PHILIPPINES: Diagnostic Country Report Current Status and Plans

STAPLE FOODS

Analysis of sectoral reforms The rice sector is regulated by the National Food Authority under a highly interventionist regime aimed at food security and price stabilization. Since 1995, the most significant reform in import policy was its compliance with WTO rules and decisions. Other competition regulation is guided by relevant provisions in the Constitution of 1987 and the Price Act of 1991.

Research hypotheses 1.The rice market at the level of paddy trading and milled rice retailing is highly competitive. 2.There is some deviation from competitive behavior at the wholesale level for large urban center (Metro Manila). 3.Protection of domestic suppliers from foreign suppliers presents a significant deadweight loss to the Philippine economy. 4.NFA’s price stabilization measures has been effectively implemented and helped to keep price of rice low at the consumer end.

Secondary data and preliminary findings To address the research questions, the research team looked at: – Historical trends in the rice industry (e.g. rice production, yield, area, volume of imports, and prices). – Past research studies (which were reviewed to create a clearer picture of the rice marketing chain). In addition, competitions along the chain were assessed: – Past research on rice industry shows a high degree of competition in the domestic market, from paddy production to retail marketing. – Rather than "too few" traders, marketing inefficiency in the Philippines manifests in too many traders. – NFA rice distribution has been effective in keeping domestic retail prices stable. However, the country's protectionist policy prohibits competition with foreign suppliers, keeping domestic prices significantly above retail prices.

Primary data and types of analysis Rapid appraisal of the state of competition in the rice marketing chain – The study adopts the rapid appraisal method based on interviews of key informants. Informants will be selected from each of the nodes of the value chain, beginning at retail market in Manila, tracing it back to the biggest rice- producing province in the country, Central Luzon, 3 hours north of Manila by car. Ex-ante analysis of free competition with imports – The study proposes to develop a spreadsheet model for economic surplus analysis, called the Total Welfare Impact Simulator for Trade (TWIST). The advantage of the tool is that it permits annually updated figures for calculating changes in producer surplus, consumer surplus, deadweight burden, quota rent, and tax revenue, given new baseline data (and possibly elasticities of demand and supply). – The model will be applied to 2012 data to analyze changes in economic surplus and its components due to the following scenarios: 1) repeal of QR and shift to free trade; 2) restriction of imports to 186,000 tons (the import level of 2013); and 3) repeal of the QR and adoption of the ASEAN Free Trade tariff (35%).

Primary data and types of analysis Perception Survey – To align the Philippine DCR with that of the other countries undertaking the study and gather primary data for the consumer welfare analysis, a perception survey will be implemented. The survey instrument will follow the CREW questionnaire for all countries.

{ Bus Transport Sector in the Philippines

 What is the state of competition in the bus transport sector?  What is the regulatory and institutional framework governing bus transport? How do they impact competition in the market?  What competition reforms have been implemented? How did the reforms affect:  the market structure?  the welfare of consumers and producers? Research Questions

 Bus transportation – governed by the DOTC through its line agencies (LTFRB, LTO)  LTFRB – regulation of entry & exit, bus fares  LTO – implementation of LTFRB & other transport policies  MMDA, PNP, LGUs – other agencies involved in implementation of traffic laws & transport regulations  NEDA, DPWH – involved in planning and development of road infrastructure & development policies  Regulatory framework – complicated regime where regulation and enforcement is shared by several agencies Regulatory Framework in Bus Transport

 DOTC Department Order No (1992)  Provided the framework for liberalization reform in transportation including entry & exit, route-setting mechanisms, and fare regulation & adjustment procedures  Reforms imposing moratorium on issuance of new franchises or certificate of public conveyance (CPCs)  Moratorium on issuance of CPCs for provincial buses (2000)  MC nationwide moratorium on new CPCs (2003) Reforms in bus transport

Analysis of Policy Reform  Secondary Data Gathered  Past research and data on road transportation  Previous literature and documentation on policy reforms in the bus transport sector  Data on operators and number of buses (LTFRB) Route Number of operators Number of buses Average no. of bus/operat or Manila EDSA Route2663,71114 Manila Non-EDSA Route1281,63213 Manila-Provincial North Bound3713,68410 Manila-Provincial South- Bound3573,56810 TOTAL1,12212,59511 Study Area Alabang-Fairview Baclaran-Novaliches Manila-Baguio Manila-Lucena TOTAL Route Number of operators Number of buses Average no. of bus/operator Manila EDSA Route2663,71114 Manila Non-EDSA Route1281,63213 Manila-Provincial North Bound3713,68410 Manila-Provincial South- Bound3573,56810 TOTAL1,12212,59511 Study Area Alabang-Fairview Baclaran-Novaliches Manila-Baguio Manila-Lucena TOTAL Number of operators and buses, Manila Routes

 The bus transport sector evolved from a highly regulated and concentrated market in the 1970s to a liberalized market composed primarily of small operators   The market operates under a highly complicated regime where regulation and enforcement is shared by several agencies resulting to implementation failures & regulatory capture   Operation of illegal (“colorum”) buses   Proliferation of “kabit” system where a bus owner enters the market through arrangement with an operator with established franchise   Market inefficiency manifests in too many operators and buses resulting to traffic congestion Preliminary Findings

 Secondary Data  Price data, fare changes  Time series data on market structure  Data on substitute modes of transportation (MRT, LRT fares, ridership & cost of operation)  Primary Data  FGD  Perception Survey Next Steps: Data for Further Analysis

 Market Structure Analysis: Herfindahl-Hirshman Index  Producer and Consumer Welfare Analysis  Qualitative Analysis  Economic surplus analysis using TWIST if data on demand and supply elasticities can be constructed Next Steps: Methods for Further Analysis

Appendix Slides

Metro Manila Bus Route Network

Public transportation in the Philippines Bus LRT 1LRT 2 MRT 3AUVsJeepneysTricycles

Regulatory Framework in the Bus Transport Sector Transportation Planning & Development Transport Planning & Regulation DOTC Regulatory Policy Setting LTFRB Implementation LTO MMDA PNP LGUs Infrastructure Planning & Development NEDA DPWH