HOW WILL VERTICAL FARMING INCREASE THE AGRICULTURAL PRODUCTION AND ITS CONTRIBUTION TO THE TOTAL GDP OF THE PHILIPPINES?

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1 HOW WILL VERTICAL FARMING INCREASE THE AGRICULTURAL PRODUCTION AND ITS CONTRIBUTION TO THE TOTAL GDP OF THE PHILIPPINES? A Research Paper Presented to De La Salle University Manila School of Economics, Economics Department In partial fulfillment of Of the course requirements in Macroeconomics 1 Submitted to: Dr. Rica Sauler Submitted by: Aaron C. Francisco Daniel Joseph C. Tan April 2, 2013

2 I. Research Question The Philippine posted a 6.5% growth in GDP in the 4th quarter of 2012 according to National Statistical Coordination Board (NCSB). The Philippine agricultural sector accounts for 9.3 percent of the total GDP. However, this contributes to only 0.6 percent of GDP growth. The agricultural sector has the second largest group in the labor force with an estimated 32.3 percent of the 37.7 million employed persons based on the labor survey done by the National Statistics Office in October Despite the mass of labor it employs, the sector has grown only at a rate of 0.1 percent based on the 4th quarter of Based on these figures, the Philippines despite being rich in natural resources and agricultural land does not maximize the use of assets it possesses. The researchers would like to know how the concept of "Vertical Farming", if put into application, may prove to increase the value-added of the agricultural sector of the Philippines to the annual GDP and further maximize the utilization of labor. II. Background & Significance of the Study Although the Philippines is rich in natural resources, these are poorly utilized considering the available technologies and techniques available for better yields in our day and age. But being nonindustrialized, our country cannot afford the modern machineries, infrastructures and inputs. Vertical farming can help utilize the country's relatively limited land area and significantly increase the country's agricultural production and to further expand its contribution to GDP and its growth. Apart from increasing the country's agricultural production, Vertical farming may also provide more opportunities to use our indigenous plants for research and other non-agricultural purposes. This would include the production of biofuels and medicinal plants, thereby increasing the value-added from the production of the other sectors of the economy to the GDP. Besides the obvious benefits measurable against economic indicators that the country can realize, there are also environmental synergisms in terms of control of pollution and improved air quality. All told, vertical farming will increase production efficiencies, result in more jobs and create an increase in the sector s contribution to GDP and its growth.

3 III. Review of Related Literature "The potential for increasing the supply of food through expanding the land frontier has long been exhausted, particularly in densely settled countries in Asia where 60% of the world's population live (Hossain, 2007). With the increase in the pressure of the population on the limited natural resources, land prices have continued to increase relative to prices of other factors of production. The land-saving technical change that increases the crop yield (productivity per unit of land per season) has been the dominant source for maintaining the food-population balance. However the potential for increased land productivity created by the dramatic technological breakthroughs on the late 1960's for the irrigation and favorable rainfed environments have almost been exhausted." Vertical farming provides a more effective utilization of the surface area it occupies because of its ability to be able to systematically produce the intended plants and crops on different levels or floors whilst still occupying the same area of land. Because of this, vertical farming has a fairly significant potential of being able to provide more surface area for the production of agricultural produce well as the potential of providing a corresponding increase job opportunities entailed therein. Vertical farming may also be able to address the steadily increasing demand of agricultural products due to population growth. Hossain (2007) confirms that the population continues to increase at a high rate and its population growth is a prevailing factor in regards to the demand for staple food. Apart from having the potential to increase the country's Agricultural production, vertical farming may also lessen the risk of their intended agricultural produce being jeopardized by natural disasters and calamities. According to Haen & Hemrich (2007), countries should put a big weight indevelopment strategies and food security policies when it comes to in assessing the vulnerability of agriculture and lessening the disaster risk inflicted on it i.e., protecting agricultural lands and water. It further states that the most important asset needed to address the high vulnerability and disaster risk is investment. Since the Philippines is located near the equator, it is frequently visited by typhoons and heavy rainfall. As such, the country's agricultural produce have a corresponding risk of suffering losses due to the fortuitous events that could occur thereof. Devereux (2007) further explains that unpredictable rainfalls in rain fed agricultural systems can have devastating impacts on livelihoods and local economies. Despite the stellar economic growth achieved in 2012, Mr. Benjamin Diokno, School of Economics professor in the University of the Philippines was not impressed with the agricultural sector.

4 He mentioned that the contribution of the agricultural sector to the GDP continued to shrink posting the lowest growth among the three major sectors in spite of the large labor force. Moreover, the 2.7 percent growth in the agricultural sector in 2012 did not contribute so much to GDP growth but with little improvement from the 2.34 percent growth in According to the Bureau of Labor and Employment Statistics, the employment in agricultural sector was stagnant and no significant changes in the 4 quarters of It ranged during this interval from 11.6 million to 12.4 million employed people. It has the second largest group of employed people behind the service sector and more than the industry sector. In the end of 2012, the industry sector having 5.5million to 5.9 million employed people managed to grow at a faster rate at 6.5 percent more than twice the 2.3 percent growth in IV. Analysis and Discussion Aside from the basic concepts and ideas it entails, the effects of vertical farming in the country's agricultural production would be dependent on how it is introduced and integrated to the society as a whole. The concept of vertical farming is very flexible such that the size, structure and materials used for construction in the vertical farms themselves will be dependent on the scale on which it is to cultivate any number of agricultural produce it plans to house. There may also be some legal and ethical concerns regarding the matter. Cultivating plants in an artificial environment may prove to appear unnatural or hazardous to consumers and concerned environmentalists and might cause the concept to be rejected before the first blueprints arrive. There have been bills passed in the Congress and the Senate that would implement and practice the use of vertical farming in the future. As stated in both bills that the Department of Agriculture and Department of Science and Technology are hereby mandated to promote the use of urban agriculture and vertical farming in the metropolitan areas as an instrument to address food security concerns and regenerate ecosystems in the Philippines. Idle/abandoned government lots and buildings owned nationally or locally or available land resources of state universities and colleges shall be considered for growing crops, raising livestock and producing food with the methods mentioned above. Furthermore, the said methods would be included in the academic curriculum in secondary and tertiary levels in both private and public schools.

5 V. Bibliography de Haen, H., & Hemrich, G. (2007). The Economics of Natural Disasters: Implications Challenges for Food Security. In I. A. Economists, Contributions of Econoics to Critical Policy Issues: Proceedings of the Twenty-Sixth the International Association of Agricultural Economists (p. 31). Malden, MA: International Asociation of Agricultural Economists. and Agricultural Conference of Devereux, S. (2007). The Economics of Natural Disasters: Implications and Challenges for Food Security. In I. A. Economists, Contributions of Agricultural Econoics to Policy Issues: Proceedings of the Twenty-Sixth Conference of the Association of Agricultural Economists (p. 47). Malden, MA: of Agricultural Economists. Critical International International Asociation Hossain, M. (2007). The Economics of Natural Disasters: Implications and Challenges Food Security. In I. A. Economists, Contributions of Agricultural Econoics to Policy Issues: Proceedings of the Twenty-Sixth Conference of the Association of Agricultural Economists (p. 161). Malden, MA: of Agricultural Economists. for Critical International International Asociation