Banayo said an audit of the 10-year importation record of the NFA showed that its rice imports were overpriced by an average of $60 per metric ton.

Banayo said fictitious cooperatives and corporations that took part in the purchase of cereals from abroad piggybacked smuggled rice on the NFA importation program.

During the global grains crisis in 2008, the Philippines became the world’s biggest importer of rice, with its purchases driving up the cost of the cereal on the international market.

Banayo said the huge overprice and excessive importation of rice pushed up the NFA debt to P177 billion.

In a report he submitted to President Benigno Aquino III on Jan. 10, Banayo said the overprice in 2008-2010 accounted for 83.6 percent of the total amount of overprice during the 10-year period.

“When we took over on July 8, 2010, we discovered that the NFA had stocks equivalent to 70 days supply of the total national requirement even if our mandate called for a 30-day inventory level during the lean months which begin July 1 each year,” Banayo said in his report.

“Worse, a good portion of these stocks were sourced in 2008 and had to be disposed of early to avoid spoilage,” he said.

Supplier credit

Of the P176.7 billion in NFA’s government-guaranteed debt, P62 billion was in the form of supplier credits, Banayo said.

He said the previous NFA’s pretermination of its bonds resulted in losses ranging from P1.3 billion to P3.3 billion.

Banayo submitted the written executive summary to the President for his perusal before the NFA administrator’s formal presentation of the agency’s findings Thursday afternoon.

During the early days of his administration, Mr. Aquino directed Banayo to look into the rice importation procedures of the previous administration after it was learned that a huge amount of rice was found in NFA warehouses across the country and was in danger of rotting.

“Analyzing the 10-year record of importation by the NFA, auditors determined that compared with world market spot prices, private importation and other indicators, NFA’s average import prices were overpriced at about $60 per metric ton,” Banayo said.

“In the last three years alone (2008 to 2010) the average overprice amounted to $125 per metric ton,” he added.

Favored businessmen

Banayo said that when the NFA allowed businessmen to import 200,000 metric tons to remove the pressure on the government to shoulder the costs of all rice imports, favored contractors were able to corner the allocations.

“While the purpose was correct, the procedures and practices were wrong. Instead of bidding out the service fees that would accrue to government, a ‘first come-first served’ method was employed, which allowed ‘favored’ participants to corner the allocations,” the NFA head said.

“Among the findings were fictitious cooperatives and corporations were given the quotas, and the qualification standards were extremely liberal. Also control measures were not put in place which allowed smuggled rice to piggyback on legal PSF (private sector-financed importation) imports,” he added.

Banayo also told Mr. Aquino of the zero-coupon bond investments that resulted in multibillion-peso losses for the NFA.

He said that in 2003 and 2005, the NFA at the recommendation of then NFA Administrator Arthur Yap borrowed money “by way of purchasing (government) bonds with a face value of P16.5 billion with a maturity period of seven years.” [Yap ran for congressman unopposed in Bohol last year.]

No income from bond

“The NFA had to borrow money to pay quarterly interest without receiving any income from the bond (zero-coupon). Arranger fees to the tune of P230 million were paid to Landbank and ONL Consultants (a private financial consultancy firm which was the subject of a Senate inquiry in 2009 for the Quedancor swine-lending program),” Banayo said.

“The fee far exceeded the 1-percent limit for such services,” he added.

Preterminated

In December 2009 and January 2010, the NFA preterminated its bonds and sold them before they matured, “thus losing P1.3 billion to P3.3 billion on top of the front-end fees paid to the financial advisors,” Banayo said.

“These and other attendant findings will be presented to Your Excellency along with reform prescriptions some of which have already been adopted,” Banayo told the President.

Norman Bordadora, Phil. Daily Inquirer