Transforming Agriculture

IF I WERE THE NEXT PRESIDENT (Part 8 of a series)

By BEN R. PUNONGBAYAN

Founder, Buklod National Political Party

Improving Philippine agriculture, which includes fishery and forestry products, has been a persistent major issue since much of the 20th century. Unfortunately, we still continue to struggle to come to grips with it.

So many official and academic studies as well as private commentaries and opinions abound on how to deal with this extraordinarily important issue. I chose as reference for this commentary a recent study issued by the World Bank in June 2020, “Transforming Philippine Agriculture During COVID-19 and Beyond”. This report provides a high level analysis of the present state of Philippine agriculture and a discussion of policy options to transform Philippine agriculture. Accordingly, unless otherwise specified, the data cited in this commentary come from this source.

Based on data from the Bangko Sentral ng Pilipinas (BSP), the proportion of agriculture in Philippine Gross Domestic Product (GDP) is small. It was 12.9% in 2012 and continued to get smaller to 9.2% in 2019 (I have ignored 2020, this year being an abnormal year).

The annual growth of agriculture is miniscule compared to overall GDP growth—an average of 1.7% in eight years to 2019, which includes 1.2% in 2019, as shown in the BSP data.

While agriculture is a small component of the Philippine economy, it is from where a greater proportion of our citizens make their living and where the poverty incidence is higher—34% for both farmers and fishermen in 2015 when the overall poverty incidence was 22%. It is therefore imperative that the government must devote an urgent and resolute attention to agriculture.

The problems in Philippine agriculture can all be summed up as a condition of low productivity. Agriculture economists use a measure in tracking productivity called Total Factor Productivity or TFP. This measure is derived by taking the growth rate of the agricultural sector output and deducting from it the growth rate of the related inputs.

For the past twenty years, Philippine TFP has risen to only 32%, while Vietnam’s rose 73%, Thailand’s 67% and Indonesia’s, also an archipelagic country like the Philippines, and much larger, 50%.

The World Bank report attributes the Philippine slow growth to low rice yields and failure to shift to high value crops (HVC) despite the passage of the High Value Crops Development Act in 1995. The share of HVC in total agriculture output had just slightly increased from 19.6% in 2000 to 22.9% in 2019, a period of 20 years.

Raising Philippine agriculture productivity to a desirable level requires dealing with many complexities. In addition to the two main issues mentioned above, there are several related issues. Farm land size averages only at 1.3 hectares in 2012, a small area which clearly can hardly be productive. Irrigation covers only 60% of the total area considered irrigable. Farm-to-market roads are insufficient. Extension service is generally not effective. There are also other issues, like insufficient development of local market networks and low use of current information technology.

But much more important is the overarching public policy issue that overhangs the foregoing subsidiary issues. This policy issue is the present main concentration, and therefore bias, in favor of production of rice, which represents only 18% of total agricultural output, a small proportion, indeed. Admittedly though, rice is an emotional issue to many, especially to those who equate food security to rice self-sufficiency. But that duality does not hold.

Also related to productivity is the continuing major issue relating to sugar. Because of quantitative restrictions in the importation of sugar, the local price of sugar is much higher than the world price, which unduly increases the cost and therefore consumer price of numerous goods using sugar as ingredient.

If I were the next president, I will devote close attention to transform our agriculture for the benefit of this sector’s stakeholders which naturally translates to the well being of the whole nation.

To help navigate the important issues and identify the proper solutions, I will add to the government structure a new body, the Council of Agricultural Advisers. It will not be an executive entity. The implementation of all decisions will be executed by the Secretary of Agriculture under my direct guidance, as it must be.

The first item that we will decide on is to remove the present concentration of attention and assistance on rice production and instead give the same treatments to all crops. This will mean that government assistance now given only to rice will also be given to all crops.

Moreover, we will change the present assistance to farmers from providing free inputs, which are considered expensive, to “decoupled payments” in cash computed based on farm area which is practiced in other countries, as pointed out in the World Bank report.

In this way, the farmer has free choice on what to plant and which is not necessarily rice. Irrigation will be provided to all crops and not only primarily to rice as is presently done. These changes are geared towards diversifying Philippine agriculture and increasing the production of HVCs. We will push much of the expected increased production of HVCs, and consequently processed foods, towards export.

We will increase irrigation infrastructure systematically and methodically and put the overall scheme into a long-term plan. Irrigation water has to be paid for to minimize wasteful use.

Similarly, we will develop a long-term plan for building farm-to-market roads all over the country by identifying their locations and establishing a construction time schedule. We will start building as the plan is being developed and put priority to rural areas that are beset by insurgency.

We will review the effectiveness of extension service and consider turning it towards a demand service rather than a supply service and also make use of private service providers, as suggested in the World Bank report.

In doing all the foregoing activities, we will make use of plans that may already have been developed. We will work collaboratively with the local government units (LGU) as they have better knowledge of the problem details. But more than this, under the local government decentralization law, the LGUs are responsible for the development of irrigation, farm-to-market roads, and extension service in their respective geographic areas and the funds to cover the expenditures for these development projects are included in their IRA. Nevertheless, we will work out with them a joint funding arrangement.

Land consolidation is a complicated problem because of the present ownership legal size limit of 5 hectares for each person. Land consolidation is necessary not only because productivity is associated with scale, but more importantly a larger farm area is suitable to full-scale mechanization that produces more productivity.

For this purpose, we will review the present status of land reform which reportedly is nearing completion. We will wind it down as soon as it is possible to do so, but we will continue to pursue all pending cases. At the proper time, I will declare that the social amelioration objective of land reform has now been fulfilled. It is a necessary step to take to enable us to pass a law to increase the size limit in owning land to a multiple of the present 5 hectares per individual. Land consolidation can then be done through sale.

There are other ways of consolidating land for farming. Lease and joint farming are the recognizable ones. In addition there are novel practices that have been implemented in other countries as indicated in the World Bank report. We will undertake a campaign to encourage the farmers to consolidate their land for farming and provide them with information of the the various ways of doing so, including novel ways that are suitable to Philippine conditions and culture.

Sugar by itself is also a difficult crop to deal with because of the preference of persons in interest to hold on to old practices. Nevertheless, we will carefully examine the relevant issues with the aim of lifting the quantitative restrictions in the importation of sugar and thereby reduce the local price of sugar to within the level of the world price and, thus, benefit Philippine consumers. If, as a consequence, there would be a reduction of employment in the sugar sector, the government will provide the necessary transitory assistance to the displaced sugar workers.

If we can make the difficult decisions for rice, there is no reason why we can not make similar decisions for sugar.

Transforming Philippine agriculture is a complex undertaking. Much of the problems is in convincing people in interest to accept the necessary policy changes and the applicable new laws that may need to be adopted. With the change in policy regarding rice, an important part of the whole undertaking is to articulate the safeguards that will be put in place to ensure the continuous availability of adequate supply of rice.

In this regard, it is important to point out that as per capita income grows, there is a clear tendency for the consumption of rice to go down because people have the means to diversify their food intake. With this important consideration, coupled with the expected increase in rice yields, the Philippines may yet achieve rice self-sufficiency or near self-sufficiency in the long run.

Recognizing all these complexities, we will provide resoluteness of purpose and management effectiveness in putting the necessary changes in place and making those changes work for the benefit of all of our people.

Benjamin R. Punongbayan, Founder of the Buklod National Political Party, is an experienced public accounting practitioner who started the Punongbayan & Araullo accounting firm 33 years ago.


One thought on “Transforming Agriculture

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s