent and to keep the lower pork tariff for five years.

Some economists think the extension of tariff cuts will help cool inflation, which surged to a 14-year high in November.

“The tariff cuts would help continue in providing relief from higher prices. Efforts to increase the local supply of food and other important commodities in the economy correspondingly help ease price pressures and overall inflation,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp, said in a Facebook Messenger chat.

Renato S. Reside, Jr., who teaches at the University of the Philippines School of Economics, said the lower tariffs would help ease inflation while ensuring there is sufficient supply of key agricultural products.

NO PLAN?Meanwhile, Leonardo A. Lanzona of the Ateneo Center for Economic Research and Development said the latest EO shows the government “does not have an effective inflation plan.”

“Apart from the interest rate policies, the government has resorted to allowing cheaper products from abroad to quell the price increases,” he said in a Messenger chat. “These will surely benefit the consumers, but the damage these will cause on the farmers and the environment can be permanent.”

Mr. Lanzona said tariff revenues should be used to provide greater support to pork and rice producers, as well as encourage the use of “more environmentally friendly sources of energy.”

Emy Ruth S. Gianan, who teaches economics at the Polytechnic University of the Philippines, said the EO shows that the government would continue to rely on conventional ways of addressing food security, including the bias for imports.

“The EO indicates the administration’s preference for importation rather than self-sufficiency,” she said in a Messenger chat.

“There is a reason why this policy is regularly reviewed by the National Economic Development Authority (NEDA), because it is not a long-term solution to our continued challenge of rising food prices.”

Ms. Gianan said the government needs to extend food subsidies to consumers and boost support for producers to allow them to compete with imports.

‘BACKWARD STEP’Under the EO, the zero duty on coal will continue beyond 2023.

“This will result in lower energy and electricity cost but certainly a backward step to our green energy push,” Mr. Lanzona said.

Ms. Gianan said this is only a short-term solution and is “contradictory to the government’s long-term goal for sustainability.”

“This shows lack of foresight especially given the president’s green energy agenda,” she added.

Mr. Marcos, 65, has been pushing the development of renewable energy sources to address rising electricity rates and power security issues in the Philippines, which heavily relies on coal.

Coal had the highest contribution to the country’s power generation mix at 58% in 2021, according to the Energy department.

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