To encourage processors to use local farm products as raw materials, the chief of the Department of Agriculture (DA) had pitched the idea of offering fiscal incentives to them. Agriculture Secretary Emmanuel F. Piñol reasoned out that the government extends fiscal incentives to foreign investors, so why not give the same to local firms? Piñol believes that the grant of perks would help boost the productivity of farmers as they would be assured of a ready market should Congress give its nod to his proposal.
Piñol said he has directed the Legal Office of the DA to draft the bill mandating the grant of fiscal incentives to processors using local farm products, following his meeting with Grow Asia’s Philippine Partners for Sustainable Agriculture (PPSA). PPSA, in turn, would provide inputs to the bill, including the list of countries using the same strategy to support local farmers. The DA is targeting to present the draft bill to the House of Representatives and the Senate before the end of the year.
This proposal, if approved, would certainly make local farm products more attractive to processors. Currently, the Philippine government grants a number of fiscal incentives to foreign investors, such as tax holidays and duty-free importation of capital equipment. Giving the same fiscal incentives enjoyed by foreigners to Philippine micro, small, and medium enterprises (MSMEs) that use a lot of farm products as raw materials would certainly help them grow and prosper.
While Piñol’s proposal is a welcome development, the DA could consider expanding the grant of fiscal incentives and other perks to other farm-related industries, such as manufacturers of agricultural equipment. According to a study conducted by the Philippine Center for Postharvest Development and Mechanization, the Philippines continues to import farm machines despite the existence of 400 local manufacturers of agricultural equipment. If the government cannot set aside funds needed to help this sector, fiscal incentives may be the key to unlocking its potential.
The DA could also look into the possibility of giving additional incentives to firms that would build farm infrastructure, such as silos for storing grain and big cold-storage facilities. This proposal, however, should be complemented by the continuous implementation of reforms aimed at eliminating red tape.
The agriculture sector got less than what stakeholders had hoped for in terms of the budget from the national government. The DA had aspired for a budget of more than P200 billion for 2018 to bankroll various initiatives aimed at boosting production, but it has been given only P60 billion. The amount is only 10 percent of the P643 billion given to the Department of Public Works and Highways for next year.
If funds would not permit the grant of a higher budget for the DA in the coming years, Congress and the government must back Piñol’s proposal. The previous administration had wanted to rationalize fiscal incentives to boost government revenues. The Duterte administration would do well to consider offering more incentives to entice more Filipino entrepreneurs to go into agriculture.