Performance, Policies and Pitfalls. Cielito F. Habito, Ph.D.

Transcription

1 Performance, Policies and Pitfalls Cielito F. Habito, Ph.D.

2 Overview Agriculture in the Philippine economy Performance and productivity trends Agricultural policy environment Roadblocks to Philippine agribusiness development Summary and Conclusion

3 Agriculture accounts for one-fifth of economy s s output (GDP) Services 45% Agriculture 20% Industry 35%

4 almost two-fifths of employment Services 47% Agriculture 37% Industry 16% But under broad definition that includes agro-processing and agricultural inputs, accounts for 2/3 of jobs and 40% of GDP

5 and is the most erratic growth performer among sectors. 8.00% Services (most stable) 4.00% 0.00% -4.00% 1997:1 1997:2 1997:3 1997:4 1998:1 1998:2 1998:3 1998:4 1999:1 1999:2 1999:3 1999:4 2000:1 2000:2 Industry (erratic) 2000:3 2000:4 2001:1 2001:2 2001:3 2001:4 2002:1 2002:2 2002:3 2002:4-8.00% % Agriculture (most erratic)

6 Agriculture sector is critical to overall economic development Strong growth linkage effects: Provides food and raw materials for rest of economy Buyer of non-agricultural inputs and consumer goods and services Releases surplus labor to services & industry sectors

7 Recent Production Performance: Better than targets, better than before Indicator Target Actual Target Actual GNP Growth (Percent) Net Fac Inc fr Abroad GDP Growth (Percent) Agri, Fish & Forestry Industry Services

8 Agriculture, Fishery & Forestry: Faster full year growth, but drastically slower quarterly growth Sector FY Q1 Q2 Q3 Q4 FY AGR/FISH/FORESTRY Agriculture & Fishery Forestry

9 Philippine agricultural performance compared well with neighbors in 1970s % Agricultural GVA and Exports Growth GVA Exports NEP BDESH INDIA SLK INDO CHI PAK THAI RP MAL

10 but fell behind in the 1980s % 6 Agricultural GVA and Exports Growth GVA Exports -6 RP BDESH SLK NEP INDIA MAL THAI PAK INDO CHI

11 and on through the 1990s. % Agricultural GVA and Exports Growth GVA Exports THAI BDESH RP MAL NEP SLK INDIA THAI INDO PAK

12 Agric output (GVA) growth slowed down through the decades Agricultural GVA Growth %

13 and was erratic through the 1990s. % Agricultural GVA Growth

14 Growth of major crops has been slowing down Agricultural GVA Growth Rates by Commodity Crops Palay Corn Coconut Sugar Bananas Others

15 except for Livestock and Poultry Agricultural GVA Growth Rates by Commodity, % Livestock & Poultry Livestock Poultry Fisheries Forestry

16 Farm labor productivity fell in the 1980s and has only recently recovered 25,000 Labor Productivity in Agriculture, Pesos/Worker 20,000 15,000 10,000 5,

17 ..but is comparable or better than in some of our neighbors 1990 US$ Agricultural Output Per Worker CHI INDIA INDO THAI VIET MAL BRA CHL RP Country

18 Total production of major crops has been stagnant Tons 35,000 Production, Various Crops 30,000 25,000 20,000 15,000 10,000 5, Rice Corn Coconut Sugarcane Banana

19 Crop yields have shown some improvement Average Yield of Rice, Corn and Coconut Kg/Ha 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Rice Corn Coconut

20 but vary by crop Average Yields, Sugarcane and Bananas 16,000 14,000 12,000 Bananas 10,000 8,000 Sugarcane (x10kg) 6,000 4,000 2,

21 Weak Competitiveness of RP Agriculture P/Kg Source: FAO Producer Prices of Rice China India Year Indonesia Philippines Thailand

22 Weak Competitiveness of RP Agriculture P/Kg Producer Prices of Fresh Fruits Source: FAO Year China India Indonesia Philippines Thailand

23 Peso per K Weak Competitiveness of RP Agriculture Source: FAO Producer Prices of Cattle Meat Year China India Indonesia Philippines Thailand

24 Weak Competitiveness of RP Agriculture Producer Prices of Pig Meat Peso per K Source: FAO Year China India Indonesia Philippines Thailand

25 Weak Competitiveness of RP Agriculture Peso per K Source: FAO Producer Prices of Chicken Meat Year China India Indonesia Philippines Thailand

26 The Policy Environment Price intervention and trade policies Effective protection Monopoly trading Public investment allocations Inadequate levels Misplaced priorities Institutional and governance weaknesses

27 Evolution of Effective Protection SECTORAL WEIGHTED AVERAGES 29.4% 32.2% 24.8% 19.1% 14.9% Agriculture, Fishery and Forestry 9.0% 27.1% 29.3% 28.5% 18.6% 17.2% Agriculture <0% 32.0% 35.0% 35.5% 25.3% 23.6% Fishery 116.0% 17.1% 20.8% 16.1% 6.2% 4.6% Forestry -10.0% 17.4% 10.8% 10.2% 2.9% 2.9% Mining -13.0% 1.0% 0.5% 1.1% 0.3% 0.3% Manufacturing 44.0% 31.9% 35.1% 24.8% 20.3% 14.9% Food Processing >1000% 38.2% 50.7% 34.2% 37.6% 28.2% Beverages and Tobacco >300% 51.6% 48.4% 48.1% 16.4% 7.9% Textile, Garments and Footwear 36.0% 25.0% 21.8% 13.1% 11.1% 8.4% Wood and Wood Products 16.0% 32.8% 19.2% 15.8% 17.4% 10.3% Furniture and Fixtures 0.0% 21.1% 19.0% 13.1% 14.2% 11.8% Paper/Rub/Leather/Plast Prods >200% 32.0% 26.1% 20.5% 13.3% 8.5% Chemicals and chemical products 35.0% 28.0% 21.3% 14.8% 7.3% 5.8% Non-metallic mineral products 16.0% 21.9% 25.8% 18.0% 4.2% 3.3% Basic Metals and metal products 27.0% 22.6% 19.2% 15.2% 9.4% 7.4% Machinery 30.0% 24.2% 20.7% 11.3% 8.1% 6.3% Miscellaneous Manufactures 91.0% 20.4% 16.6% 10.2% 6.0% 3.8%

28 Funds Allocation and Utilization Program Required (P B) Allotment (P B) % Utilized of Allotment Grains HV Crops Livestock Fisheries Basic Infra Others

29 LOW FARM/FISHERY PRODUCTIVITY Lack of access to modern inputs Weak R&D; low level of technology Inadequate rural infrastructure Excessive postharvest losses Inadequate postharvest facilities High cost of inputs High tariffs on inputs, e.g. feedgrains Lack of competition in input mkts Low level of investments in agriculture Weak extension services LOW FARM/FISHERY INCOMES Poor product quality Weak quality standards Uncertainty due to land reform Lack of land Trade barriers in mkts abroad Sub-standard quality of agri exports Low farmgate prices Unfair import competition Smuggling Import liberalization Untimely importations High cost of inter-island transport Difficult access to export mkts Philippine Agriculture: Root Issues Lack of choice of mkt outlets Inability to transport harvest to market Interlinked credit transactions Lack of processing firms/facilities Local buyer cartels/ monopsonies Lack of farm to market roads Poor access to (formal) credit

30 Competitive Products Sustainable Production Systems Food Security Prosperous Farmers Overcentralization Politicization Unclear Communication Lines LOW FARM/FISHERY PRODUCTIVITY Budget Instability GOOD GOVERNANCE Fragmentation/Lack of Coordination Corruption Weak Technical/ Managerial Capability No Clear Organizational Framework LOW FARM/FISHERY INCOMES

31 Deterrents to Agribusiness Lack of access to public/private lands Inadequate infrastructure Local governance weaknesses Lack of long-term financing Limited access to improved technology

32 Deterrents to Agribusiness Limited access to raw materials Lack of global market access Unstable peace & order Widespread corruption Weak enforcement of policies, laws and contracts

33 A Trend of Strategic Importance: Rapid rise in demand for horticultural products in East Asia and Europe

34 The Need: A coherent strategy to invigorate Philippine agriculture and agribusiness and a sound governance structure and the political will to faithfully implement it.

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