Bernardo M. Villegas
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published: Sep 27, 2019






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How Agribusiness Can Eradicate Poverty (Part 3)

          Before the May 2016 Presidential elections, Dr. Rolando Dy wrote a very insightful memorandum to all the presidential aspirants on how to eradicate poverty in the Philippines. Now that the mid-term election fever seems to be prematurely in the air, I think that his message can be communicated to all the aspiring legislators and local government officials, who are as responsible in implementing anti-poverty measures, and possibly more effective, than the highest official of the land.  Let me summarize the content of his memo as part of this series on how agribusiness can eradicate poverty.

         Now that our Government is proudly announcing to the world that the Philippine economy is one of the fastest growing in East Asia and even in the world, let us be reminded of what Dr. Dy presented at the start of his memo.  He presented hard evidence that over the last decade or so, the Philippines failed miserably in poverty reduction, in comparison with the achievements of our ASEAN neighbors, especially Indonesia, Malaysia, Thailand and Vietnam.  To our shame, poverty incidence is up two to three times those of our neighbors.  The figures speak for themselvesLatest comparative: In mid-2010s, total poverty incidence in the Philippines was 21.6% as compared to 10.9% in Indonesia, 0.6% in Malaysia, 8.6% in Thailand and 7% in Vietnam.  The poverty incidence in the rural areas is even much worse.  In the Philippines, it was 30%, in Indonesia, Thailand and Vietnam, about 10% and, Malaysia, 1.6%.   It is obvious that even the most optimistic expectation of the Duterte Administration to bring down our poverty incidence to 14% by 2022 cannot match what our most of our peers were already able to achieve as far back as 2014.  We are in a tough catching up game!

`       The most obvious explanation is the very low productivity of the key crops grown in the Philippines which results in meagre incomes for our farmers and farm workers.  As I have pointed out in the first two articles in this series, the main culprit for this is the State that has failed to provide our small farmers with the necessary farm-to-market roads, irrigation systems, post-harvest facilities and other support services that our ASEAN neighbors have been able to do, especially Thailand and Vietnam.  In farm productivity, the Philippines has among the lowest ranking crops, except banana and pineapple.  Philippine palay yield may be higher than that of Thailand, but the latter produces high-priced rice, two to three times the price of ordinary rice.

         The growth of Philippine agriculture has been anemic.  During 1986 to 2014, Philippine agriculture growth averaged 2.4% annually, as compared with Indonesia’s 3.3% and Vietnam’s 3.6%.  Malaysia and Thailand had slower growth, 2.3% and 2.4% respectively, but these two agribusiness behemoths already have had a much higher base as far back as 1986.  Our poor performance in agricultural production has had a depressing effect on agri-food manufacturing which accounts for about 10 percent of GDP and nearly half of total manufacturing.  Ironically, the import-dependent food manufacturers are doing well, such as biscuit, snack foods, processed meat, and beverages because they have little raw material constraints.  The food manufacturing ventures that depend on local raw material supplies are the ones handicapped by shortages and are forced to import such crops as cocoa, coffee, palm oil, and sugar.  Food manufacturing can grow much faster and generate more jobs if they can have a wider raw material base at competitive costs. 

         One way of measuring the competitiveness of our agricultural sector is to determine how we are able to penetrate the global markets with our products.  The Philippines agri-food exports of $6.7 in 2014 appear puny in comparison with our Southeast Asian neighbors.  In the same year, Indonesia exported agri-food products to the tune of $38.8 billion; Thailand, $38.4 billion; Malaysia, $26 billion; and Vietnam $24.8 billion.  To make matters worse, the Philippines is the only one with a trade deficit in agribusiness trade.  The explanation for this dismal situation of Philippine agribusiness is easy to find:  low farm productivity and limited product diversification.    The solutions are, therefore, also easy to identify:  address farm productivity and supply chains by adopting and applying advance and appropriate technologies and increasing investments, both public and private, in the countryside.

         On a crop to crop basis, Philippine farm productivity falls behind those of its ASEAN peers, except in bananas and pineapples.  The typical farmers in Thailand can out-produce Filipino farmers in corn, sugarcane, rubber, cassava, dairy and hogs.  Those from Indonesia, in oil palm, coffee and cacao.  Those from Vietnam are more than three times more productive than their Filipino counterparts in coffee and rubber.  They are also ahead in cashew, pepper and rubber. The irony is that there are cases of exceptionally productive Filipino farmers across the so-called low productivity agriculture.  The problem is that there is limited diffusion of best practices across farms.  The root problem is the weak extension system at the municipal local government units.  To address this problem technical diffusion, there must be a wider resort to the DMT approach described above.  Professional management groups must increasingly adopt the small farmers and assist them in good agricultural practices (GAP) Cooperatives and corporations can also assume this role of technological diffusion.

         In more specific terms, an agricultural and fisheries coalition, led by Alyansa Agriculture, advocated for:  (1) an effective agriculture bureaucracy that will include road maps and ISO management systems; (2) agriculture and fisheries councils that ensure the active participation of stakeholders, especially in crafting and monitoring the agriculture budget; (3) support of 17,000 agricultural extension workers under the local government units; (4) improve access to farm credit and insurance; (5) subsidies and technical support to make Philippine agriculture globally competitive; and (6) ensure that farmers and fishers actually benefit from initiatives purported to assist them, such as agrarian reform, fishers resettlement program, competitiveness-enhancing measures, and the use of the coconut levy.

         U.S. billionaire says it all: “It has been proven that of all the interventions to reduce poverty, improving agricultural productivity is the best.  All the other different activity—yes it trickles down.   But nothing as efficiently as in agriculture.” (International Agriculture and Food Security Briefing sponsored by the Farmers Feeding the World, 2013).   For comments, my email address is bernardo.villegas@uap.asia.