Part Two
AGRICULTURE has been growing every year, except a few stagnant years. But how come agriculture, as a percentage of gross domestic product (GDP), has steadily been declining? So, has the sector been growing or collapsing?
Agri collapsing as percentage of GDP
RECORDS from the National Economic and Development Authority (Neda) show that agriculture as a percentage of GDP has been dropping from 31 percent in the late- 1960s to 29 percent in 1971, 23.5 percent in 1980, 22.47 percent in 1990, 17.5 percent in 2005, 15 percent in 2012, 10 percent in 2014 and 9.7 percent in 2016.
To find sustainable solutions, problems must be recognized first, because it is unfair to blame the Department of Agriculture (DA) if much of agriculture’s woes are carryover problems from decades of neglect. But the public must be vigilant and critical constructively from hereon, particularly conflicting tricky policy issues.
It is therefore advisable to scrutinize agriculture in the past.
Former Neda Secretary Arsenio M. Balisacan, a “povertologist” when he was still with UP Diliman, produced a study, titled “Philippine Agriculture: Are We Ready for Competition?,” which made poignant revelations of the Philippines as a top laggard in farm yields that is blamed for widespread rural poverty.
From 1980 to 2000, China’s total productivity alone grew by 4.7 percent a year, a whopping 4,600 percent higher than Philippine growth of 0.1 percent. Thailand grew by 1 percent a year, or 900 percent more; while Indonesia’s productivity grew by 1.6 percent, or 1,500 percent more than the Philippine average.
Factor productivity measures efficiency, or yields per hectare. It gauges efficiency, unlike the misleading agricultural growth, bolstered by inflation and production due to bigger hectarage, not through yield improvements.
Grain of truth
OUR rice yields were the worst in Asia, which is ironic, having the International Rice Research Institute and the Philippine Rice Research Institute.
Even private-sector initiatives like Henry Lim Bon Liong of SL-Agritech made technological breakthroughs.
Balisacan’s study said local rice yields from 2000 to 2002 were the lowest at three metric tons (MT) per hectare, much lower than China’s 6 MT per hectare, Indonesia’s 4.1 MT per hectare, Vietnam’s 4.2 MT per hectare and even Myanmar’s 3.2 MT per hectare. Even East and Southeast Asia’s average yields were higher at 3.6 MT per hectare, while developing countries posted average yields of 3.8 MT per hectare, Balisacan’s study said. Local rice yields already improved to over 3.8 MT per hectare, but others have also increased since then.
Average corn yields from 2000 to 2002 were also the lowest at 1.7 MT per hectare below China’s corn yields of 4.7 MT per hectare and Vietnam’s and Indonesia’s 2.8 MT per hectare. Even Myanmar posted a higher yield of 1.9 MT per hectare. East and Southeast Asia recorded average yields of 2.5 MT per hectare, while developing countries posted yields of 2.9 MT per hectare. Costs of corn are vital being the main ingredient in feeds for livestock and poultry. It is no wonder beef and chicken imports are cheaper.
Our national average yields are low, as they are dragged down by low-yielding, nonirrigated rain-fed rice, partly due to poor investments in irrigation projects, which figuratively don’t hold water due to corruption. We can only surmise why more canals are rehabilitated yearly, than new ones built as if they get damaged every year.
Thus, our low productivity plus the alleged temptations from rice imports have encouraged massive rice imports, which hit 2.3 million MT in 2007 making the Philippines the world’s biggest importer that year.
Small banks for farmers shutting down?
RAISING agriculture back on its feet is difficult if there are prevailing biases against agriculture and conflicting policies that’s likened to the left hand doing the opposite of the right hand. Perhaps, it’s neither wise to allow Adam Smith’s proverbial “Invisible Hand” the wanton freedom on the naïve belief that the free market will solve all problems.
As the government pumps in more resources into agriculture, the Bangko Sentral ng Pilipinas (BSP) and Philippine Deposit Insurance Corp. may have liberally allowed the systematic yearly closure of 19 small banks from 2000 to June 2017, or about 310 small banks.
In 2000 23 small banks were closed by the BSP; 2001, 19 rural banks, including four cooperative banks; 2002, 12 banks; 2003, nine rural banks, including two cooperative banks; 2004, two savings and two rural banks; 2005, eight rural banks and two savings banks; 2006, 10 rural banks and one development bank; 2007, 16 rural and one savings; 2008, 22 rural, one coop and one thrift; 2009, 27 rural, two savings and two cooperatives; 2010, 21 rural, one savings and three cooperatives; 2011, 25 rural and four savings; 2012, 22 rural, one commercial and one cooperative; 2013, 18 rural and one big cooperative; 2014, 13 rural, one cooperative and one
savings; 2015, 14 rural; 2016, 20 rural, three thrifts and savings. As of June five rural banks were closed.
Will credit to farmers dry up? As rural banks shut down, farmer credit may dry up or tighten as commercial banks replacing them remain allergic to farmer lending.
A commercial-bank manager in Ilocos revealed years back that only 2 percent of funds are retained to meet withdrawals and loans and remits 98 percent to Manila.
Ilocos banks are exceptions as overseas Ilocanos continue remitting to their families, who remain fairly frugal as they spend less and invest less.
It is ironic that while credit to agriculture is restricted, commercial banks are awash with funds. BSP records show 2015 domestic-savings rate was 30.3 percent of gross national income, but gross capital formation was only 19.8 percent. The difference indicates that so much in savings are held by banks unproductively.
Why not incentives to rural lending?
PERHAPS, these surplus savings can be bundled and redirected to fund rural investments, this time, matched with incentives and government guarantees.
If the government can provide sovereign guarantees to foreign loans and investors, why not provide the same incentives to local banks funding rural projects, which have no foreign-exchange risks, no import content and have higher multiplier effects to the economy in terms of job generation, value-added earnings and resulting higher tax revenues for government, etc.
After all, there is the Agri-Agra loan law, requiring banks to allocate 25 percent of their loan portfolio for agriculture, but the BSP allows them an escape clause by buying T-bills as a form of compliance. Banks obviously prefer safer paper investments in government securities over loans to agriculture, which are vulnerable to risks, including vagaries of nature.
If reforms are not made that will redound to the poor farmers and fishermen, then the growth the Philippines keeps bragging about is just financial growth, while the real physical economy in agriculture may continue collapsing, thus breeding massive rural poverty, rural-to-urban migration and all attendant social problems like slums, criminality, drugs, prostitution, insurgency, social unrest, the overseas Filipino worker phenomenon and a host of other problems plaguing society.
To be concluded
Image credits: Nonie Reyes