REPUBLIC ACT NO.
11203
An act liberalizing the importation,
exportation and trading of rice, lifting for the
purpose the quantitative import restriction
on rice, and for other purposes.
or the
rice Tariffication law
The Philippine rice sector has
always been the center of
government agricultural policies.
The focal points of the policies
revolve around promoting food
self-sufficiency, providing high
income to rice farmers while
making prices affordable to the
consuming public.
The Philippines became self-
sufficient in rice in the 1970s
and was a rice exporter to
neighboring countries such as
Indonesia, China, and Myanmar.
However, with the rapid increase in population and limited land resources to produce the total
rice requirement, the country slowly turned into a net rice importer. The Philippines is the second
largest rice importer in the world next to China (Simeon, 2019). In 2017, the country imports rice
mainly from Vietnam (52%) and Thailand (29%)
In 1995, the Philippines acceded to the World Trade Organization (WTO) with the
premise of revising QRs and reduce tariff protection. Rice, however, was exempted from
tariffication. The Philippines opened up imports on rice under a minimum access volume (MAV)
which is in operation equivalent to Quantitative Restrictions (QRs). The QR regime of the
Philippines was mandated for conversion into tariff protection. The country obtained a special
treatment for rice up to 2005, which was later on extended until 2012. The Philippines has been
applying for extensions of QR on rice since 1995. Eventually, the Philippines acquired a waiver
to maintain QR up to June 30, 2017.
The Philippines’ membership to WTO for 24 years aimed to counter the impact of the
expected influx of cheap rice imports. The country apparently has been extending protection
primarily to safeguard the local rice farmers from increased competition of imported rice.
Another reason the Philippines had been pushing for a two-year extension of the restriction is to
achieve rice self-sufficiency by 2020. However, given that QR on rice shall be retained,
consumers shall continue to bear the burden of overpriced rice, with the poorest households
bearing the burden. Based on the 2012 Family Income and Expenditure Survey, the richest 20%
of households only devote 3% of their spending on rice while poorer income groups tend to
allocate greater share for rice (PIDS, 2012).
After 24 years since the Philippines was granted approval in 1995 by the WTO to impose
QR on rice importation into the country, the government finally eliminated the quota system on
rice importation through the passage of RA 11203. The law, which was recently signed, will be
implemented on March 5, 2019.
What is RA 11203?
This is Rice Tariffication Law titled “An Act liberalizing the importation, exportation,
and trading of rice, lifting for the purpose the quantitative import restriction on rice, and for other
purposes” was signed into law by President Rodrigo Roa Duterte. This is also known as the Rice
Liberalization Act or Republic Act No. 11203, which amends the Agricultural Tariffication Act
of 1996 that imposed tariff to agricultural imports except for rice.
Salient Provisions
NFA LOSES SOME OF ITS MANDATES
1 • sole importation of rice and issue importlicenses/permits
• undertaking direct importation only for maintaining buffer stock
All rice importers to secure sanitary and phytosanitary import clearance
2 from bureau of plant industry prior to importation
REMOVAL OF IMPOT RESTRICTIONS AND IMPOSITION OF
• (i) 35% if rice was imported from within ASEAN
3 • ii) 40% if within the minimum access volume (MAV) of 350,000 metric
tons for imports coming from countries outside of ASEAN
• (iii) 180% if above the MAV and from a non-ASEAN country.
CREATION OF RICE ENHANCEMENT COMPETITIVENESS FUND
4 • 10 billion yearly appropriation
When was it signed?
Duterte signed the bill into law on Feb. 15, according to the Official Gazette, and the law will
take effect on Mar. 5, according to the Department of Finance. The law’s implementing rules and
regulations will be enacted on Mar. 3.
Why was it signed?
Since October 2018, Duterte declared the issue as “urgent” due to price hikes that caused rice to
hit P70 per kilo last year. Finance Undersecretary Tony Lambino predicts that the law will cut
rice prices by P7 per kilo. Bangko Sentral ng Pilipinas projects that this will also cut inflation by
0.6 percent.
What does Duterte have
to say? There is a need
“to address the urgent
need to improve
availability of rice in the
country, to prevent
artificial rice shortage,
reduce the prices of rice in
the market, and curtail the
prevalence of corruption
and cartel domination in
the rice industry.”
What will the law do?
The law essentially allows
for the liberalization of
rice imports. It will
remove the previously
placed quota on rice
imports, permitting traders to import a near-unlimited quantity of rice.
How will it work? In the basic rules of economy, the law of supply and demand will dictate
market prices. By allowing more competitors to enter the rice market, the law will lower the
price of rice by increasing supply.
How much are the tariffs? Thirty-five percent from the Association of Southeast Asian
Nations (ASEAN); 40 percent from non-ASEAN countries if imports are below 350,000 metric
tons; and 180 percent if imports are from non-ASEAN countries and above 350,000 metric tons.
Where will the tariffs go? The taxes will go to a Rice Competitiveness Enhancement Fund
(RCEF), which will allocate the revenue to programs for mass irrigation, rice storage, and
research initiatives.
Who will it impact? Local farmers are expected to be impacted the most as the removal of
quantitative restrictions will pit them against foreign competitors. The National Food Authority
(NFA) will also be directly affected as the law will remove various functions from their role in
food importation and distribution.
How will local farmers be compensated? The RCEF is expected to allocate P10 billion
annually to the support of Filipino rice farmers over a six-year period. This will be done through
the following fund allocations: 50 percent on rice farm machinery and equipment, rice
cooperatives, and local government units; 30 percent on rice seed development, propagation, and
promotion; 10 percent on rice credit assistance; and 10 percent to rice extension services.
Is it a good move in the long run? Technically, it will prevent price hikes in the future as
competition is a healthy component for the economy. Senate Committee on Agriculture and
Food Chairperson Cynthia Villar concurs, “With the expiration of the quantitative restriction on
rice importation, this is a very important piece of legislation, which will help our farmers
improve their profitability and competitiveness.”
Also in favor of competition, Panelo insists the liberalization of the rice market will promote
production. “Well, ‘pag ni-liberalize mo naman eh magkakaroon ng competition in the market.
So magpapababaan sila ng presyo, otherwise hindi sila mabibili, hindi ba? Kaya nga—law of
supply and demand iyan eh,” he said.
What do the farmers have to say? Kilusan ng Magbubukid ng Pilipinas considers the law as a
“death warrant” to the local rice industry as it would open the floodgates to foreign industries
that would overpower or “wipe out” local rice farmers. KMP estimates that 500,000 of a total of
2.4 million rice farmers will be negatively impacted by the law. The organization states that only
through investing and boosting local production will the Philippines achieve stable rice prices
and supply.
What does NFA have to say? With restrictions removed, NFA will lose its power and functions
in rice importation. Their role will now be limited to maintaining a buffer stock of rice for
emergency situations. They will not be permitted to manage the licensing of importers and
traders. Some 400 NFA employees are expected to be laid off as the law will also move NFA
under the Department of Agriculture.
What does this mean for the agriculture industry now? Now that it has been rendered a law,
expect the aftermath of its implementation to come in the following months. Local farmers will
be affected by the introduction of more foreign competitors and how they fare in the face of that
competition will depend on the RCEF that the law has put into place.
The Philippine government expects to generate additional tariff revenue of P10 billion as a result
of the tariffication of the rice quota. This amount is expected to be allocated to assist rice farmers
who will be negatively affected by the expected increase in the inflow of cheaper rice imports of
similar quality (Class C or 25% broken) into the country.
The objective of this short note is to present our simulation results of the potential economic
impact of RA 11203 on rice farmers, rice imports, consumer prices, Filipino consumers,
government tariff revenue, and poverty. The simulation was conducted using a Philippine
economic model. We considered two scenarios involving a complete elimination of QR: (i)
without tariff replacement on rice imports; and (ii) with rice tariffs in RA 11203. The simulations
were compared to the base case where the QR on rice importation is retained.
1. In the case of QR elimination with no tariff replacement, the volume of inflows of cheaper rice
will increase by 92.7%, displacing local palay production by 5.9%. The price of local palay will
also decline by 2.9%. Overall, the value of local palay production will decrease by P35.1 billion
as a result of the drop in both the volume of production and prices. Because there are no tariffs to
replace the quota, government revenue will drop by P1.3 billion.
2. If the elimination of the QR is replaced with tariffs stated in RA 11203, the volume of inflows
of cheaper rice imports increase at significantly lower rate of 8.1 %. The drop in palay price is
also considerably smaller at 0.2%. Overall, the value of local palay production will decline by
P2.7 billion. Because of the tariffs imposed on rice imports, government tariff revenue will
increase by P18.9 billion, significantly larger than the estimates of the government.
3. In both cases, the elimination of the rice QR will result in lower domestic prices of rice, which
in turn leads to higher volume of rice consumption. The value of rice consumption however will
decline by P2.1 billion despite the increase in the volume of rice consumption largely because of
the decrease in the domestic prices of rice as a result of the tariffication of rice QR.
4. In both cases, the tariffication of the QR will result in lower inflation. The reduction in the
overall price is larger in the case of no tariff replacement, mainly because tariffs are additional
taxes on consumption. Across decile income groups, however, the decline in consumer prices is
higher in lower income groups largely because these groups have relatively higher expenditure
share on rice in their consumption basket. Cororaton and Yu (2019) have noted that 20.2% of
consumption of poor households is on rice as compared to 10.9% of consumption of non-poor.
5. Both cases are poverty-reducing. The number of poor who will be lifted out of poverty is
considerably higher in the first case at 409,956 compared to 38,060 for the second case mainly
because of the higher reduction in consumer prices. However, the negative effects on palay
farmers are significantly higher in the first case with no tariff replacement compared to the case
with tariffs under RA 11203.
The rice QR system which lasted for 24 years generated sizable pure economic rent that went
directly to the pockets of select few. It is about time to tariffy the rent and redistribute these to
the rice farmers who will be negatively affected by the influx of cheaper imported rice. The
higher expected increase in government tariff revenue generated through RA 11203 will be more
than enough to assist palay farmers and may be used by the government to increase the
assistance to palay farmers through direct income support or through productivity assistance,
e.g., the development of improved rice varieties that can withstand and adapt to rapid changes in
weather conditions, in addition to the programmes specified under the Rice Competitiveness
Enhancement Fund.
All told, the implementation of RA 11203 was a right policy move by the government to correct
the distortion created by the rice QR that puts heavy burden on poor.
Caesar B. Cororaton is a Senior Research Fellow at the Global Issues Initiative of the Virginia
Polytechnic Institute and State University. He has been working on global economic modeling
focusing on regional trade agreements, country-level modeling focusing on policy reforms and
poverty, and community-level modeling focusing on impact evaluation of policy interventions.
Krista Danielle S. Yu is an associate professor and research fellow in the School of Economics
of De La Salle University. Her research activities centers on the development of quantitative
models for disaster risk and vulnerability analyses, as well as on the economic impact of natural
disasters. In 2016, she was recognized by Thomson Reuters as the Philippines Promising Star in
Economics and Business. In 2017, she received the National Academy of Science and
Technology Outstanding Young Scientist Award in the field of Economics.
Marites M. Tiongco is a Full Professor and Dean of the School of Economics at the De La Salle
University in Manila, Philippines. Her research work focus on the impact of human and social
capital on development and poverty, and on the economics of agricultural development with
emphasis on critical natural resources and policy issues as they affect food security, food and
water safety along the value chain, market access of smallholder producers, agricultural health
and productivity, climate change mitigation and adaptation, and environmental sustainability.
With the Rice Tariffication Bill (Senate Bill No. 1998) recently enacted into law by President
Rodrigo Duterte, as confirmed by Presidential Spokesperson Salvador Panelo, the rice
economy and its local farmers are expected to be affected, for better or worse, and they’re
bracing for the impact.
Sources:
fnbreport.ph
Food and fertilizer Technology Center Agricultural Policy Platform
Center for Media Freedom and Responsibility
Center for Agrarian Reform and Rural Development
grant for farmers' associations and rice cooperatives to procure
farm equipment
development,propagation and promotion of inbred rice
seeds c/o Philrice
agricultural credit for rice farmers c/o Landbank
extension service c/o Philmech, PhilRice, ATI and TESDA
Pros
Cons
If we open for importation, NFA will not
Exemption to WTO is not free. In
have sole control on the amount of rice exchange of these concessions, we were
to be imported. This will minimize forced to open up our market to accept
corruption, and will address rice other commodities - poultry/ livestock and
shortage. Prices will also be stabilized if any other commodities and we get almost
there is plenty of rice in the market. no additional benefit from it.
Businesses will also less likely to hoard Current strategies to improve the rice
under such circumstances. sector are already failing. We still have
Right now, we are not earning from lots of farmers being forced to sell their
NFA's QRs. If we open up and tariffy, we land for lack of support. Rice farming has
will be able to generate funds to not mechanized. On the consumer side,
support our local rice farmers. The NFA's QRs have not been able to curb
proponents project that we will be able down or control rice prices. If we adopt a
to mechanize and improve our new policy, we can have better prospects
production in 6 years, because there
are funds that are already available.
OUR RESERVATIONS:
The proponents believe that we will be able to mechanize fully within six years. How do
we bridge the transition period? We're opening up to a new bunch of players, and we
have not really prepared our farmers. Six years is a long period. By then, they may have
already sold their land. There is no provision in the law on the safeguards for small-scale
farmers when their products compete with the influx of imported rice products. We also
need to consider that there is a sizeable local industry on rice by-products (such as feeds).
How will these potentially impact them?
Essentially, while this bill is being advanced, the government has not moved an inch on
the National Land Use Bill, which would have rationalized land use planning all over the
country and prevent the undue conversion of land. This should complement the other.
The fact that Sen Villar is actively pushing for this (and is not hearing NLUA) casts
doubts.
The bill specifically provides support for farmer associations. What will happen to those
without? There is no provision to organize rice farmers, or even reference of the bill to
the need to invest in organizing these farmers so they can avail the services.
How will this not duplicate services that are already being amply provided in some areas
(while there are none in other areas)? How do we ensure (considering the current norm in
the government) that this will not be another "fertilizer fund scam"?
There is no provision within the 10 billion fund (there is a list of items that the fund can
fund) on crop insurance, when we all know that every year disasters claim a significant
part of farmers' income.
The equipment to be procured (as part of the proceeds of the fund) is already stated.
There is no room to allow the farmers to identify what they need.
