Biotechnologies in the Philippines: The Cost of Regulation

Biotechnologies potentially have significant benefits for developing countries but many countries lack complete regulatory processes to allow their release. In evaluating the potential benefits of genetically modified crops, one must be able to measure the true cost of regulations in addition to the other costs associated with bringing the crop to market. The objectives of this paper are to (1) identify the direct costs of the regulation of Bt eggplant, Bt rice, ringspot virus resistant (PRSV) papaya and virus resistant tomatoes in the Philippines, and (2) estimate the opportunity cost of time lost in the regulatory process. The study compares the cost of regulations as they differ by factors such as the existence of previous studies on the product or the intention for export or domestic use. It is hypothesized that the costs are greater for products that are intended for export or human consumption or are produced by the private sector. It is also hypothesized that these factors increase the time to complete the regulatory process, therefore increasing the opportunity cost of time.

This study evaluates the economic impact of the GMO regulatory process on the change in producer surplus, the net present value and the internal rate return using an economic surplus model. Scientists and other experts in the field of GMOs and regulation were interviewed to obtain the necessary data on the regulatory process. The evaluation was carried out for four different commodities in the Philippines, Bt Rice, Bt Eggplant, PRSV Papaya and MVR Tomato. The results for the open economy model revealed a change in producer surplus, as a result of the GMO research, of $418.3 million for Bt Rice and $353.7 million for PRSV Papaya. The closed economy model of Bt Eggplant has a change in producer surplus of $25.1 million and a change in total surplus of $40.8 million while the result for the change in producer surplus for MVR Tomato is $19.3 million and the change in total surplus is $51.6 million. A sensitivity analysis of the results was then carried out in which the elasticity of supply, the cost of regulation, and the release date were each varied in order to show the welfare impact of such changes. The sensitivity analysis revealed limited changes in surplus when elasticity and regulatory costs were changed. However, changing the date of release or commercialization resulted in monumental changes in surplus.