PBBM’s ASEAN coup

Relying on the power of markets and free trade alone to provide a staple food like rice at an affordable price is becoming an increasingly risky proposition.

One of the less-heralded achievements of President Ferdinand “Bongbong” Marcos Jr. but which is of strategic importance is the recent five-year rice supply deal with Vietnam.

Marcos and Agriculture Secretary Francisco Tiu Laurel were able to wrangle from Vietnamese Prime Minister Pham Minh Chinh a deal that will have a far-reaching effect on the market and on the social dynamics considering that rice is a staple grain.

The upsurge in rice prices last year resulted in a public outcry that the government effectively addressed by putting a temporary price cap on the commodity.

Foreign relations experts hailed the deal as a coup. The deal guarantees a supply of 1.5 million to 2 million metric tons of Vietnamese white rice at a “competitive and affordable price” for five years.

Laurel has lined up several measures towards rice self-sufficiency and with the help of Marcos, who is his predecessor, the first step which is the irrigation of farms is moving.

Marcos has approved the installation of solar-powered irrigation equipment throughout the country. He directed Laurel and members of his Cabinet to look for immediate funding for the project.

The country at the moment consumes more rice than it produces and depends on imported rice to make up the difference.

In the previous administration, a rice tariffication law was passed that transferred the importing authority from the National Food Authority exclusively to private traders.

Despite freeing up the rice trade, in this disaster-prone nation, whether it be drought or floods, rice yields plunged, forcing the importation of even more rice. In 2023, the Philippines imported over 3 million metric tons.

Marcos was credited for his quick action in addressing the possibly debilitating effects of the coming El Niño dry spell since the deal with Vietnam addresses uncertainties in price and supply while the irrigation offensive will ensure that farms are not devastated.

Unscrupulous traders take advantage of adverse situations to jack up prices, such as when India announced it would stop exporting non-basmati rice to ensure a sufficient domestic supply.

Despite India not being a major source of rice, prices still went through the roof in the local market, which was helped along by hoarding by the cartel.

Since the market is influenced by perception or fear, which some traders exploit to the hilt, a guaranteed supply of rice will stabilize prices.

“What the memorandum of understanding that was signed in Vietnam does is guarantee that, whatever happens in the next five years, the Philippines will get a steady supply of rice from one of its major rice-producing neighbors,” said James Guild, who holds a Ph.D. in International Political Economy from the S. Rajaratnam School of International Studies in Singapore.

He said that while the language on price (“competitive and affordable”) is vague, the Philippines now knows that “if India decides to enact another export ban in the next five years, or if there are more droughts, the Vietnamese rice will be there.”

Guild lauded the deal as a crucial triumph in the ASEAN Economic Community in taking care of the welfare of its member states.

“Relying on the power of markets and free trade alone to provide a staple food like rice at an affordable price is becoming an increasingly risky proposition. Negotiating these kinds of back-stops with trade partners that have a surplus of critical commodities is a way to reduce some of that risk,” he pointed out.

“ASEAN has struggled to be effective when it comes to geopolitical and security issues. But when it comes to trade and economic issues (like cross-border payment systems) the bloc has had more success,” Guild noted.

Marcos is benefited by his broad outlook and innovation and from having deft people around him to nip developing crises in the bud.