The Philippines should prioritize investing in high-value crops production rather than focusing its resources on the rice production sector to ensure the country’s food security in the long run, according to the Organization for Economic Co-operation and Development (OECD).
In its study, titled “Agricultural Policy Monitoring and Evaluation 2018,” the OECD also recommended that the government should scrap the quantitative restriction (QR) on rice to allow the freer entry of foreign imports to augment the country’s supply.
Furthermore, the organization supported the proposal to convert the National Food Authority (NFA) into a “market-neutral agency managing emergency stocks” so as not to distort the prices of rice in the market.
“The Philippines could improve the country’s food security through policies, such as diversification of production, consumption and income by removing commodity specific incentives; gradual removal of restrictions on rice imports; and transformation of the National Food Authority’s into a market-neutral agency managing emergency stocks,” it said in the study, which was published in end-June.
The OECD noted that the country’s objective of reaching food security through a stable supply of staple at affordable prices is being achieved at the expense of producing more profitable high-value crops.
“The goal of self-sufficiency in rice has driven a range of policy measures supporting rice producers—in contrast to diversification towards higher value commodities typical of other countries in the region—while contributing to the undernourishment of poor households that are net rice consumers,” it said.
The OECD report said the Philippine farm sector’s total factor productivity (TFP) growth “is slower than the world average and slower than in most countries in the region,” due to improper fund allocations.
“This is the result of decades of underinvestment [or, in some cases, misdirected investment], policy distortions, uncertainties linked with the implementation of agrarian reform and periodic extreme weather conditions,” it said.
The Philippines’s average TFP growth from 2001 to 2014 is just 1.7 percent, which was lower than the 1.71 percent global average TFP growth.
The country’s 10-year average TFP growth was also below the average TFP growth recorded by Asian countries (except Western Asia) and the developing nations at 2.61 percent and 1.93 percent, respectively.
TFP determines a farm sector’s productivity by taking the amount of output against the total production inputs employed (land, labor, capital and material resources), according to the United States Department of Agriculture (USDA).
If total output is growing faster than total inputs, we call this an improvement in total factor productivity (factor—input), according to the USDA.
The OECD report noted that there are recent policy changes made by the Philippines that should be sustained in order to improve its farm sector’s TFP.
“In 2017 the Philippines reallocated some funding from variable input subsidies to investment in infrastructure and through the re-orientation of agricultural knowledge systems,” it said.
“Continuing such efforts to refocus budgetary support on long-term structural reform is key to promoting total factor productivity growth,” it added.