Despite high levels of economic growth, the Philippines’s agriculture sector has shown consistently low growth and productivity rates. The lack of modernization, productivity and profitability of the agriculture sector is the result of an accumulation of factors across the supply and value chain:
Farmers, in the vast majority smallholders with an average age of 57 and five years of education, are often unable to turn agriculture into a profitable business, as they lack the capacity or the funds to apply innovative methods and technologies to their farming methods. Indeed, the small size of the farms, the lack of mechanization, use of high-productivity agricultural methods, such as intercropping, planting of new plant varieties and proper application of agricultural inputs, are some of the major barriers to increasing farmers’ productivity. As mentioned in my last week’s column, cooperatives have to be created to establish farming communities that will be able to address the issues I mentioned above.
The supply and value chain itself has handicapped the ability of the Philippines to guarantee food security, and increase its agricultural products’ competitiveness at an international level. Farm-to-market infrastructure, including roads and logistics services, are an important hindrance to the supply and value chains.
Indicatively, it is estimated that 20 percent to 50 percent of fresh goods are damaged during the journey from market to consumer (postharvest losses are estimated at 30 percent); this is compared to just 6 percent in Thailand. Again, the lack of a support framework, such as effective cooperatives, to ensure that farmers are able to access the market at competitive prices has meant that they are vulnerable to middle-men.
While there have been efforts at a national level to implement laws, policies and projects in support of agricultural development, often jointly with the private sector, the implementation of those is frequently challenged at the regional and local level.
However, there were some encouraging movements in recent weeks:
- The Board of Investments approved the granting of perks to two agri-processing expansion projects, with a combined value of P86 million (poultry and cashew).
- The Bangko Sentral ng Pilipinas is planning additional incentives for agri-value chain financing. The framework aims to promote value-chain financing as an effective, organized process of channeling funds to the agricultural sector.
- The Department of Agriculture is pushing for a bill that will provide incentives to food manufacturers using domestic produce, in order to drive agricultural growth through effective value-chain developments; it has to be understood that local suppliers will have to be reasonably competitive, which—again—an effective cooperative movement can create.
- The private sector should join hands with relevant government authorities, including local government units, to establish a constructive public-private partnership with the objective to share expertise, create joint ventures between Philippine and foreign companies in the agri-food supply and value chain, and invest in a bankable, sustainable agriculture sector with the following aims:
- Reform the land title regime to establish a system that allows farmers to be bankable;
- Establish professional, transparent cooperatives across the country to serve as agricultural hubs, and support farmers with access to finance, capacity building in agripreneurship and agri-business skills, new agricultural techniques and value-added processing;
- Provide processing facilities, serve as a trading hub for agricultural goods to cut out the middle man and provide machinery and agricultural inputs to farmers at fair market prices;
- Invest in transportation and storage infrastructure and facilities to reduce spoilage of products during the transportation/storage process from farm to market; and
- Ensure cooperation and alignment between national and local government, in support of the implementation of pro-growth policies and projects for the agriculture sector.
Let me conclude by explaining again why we need to deliver support services to farmers and fishermen, such as financing, incentives, technology, irrigation, postharvest facilities, farm-to-market roads, improved logistics and integration in the supply chain to fully develop the potential of the agricultural industry to develop rural areas and the countryside:
Some 20 million rural Filipinos can be lifted out of poverty.
And the children of farmers will stop moving from rural areas to urban centers or become overseas Filipino workers.
Comments are welcome; contact me via email Schumacher@mcasia.org.