This paper offers an overview toward assessing the implementation of the Agriculture and Fisheries Modernization Act (AFMA) or Republic Act 8435, the country's landmark legislation on the sustainable and equitable development of its agriculture and fisheries. The study presents a Theory of Change implicit in the AFMA, and reviews the Philippines' agricultural development trends, within an overall economic context of structural change. It concludes with a synthesis of past AFMA program reviews.
This chapter aims to evaluate the country's agricultural modernization strategy under the lens of the market-driven approach. The early post-War period of economic policy relates to solving the food problem solution for low-income countries, which minimizes farmer welfare and emphasizes benefits to the wealthier, non-farming class. This prevailed until the 1970s when the interest of the farming class began to be reasserted. By the 1990s the main issue was the the disparity problems, which considers as almost equally weighty, the interests of poor farmers, as well as that of non-agricultural consumers. In the 1990s, the nation enacted numerous market reforms to address the anti-market policies of the early 1990s. However, progress in implementing market reform for agriculture was largely moribund until 2019, with the enactment of the Rice Tariffication Act (RA 11203). Despite the reforms already enforced, further measures should be implemented, namely: i) Producer support for agriculture should move away from market price support in favor of expenditure support; ii) Expenditure support programs should themselves be oriented away from commodity-specific towards support for public goods and general services such as extension, regulatory, and market assistance services; iii) Expenditure programs require careful design along with functional tasks, performance indicators, and M&E systems; iv) Design, performance indicators, M&E systems, and appropriate strategies, should be put together in the AFMP, and structured around SAFDZs; iv) Sustained political will behind the market approach is needed to adopt it more consistent in agricultural policy.
A comprehensive assessment of irrigation investment should examine not just the benefits, but also make a systematic comparison of benefits with costs. This study has conducted this systematic comparison for investments undertaken in 2008-2016. Across various assessment frames, the findings converge around the following: Costs of irrigation investment are simply too large in comparison with expected benefits. None of the project worth indicators reach threshold levels: rather, the benefit-cost ratio (BCR) tends to fall below unity; internal rate of return (IRR) estimates tend to fall below the hurdle rate of 10 percent; and net present value (NPV) estimates tend to fall below zero. A key limitation of our analysis is that it incorporates benefits only from incremental rice output. Rather than invalidating the government's irrigation planning and investment allocation, our benefit-cost analysis makes a case for: more skeptical treatment of irrigation area targeting; and stricter application of benefit-cost analysis, with emphasis on credible projections of both crop and non-crop benefits.
The main driver of long run economic growth is total factor productivity. Among the basic sectors, namely agriculture, industry, and services, inclusiveness of economic growth depends most importantly on agriculture. This study provides growth projections for the Philippine agriculture based on growth in productivity differentiated by basic sector, using a computable general equilibrium (CGE) model. Scenario analysis finds that the current policy thrust for agriculture of subsidizing capital cost slightly accelerates growth of agriculture, but slows down overall growth by reducing capital formation. Meanwhile, maintaining productivity growth for industry-service at trend, notwithstanding weak growth of agriculture, suffices to reach government plan targets. Productivity growth of agriculture impacts strongly on agriculture itself, but not on the industry-services sectors; conversely, productivity growth in the latter strongly impacts on itself and GDP, but not on agriculture. The study suggests that policies emphasize the acceleration of productivity growth in the long run across all sectors, but especially in agriculture. Currently, forward and backward linkages of agriculture matter little to economic growth; increasing growth interactions across the basic sectors.
The commonly touted solution to achieve food security has always been articulated as achieving self-sufficiency in rice. Since the 1960s, various government regimes have articulated strategies and executed actions to achieve this much-vaunted goal. It has been over half a century, but we have yet to realize this dream. At this point, looking at the hard facts and the numbers, the picture it paints is not pretty. Achieving rice self-sufficiency comes with a price, and let us take a sober look at what it really costs.
Inclusive business (IB) is a private sector approach to providing goods, services, and livelihoods on a commercially viable basis, either at scale or scalable, to people at the base of the pyramid by making them part of the value chain of companies' core business as suppliers, distributors, retailers, or customers. There is keen interest in IBs, both in the public and private spheres, as a strategy for inclusive growth. The Department of Trade and Industry is setting up an accreditation system to certify business models as IB, based on an evaluation tool, initially for three priority sectors: agribusiness, housing, and tourism. This paper analyzes the economic and development potential of IBs, and describes existing programs and policies of the government in terms of openness to IB. It then makes several recommendations for short-term IB promotion, as well as long-term measures to support IB in the Philippines.
Fertilizer policy in the country has evolved from pervasive interventionism in the 1970s to today's market-oriented regime. Government has abandoned price policies and subsidies, focusing rather on standard setting, quality regulation, and training. Over the same period domestic demand for fertilizer has continually been increasing, though recently resurgent fertilizer prices have reduced total utilization. Evidence suggests that farmers are under-applying fertilizer, thereby forfeiting efficiency gains at the margin. On the supply side, imports have in the past few decades emerged, as the main source of fertilizer as domestic production has dwindled. With deregulation, numerous private sector players have taken over the distribution of fertilizers; analysis of the supply chain points to low marketing margins. Integration analysis fails to find systematic arbitrage opportunities between the domestic and world markets. Within the domestic market, however, there remain large disparities in prices across regions. Priorities for research and policy are therefore understanding the behavior of farmers in terms of fertilizer application and addressing internal price disparities, perhaps by improved transport infrastructure and logistics.
The Philippines has made considerable progress in attaining the Millennium Development Goals (MDGs). However, achieving all the targets remains a daunting challenge, with goals for poverty, education, and maternal mortality unlikely to be attained by 2015. Focus has now shifted to informing the post-2015 development agenda, based on future scenarios for the macroeconomy and the MDGs. In this study, such assessment is done using an integrated macro-micro modelling approach, using the Maquette for MDG Simulation (MAMS), calibrated to Philippine data, over the period 2009-2025.Findings for the scenario analysis are as follows: In the Base or business-as-usual scenario, MDG targets for household water and sanitation, as well as child health, will be met (or approximated) by 2015. However, those for education and maternal health will be attained in 2025 and 2021, respectively. The goal for poverty will not be achieved even by 2025. The national debt follows a downward trajectory over the simulation period.Meanwhile in the alternative scenarios, significantly higher outlays for primary education, health, and infrastructure (equivalent to 2% of GDP) lead to earlier attainment of the education and maternal health goals (2019 and 2016, respectively); likewise significant gains will be realized in terms of per capita income and poverty reduction by 2025. Tax financing of higher outlays maintains the debt reduction path in the Base; however, financing through increased borrowing from abroad leads to persistent escalation of foreign debt. Hence, government should be cautious about proposals for dramatic increases in social spending and infrastructure to more quickly close development gaps, unless it is able to accompany increases in spending with commensurate tax effort.
This paper argues that the development of the rural economy is a key factor for achieving inclusive growth, one that creates jobs, draws the majority into the economic and social mainstream, and continuously reduces mass poverty. Employment conditions in Philippine rural labor markets and agriculture can be characterized as casual or informal, with low skill requirements, with low productivity and returns, and a greater concentration of poverty. This is consistent with a prominent strand of development literature that posits a traditional sector, mostly located in rural areas, and highly dependent on agricultural livelihood. Development involves the change in economic structure, anchored on productivity growth in agriculture, involving a movement of labor from the traditional sector, as well as accelerated capital formation in industry and services.Evidence, both international and for the Philippines, is favorable to the structural transformation perspective. For the Philippines, in particular, the evidence points to the following: agricultural growth causes nonagricultural growth, is tightly linked to downstream manufacturing, and contributes significantly toward reducing poverty. Agricultural growth has a differential impact on employment of the unskilled labor, indirectly reducing economywide labor cost by keeping food affordable. Lastly, agricultural productivity growth can have long-term dynamic effects by enabling farm households to invest in human capital, leading to intergenerational diversification of income sources.The evidence suggests that the agricultural and rural economy should be at the forefront, rather than periphery, of the country's strategy for quality employment generation; such a strategy completing an unfinished reform agenda for sustained development of the rural economy. This involves swift completion of the land reform program. Post-2014, the state should focus on developing a flexible and responsive market for land rights. Liberalization initiatives should be pursued in the area of market policy and logistics. Government should rationalize its role as market regulator. Support for agricultural production should be oriented toward enhancing agricultural productivity and comparative advantage based largely on the effective delivery of public goods and associated services such as R&D, irrigation, and other infrastructure. Agricultural development transcends productivity enhancement at the level of primary production, encompassing the agribusiness value chain and based on comparative advantage.
Sustaining and accelerating agricultural growth remains a development imperative in view of persistent rural poverty and emerging threats to food security. While growth can be achieved by expansion of agricultural area and input intensification, growth through improvement in productivity is a promising option. However, productivity growth appears to be a relatively low priority for policy. Rather, the agricultural strategy is oriented toward domestic protection to achieve self-sufficiency and to support production by generous subsidies. In contrast, an alternative strategy may be one that is competition-oriented and productivity-based, i.e., one that favors integration with the international economy through trade, as well as making domestic investments targeted at productivity growth. Scenarios for Philippine agriculture under these policy options are evaluated using a new supply and demand model (Agricultural Multimarket Model for Policy Evaluation or AMPLE). Model simulations suggest that: rapid productivity growth, even when combined with trade liberalization, is generally favorable for farmers and consumers based on improved outlook on production, exports, and food consumption. In contrast, trade liberalization alone has a contractionary effect on agriculture; and production support is a costly instrument for promoting agricultural growth. The model experiments suggest that a back-to-basics strategy for agriculture, incorporating various productivity-based instruments such as investments in R&D, extension, rural infrastructure, protection of the resource base of agriculture, and even human capital formation and institutional reforms, are key to long-term agricultural growth.
In the Philippines, the rice and corn sectors play an integral role in the agricultural economy in terms of production and employment. However, both sectors suffer from inefficiencies in the marketing chain (e.g., high transaction costs, weak quality assurance). Farmers also find difficulty in obtaining short-term loans from banks; hence they resort to informal loans with high interest rate. This paper explores the warehouse receipt system as platform for transforming the marketing chain in the grains market of the Philippines. Salient features of an effective warehouse receipt system are outlined based on literature review and international experience. Assessment of Philippine experience shows that while a legal framework is already in place, a warehouse receipt system in grains is currently non-operational. Likewise, standardization of rice and corn is not practiced. Key recommendations of the study include strict enforcement of grain grades and standards, pilot testing of the warehouse receipt system in a suitable area, and legislative reforms to establish a sound legal and regulatory framework for a warehouse receipt system.
The fruits and vegetables subsector shows great dynamism despite lack of government support compared to other subsectors within agriculture. To further realize the potential of the fruits and vegetables sector, one promising instrument is investment in research and development (R&D). The government is the primary source of funding for agricultural R&D efforts due to the "public good" character of such kind of research. However, the Philippines lags behind its neighbors in Asia in terms of agricultural research investment. Moreover, current R&D investments are skewed toward traditional commodities. This paper assesses the prospective impact at the industry level of fruits and vegetables R&D using the ACIAR-PCAARRD horticulture project as case study. An economic surplus model running on a spreadsheet is used to evaluate measures of project worth for R&D investment. Application of the model shows the high social returns from raising investments in horticulture R&D.
The Department of Health formulates and implements health care financing strategies. To aid the agency, this paper provides baseline figures on the parameters of the entire health care environment. In particular, the following parameters in the health sectors are studied: the regulatory institutions, the legal mandates of these institutions, the set of laws, executive orders, decrees and regulations affecting the health sector and the -regulatory functions of health care institutions.
