Rice quota Bad for PNG families and the Budget

“There were startling revelations that the government is ready to give Naima rice monopoly control of the rice market. This will lead to massive increases in rice prices for PNG families. In addition, Naima is to be given a 10 year tax holiday when poor PNG workers are struggling with high levels of tax. This rice plan is a really bad deal for PNG. If the government really understood the needs of its PNG people rather than just some high paying foreign besties, they would immediately cancel this sweetheart arrangement. Instead, the government should do more to invest in small-holder extension activities, research and development, and improved transport and storage systems” said the Shadow Minister for Treasury and Finance, Ian Ling-Stuckey.

“There were disturbing reports in mainstream media on 26 January that Agriculture and Livestock Minister Benny Allan had stated that foreign controlled Naima would take control of the rice market in PNG once the state solicitor had cleared the 80% quota and 10-year tax holiday. Surely these are not issues for the State Solicitor to resolve. These are fundamental issues of public policy, of choices that should be given to parliamentarians to balance the needs of PNG’s consumers, the future of their children, and an obscure foreign firm with its Ministerial besties.

“When this proposal was floated, there was near universal condemnation of this outrageous, protectionist proposal. The National Research Institute put out a Spotlight paper condemning the proposal stating “PNG’s experiences of monopolies in the delivery of crucial goods and services have been dreadful. A monopoly trader emerging in the rice industry is therefore a dangerous prospect especially with rice fast becoming a staple food throughout the country; the cost of survival for many households will increase.”

The PNG Independent Consumer and Competition Commission condemned the proposal saying it could have “major negative effects upon consumers and competition” and “It is essential that no domestic rice monopoly is created by the issuing of ‘pioneer status’ to only one rice grower”.

Outside experts such as Professor Howes at the ANU have condemned the proposal when he stated “As any economist will tell you, a quota, especially a quota to a monopoly, will push up prices and profits.” Researchers from the 1960s have highlighted that in most areas in PNG, there are other crop options with much higher returns to our farmers.

Rice was a low return crop relative to potatoes, oil palm, cocoa, coffee and vanilla. Why force our farmers into these high labour, risky areas under a massive subsidy that will hurt PNG families with increases in prices? Why are we ignoring the advice of these experts?” asked the Shadow Treasurer.
So who are the losers from this proposal?

The main loser is PNG families, especially poorer families in urban areas where rice consumptions is such a staple of their diet and where there is limited garden opportunities to grow alternate crops such as sweet potato.

Economists are clear that the worst protectionist policy is quotas, then tariffs, then direct subsidies, then competition under a properly regulated market. Why is the government going for an option that is the worst of all the protectionist policy options?

This is the one with the greatest risk to consumers. Current price monitoring arrangements with weak enforcement provisions means that Naima could effectively start asking almost any price it wants for rice. Of course, we know that there will be the normal political rhetoric of good noises made that rice prices will decrease, but the people of PNG are just, too wise to believe those stories yet again stressed the shadow treasurer.

“Another major loser from this proposal are the people of PNG through the budget. It is one thing to give Naima a license to print money through this scheme, but then to give them a ten-year tax holiday? I do hope the PNG Treasurer Charles Abel will fiercely oppose this suggestion as the budget desperately needs budget repair. How on earth could the government support a 10-year tax holiday when our debt levels are already blowing out of control?” said Mr Ling-Stuckey.

So who are the winners from this proposal. Clearly, Naima rice would have just been given a license to become an extraordinarily profitable company, milking the pockets of PNG consumers and taking the funds away overseas tax-free.

They may promise to make big rice investments in Central Province like all these buggers do, but the firm has no track record in rice production. There are also very disturbing reports that the main person behind the deal is a wanted fugitive from Indonesia, facing charges for taking very large sums of money during the Asian Financial Crisis. This person clearly has very strong links, for some reason, with a range of senior government Ministers. There remain questions about this person’s rapid granting of PNG citizenship when he did not meet the usual citizenship criteria.

“There are much better ways to build up our agriculture sector than this type of dangerous and destructive proposal. In the spirit of APEC and trade integration, we should invest our time and funds instead into ways that PNG small-holders can grow products both for our own markets as well for the supermarkets of Asia. The APEC meeting is an opportunity to demonstrate the potential of PNG, and we can invite firms with much greater expertise to make investments in our agriculture sector. Setting up a rice monopoly absolutely undermines the ideals of APEC and puts our role as host to shame.
The O’Neill/Abel government should cancel the Naima proposal with its extreme protectionist policies and questionable deals. There are better ways to build up our agriculture sector and lift the incomes and job opportunities for our people” said Shadow Treasurer Ian Ling-Stuckey

Hon.Ian Ling-Stuckey,CMG.MP
Shadow Minister for Treasury & Finance

29 January 2018