Addressing the problem of agricultural improvement


(Half 1)

As if to dare President Ferdinand Marcos, Jr. to exert even better effort in assembly his best problem, which is that of enhancing the productiveness of the agricultural sector, agricultural output contracted additional in the course of the quarter through which he was sworn in as President and through which he designated himself because the Secretary of Agriculture.

Knowledge from the Philippine Statistics Authority (PSA) confirmed that the worth of manufacturing in agriculture and fisheries at fixed 2018 costs declined 0.6% within the April to June 2022 interval, worsening from the 0.3% contraction within the first quarter. The President is aware of that growing agricultural productiveness shouldn’t be going to be a stroll within the park. That’s the reason one of many very first advisory teams from the personal sector that he convoked was in meals safety, composed of among the most skilled entrepreneurs within the area of agribusiness gathered by his personal sector adviser, Sabine Aboitiz.

The President is lucky that the outgoing Secretary of Agriculture, William Dar, led a gaggle of specialists from his personal Division and from outdoors specialists (a few of them former Secretaries of Agriculture) to return out with a Transition Report full of suggestions and particular coverage targets and options in direction of long-term visions of meals safety and meals sovereignty, whereas on the identical time emphasizing pressing motion factors, particularly within the context of a looming meals disaster worldwide caused by the Russia-Ukraine conflict. This doc must be carefully studied, not solely by the members of the Cupboard of the current Administration but additionally by all these in authorities, enterprise, and civil society who wish to make their contribution to fixing the issue of agricultural underdevelopment. To do one thing concerning the low productiveness of farmers and fisherfolks is to straight deal with the issue of mass poverty since three-fourths of those that fall under the poverty line within the Philippines (now estimated at 18.1% of the whole inhabitants of about 112 million) are within the rural areas.

As each effort to handle an financial downside ought to, the Report begins with a situational evaluation. Over the interval 2001 to 2021 (one technology), the common development of the Agriculture, Fisheries and Forestry (AFF) sector was a measly 2.5%, in comparison with the Trade and Service sectors’ common development charges of 4.5% and 5.5%, respectively. AFF’s contribution to the gross home product (GDP) at fixed 2018 costs declined by 37.5%, or from 15.4% in 2001 to 9.5% in 2021—with a median share of 12.8% from 2001 to 2021. It follows then that of the three main sectors of the financial system, AFF’s contribution to the nation’s financial development was the smallest. Out of the 4.8% common GDP annual development throughout the technology studied, the AFF sector contributed solely 0.3%. For a similar interval, the share of the Trade and Service sectors to GDP development have been 1.4 and three.1 proportion factors, respectively.

Reflecting the very low labor productiveness within the agricultural sector is the truth that, whereas it contributes solely 10% of GDP, its contribution to the labor pressure is 24% of the whole. It was a lot larger at 37% in 2000. Labor in agriculture grew from 2000 to 2011 by 20.5%, which was equal to round 2 million staff. The variety of agricultural staff, nevertheless, constantly decreased since 2011, throughout which roughly 2.3 million agricultural staff migrated to the opposite two sectors from 2011 to 2018. This interprets to round 284,000 staff per yr leaving the sector throughout that interval, which coincided with the Philippine financial system shedding its notoriety because the sick man of Asia. This era noticed Philippine GDP rising at a median of 6% to 7%, one of the crucial fast in East Asia. The contraction in agriculture’s employment share considerably accelerated beginning 2011. From 2011 to 2018, the employment share of agriculture shrank by 10 proportion factors in 2011, or from 33% in 2011 to 24% in 2018. This pattern, if continued in the course of the current Administration of President Marcos Jr., may very well favor the elevated mechanization of farming, resulting in an enchancment of agricultural productiveness. For this to occur, efforts in agrarian reform ought to shift from additional fragmentation of land to consolidation of small farms into bigger items by means of farmers’ cooperatives or the nucleus property system perfected by the Malaysians in palm oil and rubber plantations.

Contemplating the gradual development of the AFF sector and its modest share in GDP, coupled with its comparatively excessive contribution to whole employment, its improvement significantly lagged behind the opposite sectors as measured by labor productiveness. AFF’s output per work was constantly the bottom among the many main sectors from 2000 to 2018, the true golden age of the Philippine financial system shared by the 2 Presidents, i.e., Benigno Aquino III and Rodrigo Duterte. The best productiveness was seen within the manufacturing sector through which the business’s output share was roughly 30%, regardless of accounting just for 16% of the whole employment.

Two apparent means of accelerating labor productiveness in agriculture are the introduction of extra capital investments and the upskilling and retooling of farmers, particularly among the many youthful ones. The typical age of a Filipino farmer is already near 60 years. There have to be a approach of attracting the younger, whether or not or not kids of farmers themselves, to the vocation of a farmer and finally the entire sector of agribusiness, which contains not solely farming however the entire worth chain, from post-harvest, to storage and warehousing, processing, wholesale and retail.

It was not solely in labor productiveness that the Philippine AFF sector fared very poorly compared to its Southeast Asian friends. The sector was weak by way of productiveness, per capita quantity, and excessive prices (low returns) in comparison with neighboring nations within the ASEAN. The Philippine whole issue productiveness development in AFF, which is a measure of productive efficiency, was the bottom in 2010 to 2014. Subsequently, common farm yield within the Philippines was 9% and 67% decrease than in Malaysia and Vietnam in 2014, respectively. This low productiveness of the Philippine AFF sector in nice distinction with Vietnam is one main reason Vietnam surpassed us in per capita revenue in 2020. What Vietnam has completed in reaching excessive ranges of productiveness in rice, espresso, and aquaculture must be emulated by the Administration of President Marcos Jr.

Philippine manufacturing, each for the home and international markets, might be given a giant increase if we are able to enhance the ahead linkages of the AFF sector. Sadly, these linkages are weak as compared additionally to our ASEAN neighbors, particularly Thailand that’s thought of the agribusiness behemoth of Southeast Asia. The ahead linkages of the Philippine AFF sector to manufacturing grew marginally by solely 10% from 1994 to 2012. In distinction, the contribution of meals and beverage (the likes of San Miguel Corp., Robina, Century Canning, Monde Nissin, and so forth.), which largely rely on agricultural or aquacultural merchandise for inputs, to whole gross worth added (GVA) of producing grew very quickly in the course of the 2000 to 2021 interval. The share of meals and beverage manufacturing to whole GVA of the manufacturing sector (one of many main elements of business) rose from 36% in 2001 to a whopping 55% in 2021.

Given the meager ahead linkage of the AFF sector, this suggests that the meals and beverage manufacturing subsector depends closely on imports for its inputs. It stood to purpose that agri-food exports of the Philippines have been, on common, round thrice and 6 occasions lower than Vietnam and Thailand, respectively from 2001 to 2020. Philippine agricultural commerce deficits have been likewise widening. Worldwide commerce economist Ramon Clarete estimated that the Philippines incurred massive potential export revenue losses of roughly $230 million in 2018 alone.

For sure, the low productiveness and the diminishing aggressive benefit of the Philippine AFF sector have two main detrimental impacts on sustainable and inclusive development: low wages leading to excessive poverty incidence amongst agricultural staff, and hovering home costs, which have been exacerbated in the course of the COVID-19 pandemic and the Russia-Ukraine conflict. Given the comparatively low productiveness of labor in agriculture, wages within the sector are anticipated to be decrease than these in business and providers. True sufficient, the common day by day primary pay in agriculture, at fixed 2006 costs, was roughly 55% and 46% decrease than in providers and manufacturing, respectively, in 2016.

Probably the most tragic consequence of the low productiveness of the AFF sector is mass poverty within the rural areas, the place three-fourths of Filipinos falling under the poverty line are. Agricultural households had poverty incidence roughly 4 occasions larger than non-agricultural households from 2003 to 2015. Then again, though visibly underemployed staff accounted just for 12% of whole staff, the speed of poverty amongst visibly underemployed in staff basically was at 34.2% whereas poverty incidence of visibly underemployed agricultural staff was at 44% in 2015.

Lastly, the backwardness of the AFF sector resulted in excessive home meals costs, contributing to malnutrition and in the end to lesser and/or slower human improvement of poor households.

The typical share of meals and non-alcoholic beverage to headline inflation was vital at 43% from 2000 to 2021, with 57% being accounted for by the opposite 10 main commodity teams. On condition that the poorest of the poor households spend roughly 60% of their whole revenue on meals gadgets, rising meals costs inevitably result in larger incidence of malnutrition. This was exacerbated in the course of the pandemic. Malnutrition is considerably larger within the Philippines in contrast with its ASEAN friends. In 2018, malnutrition within the Philippines, particularly amongst kids, is 9 occasions, 20 occasions, and a whopping 287 occasions in contrast with that of Thailand, Malaysia, and Vietnam, respectively. This state of affairs within the space of meals safety has very tragic penalties on the standard of our human assets.

(To be continued.)


Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus on the College of Asia and the Pacific, and a visiting professor on the IESE Enterprise College in Barcelona, Spain. He was a member of the 1986 Constitutional Fee.

Supply hyperlink