Competition policy needed for PHL rice and transport sectors

Competition policy needed for PHL rice and transport sectors

Philippine Information Agency, June 10, 2014

A competition policy for the rice and passenger transport sector is needed to encourage innovation and prevent cartels. This was stressed in a national reference group meeting organized by state think tank Philippine Institute for Development Studies (PIDS) with the Consumer Unity and Trust Society (CUTS) International based in Jaipur, India, and the Action for Economic Reforms (AER) and attended by various sector leaders.

PIDS Senior Research Fellow and Competition Reforms in Key Markets for Enhancing Social and Economic Welfare in Developing Countries (CREW) Project Director Dr. Roehlano Briones stressed that a more flexible policy toward rice imports should be adopted. There is a competitive market structure for domestic rice production and marketing, but rice import quota which is decided solely by the National Food Authority through the National Food Authority Council could facilitate a cartel-like behavior, Briones said. “NFA manages to stabilize retail prices, but keeps domestic prices high by means of an import monopoly.”

Briones cited a study by Beulah de la Peña that a few big players in the rice industry are allowed to import a minimum of 2,000 metric tons and a maximum of 5,000 metric tons of rice under the current importation quota distribution. The study suggests that small players should be allowed to import 10- or 20-ton container load of rice to prevent rice supply monopoly by a few big players.

Quantitative restrictions on imports to support the country’s rice self-sufficiency objective must be repealed, Briones said. “If quantitative restrictions were eliminated and rice imports were allowed to freely come in the country, total rice imports would have reached 3.68 million metric tons,” Briones said. “Such high level of imports would have brought down the retail price of rice to PHP21.43 per kilogram and PHP19.39 per kilogram at the wholesale level.”

Last year, the retail price of rice shot up to PHP36.28 in December from PHP32.37 in June, he said. “It is equivalent to a 12-percent increase in just six months.” Meanwhile, PIDS Research Consultant Debbie Gundaya revealed the market inefficiency in the bus transport sector.

“Market inefficiency manifests in too many operators and buses resulting in traffic congestion,” she said. There are 1,122 bus operators and 12,595 buses in Manila routes, she said. Moreover, Gundaya described that the bus transport sector market operates under a highly complicated regime where regulation and enforcement is shared by several agencies resulting in implementation failures and regulatory capture.

There is an operation of illegal or “colorum” buses in Manila routes, Gundaya said. “Proliferation of ’kabit‘ system where a bus operator enters the market through an arrangement with an operator with an established franchise is also present.” In reaction to the consultant’s recommendation to consolidate bus operations in Metro Manila, PIDS Senior Research Fellow Dr. Adoracion Navarro recommended that competitively tendered service contracts or concessions for defined routes be explored.

Moreover, International transport expert Rene Santiago suggested that contracted trips made on predefined routes and headways should be the basis to pool the revenues and pay bus operators.

The meeting is part of the activities of the three-year project of PIDS, CUTS, and AER on Competition Reforms in Key Markets for Enhancing Social and Economic Welfare in Developing Countries or CREW. The project aims to assess the level of competition in the rice and passenger transport sectors to generate broad-based support, especially from policymakers, for competition reforms.(MAL/PMGVineles-PIDS/PIA5)

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