World Bank: PHL needs to go back to agriculture

BUSINESS MIRROR

By : Cai U. Ordinario

http://www.businessmirror.com.ph/world-bank-phl-needs-to-go-back-to-agriculture/

The next administration needs to focus on labor-intensive sectors, such as agriculture, to lift millions from poverty, according to experts and members of the Joint Foreign Chambers (JFC).

At the Fifth Arangkada Forum on Tuesday, JFC members and experts, including World Bank East Asia and the Pacific Poverty Reduction and Economic Management’s Lead Economist Rogier van den Brink, said there is a need to “go back” to agriculture.

“To get to inclusive growth, we need to go back to agriculture. Why is this? Many countries in the region have really done very well in terms of economic growth and poverty reduction by starting with agriculture: Japan, Korea, Taiwan, China. There are 600 million people that were lifted from poverty from China,” van den Brink said.

He added, however, that the lifting of 600 million people from poverty in China happened in phases, and with the manufacturing sector in tow.

The first phase moved people in farms to factories to meet local demands; and then the second phase occurred when factories began producing goods for the international market.

Agriculture can lift millions from poverty because it can raise farm profits and incomes, as well as increase nonfarm incomes and profits through multipliers. With greater productivity and better incomes, food prices remain low.

“[The Philippines’s] long history of policy distortions has slowed the growth of agriculture and manufacturing in the last six decades. [As a result] agricultural productivity has remained depressed; manufacturing has failed to grow sustainably; [and] low-productivity, low-skill services sector has emerged as the dominant sector of the economy,” van den Brink said in a presentation.

American Chamber of Commerce of the Philippines Agribusiness Committee Cochairman Varinia Tinga agreed, saying there is also a need to increase research-and-development budgets, as well as diversify public spending in agriculture.

Tinga said the government should not only focus its spending on rice and corn, the country’s food staples, but also on high-value commercial crops (HVCCs), which cost more to produce but have huge returns.

HVCCs include products such as coffee, cacao, fruit crops, root crops, vegetable crops, legumes, pole sitao, spices and condiments, and cut flower and ornamental plants.

She added the government must create a comprehensive crop-insurance system, which could serve as the Conditional Cash-Transfer Program of the government in the farm sector.

Tinga also said there is a need to rationalize agriculture-extension services. Under the local government code, these extension services are under the purview of local governments.

“We believe the Department of Agriculture should reassert its leadership and put some sense of order into this [extension services] and, more important, to strengthen links to research and development, and be able to use this position to share this information to farmers,” Tinga said.

Canadian Chamber of Commerce of the Philippines President Julian Payne added that apart from agriculture, mining is another area that the next administration needs to focus on.

Payne said these two sectors have a huge potential to employ millions of Filipinos. As it is, the Philippines already missed out on the recent increases in mineral prices.

He said the new administration must make mining a part of the national priority and ensure that the government will honor the “sanctity of mining contracts,” since these contracts are crafted for the long term.

In January Ateneo Center for Economic Research and Development Director Leonardo A. Lanzona Jr. said the Philippine electorate needs to elect a president who is pro-agriculture.

Lanzona added that a pro-agriculture president can look at the agriculture sector as a means to lift millions of people out of poverty and as a means to improve competitiveness.

Eagle Watch Senior Fellow Alvin Ang said that, while agriculture only accounts for 10 percent of the country’s GDP, its share in employment is 30 percent.

The slow growth of the agriculture sector in the past 20 to 30 years has prevented the rise in incomes of farmers and their liberation from poverty.

Lanzona also said the country’s food-manufacturing sector is dependent on agriculture and, thus, can have significant impact on the country’s commodity exports.

This is crucial, Ang said, since McKinsey & Co. data showed the Philippines, compared to its Asean neighbors, has a competitive advantage in food, beverage and tobacco manufacturing.