Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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The Challenge of Food Security

           Food security is the greatest challenge to the global economy in the coming decades as hundreds of millions more people, especially in Asia, join the middle class.  As the per capita consumption of high-value products like vegetables, fruits, and all varieties of meat increases, there will be more pressure on food-producing countries all over the world to significantly increase the productivity of the agribusiness sector.  It must be kept in mind that agribusiness comprises the whole value chain from farming to storage to transport to food processing and eventually to retailing.  This would entail massive investments in infrastructures both by the State and the private sector.

          One of the most vocal voices about the need for investments in agribusiness comes from the Chinese, whose demand for high-value food products will be mindboggling as the benefits of economic growth eventually uplift the economic conditions of the remaining 800 million Chinese who up to now have remained relatively poor.  Chinese agricultural resources are highly insufficient in feeding a population of 1.3 billion at per capita consumption levels of middle income households.  China will have to import massive amounts of food in the coming years.  That is why none other than the CEO of the largest investment corporation in the world, the China Investment Corporation (CIC) which manages trillions of dollars of Chinese foreign exchange reserves, recently made a strong appeal for significant increases in investments all over the world in such infrastructures as irrigation, grain and animal protein production, support services such as transport, storage and processing.  Mr. Ding Xuedong, CEO of CIC, in an article in The Financial Times (June 18, 2014), pointed out that "in many countries, food security is already an urgent challenge, as the world food price crisis of 2007-2008 showed.  According to research by the UN Food and Agriculture Organization, global grain production will have to increase by 70 percent to meet the rise in food demand caused by population growth, changing dietary habits and urbanization.  The world has no shortage of fertile land and every prospect of meeting that target.  But the crops will not plant themselves.  Meeting the world's need for food will require long-term investment which, in developing countries, will have to increase by as much as 50 per cent from the current level."

          Mr. Xuedong is willing to put his money where his mouth is.  He is committing CIC funds to the agricultural sector which he is convinced offers stability, a way of hedging against inflation and a device for spreading risk: "We are keen to invest more across the entire value chain--in partnership with governments, multilateral organizations and like-minded institutional investors--in areas that will help to unlock the industry's potential, increase the food supply and offer attractive returns."  With the market-orientation now prevalent among Chinese leaders, this leading investor in the world observes that for the past 40 years, US farmland investments have outperformed stocks and bonds.  He is highly encouraged by the fact that "pension funds in North America, the Nordic region and Australia are cultivating portfolios of agriculture investments.  Some have developed their own vehicles.  Others have formed consortiums with peer funds.  Many are reaping handsome rewards."

          The needed investments in agriculture will not happen in the Philippines if we are not able to move to the next stage of agrarian reform.  As suggested by leading economists like Dr. Raul Fabella and Dr. Rolando Dy, we must allow greater consolidation of land to reach economies of scale by allowing the CARP beneficiaries to lease their lands to more productive farmers or to agribusiness corporations that can diversify into such high-value crops as palm oil, rubber, coffee, cacao and other plantation crops as has already been demonstrated in the banana and pineapple plantations.   The State must devote more funds (which can be taken from the former PDAF and PAD) to irrigation systems, farm-to-market roads, post-harvest facilities and agricultural extension services.  The private sector can complement these public investments by venturing into transport, storage and processing.  There should be more logistics or supply chain companies that will specialize in the distribution of agribusiness products.  It is my fervent wish that the next President who will take over in 2016 will be known as the Agribusiness President, who will lead the country to follow the path indicated by Mr. Xuedong.  Under this Agribusiness President, the Philippines will not only feed its population that can swell to 150 million by 2030, but will be able to export food products to the countries of Northeast Asia. For comments, my email address is bernardo.villegas@uap.asia.