After a year letting the private sector import rice on a “tax-based mechanism” instead of a quota-based mechanism in line with the G2G (Government to Government) regime, the Philippine side is considering a comeback to the previous regime (G2G) to import 300,000 tons of rice. Would this possible change strongly affect Vietnam’s rice exporters?
Prior to 2019, the Philippines had preferred the quota regime in importing rice. As a result, aside from allocating annual quotas of about 850,000 tons to the Philippine private sector, the country’s National Food Authority (NFA) maintained domestic supply-demand balance to open bidding for rice purchases from other countries, principally Vietnam and Thailand.
However, as of February 15, 2019, Philippine President Rodrigo Duterte signed into effect the Republic Act No. 11203 on “Liberalizing the Importation, Exportation and Trading of Rice, Lifting for the Purpose the Quantitative Import Restriction on Rice, and for Other Purposes.” This act has turned Philippine rice import from a quota-based regime to a tax-based regime. In short, this act abolished quotas in rice import to the Philippines to impose a 35% tax rate applicable to rice import from ASEAN countries. The import tariff is way lower than that imposed on non-ASEAN countries, which is as high as 180%.
In line with the introduction of Act No. 11203, rice import to the island state has over the past year—i.e. since February 15, 2019—has fallen into the hands of the Philippine private sector. Rice import has been no longer subject to quotas and volume as had been previously provided that it complies with the new Philippine tax requirements.
However, some sources recently said the country would import some 300,000 tons of rice under the G2G regime, which had been effective prior to the introduction of Act No. 11203. In other words, the quota regime would be reinstated.
According to several international news outlets, Philippine Secretary of Agriculture William D. Dar has sent a letter of invitation via the Philippine International Trading Corporation (PITC) about the import of 300,000 tons of rice to companies in Myanmar, Vietnam, Cambodia, Thailand and India.
However, when contacted by the Saigon Times, Nguyen Ngoc Nam, chairman of the Vietnam Food Association (VFA) and vice board chairman of the Southern Food Corporation (Vinafood II)—which was often delegated to take part in executing G2G rice contracts with the Philippines—and Tran Thanh Hai, vice head of the Import-Export Department under the Ministry of Industry and Trade, both said they have not received the invitation from the Philippine side.
Speaking to the Saigon Times on May 15, Nguyen Van Thanh, director of Phuoc Thanh IV in Vinh Long Province, said the Philippines has not yet officially invited the bidding for 300,000 tons of rice under the G2G regime. “As far as I know, a delegation from the Philippine Department of Finance came to Vietnam,” said Thanh. “But it arrived only to survey supplies and hold talks for the import of rice.”
Thanh said the Philippines might import 300,000 tons of rice under the G2G regime. However, instead of assigning the NFA to the task, the Government may select the private sector instead. “I’m not sure about this,” said Thanh, adding that by virtue of correspondents he received from Philippine rice traders, it is likely that this island state would hold G2G bidding and then assign the private sector to the task of executing the contracts.
Rice market analyst Nguyen Dinh Bich maintained that if the Philippine Government chooses the private sector instead of the NFA, such a choice will not affect Vietnamese companies involved. Vietnam, argued Bich, will simply export the rice in case she wins the bid. Meanwhile, the assignment of rice import is on the Philippine territory. “Such a change in the Philippine side, if any, may be possible,” he said.
The question, however, is whether it stands a chance for Vietnam if the Philippines returns to the G2G rice import regime.
Bich stressed that if the Philippines opts for the G2G regime, Vietnam may face no problems. She may even have an edge over rivals should such bidding be put up.
According to the rice analyst, the FOB price of Thai 25% broken rice, at US$468-472 per ton, is higher than that of Vietnamese rice, at US$435-457 per ton. That means Vietnamese rice is more competitive.
“Cambodia may not be able to meet large rice orders,” said Bich, who also remarked that Myanmar isn’t a serious contender either.
To sum up, Bich said India may be a potential rival for Vietnamese rice exporters when it comes to rice prices. India offers her 25% broken rice at US$338-342 per ton. However, maintained Bich, a scrutiny of the Philippines’ history of rice importing may show that Indian rice exporters may not be likely to win rice bids put up by the Philippines. “For example, the bidding prices [offered by India and Vietnam] may be equivalent,” explained Bich. “But transport fees from India is US$30-40 per ton higher than those from Vietnam.” What’s more, India is facing a more serious challenge from Covid-19 than Vietnam is, he argued.
Meanwhile, Thanh of Phuoc Thanh IV said Vietnamese rice exporters have almost finished all the existing rice export contracts, reaching 600,000 tons out of the 700,000 tons signed. “Therefore, Vietnam is ready to engage in the new rice order of 300,000 tons from the Philippines, especially when Vietnam begins to harvest her summer-autumn rice crop, said Thanh.
According to Thanh, the Philippines may choose to buy rice from Vietnam because it is most beneficial to her. Vietnamese rice has traditionally suited the palate of the Philippine people. Furthermore, transport fees of Vietnamese rice is low and it takes only 10 days to reach the Philippine market, he said.
By Trung Chanh