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HomePublicationsBrowse ListingRice Reforms and Poverty in the Philippines: A CGE AnalysisConclusion

Conclusion

QR on rice will be phased out by the end of 2004. While this policy reform may be justified for efficiency purposes12, the displacement effects of the expected surge in rice imports will translate into larger negative income effects for household groups where the problem of poverty is severe. This is because these groups rely heavily on agriculture, particularly palay rice production, which is expected to contract when QR is removed and tariff is reduced As a result, factor demand and factor prices in agriculture drop. Factor incomes derived from agricultural production decline as well. While all household groups enjoy reduced prices of rice as QR is removed and tariff reduced, the drop in consumer prices is not significant enough to mitigate the decline in income for those groups that are adversely affected. Thus, all poverty indicators for these groups show higher values, which means a worsening of their poverty situation. Furthermore, the overall Gini coefficient increases, which indicates worsening of income inequality.

The policy lesson that may be drawn from the exercise is that while market reform is generally necessary, it has to be carried out carefully, especially if implemented in a critical commodity such as rice. Although market reforms in rice can potentially have favorable effects on consumer prices in general, some household groups may be adversely affected by the expected surge in rice imports. Policy measures may have to be designed to counter these effects. Among the various poverty-offsetting measures experimented in the paper, the results indicate that an increase in direct government transfers to these adversely affected household groups can provide a better safety net. However, this is more of a short-run policy measure. Other policy measures that may have favorable longer-term implications would include productivity improvement through a vigorous program of intensified use of highyielding rice varieties, irrigation, better farm-to-market roads, as well as measures to encourage the growth of other non-rice crops.

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    The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

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