ASEAN contrasting narrative of agriculture

By Rolando Dy

Why is rural poverty the Philippines (30 percent) about 2.5 times that of ASEAN peers? The reasons emanate from agriculture growth and exports.

Agri growth. The Philippines doubled its agriculture output in 40 years. Every ten years, it ranked either fourth or fifth. In 38 years, the sector registered declines in seven years, the largest of which was -6.5 percent in 1998. Doubling is not enough.

Vietnam was way ahead, with output expanding 3.89 times since 1980. In 38 years, agriculture headed south only once (1987).

Indonesia landed second with output expansion of 3.35 times. In 38 years, it posted only one year of contraction (1998).

Thailand registered 2.44 times increase. It was weighed down by the large falls in 1993, and 2015. In 38 years, it experienced contractions in nine years.

Malaysia agriculture expanded 2.30 times. It shifted main crops from oil palm to labor-intensive natural rubber. The El Niño dry spells caused a toll on oil palm output. In 38 years, Malaysia experienced negatives in 11 years, especially in 2008-2009.

Agri exports. The Philippines doubled exports to $6.1 billion (B) in 2018 from $1.9B in 2001. It was up 52 percent between 2010 and 2018, far slower than 2001 to 2010 at 112 percent.

In 2001, Philippine agri-food export already paled in comparison with ASEAN peers. It was less than half of Vietnam’s, a third of Indonesia’s and one sixth of Thailand’s. Between 2001 and 2010, the ASEAN peer expansion was 2 times to 4.6 times faster than the Philippines, reflecting global orientation of neighbors.During 2010 to 2018, the Philippines grew the fastest but at a low base. As a result, Philippine export was $6.1B but those of neighbors ranged from $22B to $40B.

Big ticket items. The Philippines, due to sluggish growth in exportable production, was only able to raise its billion-dollar exports from zero to two in almost 20 years. The two are coconut products and fruits (i.e.,banana). The former is smallholder crop; the latter, agribusiness driven.

By contrast, Malaysia grew from one to four, Vietnam from one to five, Indonesia from two to nine, and Thailand four to 13. These countries have early head start.

Conclusions. The evidence shows that Philippine agriculture almost consistently performed poorly relative to its ASEAN peers.

First, poor agriculture growth can be traced to low productivity growth and narrow crop product mix. Between 1981-2015, total factor productivity growth averaged only 1.2 percent a year as compared to 1.4 percent for Indonesia, 1.8 percent each for Thailand and Vietnam, and 2.1 percent for Malaysia (based on US Department of Agriculture data). The differences appear small but compounded over 35 years, they amount to large gaps.

The focus on import-substituting crops (rice, corn, sugar) versus export-driven crops (coconut, rubber, coffee, cacao, banana, etc.) severely limited expansion of productivity and growth.

Second, key exports were anchored on only two products: coconut and Cavendish banana. The former has 3.5 million hectares; the latter, about 80,000 hectares. The two crops show a glaring contrast of inefficiency (low yield for coconut) and efficiency (high yield for Cavendish). But coconut has good prospects given its multi-product mix. Intercropping though is imperative.

The lack of scale and narrow mix of raw materials hindered the development of agri-food manufacturing industries and exports. A glaring example is the low capacity utilization of processing industries.

The next three years is strategic in laying the foundation of a competitive and inclusive agriculture and fisheries. While rice remains important as a food staple, it is paramount to push a wider range of market-driven products and value adding to reduce rural poverty.

The overriding thrust of agriculture secretary William Dar, Masaganang Ani, Mataas na Kita (high productivity and prosperous income for all), provides impetus. There is need for new paradigms, and equally important, clarion call for a professionalized agriculture bureaucracy. Time is of the essence. The Philippines has to catch up with ASEAN peers.

This appeared in Agriculture Monthly’s January 2020 issue. 

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