Options for Reform of the National Food Authority

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Given the recent developments in the international rice markets, the relevance of the original mandate of National Food Authority (NFA) as a regulatory agency is now questionable. NFA-induced distortions have prevented the private sector from maintaining sufficient inventory to head off price spikes. The sooner the distortions are removed, the better for stability of rice prices. This Policy Note discusses the options for NFA reform, namely, the status quo, decoupling with government-owned stocks, and decoupling with government-controlled stocks. The study recommends the adoption of the third option, where the private sector owns stocks but is contracted to sell them to NFA in the event of emergency at market price. However, transitioning to this involves a wider private sector development thrust, aimed at setting up of mandatory rice grades and standards, establishment of a warehouse receipt system, and upgrading of the value chain. The Philippine Competition Commission is urged to consistently enforce fair competition in the rice market to prevent large traders to manipulate the market price, particularly during events of supply shortage.