The 2007/2008 rice crisis in the Philippines

“No child will go to bed hungry within ten years”
Henry Kissinger, US Secretary of State
First World Food Conference in 1974

1) Introduction

This stud’s aim is to explain why in 2008, there were food related protests in the Philippines. The events have been analyzed using two frameworks. One examined the four dimensions of the food security concept as presented by the Food and Agriculture Organization (FAO), to understand the dynamic of the rice market; The other expounded the legitimacy of President Gloria Macapagal Arroyo’ s government, probing at the Philippines’ s level of democratization through an approach of historical institutionalism.

The staple crop in the Philippines is rice. Through available data we investigate well milled rice (WMR). When those facts are unobtainable we will resort to any rice information. If food prices in general started to increase from 2006, rice markets were slow off the mark. WMR wholesale prices in the Philippines shot up in mid-2007 and reached their peak in 2008. The food unrest critical period occurred between March 2008 and August 2008 when prices escalated Other points deemed important will be raised even if they happened outside of this time frame.

1.1 Food security aspects

The rice crisis in the Philippines was closely linked to the global food crisis and encompassed other commodities. It started as early as 2006 with the increased cost of corn, wheat and soya beans followed by the escalating cost of rice. They were spurred on by:

- depletion of grain stocks worldwide (increased consumption, reduction of stock and slower yield growth)
- rising income in Asia and change in consumption patterns
- conversion of commodities into biofuels (new policies in the US, EU and Brazil. Biofuels now account for only 1.5% of the global liquid fuels supply but for almost half the increase in the consumption for major food crops back in 2006/7)
- dire weather conditions in several important growing areas (Australia, Russia and Ukraine, Northern Europe, Canada, Southeast Europe, Turkey, Northwest Africa and Argentina) in 2006/7 depleted the world cereal production by 2.1 per cent
- depreciation of the dollar since
- speculation and shift of equities and real estate into commodities to diversify financial portfolios
- depreciated US dollar led to higher fuel prices and input costs for agriculture (fertilizer and transport costs)
- long term low rice prices, lessened incentives for private and public investors’ resources in the sector

The different commodity markets exposed to various individual shocks and particular conditions, caused a general food price increase for the consumers. It heightened the plight of the poor who were already struggling to enjoy a decent diet. Governments, in response to public protests and unrests tried to increase food supplies in their domestic markets. Two of the actions, taken in the second semester of 2007 proved fatal: minimization of exports (export-ban, minimum price, taxes etc.) and vast increase of imports (reduction in trade barriers, stock building). In July 2008 at the height of the price crisis in the Philippines, thirty one countries according the World Bank had restricted or suspended their exports. The stepped up demand mixed with a depleted supply rocketed further the prices (Childs et al. 2009 and Evans, 2009).

The International rice market features a number of important specificities. The food crisis, occurred when the rice harvest was at its highest on record (2007/8) and global ending stocks were increasing. Roughly half the world’s population relies on rice to survive. South Asian consumers’ diet alters between rice- and wheat-based products, according to market price. This does not occur in other parts of Asia (Childs et al., 2009). The export market has been dominated by a small number of players for several years (in 2008, Thailand, Vietnam, Pakistan, India and the US were the top 5 exporters, accounting for almost 80 per cent of the world export volume) (USDA). The market structure could be defined as an oligopoly. Rice trade was initially relatively marginal as most of the production was consumed domestically. It has remained smaller than the intense wheat market. The trade-to-production ratio has reached 7 percent. Asian countries have traditionally been the most significant rice importers. This pattern is slowly shifting (Shigetomi et al., 2011).

The Philippines’ rice production sector faced its own short and long-term challenges. During the Green Revolution, the Philippines could increase its productivity but only slowly expand it in recent years. High population growth and low productivity led to increased imports in rice. The Philippines’ investment in agricultural research and related activities (support service, infrastructure etc.) was much less significant than their neighbors’. The Department of Agriculture’s technical capacities could hardly support the local government. Overall, there was a weak governance in the provision of agricultural support services. High unemployment rates did not allow for work opportunities outside of the farm sector. Growers turned to expanding farming to more marginal land, further reducing the productivity rate and worsening the degradation of natural resources. Inadequate government policies aiming at keeping rice prices high for farmers and low for consumers, through subsidized distribution via National Food Authority (NFA) proved exorbitant. The total effective costs of the NFA rice subsidy program were estimated at 19 Billion Philippine Peso (PhP) (400 Million US$) in 2007 and 69 PhP Billion (1.5 Billion US$) in 2008. The land reform only inched forward. Farmers’ shaky property rights limited the access to credits. Small holders had to contend with informal credit markets and their high interests as snubbed by commercial banks.

1.2 Legitimacy aspects

Might the demonstrations be linked to other factors than those of food (in)security and reflect a legitimacy crisis in the government? Accepting that a democratic system was the most legitimate form of government, this paper has evaluated selected dimensions of democratization in the Philippines to present a more complete picture of the situation.

2) Material and methods

2.1 Food (In)security

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Figure 1: Food security operationalized base on the four FAO main dimensions

Source: Dr. Andrea Markos, Webster University

The Philippines’s rice crisis has been analyzed according to the four main dimensions elaborated during the 1996 World Food Summit in Rome. Delegates agreed on the following food security definition:

“Food security exists when all people, at all times, have physical, social and economic access to sufficient safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life” (World Food Summit, 1996).

illustration not visible in this excerpt

Table 1: Four main dimensions of food security defined by FAO

Source: FAO introduction to the basic concept of food security.

In this study no distinction has been marked between “food security” and “nutrition security”. The nutritional aspect has been approached through the chronic undernourishment indicator.

2.2 Democratization

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Figure 2: Legitimacy of the government in the Philippines operationalized based on Historical-Institutionalism supported by categorization proposed by Regilme (2010).

Source: own creation

The second concept applied to fully comprehend the food demonstrations, is based on the “Historical-institutionalism” approach. It punctuates historically-based norms- and a value system which impacts on present institutions. The Philippines had been a Spanish colony during more than 330 years. The invaders’ hacienda system in which large family holdings were tilled by tenant farmers, ruled. It set an institutionalized divide between an elite and peasants, a partition which still prevails today in a patron-client structure. Colonialism has instated a top-down ruling by an alienated bureaucracy. It is not accountable to the masses and keeps a tight elite’s control over government policies. However attached to democratic values Nationals may be and despite formal democratic institutions, corruption enmeshes the country’s political culture. An oligarchy government lurking behind a Western-style liberal democracy controls the bureaucracy, political parties and elections, thanks to contacts within the security apparatus and their money. The state has evolved into an instrument serving the elites’ interests to the detriment of the public at large. Even though there are elections, politicians, once in power, only seek to recover the costs to enhance their patron-client system in order to stay in power by ensuring reelection (Caoili, 2005).

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