In support Agriculture Secretary Emmanuel F. Piñol’s attempt to get a much-higher budget for 2018 to fulfill the Duterte administration’s vision of “a comfortable life for all”, and in line with Arangkada’s “evergreen” call for “bold inclusive reforms for agribusiness for the next decade”, I would like to again highlight the urgently needed steps to be taken to develop agriculture into the industry it should be.
The following recommendations, while not exhaustive, point to sensible ideas that merit public policy considerations without delay:
Market access—New free-trade agreements (FTAs), including the Asean Economic Community, and other preferential trade privileges, including the Generalized Scheme of Preferences Plus (GSP+), provide unprecedented market access, if Filipino agribusinesses can successfully compete in a more liberalized environment. To take advantage of new market opportunities, measures are needed to improve market information, technology transfer, marketing, export promotion and broader trade facilitation measures. The country must double down and boost agriculture research and development, which accounts for only 0.1 percent of GDP. In other countries, this figure exceeds 1 percent. Priority should be given to high-value export winner crops, such as avocado, banana, cacao, coffee, mango, marine products, mongo beans, peanuts, pineapple, red hot chili, squash and tobacco. Current and further expansion of high value-added crops, like coconut and palm oil, must be encouraged by the Philippine government to maximize the potential of nontraditional exports.
Access to finance—The agribusiness sector boasts a small pool of bankable projects, mostly concentrated with the larger commercial farm owners in possession of traditional collateral, secure property rights and financial track records. Hampering investments and access to credit poses a daunting challenge for the sector. Many agribusinesses are small and financially weak, requiring business-development support, collateral substitutes and other credit enhancements to improve their risk profile. Given these long-standing challenges and ingrained market failures, fresh proposals by both public and private sectors are needed to unleash capital for agricultural development. In this context, a more comprehensive approach to crop insurance is recommended, including micro-insurance schemes.
Freeing up the land market—In another significant area of market distortions, the property-rights regime contains major deficiencies and greatly undermines the investment climate. The business of agricultural production relies heavily on exploiting and developing land for human needs. Indicative of inefficiencies in the land market, a staggering 11 million parcels of untitled properties litter a country of 24 million parcels. Land-use planning, zoning and overall management are weak, undermining property development and associated tax collection vital to public investments. After six decades, the country’s land reform remains incomplete, creating uncertainties for agribusinesses, limiting collateralized lending in finance and discouraging investments in agricultural production. Land redistribution has created a new class of landed poor, who lack the resources, access to finance, postharvest facilities, market information and associated support services to cultivate the productive benefits of newly acquired land. Strong measures are needed to unshackle the land market in the Philippines.
As I (and many others) have mentioned before, increased agricultural productivity would necessitate improving the security of property rights by amending the antigrowth and development provisions in the Comprehensive Agrarian Reform Law and removing the restrictions on sale and conveyance on agricultural land patents. Nobody will invest in agriculture if land titles are not available.
Infrastructure investments—As emphasized in the Arangkada report, long-standing farm infrastructure requires ongoing investment to allow more local value-added for agribusinesses. These priorities areas include: farm-to-market roads, postharvest processing facilities, irrigation, sanitary phytosanitary inspection facilities, food terminals, cold storage and food-processing factories. The lack of postharvest facilities cries out for more private-sector investment, as part of efforts to manage overall supply chains. Farm-to-market roads provide much-needed linkages. Yet, only 3.5 percent of barangay roads are paved. Of particular concern, the Philippines faces a large gap in irrigation infrastructure. Only 1.7 million hectares (some 57 percent of the 3 million hectares of total irrigable area) of the country’s agriculture lands receive irrigation. Large-scale investments are needed to rehabilitate, modernize and restructure the country’s large surface irrigation schemes, so as to improve their productivity and efficiency in water usages.
Rationalization of extension services—With low productivity, the business of agricultural production would benefit from adopting new and innovative technologies. Even with advances in research and development, the latest research and information on improved agricultural practices (including intercropping) have not reached farmers sufficiently. As such, agricultural extension services provide a vital link in the mass diffusion of agricultural research, transfer of appropriate knowledge and sharing of best practices. However, the structure of extension services requires rationalization in the Philippines.
Creating cooperatives to gain productivity and profits—From a European perspective, we have always strongly believed in cooperatives. They have made European agriculture, the financing of farming and the marketing of farm products, what European agriculture stands for today. Europe and other parts of the world have moved on from the old-style of collectivized farming; today’s cooperatives are thoroughly commercial, prioritizing supply and value chains, efficiency and profits.
Cooperatives can also help farmers manage the effects of climate change and play a strong role in getting crop-insurance going, and make climate-smart technologies more affordable. Cooperatives could, with the support of government financing, buy greenhouses to prolong their production season and shield crops against erratic weather.
The needed heavy budget allocation for agricultural productivity and profit will generate more investments in agriculture, farmers will get easier access to finance, there will be lower unemployment, and supply or value chains will be created.
Comments are welcome; contact me at Schumacher@mca.com.ph.