To the Duterte
Administration: pay attention to Agriculture!
February 10, 2019 | 8:42 pm
Introspective
By Romeo L. Bernardo
The recent spike in rice inflation and its harm on the
macro-economy and poverty incidence has focused attention to long-standing
failures of our agricultural sector. This is evident in comparative statistics
vs. peers, e.g. farm productivity (see table below), agriculture sector
growth, rural poverty incidence.
Failed policies over decades: tunnel vision on rice self
sufficiency ( rice related spending accounts for over 70% of public spending
for agriculture), the neglect of other crops and aqua resources where the
Philippines has higher actual or potential comparative advantage, and a
seriously flawed agrarian reform program that has only transformed landless
peasants into “impoverished landowners,” as National Scientist Raul Fabella has
found in his research.
I would invite you to read Prof. Fabella’s column, “CARPER:
Time to let go” (Oct. 28, 2013),and my other fellow Introspective columnist and
Foundation for Economic Freedom (FEF) President Calixto Chikimaco’s more recent
“Agriculture, Agriculture, Agriculture” ( November 2018) for a deeper analysis
of why we are where in this hole.
Looking forward, may I share with readers our FEF Statement
calling for action. Some personal annotations are in italics.
TO THE DUTERTE ADMINISTRATION: PAY ATTENTION TO AGRICULTURE!
We, the Foundation for Economic Freedom, are calling on the
Duterte Administration to pay special attention to agriculture because low
agricultural productivity and anemic agricultural growth will increase the risk
of a return of high inflation and will drag down the economy as it has in 2018.
Agriculture posted a measly 0.56% growth in 2018, way below
population growth of 1.6% pa, exposing the dismal performance of this sector.
Climate change and weather disturbances cannot be blamed because our ASEAN
neighbors are posting healthy growth rates despite similar weather
disturbances.
Without significant improvement in the agricultural sector,
the government cannot hope to alleviate poverty in the rural areas where most
of the poor people live.
Poor agricultural productivity will remain also a drag on
the Philippine economy. High food costs translate into high wages and
uncompetitiveness of our manufacturing and export sectors. Agricultural
products also serve as inputs into food manufacturing. Therefore, high
agricultural input costs mean high manufacturing costs and poor
competitiveness.
On enhancing agricultural productivity, we ask the Duterte
Administration to do the following:
1. Ensure that the P10 billion competitiveness fund for
affected rice farmers under the Rice Tariffication Law be properly used to
increase agricultural productivity with tight measures to prevent misuse and
leakages. (We are all too familiar with past examples of bad, possibly
criminal, spending — election linked fertilizer and pesticide programs, most
loans under the WTO adjustment fund that went bad, “farm to pocket roads,” and
suspicious procurements by NFA. This will need to be addressed more strictly in
the IRRs of this new law. A straightforward use should be to directly assist
affected marginal rice farmers , along the lines of the Conditional Cash
Transfers program. Another would be to support much needed farm mechanization
to realize greater efficiencies.)
2. Make rural infrastructure a significant component of the
country’s Build-Build-Build Program.
3. Certify the Public Service Act Amendments as urgent in
order to increase foreign investments in shipping and ports and thereby lower
logistical costs for farmers trying to reach the market.
4. Amend the Comprehensive Agrarian Reform Law to reverse
the fragmentation of farmlands, make CARP lands bankable, and enable efficient
farmers to expand beyond the legal ownership limit of five (5) hectares.
5. Increase the budget for agricultural research and
development, especially for research into crops that will be resistant to
climate change.( I would add here, revisit and revamp broken agriculture
extension program. This has been ill-designed under the Local Government Code —
devolved to the municipal level, when it should have been done at the
provincial.)
6. Liberalize sugar imports in order to make local sugar
production more competitive and to lower the input costs of our food export
manufacturing sector. (Although we are bound under ASEAN to 5%, all imports now
are required to pass through the Sugar Regulatory Commission. Another NFA-like
situation that has already led to the exit of a large multinational investor in
a beverage company because of inability to source their sugar requirements
efficiently. )
To these six, allow me to add a couple more:
7. Urgent action to utilize the P80-billion coco levy funds
to revive the long-neglected coconut industry. This industry employs 3.5
million Filipinos; 60% and their families live in poverty.
8. Refocus public financial institutions to support
agriculture and rural development, especially the LANDBANK and the Development
Bank of the Philippines. Over the years, they seem to have been distracted into
simply duplicating commercial banking services of private financial
institutions, instead of doing development. As a corollary, scrap the failed
Agri-Agra Credit Reform Act which mandates banks to lend a certain percent of
their portfolio for agrarian and agriculture activities. No private commercial
bank has been able to nearly comply and all prudently chose to pay the fines
instead of risking money of depositors on bad performing loans. Ultimately it
is just a bad tax that raises the cost of credit to all.
Romeo L. Bernardo is vice chairman of the Foundation for Economic
Freedom and GlobalSource Partners Philippine Advisor. He was Finance
undersecretary during the Corazon Aquino and Fidel Ramos administrations.
