Runaway inflation highlights the Philippines’ fundamental weaknesses: addiction to imports and corrupt bureaucracy

It’s easy to blame higher rice prices on the previous administration for passing the rice tarrification law when one conveniently forgets the corruption that came with rice import permits. Importers were openly paying farmers’ cooperatives to apply for permits which they used to import rice. The cooperatives didn’t have the financial capacity to import which did nothing to alleviate their plight when their crop was destroyed by floods.

Former Secretary of Agriculture Manny Piñol has an axe to grind against Former Finance Secretary Carlos Dominguez III, whom he attributes his ouster to. The truth was Piñol’s ideas were mostly harebrained like using C-130s to transport fish from Mindanao to Manila. As agriculture secretary, his tenure was more press release than action, particularly against the members of the rice cartel. In his PhilStar piece, Alex Magno highlights how precarious the Philippines’ food security situation is. This, together with our dependence on imported energy, makes small wonder that much of what accounts for today’s galloping inflation lies outside of our control…

We import nearly all of our oil needs. The international prices for the commodity increased substantially the past few weeks, mainly as a result of Saudi Arabia’s decision to trim its production levels. That puts supply pressure on fuel prices.

Recently, too, India decided to curtail its rice exportation in the interest of domestic food security. India accounts for a substantial portion of tradable rice supplies. As a result of India’s decision, rice prices have spiked.

President Bongbong Marcos is the concurrent agriculture secretary but he hasn’t done much against the cartels either. It’s been all threats of prosecution but no arrests. This goes further to explain why we continue to experience food driven inflation.

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The Marcos administration wants to reinstate the National Food Authority’s (NFA’s) authority to import. This means government will spend to buy rice and, what, sell at a subsidy to consumers? When BBM’s late father and former President Ferdinand E Marcos was president, he made sure to make the cartels in different industries bow to submission, under threat of incarceration. There was no shenanigans in the NFA under its then administrator Jess Tanchangco. Grains retailers registered with the NFA and if anyone was found to be overpricing, their license was revoked. This is not the case now. While rice is a political commodity, our lawmakers didn’t enact laws to protect consumers. It’s no secret that some of them are in cahoots with the cartel, which is why its members don’t have any fear of anyone, including the president.

The neglect of agriculture is why we find ourselves in this situation. It will take at least 20 years before the sector recovers. The root cause of all our problems is our political structure. We can’t have a change in policy each time a new president is elected. A friend who is a partner at Cinven in London said that the Philippines isn’t on any investors’ radars because the gaps haven’t been addressed and now, we’re back to being America’s doormat in the region. Who’d want to invest in a country which would be right smack in the middle in the event the US and China go to war over Taiwan?

Indeed, Magno also cites this dependence on another key import — capital — as another ugly head today’s business climate is rearing…

It is also true, however, that a second factor in slowing growth is investments. Here the interest rate regime is a factor. Higher borrowing costs presents investors a much more difficult hurdle to surmount.

While Marcos is running the country like a CEO, he isn’t addressing the main problem which is the structure. A salesman needs a product to sell and, unfortunately, the Philippines isn’t a good product. Despite all the hype, it’s still ampaw. Marcos should make it his job to make the Philippines a good product. He has the political capital to begin with. He should maximize its use.

6 Replies to “Runaway inflation highlights the Philippines’ fundamental weaknesses: addiction to imports and corrupt bureaucracy”

  1. Filipino stupidity, greed corruption and their pea brains are the reason they will never amount to anything. It is pitiful the way they run to different countries to try and con the presidents into giving money to them. China needs to take over those pieces of shit and make every one of them slaves.

  2. low wages, maybe.

    but never slaves.

    attempt slavery on a filipino, and you get a warm smile and poison in your daily soup

  3. Yes, China, Japan, Malaysia, or Singapore could help vastly improve the Philippines. However, the problem is structural with Ph. It’s the people. And one cannot change them because it’s a structural problem regardless of pesos, plans, and happy talk.

  4. Sellers want to sell high-consumers want to buy low. There’s your low production-high import mess. We really have to go beyond the arithmetic.

  5. 1. Inflation is worldwide, and in some countries, like Japan, there is no inflation. In The Philippines, it’s close to average.
    2. Sellers want to sell high-consumers want to buy low, it makes no difference if that is on imported or local products. It’s simply a basic fact on the economy.
    3. I don’t see many import-addicts, although expats miss products not available or very expensive.
    4. Indeed China, Japan, Malaysia, or Singapore and plenty of other countries could help vastly improve the Philippines. Most foreigners also try to help, but it’s not a very good idea to always try to take advantage of them, skin-tax is a reality, and the unstoppable habit to always try to scam is very stupid, just about all foreigners stop to allow it, and if live-or-death help is required, they will think twice before they give it.

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