Liberalization of foreign investments in rice, corn sector sought

By Jose Cielito Reganit

February 21, 2024, 8:48 pm

<p><em>(PNA file photo)</em></p>

(PNA file photo)

MANILA – Officials of the Department of Agriculture (DA) and Board of Investments (BOI) and economists on Wednesday expressed support for the liberalization of foreign investments in the rice and corn industry to boost food production, increase farmers' income, and foster greater competition to benefit consumers.

At a roundtable discussion at the House of Representatives on bills seeking to increase investments in the rice and corn sector, Mari Charina Ubarra, a technical consultant at the Foundation for Economic Freedom (FEF), pointed out that restrictions are not only contained in the Constitution but in two olds laws – Republic Act No. 3018, which limited the industry to Filipinos and which was enacted on Aug. 2, 1960, and Presidential Decree No. 194, issued by the late President Ferdinand E. Marcos Sr. on May 17, 1973.

She said a study conducted by FEF showed that while PD 194 opened the door to foreign investments in the rice and corn sector, it required foreign investors to divest 60 percent of their ownership to Filipinos after 30 years of operations.

“The divestment requirement is a unique restriction to the Philippines and the rice and corn sector, in particular. Foreign companies that have established operations in the country are hesitant to expand their operations as they near the divestment period, since they will lose control of their investments,” Ubarra said.

The former House legislative officer urged lawmakers to repeal or amend RA 3018 and PD 194 to make them consistent with the goal of the Marcos administration of growing the agriculture sector.

Ubarra said if the full opening of the rice and corn sector won’t be allowed, an alternative proposal to attract investments and modernize the sector is to extend the divestment period to 50 years.

She estimated the agriculture sector will need at least PHP1.3 trillion for irrigation, post-harvest facilities, and other infrastructure to catch up with its Asian neighbors -- a large sum that could be reduced by attracting foreign investments.

Meanwhile, Christopher Ilagan, chairman of the agribusiness committee of the American Chamber of Commerce in the Philippines, said several American firms operating in the country have expressed concern over the divestment requirement in PD 194.

“This is a thorn on the side of foreign investors… This 30-year divestment rule may not be an issue in the first few years but as you get closer to the [end] period, you rethink your investment,” Ilagan said.

Ilagan pointed out that the power of the National Food Authority (NFA) to oversee this divestment provision has been removed by the Rice Tariffication Law, which adds to the confusion as to where foreign investors will turn for approval of their divestment plans.

Agriculture Assistant Secretary U-Nichols Manalo, director of the National Rice Program, said the DA welcomes efforts to attract investments in agriculture to address years of “under-investment in the sector.”

NFA administrator Roderico Bioco told the roundtable session that NFA alone will need PHP93 billion to build dryers, rice mills, and other infrastructure needed to build up capacity to meet the country's rice buffer requirement.

“The same amount may have to be shouldered by the private sector to ensure the country’s food security,” he said.

BOI director Raquel Echague said the government is promoting high-tech agriculture as a possible area of investment for foreign direct investors.

She said extending the divestment period to 50 years from 30 years for the rice and corn sector should help draw more attention to the Philippines, especially in the feed milling industry, and will allow the country “to catch up with our ASEAN neighbors.”

Foreign investments in the rice and corn sector now stands at PHP21 billion and employ more than 4,000 workers.

Aside from liberalizing foreign investments in certain sectors by changing existing laws, the House of Representatives, along with the Senate, is reviewing the economic provisions of the 1987 Constitution for updates to allow more foreign direct investments into the country. (PNA)