Dar’s ‘Mission Impossible’: Rebuilding a damaged agricultural sector

William Dar, the new Secretary of Agriculture, has one of the most difficult jobs in President Duterte’s Cabinet: stop the downhill slide of a broken agricultural sector. Agriculture’s share in the GDP is now a measly 8 percent, and yet its contribution to employment is still around 25 percent. In 1980, agriculture accounted for 25 percent of the GDP, and over 50 percent of employment.

Poverty is deepest and widest in the countryside. This explains why rural insurgency in the Philippines, one of the world’s longest, has persisted.

And yet, the country has not been lacking in prophets who have been proclaiming an agricultural renaissance for the country and redemption of the masses of rural poor from abject poverty. The most influential among these boom sayers are those pushing for the total deregulation of the sector in the name of global integration and competition. In 1994, at the height of the Senate debate on Philippine membership in the World Trade Organization (WTO), they came up with the following projections for the agricultural sector:

• 500,000 new jobs a year;

• P60 billion gross value added a year; and

• P3.2 billion net export surplus a year.

The explanations given by the neoliberal economists advising the pro-WTO senators on how the above forecasts are going to be realized are, briefly, as follows: greater market access for Philippine agricultural exports, higher foreign exchange earnings because of rising global prices for agricultural commodities, and higher earnings for farmers due to the greater agricultural tradeability of agricultural commodities. At home, consumers were projected to gain from the regime of general agricultural trade opening because accordingly, prices of agricultural commodities sold in the domestic market would go down and there would be more “efficient allocation” of resources within and across the different economic sectors.

Based on the foregoing arguments, the Agricultural Tariffication law was fast-tracked for all agricultural products, with the exception of rice. Once in place, the tariffication was followed with the downward restructuring of the tariffs themselves, in line with the IMF-World Bank’s structural adjustment program. Under the SAP program of “unilateral tariff liberalization,” the Philippines became one of Asia’s radical trade and tariff liberalizers because its trade negotiators agreed to tariff slashing targets that were lower than those of China, Thailand, Vietnam and other countries. To reassure those doubting the viability of wholesale agricultural trade liberalization, the “pros” pushed for an agricultural modernization programs dubbed Agriculture Fisheries and Modernization Act and the Agricultural Competitiveness Enhancement Act, with billion-peso annual budgetary allocations.

And yet, the nation’s agricultural performance from 1995 to the present has been a complete disaster. From a net agricultural exporting country, the Philippines has become a net agricultural importing country beginning, ironically, in 1994, the year the Senate approved the ratification of Philippine membership in the WTO. The deficits grew from million dollars a year to $2 billion to $4 billion a year. The United States, the world’s leading agribusiness power, now ranks the Philippines as one of the top 10 US customers.

In 2018, an artificial rice shortage occurred. This was artificial because it was created by the policy conflict between the so-called Cabinet-led NFA Council and the DA-NFA leadership on whether to import rice or not. The conflict led to delays in rice importation, resulting in shortages, which, in turn, were blamed by the Council on the bad management of NFA and the Department of Agriculture.

Against this backdrop, the Rice Tariffication law was pushed and fast-tracked by the economic technocrats and their supporters in the Congress. Like the 1995-1996 Agricultural Tariffication law, the rice tariffication law was justified based on simplistic assumptions and optimistic projections—rice import liberalization would benefit consumers in terms of lower rice prices, and yet, the palay producers would also benefit because incomes would rise because of stable prices and higher productivity under a so-called Rice Competitiveness Enhancement Program (RCEP). Clearly, an imaginary win-win world for the rice industry of the Philippines.

Today, we all know what happened. Rice prices indeed dipped a bit, with a group of nameless private traders suddenly able to import 2 million tons of rice from Thailand and Vietnam. However, palay farmers, from Luzon to Mindanao, are devastated: palay prices went down, from P17 a kilo to P12 a kilo, which is the average cost of producing palay. In some places, palay prices even dipped to as low as P7 and P8 a kilo. As to the RCEP, it is nowhere to be found in the rice areas, for it is simply not yet in place.

Secretary William Dar, a cautious man, is one of those who cautioned against the fast-tracking of the rice tariffication law, explaining that the rice sector needs a gradual phase-by-phase transition to trade liberalization. He was for the vetoing of the Rice Tariffication law.

The problem is that this “transitioning” issue, which requires a series of adjustments and consultations between and among policy-makers and producers, was ignored by those who pushed for the 2018 RCEP and the much earlier 1996 Agricultural Tariffication law. Adhering dogmatically to their neoliberal economic paradigm, they held on to the assumption that a liberalized market for inputs and outputs will sort out things for producers and consumers, and in the end, efficiency and higher palay production would even be realized.

The Thai and Vietnam palay producers and rice exporters must be ecstatic over the rice tariffication/liberalization program of the Philippines. Their rice policies and programs are starkly different. Thailand’s military government has continued the rice subsidy program of the past Thaksin government, which amounts to several billion dollars a year. It is supplemented by other support programs, such as assistance in irrigation, marketing and procurement of seeds.

Vietnam has a similar subsidy program, complemented by policies on the preservation of lands for the small holders (no to FDI on land management), promotion of rice intensification technology, and so on. Additionally, the Vietnamese rice farmers are fully supported by the Agricultural Bank of Vietnam, the country’s biggest bank with over 100,000 employees. This army of bank employees are the steady partners of the Vietnamese farmers, from production to trading.

Does the Philippine palay producers have similar credit partners and supportive government policies? Obviously, this is one of the critical issues that Dar has to attend to. The RCEP, with its P10 billion a year budget, promises on paper the distribution of agricultural machinery and modern hybrid seeds. How this will be done in a segmented palay production system characterized by varying sizes of rice lands, varying land ownerships, and varying capitalization is still a puzzle that remains to be solved. The RCEP is also silent on the other requirements of successful palay production, such as support for the credit, irrigation, input procurement, marketing and human resources development requirements of palay producers. There is also the knotty issue of land reform.

And here, we are talking only of the palay-rice production-importation-distribution issues. There are other problems plaguing the agricultural sector. More on this in the next column.

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