Philippines : PL-480 Title I paper

480 Title I programs in the Philippines in FY85 and FY86. The FY85 program provided $40 million worth of rice, while the FY86 program provided $35 million worth of wheat. The selection of rice had several negative effects. (1) The Philippine rice harvest in 1985 was very good and rice imports were not needed. In fact, rice stocks are still high, with growing risk of spoilage. (2) Since U.S. rice was much more expensive than rice from alternative sources, the FY85 rice program contributed about $17.5 million less in balance of payments support than would have been the case for wheat. (3) Intense pressure from U.S. rice exporters made it impossible to switch to a more valuable commodity. These U.S. market interests were exploited by the National Food Authority (NFA) in resisting self-help measures during both the rice and wheat programs. Specific policies were detrimental to the effective use of the foreign exchange resources provided by the Title I programs. Import restrictions and regulations were intensified and the exchange rate remained overvalued due to excessively tight monetary policy and manipulation of the ostensibly freely floating exchange rate. Nonetheless, policy dialogue was the most successful aspect of the programs, contributing to the development of several self-help measures, including: (1) decontrol of milled rice prices, (2) opening of wheat importation and domestic flour distribution to full private sector participation, (3) NFA divestiture of all stabilization and trading activities except grain price stabilization, and (4) liberalized fertilizer importation and domestic distribution. Implementation of rice price decontrol has been satisfactory, and incentives to producers have been adequate. However, an effective system for grain price stabilization needs to be established, and the Government of the Philippines" (GOP) capacity to enforce support prices needs to be strengthened. The apparent outcome of the wheat/flour privatization reforms has been essentially a transfer of monopoly power from the public sector to the private sector, and even higher consumer prices for flour. This is in sharp contrast to the fertilizer sector reforms, which have moved prices favorably due to greater competitive forces. Contrast in implementation between the former and current governments has been striking. The Marcos government readily sabotaged some of the reforms, demonstrating that little is to be gained by compelling an unwilling government to implement a reform. Even with a cooperative government, continued presence and significant allocation of financial and human resources will be required to help the GOP implement the complex, difficult reforms.