Rice, transportation competition policy sought

Business Mirror, Philippines, June 22, 2014

WITH the perennial problems of supply shortage and price increases in rice, the country’s food staple, and traffic congestion brought about by the huge volume of motor vehicles plying Metro Manila’s routes, experts said there is a need to adopt a competition policy to encourage innovation and prevent cartels, particularly in the rice and transport sectors.

For rice, Roehlano Briones, a senior research fellow of the state think tank Philippine Institute for Development Studies (PIDS) said a more flexible policy toward rice imports should be adopted. Briones, project director for Competition Reforms in Key Markets for Enhancing Social and Economic Welfare in Developing Countries (CREW), said 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 (NFA) through the National Food Authority Council, could facilitate a cartel-like behavior.

“The NFA manages to stabilize retail prices, but keeps domestic prices high by means of an import monopoly,” he said. Citing a study by Beulah de la Peña, Briones noted that the government allows a few big players in the rice industry to import a minimum of 2,000 MT and a maximum of 5,000 MT of rice under the current importation-quota distribution.

He said 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a few big players.Quantitative restrictions on imports to support the country’s rice self-sufficiency objective must be repealed, Briones said.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 MT,” Briones said. Such high level of imports would have brought down the retail price of rice to P21.43 per kg and P19.39 per kg at the wholesale level, added.

Last year the retail price of rice shot up to P36.28 in December from P32.37 in June, he said. “It is equivalent to a 12-percent increase in just six months.” Meanwhile, the market inefficiency in the bus-transport sector is manifested by too many operators and buses that result to traffic congestion, PIDS Research Consultant Debbie Gundaya said.

There are 1,122 bus operators and 12,595 buses plying Metro Manila, she said. The bus-transport sector market operates under a highly complicated regime, where regulation and enforcement are shared by several agencies, resulting in implementation failures and regulatory capture, she said.

Gundaya noted that there is a proliferation of illegal or “colorum” buses in Manila routes. “Proliferation of kabit system, where a bus operator enters the market through an arrangement with an operator with an established franchise, is also present,” Gundaya added.

PIDS Senior Research fellow Adoracion Navarro recommended that competitively tendered service contracts or concessions for defined routes should be explored. Rene Santiago, a transportation expert, suggested that contracted trips made on predefined routes and headways should be the basis to pool the revenues and pay bus operators.

The observations and policy recommendations were brought up during a national reference group meeting organized by PIDS; Consumer Unity and Trust Society International based in Jaipur, India; and the Action for Economic Reforms, as part of the activities of a three-year project on CREW.

The project aims to assess the level of competition in the rice and passenger-transport sectors to generate broad-based support, especially from policy-makers, for competition reforms.

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