ERNESTO M. PERNIA
Socioeconomic Planning Secretary
Director-General, National Economic and Development Authority
Smart Agriculture Forum 2016: Food Security Challenges in the Face of Climate Change and ASEAN Integration
“Increasing Investments in Agriculture”
SMX Convention Center, Pasay City
08 September 2016
First off, thanks to the European Chamber of Commerce of the Philippines (ECCP) for inviting the NEDA to this event. This is an opportunity for us to partner with the private sector in developing Philippine agriculture.
Modernizing agriculture or making agriculture smart has typically been a priority of every administration, but achieving this goal has been elusive. The role of the agricultural sector remains critical as it ensures food security and is pivotal in reducing poverty and inequality. Much of our food supply is produced domestically by millions of our small farmers and fisher folk who account for 29 percent of our labor force, but who unfortunately remain poor.
Where have we gone wrong? No doubt, investments have poured into developing and modernizing the sector. Based on data from the Philippine Statistics Authority, the expenditure of government on agriculture in year 2000 was about Php29 billion. This increased to nearly Php114 billion in 2015 or at an average annual rate of 13.2 percent. In real terms at 2006 prices, though, the average annual rate of increase was slower at 8.7 percent.
A comparison among select ASEAN countries—Indonesia, Malaysia, and Thailand—shows that the Philippines ranked second in terms of average share of central government expenditure for agriculture a little over 5 percent during 2005 to 2014. Thailand was reported with the highest share of national budget going to agriculture.
It seems, then, that investment in agriculture has not been that measly—it just did not seem to translate well into boosting the sector. In years 2000 through 2015, the sector only grew by 2.5 percent annually, and in 2015 at only 0.13 percent. This may indicate that we have not been investing the right amount in the right areas. This has been alluded to by numerous studies. Irrigation investments have declined overtime from the 1980s through the early 1990s and so have investments in good quality rural roads and ports. Also, we have not sufficiently invested in research & development (R&D) nor provided enough support services to our farmers. This forces the private sector to explore new market opportunities, such as market linkage assistance, market information, product standards enforcement, trade facilitation and import/export processing.
The question is not so much whether we should further increase investments in agriculture, but more how to strategically channel investments in areas that would enhance the sector’s competitiveness, especially in the face of new challenges.
First is the increasing pressure in opening the sector to international trade as we continue to subscribe to trade agreements and be part of the global community. Second, is the increasing threats of climate change and other natural calamities that have not only occurred more frequently but also at higher intensity. The key responses to both would be to increase sector’s productivity, diversify, and identify higher value crops.
Where should we then invest? Further development and improvements in infrastructure facilities seem to be a winning investment, like efficient irrigation facilities and good quality transportation infrastructure. There remain large undeveloped areas could profitably be irrigated in the country. Selecting new investments in irrigation expansion and rehabilitation of existing systems would be beneficial in adapting to climate change and improving food security. Likewise, developing the transportation network continues to be a priority to improve farmers’ access to input and output markets. In addition, with climate change, proper planning of irrigation and transportation facilities’ type is essential. This includes ensuring that their structural and engineering designs are suited to the adverse impacts of climate change. Accelerating infrastructure development could provide more incentives to the private sector to invest in the agriculture and fisheries sector.
There are also productivity-enhancing services the government can provide to raise our farmers’ productivity and incomes, such as R&D, extension support, market development, credit, insurance and information, and communication technology.
The importance of R&D in facilitating agricultural modernization cannot be emphasized. New technologies and farm practices need to be developed to respond to a range of challenges, especially those related to climate change. A number of technologies are in advanced stages of development, including climate-smart technologies that are more resilient to severe and extreme climate conditions. Thus, increased and sustained investment is needed to ensure the stream of new technologies and practices. In addition to these “new and emerging” technologies, R&D is needed to respond to fundamental problems, such as lowering the production costs of local commodities to make them more competitive and affordable to consumers. Farming systems and varieties that would lower labor costs in rice production, for example, are very much needed given that labor accounts for the largest share of the commodity’s total production cost. Support for rapid dissemination of tested technologies and their proper adoption are likewise important.
In agriculture investment, we should also consider the geologic characteristics of our regions and provinces. We should see their respective comparative advantage and growth potential, and develop such areas by linking agriculture with agri-business and manufacturing.
In Tuburan, Cebu, for instance, local coffee growers are provided technical assistance to increase production of good quality coffee so they can supply the requirements of a large local coffee chain. Local small farmers can indeed be organized and supported so they can be part of a supply chain that would enable them to earn more from their raw materials by supplying food manufacturers, restaurants, and grocery chains.
The role of the private sector in the whole gamut of agricultural development should not be overlooked. There are clear areas where you can be involved and provide a big boost to the sector. Private sector assistance in developing agri-business and other rural industries can create employment opportunities. Through public-private partnership, the private sector and the government can work together to provide facilities that enhance agri-business activities. These could include post-harvest processing facilities for corn and dairy processing, and bio-ethanol plans, among others. Public-private collaboration—along with improved rural infrastructure—would provide opportunities for advancement in developing higher value chains. Additional incomes from nonfarm activities would thereby support household food security.
Research and technology development would likewise benefit from greater private sector support and participation. Private sector research and seed development has social benefits above the private returns generated, and would be facilitated by the improved infrastructure and regulatory system.
Another area of public-private partnership that could be explored is the provision of weather index crop insurance.
As the NEDA coordinates the formulation of the Philippine Development Plan 2017-2022 along with its Public Investment Program, we will identify more concrete strategies, programs and projects that are consistent with the thrusts and priorities of President Duterte’s 0-10 Socioeconomic Agenda. The NEDA will continue to identify programs and projects of government agencies toward poverty- and inequality-reducing economic growth across the regions.
We would like to urge the agriculture stakeholders, both from the government and private sector, to forge productive partnerships. Investments and efforts towards developing and modernizing Philippine agriculture will not only uplift the welfare of millions dependent on it, but help ensure food security as well.