Finance Secretary Carlos Dominguez III told senators Tuesday that President Duterte’s directive allowing more pork imports at lower tariffs for a temporary period is an immediate and practicable response to protect Filipino consumers from price spirals that could further drive up inflation and undermine the country’s economic recovery from the COVID-19 pandemic.

Dominguez said the spike in meat prices this year has unduly jacked up food inflation, thus exacerbating the problems of unemployment, hunger and reduced or lost incomes for many Filipinos that have led “people to line up at community pantries at dawn.”

A former agriculture secretary, Dominguez said that although the presidential directive to ease the pork supply shortage appears to be a painful solution as it would lead to a revenue loss of P13.68 billion for the government, this would actually slash pork prices to a level estimated to save Filipino consumers a whopping P67.38 billion.

“The gains of consumers reeling from the economic shock of the pandemic dwarf the foregone revenues by P53.7 billion, which is clearly a tradeoff beneficial to the entire country,” Dominguez said during the resumption of the Senate’s Committee of the While (COW) inquiry into the current pork supply shortfall in the country resulting from the prolonged outbreak of the African Swine Fever (ASF).

“The worse we could do in a situation like the one we are facing today is to let supply issues force food prices up even more. If food prices rise, the inflation rate also increases. If the inflation rate rises, interest rate increases will follow. This unhealthy chain of events will make economic recovery even more difficult for all,” Dominguez told senators.

Long-term solutions are necessary to deal in the long run with the current situation triggered mainly by the ASF outbreak, and these are already being initiated by the Department of Agriculture (DA), said Dominguez, hence the issuance of Executive Order (EO) 128 to provide an instant, albeit temporary, answer to the current supply and price problems.

EO 128 temporarily cuts the tariff rate on pork imports within the minimum access volume (MAV) quota to 5 percent, from the current rate of 30 percent, for the first three months upon the effectivity of the presidential directive. The reduced rate will go up to 10 percent for the next nine months thereafter.

It also increases the MAV quota for pork from 54,210 metric tons (MT) to 404,210 MT.

The current import quota was set way back in 1998 as part of the implementation of the Agricultural Tariffication Act, which was more than 20 years ago when the Philippines’ consuming population was only 71 million.

“Again, more than the economics of it, EO 128 is a response to protect our people from shortages and price spikes during this difficult time. We need to do it now for the sake of our countrymen,” Dominguez said.

Dominguez told senators that the increase in the MAV quota for pork factors in the estimated supply deficit for 2021 at up to 477,000 MT based on estimates by the National Economic and Development Authority (NEDA).

Thus, the temporary increase in pork imports will not “kill” the local hog industry as feared by some quarters, given that imports would potentially account for only up to 22.8 percent of total consumption, Dominguez said.

Dominguez also made it clear that the decision to adjust pork import tariffs was not done haphazardly, but underwent extensive deliberations and consultations among the public and concerned agencies, with all the tradeoffs considered in the cost-benefit analysis.

The spike in pork prices could be immediately be resolved by bringing in more supply, Dominguez noted.

“It is not a question of smuggling or anything. It is because of shortage, and bringing in more supply would stabilize and bring down the price of pork, and therefore, the inflation rate,” he said.

Dominguez noted that allowing supply issues to drive food prices up will lead to an “unhealthy chain of events,” that could inflict long-term damage on the economy and the people, starting with the sharp rise in inflation, which would then lead to an increase in interest rates, and a difficult economic recovery for the country.

“Everyone will suffer from high interest rates—from those struggling to pay the amortization dues on their home loans, to those making monthly payments on their cars or motorcycles. High inflation erodes people’s confidence and their desire to save,” Dominguez said.

Comparing the economy to a house, Dominguez explained to senators that the government spent decades reinforcing it through fiscal and monetary policies that serve as its solid foundations made even stronger by the tax reforms and other game-changing measures passed by the Congress.

But with COVID-19 as a once-in-a-century superstorm testing the house’s strength, the first that could give way is its roof, which represent the prices, jobs and incomes of the people, Dominguez said.

To keep this house strong amid the pandemic, Dominguez said the government must remain fiscally responsible to ensure that this public health crisis would not destroy the house, drag it down to a crippling debt crisis, and make economic recovery difficult.

Inflation, on the other hand, is another threat to the house that could eventually erode its fiscal and monetary foundations and wash away the gains earned by the country in the past years, he said.

To prevent this from happening, Dominguez said pork prices, which has become a large factor in driving up inflation, should be immediately addressed.

Dominguez said the DA has been investing in long-term solutions to improve domestic hog production and resolve the problems plaguing the local swine industry, such as repopulating the swine herd and compensating producers for losses of pigs to ASF.

Moreover, the DA has been implementing strengthened surveillance and quarantine, which has now evolved as the Bantay ASF sa Barangay since 2019.

Based on a directive by Dominguez, who chairs the Land Bank of the Philippines (LANDBANK), the state lender is doubling its support, from P15 billion to P30 billion, for domestic hog raisers and animal feed producers by providing them loans for repopulating their stock and for increasing animal feed production

“We are not giving up on the domestic pork industry. The interventions of the Department of Agriculture to help the industry are aggressive. They expect them to yield even greater benefits once a permanent solution to the ASF outbreak becomes available,” Dominguez said.

Dominguez, noted, though, that these are long-term solutions while the current pork price spiral requires swift, but balanced responses.

“The short-term and only practicable strategy for the current problem is contained in Executive Order 128,” he said.

He noted that more than 60 percent of pork imports last year were offals, fats and pork skin used for meat processing, and not the kind of meat such as kasim and liempo that Filipino families prepare as food and put on their tables.

The imports covered by EO 128 refer to the kind of pork that people eat as viand or ulam, Dominguez said.

From 1995 to 2020, meat contributed only around 5 percent of overall inflation. In the first three months of 2021, though, it contributed more than one fourth of overall inflation, which is unprecedented, Dominguez said.

“I was a former Secretary of Agriculture in the mid- to late 1980’s. I was in different segments of the private sector, including agriculture. I have seen various food supply issues, but I have never seen the price of pork driving up the inflation rate like it does now,” he said.

With pork prices reaching as high as P327 per kilogram (kg) in the National Capital Region (NCR) last month, meat inflation rose from 3.5 percent and 4.3 percent in 2019 and 2020, respectively, to 19.6 percent in the first quarter of 2021.

As meat inflation soared double-digit in the first quarter of 2021, it became the top contributor to overall inflation of 1.3 percentage points, which is even higher than the 1-percentage point contribution to inflation of rice at the height of the 2018 rice crisis.

Dominguez said this price spiral has hurt Filipino families whose incomes were either reduced or lost as a result of the lockdowns that were necessary to curb the spread of COVID-19.

According to NEDA, the lockdowns led to an average annual income loss of P23,000 per worker.

“You also have to note that this is just the average loss, and some workers are hit much harder, especially those who lost their jobs. The food inflation exacerbates the situation and leads to increased hunger. This is the reason why people line up at community pantries at dawn,” Dominguez said.

A Social Weather Stations (SWS) survey showed that as of November 2020, 16 percent or an estimated 4 million families experienced involuntary hunger.

While this is about half of the record-high of 30.7 percent reported two months earlier, the latest data is still double the pre-pandemic level of 8.8 percent in December 2019.

The outbreak of ASF over the past two years has taken a toll on domestic hog production, with the disease contributing to 1.6 million hog deaths in 2020, which is up by a third from the 1.2 million hogs lost in 2019, according to Philippine Statistic Authority (PSA) data.

To compound the supply situation, hog live births declined by 16 percent in 2020. As a result, the ending head count of hogs dropped by 24 percent from 12.8 million in 2019 to 9.7 million in last year.

Meanwhile, the number of hogs slaughtered for food in 2020 declined by 6.7 percent or 25.2 million compared to the 2019 figure of 27.2 million hogs.

In the first quarter of 2021, the total volume of hog production plunged by 26 percent to 420,985 metric tons from 568,672 metric tons in the same period last year.

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