Market Information
Southeast Asia

An Analysis of Agriculture and Fisheries Growth in the Philippines,1990 - 2002⁽¹⁾

Rolando T. Dy
Executive Director
Center for Food and Agri Business
University of Asia and the Pacific

This short paper will try to answer the question: what subsectors and industries contributed to agriculture growth in the decade in general, and in 2002 in particular. It will delve into the many causes of underdevelopment of agriculture which are discussed in many fora.

STRUCTURE

Agriculture and fisheries directly account for about a fifth of the total economy and directly and indirectly (which considers the backward and forward linkages, or the cluster universe) three fifths of the economy. More importantly, it directly employs about 10 million people, nearly 40% of the labor force. Agri-based communities are host to most of the poor in the country. It therefore makes a lot of business sense to "enrich" the poor as they will invariably make the industrial and services sector more vibrant.

Rice, 20% of total agriculture, is certainly the biggest industry in terms of output value (Table 1). Surprisingly, the next in line are not crops but chicken (11.9%) and hogs (11.6%). Distant fourth and fifth are coconut (7.9%) and corn (4.9%). Aquaculture (10%) is large but this comprises at least three products (seaweeds, bangus and tilapia).

The three main crops - palay, coconut and corn - account for about 80% of all farmlands but contribute 29% of total value. This translates to P17,000 per harvested hectare at current prices in 2002! Certainly, there is room for productivity improvement and farm diversification measures.

AGRICULTURE STRUCTURE

Source: BAS

BENCHMARKING

Agriculture grew at an average annual rate of about 2% during 1990-2000 (Table 2). China, Indonesia, Thailand, and Vietnam did much better. It is a dismal record which most people already know but our decision-makers are struggling to address.

Note: The average growth rates are computed from real agriculture gross value added. The 2.1% p.a. was computed over a longer period from BAS data.
Source: World Bank

GROWTH

Amid the already poor performance, what were the drivers and downers? The drivers were the mostly non-land-based agriculture- poultry, livestock and fisheries. The downers were practically crops - the land-based agriculture.

Agriculture grew faster to 4.7% and 3.7% , respectively in 2001 and 2002. The main drivers were fisheries, poultry and livestock. Interestingly, these sectors were mostly demand-driven.

Source of basic data: BAS

CONTRIBUTIONS TO GROWTH

Where did the growth come from? Which subsector contributed to the growth in the 1990s and early 2000s? The analysis below shows the growth sources.

In 1990-2000, expansion was fuelled by the non-crop subsectors which together contributed about 86% of growth. Poultry gave 36.8%, livestock 27.5% and fisheries 22%. Crops, which occupy over 95% of the farmland, contributed only 13.7% of growth!

What were the leaders and the laggards of the crops subsector? The leaders were: rice, mango, banana and sugarcane. The laggards: corn, coffee, garlic, onion, tobacco and abaca.

In 2001 and 2002, non-crops remained the heaviest contributors. In 2002, their share to total growth was more than 81% compared to 19% for crops. The leaders in the crops were mango, rice, banana, sugarcane, and garlic.

Source of basic data: BAS

STRATEGIC IMPLICATIONS

The overall agriculture portfolio is not doing well. We need to increase growth.

Crops, which use over 95% of land resources and use most of the public budget, contribute less than 20% to growth.

Poultry, livestock and fisheries had been consistent drivers of agriculture growth since 1990. They were mostly demand-driven. A key support would be access to competitively priced inputs.

Aquaculture needs more resource flow given its high potential for gains. If growth in these subsectors are stymied, the whole agriculture growth will suffer and in turn, the total economy too.

It is claimed that:

• Public spending is not adequate. The AFMA, which was passed in 1997, provides for an additional P20 billion (B) budget for agriculture on top of the regular DA budget in the first two years of implementation and P17B in the next five years. The AFMA requirements were only partially met.
• Efficiency of public investments. Money has mostly been spent on areas with low returns but are politically popular (e.g. rice).
• Management and delivery of support services have been hampered because of the Local Government Code, which devolved extension and delivery of agricultural services to the local government units. The law has to be revisited.

We need to adopt the "seed-to-shelf" approach in order to enhance the competitiveness of agriculture.

Developing agriculture makes a lot of business sense. Today, a large chunk of the rural sector are outside the marketing loop of consumer goods firms. Consumers there could hardly afford packaged foods and non-food items. Most homes can spare at most P2.50 to P5 per purchase. With rising jobs and incomes, it will be a different story.

1. * This industry brief was published by the Manila-based University of Asia & the Pacific, Center for Food & Agribusiness in the January 2003 issue of the Food & Agribusiness Monitor, primarily for a Philippine audience. This industry brief is being made available to Canadian businesspeople in order to provide basic market information should there be export interest in relevant agrifood commodities.