Due to persistent inflation, the Philippines, a leading rice importer globally, is implementing a gradual reduction in rice import tariffs from 35% to 15% by 2028. This measure aims to alleviate price pressures. However, experts express concern that this move may favor international producers, such as Vietnam, while posing challenges for Philippine farmers in maintaining competitiveness.
The decision was announced after a meeting led by President Ferdinand Marcos Jr. and an inter-agency panel. The head of the National Economic and Development Authority, Arsenio Balisacan, emphasized that lowering import tariffs will reduce rice prices, making it more accessible for consumers.
Rice comprises approximately 9% of the Philippine consumer price index. Notably, over the past three months, it has contributed to over half of the overall inflation rate. Consumer prices have risen for the third consecutive month in April, with a 3.8% year-over-year increase.
Reducing rice tariffs is anticipated to lower consumer prices while bolstering domestic production through continued tariff protection and increased governmental support for enhancing agricultural efficiency, particularly in light of persistent high global rice prices.
Balisacan stated that the Marcos administration aims to diminish the price burden for impoverished Filipinos by slashing the duty on imported rice to as low as 29 Philippine pesos (approximately $0.49) per kilogram within the year.
When Marcos was in charge of the agriculture department in August last year, he imposed a price cap on rice to stifle inflation, a move economists said was ineffective. He lifted the price cap a month later.
According to Balisacan, the president will issue an executive order cutting the tariff. At the same meeting, the Philippines announced that tariffs on corn, pork and mechanically deboned meat will remain unchanged through 2028.
Miguel Chanco, chief emerging Asia economist at U.K.-based Pantheon Macroeconomics, noted that the move will make imported rice cheaper than domestic products, "which in turn will undoubtedly have a negative impact on farmers' incomes," he said. "The flip side, on a macro basis, is that this should help significantly -- once implemented -- in pulling headline inflation down, assisting the purchasing power of all Filipinos," Chanco told Nikkei Asia.
He said that the change would be a "huge benefit" to rice exporters in Asia, such as Vietnam and Thailand, but that India will continue to miss the boat due to the country's export curbs.
Robert Dan Roces, chief economist at Security Bank in Manila, called the lower duties a "double-edged sword," since consumers will benefit while leaving farmers facing stiff competition from cheaper imports. "This might push some to diversify crops, potentially disrupting established practices. Government support programs, such as subsidies and improved farm efficiency, are crucial to cushion the blow for farmers," he told Nikkei Asia.
Roces, however, cautioned that such a move could leave rice exporters rethinking their fortunes in the Philippines. "Rice exporters like Vietnam may see lower sales to the Philippines, but this could also nudge them to explore new markets, or ... producers like Vietnam might offer higher-value types of rice [to Philippine importers]," he added.
Additional reporting by Ella Hermonio.
Source: asia.nikkei
