Japan Abe’s deceptive rice reform

At a press conference Dec. 9, shortly after an extraordinary session of the Diet adjourned, Prime Minister Shinzo Abe emphatically declared, “We have abolished gentan, a feat many said could not be accomplished by our Liberal Democratic Party.” Gentan refers to the government’s decades-old policy of curtailing rice production by encouraging farmers to reduce the acreage of their rice paddies in exchange for subsidy payments.

Apparently realizing that he was addressing a press corps rather than making a speech at a political rally, he corrected his statement by saying, “We have decided to abolish gentan.” Nothing symbolizes the Abe administration’s rhetoric on the subject better than this “minor correction.”

Although the prime minister’s headquarters stresses a shift in the nation’s agricultural policy, what the government has actually done is make a broad decision to abolish gentan five years from now. This is just putting off a true decision and in fact means that the existing gentan scheme will be strengthened, instead of being abolished.

About two weeks earlier, on Nov. 25, a meeting was being held at the Liberal Democratic Party headquarters to decide on the party’s farm policies.

A preliminary decision to raise subsidies for planting rice for use as animal feed from the current ¥80,000 per 10 ares (1,000 sq. meters) to ¥100,000 met strong opposition from legislators representing Akita, Miyazaki and other farming prefectures. The amount of subsidies was eventually raised to ¥105,000 per 10 ares.

This represented recurrence of a scenario dating back to the days before the LDP had to give the reins of government to the Democratic Party of Japan for the 2009-12 period. In those days, the government had first presented tight limits on farm subsidies, only to meet strong opposition from lawmakers representing farming interests, and eventually raised the amount little by little to a level that satisfy them.

Although there have been reports that lawmakers with vested interest in agriculture, forestry and fishery have lost some of their political influence, they still continue to maneuver behind the scenes.

Major news media reported in unison that the gentan scheme would be abolished five years hence. But in reality the government’s decision will only reinforce, rather than abolish, the scheme.

Understanding the misleading rhetoric of the Abe government on this subject requires understanding the difference between gentan and production adjustment. Production adjustment is common not only in agriculture but also in other industrial sectors as a means of preventing excessive production from causing price falls. In the manufacturing sector, this is done by such means as plant closures and shorter operation hours.

In the case of rice production, a large-scale gentan started in the 1970s. It consists of reduction of areas of rice paddies in which rice as staple food is planted, thus idling certain paddies in return for government subsidies.

To use such land more efficiently, measures were taken in later years to encourage use of such idled rice paddies for cultivating other crops like wheat, barley and soybeans. But because there is difficulty in growing dry-field crops in former rice paddies, the government started a new scheme in which farmers can choose the types of substitute crops they want to grow.

The DPJ government (which took power in 2009) began attaching importance to growing rice that is processed into various products or used as feed for animals as a substitute crop for ordinary rice.

Thus it is clear that gentan is just one of means for production adjustment. The Abe regime’s farm policy clearly testifies to this.

Under the Abe regime, subsidies for growing rice as feed for animals will be greatly increased to ¥105,000 per 10 ares. Income compensation for individual farmers introduced by the DPJ government will be halved from ¥15,000 to ¥7,500 per 10 ares. But a new system of making direct payments to farmers will be instituted.

Although Abe claims to have reformed the government’s farm policies, much stronger measures are being taken to curtail production of rice for human consumption by encouraging farmers to grow more rice for use as animal feed.

As if these measures were not enough to protect farmers, the Ministry of Agriculture, Forestry and Fisheries raised the government’s purchase of rice produced in fiscal 2013 for strategic emergency reserves from the original plan of 200,000 tons to 246,000 tons. Even though the increase may look small, it will have the effect of adjusting the supply and demand balance for rice through an increase in the amount of rice the government purchases. This constitutes de facto price support by the government and could trigger condemnation from other members of the World Trade Organization for violating its rules.

Great confusion has resulted from the major news media reporting that gentan will be abolished, instead of reporting that the production adjustment for rice has been shifted toward a policy of producing more rice for animal feed.

With the next elections of both the Upper House and Lower House unlikely to be held for two and a half years, farmers will enjoy generous protection during this period. This in turn will strengthen the farming bloc as a support base for the LDP.

In big cities, the LDP has been trying to create an impression that it is reform-oriented by emphasizing the “Abenomics” — economic policy named after Abe — with its implementation of “three arrows” — an aggressive monetary policy, carrying out a flexible fiscal policy and pursuing a growth strategy to encourage private sector investments.

In rural areas, however, the LDP has pledged to mobilize everything in its power to enrich farmers, foresters and fishermen. This led to its overwhelming victories in the Lower House election of 2012 and the Upper House election of 2013.

Although this may sound like a joke to city dwellers, the LDP distributed posters in agricultural villages that described “15 arrows.” The basic message was that the LDP would do anything for the sake of farmers. This is simply pork barrel politics and has no principles or strategies.

The LDP has been able to act so recklessly because it has continued to command majorities in most local legislatures. Although control of the central government shifted from the LDP to the DPJ in 2009, little change took place on the local level before 2012.

The Abe administration is unscrupulous in deftly using reform and conservative policy lines for different purposes. It is a pity that major news media are incapable of comprehending its true nature and have reported only its reformist side. This is due to a near total lack of reporters who can understand complex agriculture policy. The failure to distinguish between gentan and production adjustment is just one example.

The biggest losers are the taxpayers and consumers. Taxes paid by the sweat of their brow are being showered by the LDP on farming villages to secure votes for its candidates in those rural areas. High import tariffs and virtual price support for farmers will be maintained, thus preventing rice prices and for that matter, other food prices from falling.

What the Abe administration and LDP are spoon-feeding to Japan’s urban residents is merely an illusion of “reform.”

Rice smuggling, WTO and Philippine law

At the hearing on rice smuggling at the Senate last Jan. 22, some senators stated that whether rice smuggling exists or not depends on whether we will follow Philippine Law or the World Trade Organization (WTO).
As we wait for the answer, the Bureau of Customs (BOC) declared that it would release the seized rice shipments because of injunctions from three courts in Davao, Batangas and Manila ordering it to do so.
These injunctions were based on a WTO document that states that Philippine rice import restrictions expired on June 30, 2012. Therefore, all rice shipped to the Philippines after this date do not need import permits and, consequently, are not smuggled.
We will argue here that this is a misguided understanding of WTO. There is no contradiction between our WTO commitment and Philippine law. I know this because of my background as former DTI and DA undersecretary, presidential flagship secretary under the Office of the President, and vice president for Asia of the United Nations Conference on Trade and Development (UNCTAD).
WTO
It is necessary to understand WTO. I will quote here direct statements from the WTO website (www.wto.org). WTO has given us the flexibility to extend this deadline. We have done so, and the import restrictions are now in effect. The 2,000 smuggled rice containers seized by BOC are therefore smuggled. This should not be released back to the smugglers, as what is happening today.
The website states: “WTO is a rules-based, member-driven organization—all decisions are made by the member-governments, and the rules are the outcome of negotiations among members.” There is a special section in WTO called the “Agreement on Agriculture.” It states that this agreement “allows some flexibility in the way commitments are implemented.” How is this done?
The topmost WTO decision-making body is the Ministerial Conference. This “can take decisions on all matters under any of the multilateral trade agreements.” As a private sector agricultural representative of the Philippine delegation to a previous WTO Ministerial Conference held in Hong Kong, I witnessed this firsthand. The most recent one occurred last December 2013 in Bali, Indonesia.
Bali Package
The Ministers “adopted the Bali Package, a series of decisions made at streamlining trade, allowing developing countries more options for providing food security, boosting least developed countries’ trade, and helping development more generally.”
Following the WTO objectives of food security and development, the Philippines notified the WTO that it was extending rice import restrictions beyond the 2012 deadline. We exercised our negotiating flexibility to extend this to 2017. Our official negotiations are now going on. At the Bali Conference, this was recognized. There were no objections made.
Therefore, the import restrictions mandated by Philippine Law currently implemented by the BOC do not in any way contradict WTO. Perhaps, some misguided elements should consult the WTO website, which records the WTO Bali Ministerial Conference agreements to understand this better.
In addition, for us to lift rice import restrictions, a WTO member should bring this issue to WTO Dispute Settlement, secure a decision against our stand, and wait until we amend our law to conform to this decision. Not even one of these three steps has occurred. It is therefore very clear that rice import restrictions in the Philippines fully recognized and accepted by WTO are in effect today. There is no contradiction between WTO and Philippine Law.
Since the three courts that ordered the injunctions may not be aware of this, they should attend immediately to the Solicitor General’s Motions for Reconsideration. The BOC should stop releasing these seized smuggled rice containers, which is making a mockery of the anti-smuggling drive. More importantly, this release that we are witnessing today loses government revenues, endangers our food security, damages the livelihood of three million rice farmers, and puts in reverse mode the inclusive growth strategy of our government.
Competence
“Kung walang corrupt, walang mahirap.” Many rice farmers believe that much corruption has entered both the executive and legislative branches of the government. But in addition to fighting this corruption, the farmers contend that government should increase significantly its competence in dealing with issues such as rice smuggling.
Already, our farmer leaders have submitted documented charges to the Supreme Court and the Ombudsman to protest this travesty of justice shown by the release of smuggled rice shipments back to the smugglers. With increased government competence, it should no longer be necessary for poor farmers to risk their safety and meager resources in fighting for what should have been given them if government competence were at the desired level.


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Vietnam’s High-quality Rice Targets African Market

Vietnam’s top labour markets this year have shown some surprising results due to various factors around the world.

The Ministry of Industry and Trade (MoIT) has called on the country’s farmers to put more focus on producing high-quality products like fragrant and glutinous rice to export to Africa, the world’s biggest rice consumer.

The continent has an annual demand of over 9 million tonnes, including 6.5 million tonnes from imports.

The MoIT said rice exporters have gained a stronger foothold in overseas markets thanks to their quality products. However, their success is threatened by growing competition with India and Thailand, which offer low-cost rice as one of their selling points.

In January–August 2013, Vietnam shipped 600,000 tonnes of fragrant rice to Africa, nearly half of its total grain imports.

This year, the ministry will hold visits to Angola and Ivory Coast where two memorandums of understanding on rice trade are expected to be signed. A number of African firms will be invited to Vietnam to seek partners.

To minimise risks, it will offer advice to Vietnamese rice exporters while making it easier for them to open representative offices and warehouses abroad.

India Rabi rice planting picking up

The coverage of rice, which had been trailing until the start of this month, has begun to gather pace. Rice has been sown on 15.26 lh, against 10.73 lh last year at this point of time.

Thailand Rice farmers block route to South

A group of rice farmers blocked the Wang Manao intersection on Friday morning, demanding overdue payments from the government for rice pledged under its controversial scheme, reports said. The Wang Manao...

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Thailand KTB: No loans for rice scheme

Krung Thai Bank has not approved 160 billion baht in loans for the government’s rice-pledging scheme, as reports on social media have claimed, KTB president Worapak Thanyawong said on Thursday.

Mr Worapak insisted that the issue of whether to approve loans for the Bank for Agriculture and Agricultural Cooperatives to pay farmers involved in the rice scheme was not on the agenda at a meeting of the board of KTB directors.

He added that he was confident the government would not attempt to use KTB to finance its rice scheme.

Despite being state-owned, Mr Worapak said KTB is a commercial bank listed on the Stock Exchange of Thailand (SET). More than 45% of its shareholders are retail and institutional investors, so it must maintain its competitiveness with other commercial banks, he said.

Loan approval standards based on risk factors and the ability of borrowers and guarantors to service debts will be used to make loans decisions regardless of whether clients are public and private sector, he added.

Thailand Rice pledging scheme not extended after next month deadline

The National Rice Policy Committee (NRPC) resolved today not to extend the February deadline to purchase rice in the 2013/2014 crop from farmers.

Caretaker Deputy Commerce Minister Yanyong Puangrach said some farmers have asked the government to continue buying rice from them under the pledging price of Bt15,000 per tonne after the end of the rice pledging programme late next month.

The government doesn’t want to be involved in additional financial obligations, he said, adding that the caretaker Cabinet will be asked to find financial resources to pay the remaining Bt700 million for rice in the 2012/2013 crop.

Mr Yanyong stood firm that the government has never intended to refuse payment but said that the reimbursement procedure for a caretaker government is complicated.

The government has so far paid Bt680 billion to farmers – a signal of its determination to pay and help farmers earn higher income from their rice sales, he said.

Mr Yanyong criticised the labour union of the Bank of Agriculture and Agricultural Cooperatives (BAAC) for obstructing loans, to be sought by the government for payment to farmers.

The BAAC has made profit from the rice pledging scheme including deposits from farmers and bonus to bank employees was from the profit the bank has made from the rice subsidy scheme, said Mr Yanyong.

He said the BAAC should help farmers who are encountering financial constraint and the BAAC has received full payment plus management and risk fees and interest from the loans given to the government.

There has never been risk involved for the BAAC and the labour union should let management manages the issue, he said, calling on the labour unions of the Government Savings Bank and Krung Thai Bank to take that into consideration if the government seeks help from the two state banks.

The government is not asking for free service and employees should bear in mind the state enterprises’ objectives of sustaining the economy in time of trouble, he said.

He said the Election Commission (EC) should also be aware that the rice pledging scheme is a continuous project, and not an election campaign.

Whether the government is capable of paying to farmers within the Jan 25 deadline depends on the EC’s decision, he said.

Caretaker Deputy Prime Minister/Finance Minister Kittiratt Na-Ranong is scheduled to meet with EC members tomorrow to discuss the issue.

Vorapak Tanyawong, president of Krung Thai Bank, gave assurances that an extension of loans to the BAAC for the rice subsidy plan, if made, will be under similar regulations imposed for other financial institutions.

“We have to take into consideration the risk factor, the applicant’s payment capability and guarantors. The loan request must be scrutinised by a committee,” he said.

“Krung Thai Bank is a public company with 45 per cent of shares held by retail investors and financial institutes. It has to compete with major commercial banks and be accountable for stakeholders. It is under the supervision of the Bank of Thailand, Stock Exchange of Thailand and the Auditor General Office,” said Mr Vorapak.

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