Press Release
March 30, 2008

Legarda warns of runaway inflation due to costlier rice Palace urged to certify bill privatizing rice importation

The surge in the cost of regular commercial rice is bound to set off massive increases in the prices of other basic commodities in the months ahead, Sen. Loren Legarda warned Sunday.

"We definitely see heightened risk of runaway inflation, should ordinary rice retail prices persist at P27 to P30 per kilo for an extended period," said Legarda, Senate economic affairs committee chairperson.

"We're afraid costlier rice will drive broad consumer price increases in a bigger way, more than record-high oil prices. This is because rice is much closer to the stomach," Legarda said.

For instance, Legarda said small fishermen and vegetable growers could normally cope with more expensive fuel and transport, without passing the extra cost on to consumers right away. "But once forced to pay more for the rice they consume every day, they will surely want to raise as well the prices of their own produce," she said.

With the surge in rice prices, the senator also predicted that organized labor would soon push for a new round of wage adjustments.

Legarda said she sees the Bangko Sentral ng Pilipinas (BSP) revising upward this year's projected inflation rate, mainly on account of the increased risk posed by soaring rice prices.

The BSP previously projected that consumer prices, as measured by the inflation rate, would rise by 3.0 to 5.0 percent this year. However, inflation already soared to 4.9 percent in January and 5.4 percent in February, with food posting the highest price increases in both months.

Due to the looming rice scarcity, farmers' groups earlier warned that rice prices could hit as high as P40 to P50 per kilo in the lean months of July to September.

The threatening shortage has already prompted the government to embark on an unprecedented rice importation plan. The Philippines recently sealed a deal to spend up to $3.3 billion (around P138 billion) to procure an extra 4.5 million metric tons of the staple from Vietnam starting this year until 2010.

Legarda cautioned the National Food Authority (NFA) against resorting to any form of rice rationing, saying this would only heighten the perception of an imminent shortage.

In some parts of the country, NFA-accredited rice retailers have supposedly been ordered to limit sales to five kilos per buyer.

Legarda, meanwhile, urged Malacañang to promptly certify a bill that seeks to privatize rice importation.

Legarda was referring to Senate Bill 1081, which seeks to allow farmers' groups to import rice. She filed the bill last year.

Senate President Manuel Villar Jr. recently introduced a similar measure, Senate Bill 1897. Nueva Ecija Rep. Eduardo Joson also filed a counterpart bill.

Former Socio-Economic Planning Secretary Felipe Medalla earlier urged the government to end its absolute control of rice importation, so that the economy would be less vulnerable to global supply and price shocks.

Legarda's bill effectively privatizes rice importation, thus allowing the NFA to concentrate on buying at market prices the grain produced by local farmers.

The bill seeks to amend Presidential Decree 1770, which gave the NFA the sole power to import the staple.

Besides devoting more land to produce rice, Legarda also batted for "the willful implementation the Rainwater and Spring Development Act," which she said would lessen harvest losses due to the unusually dry weather.

The 1989 law mandates the Department of Public Works and Highways to install new water wells, put up rainwater collectors and receptacles and develop springs in every barangay.

Legarda also said extensive losses due to "inefficiencies" have merely underscored the need to quickly upgrade rice production as well as post-production processing.

According to the Philippine Rice Research Institute, some 450,000 metric tons of rice are wasted every year due to inefficiencies during the harvesting, threshing, transport, drying, storage and milling stages.

Legarda cited the need for the country to push for a robust and rapidly expanding farm sector.

"Vibrant farm systems will ensure ample food supply, apart from providing more income for growers and new jobs in the rural districts. Solid food production is also the best way for us to guarantee stable and affordable consumer prices," she pointed out.

"In the process, we also get to fight widespread hunger -- by creating gainful employment in the countryside and making food more accessible, both in terms of price and income, to more people," Legarda said.

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