by Arsenio M. Balisacan
UP Forum Online, May-June 2007 issue
View from source: http://www.up.edu.ph/upforum.php?i=144
Because food is a basic human need, its continued insufficiency or at worse unavailability to many Filipinos, whether chronic or intermittent, is a great challenge to—and judgment on—the government.
Filipinos living outside gated villages are far from being substantially more food-secure now than a decade or two ago. We are also less food-secure than our neighbors – the Thais, the Indonesians, the Vietnamese, and the Chinese.
By food security, we simply mean the availability, accessibility, and safety of food for all and at all times.
The Family Incomes and Expenditure Survey data for 2003 (the latest available) indicate that roughly 14 percent of the population, or 11 million people, did not have access to food sufficient to meet nutritional requirements. That is, they were food-poor. Data from the Food and Nutrition Research Institute also show that 3 out of 10 Filipino children in 2003 were undernourished. The incidence was nearly four times higher for the poorest 25 percent of the population than for the richest 25 percent.
In March 2007, the Social Weather Stations (SWS) reported that 19 percent of Filipino families (or an estimated 3.4 million households) said they experienced involuntary hunger at least once between December 2006 and February 2007 (SWS Media Release, 19 Mar 2007). The SWS survey found that hunger worsened in Metro Manila and the rest of Luzon, although it declined in the Visayas and barely changed in Mindanao.
The most important among the food commodities in the country is rice, which remains the staple food of Filipinos in general, the poor in particular. For many poor Filipinos, rice is a major food expense. For example, for the poorest 30 percent of the population, a fourth of food expenses goes to rice. Rice prices, therefore, have a significant impact on the well-being of Filipinos, including the small rice producers, most of whom are net buyers of rice for household consumption, and are poor by any common measures of poverty. Moreover, the relatively high share of rice in the consumption expenditures of workers means that high rice prices (food prices in general) can trigger demands for wage increases even as the economy suffers from low productivity, consequently eroding the country’s competitiveness in the global marketplace. It is thus not surprising that, more than any other agricultural commodity, rice has figured high in the political landscape.
Self-sufficiency in rice has been the government’s goal since the 1960s. Various programs have been developed and implemented toward this goal, and yet achieving a more sustainable growth in rice production continues to elude the Philippines. Except for a spell in the 1970s, during the implementation of the Green Revolution program (when rice production benefited from significant investments in technology development, irrigation, and extension, along with a favorable trade policy regime and initial conditions in transport and education), rice security in the Philippines continues to be a quest.
Viewed from an international perspective, the performance of Philippine agriculture in the past 25 years has been poorer than that of most developing countries of Asia. Productivity — both levels and growth rates — is low compared with that in most of these countries. This is so even for the rice sector, which has received the bulk of the government’s outlay for agriculture. Yet, the country’s human capital is considerably stronger than, or at least at par with, that of most of these countries. Moreover, the country hosts the International Rice Research Institute, and has arguably a world-class homegrown rice research arm, the Philippine Rice Research Institute.
At the outset, we should note that food self-sufficiency is not the same as food security. A nation can be food-secure even if it imports a sizeable proportion of its food supply. Singapore is arguably one of the most food-secure countries in the world, even though it imports virtually all of its food requirements. Put differently, a resource-poor country may be able to produce the food requirement of its expanding population, but it may come at a high cost—say, in terms of high food prices—and at the expense of investment for long-term development, e.g., in transport, energy, education, and health. Also, some regions or areas of the country may have food surpluses, but it may not be possible to move these surpluses as quickly as needed to areas or regions with food deficits owing to infrastructure or institutional bottlenecks.
Invariably, persistent hunger in the Philippines, as in most other developing countries, is not so much a problem of food availability, but the inadequacy or lack of access to this food owing to low household incomes, high prices, or both.
Despite the hundreds of billions of pesos poured into it in the past two decades, the country’s rice self-sufficiency objective has been very costly to the general population, including the small farmers. While it brings short-term relief to select groups whenever money pours in from the government coffers, such a self-sufficiency strategy has failed to sustain growth in productivity and farm incomes.
What has gone wrong?
Poverty is far more extensive and involves greater numbers in agriculture than in any other sector of the Philippine economy. Poverty incidence among agricultural households is about four times that in the rest of the population. While only a little more than one-third of the labor force is in agriculture, two of every three destitute persons are dependent directly on agriculture for employment and sustenance.
Low farm incomes simply reflect low levels of productivity. As the experiences of many countries in Asia demonstrate, a key to their success in rural development and poverty reduction is having sustained increases in the agriculture sector’s productivity. However, in recent years, productivity growth in the Philippines has discernibly declined from the level achieved during the Green Revolution era. This is despite substantial policy changes put in place since the mid-1980s to invigorate the agriculture sector. This decline also occurred during a period of unprecedented expansion of trade in goods, capital and technology, and services opened up by the rapid economic transformation in the major countries of Asia and the Pacific.
Sustaining growth in productivity and household incomes in agriculture also requires continued expansion of productive employment opportunities outside the sector. Indeed, this is a notably typical feature of a vibrant economy. The feature is present in major economies of Southeast and East Asia, but not in the Philippines, which has particularly neglected the development and growth of labor-intensive, small- and medium-scale, industries.
With agricultural productivity declining, and the possibilities for highly rewarding employment opportunities outside agriculture remaining miserably low, in the face of sustained high rates of overall labor force growth, the tendency for small farm households and landless workers has been to expand farming to more marginal open-access lands, including the ecologically fragile uplands. This movement has contributed to natural resource degradation, which, in a vicious cycle, leads to further declines in agricultural productivity.
Aggravating the situation is the rapid growth of the country’s population, which requires more food supplies and more jobs offering decent incomes. While population growth rates declined substantially to well below 2 percent a year in such countries as Thailand, Indonesia, China, and Vietnam, the rate in the Philippines hardly changed; it is still at a high level of 2.3 percent a year.
Evidently, from a macroeconomic perspective, this difference in the patterns of population growth between the Philippines and its neighbors is a key factor contributing to the much slower income growth and poverty reduction in the Philippines.
Chronic food insecurity and poverty in the Philippines are thus a twin problem involving the rather dismal performance of the agricultural sector and the failure to secure rapid expansion of employment opportunities outside the sector.
In particular, the country has neglected the basics of agricultural development: good R&D system, infrastructure, information, and education. Lack of accountability, coordination, and program focus in public spending for agriculture and natural resources has become the norm, not the rule.
Part of the problem has been the lack of appreciation of the respective roles of the government and the private sector in agricultural and rural development. For example, the government gives high priority to building post-harvest facilities, thereby crowding out the private sector, but assigns very limited resources to developing the effective research and information systems needed to enhance agricultural profitability and competitiveness, especially by small farmers.
Moreover, the high “cost of doing business” in rural areas has persisted, owing mainly to serious under-investment in rural infrastructure, especially transport and power, and the prevalence of archaic policies and regulations impeding private-sector investment. The peace-and-order problem in the countryside has also become a hindrance to food security and rural development.
A Way Forward
Technological change has underpinned the productivity increases among the country’s neighbors. But for technological change to occur, there must be investments in technology development appropriate to the country’s resource constraints, socioeconomic conditions, and physical environments. Investments are also needed in support services, particularly infrastructure and institutions. This would reduce the cost of doing business in rural areas to sustain the productivity-enhancing effects of improved technologies and to diversify the rural economy.
The country’s investments in agricultural research and related activities have remained at a low level of 0.1 percent of the country’s Gross Value Added (GVA) in agriculture over the past 10 years. This is far below the one-percent level recommended for developing countries and very much lower than the 2-3 percent observed in many countries. In the case of China, whose agricultural productivity has been growing at much faster rates than most countries in Asia, investments in R&D rose from 0.4 percent of GVA in the 1990s to 0.8 percent in the mid-2000s. With this growth rate, it is not a surprise that Chinese farmers are beating Filipino farmers in the global competitiveness game.
It is not that economic rates of return to agricultural R&D are low. On the contrary, evidence indicates rates typically exceeding 50 percent. It is difficult to find public investments outside of agriculture that could deliver such high rates of returns—expectedly not from export processing zone or massive tourism projects.
Investments in irrigation, technology development (R&D), and extension, along with favorable trade policy regime and initial conditions in transport and education, were the backbone of the Green Revolution. Although these investments initially favored lowland areas, the benefits spread as well to upland areas. As returns to labor increased in lowland areas, members of upland households found incentives to seek employment in lowland areas, especially as the rice productivity growth in lowland areas also fueled employment growth in other sectors of the rural (and urban) economy through demand and supply linkages.
In an earlier work (see Balisacan, Sebastian, and Associates 2006), we examined the implications of various agricultural policy and investment alternatives and their impact on price and trade patterns, household incomes, rural to urban migration, and poverty. Two options are relevant for the present discussion:
Business-as-Usual (Base) – This scenario represents a status quo on productivity programs and agricultural trade policies, i.e. slow growth of real spending in research, information, irrigation and transport infrastructure, and maintaining high domestic prices by way of high tariffs and import restrictions.
Governance & Market Recovery (GMR) – This scenario assumes a progressive liberalization of trade policy, combined with a strong commitment to improved governance by balancing the protection of interests of domestic producers and consumers, as well as increasing investments in agricultural productivity. The latter requires the government to seriously craft productivity-enhancing policies, earmark and spend public money on low cost and efficient irrigation, freshen up research and technology development budgets, put teeth to extension to fortify the rice production base, encourage joint efforts with the private sector, and actualize many other policy reforms in favor of increasing productivity and incomes.
The simulation results under GMR give reasons to be optimistic, when domestic policy reforms for increased investment on productivity enhancing support services and infrastructure are undertaken simultaneously with trade policy reforms that enable the country to comply with its WTO commitments. Production of rice and other crops is projected to grow significantly primarily due to sustained increases in yield. By itself, opening up of trade opportunities in developed economies barely makes any positive impact on Philippine agriculture, including rice. Higher world price trends arising from liberalized trade would not be strong enough an incentive to boost domestic production and could negatively affect the poor rice consumers.
The scenarios indicate the critical role of public investment particularly in irrigation, research and development, and extension to help farmers realize higher yields and incomes. This result is quite consistent with evidence on the impact of the Green Revolution.
The GMR scenario also has a greater impact on the rate of poverty reduction compared with that of business-as-usual projection results. Moreover, its impact is broadly pro-poor. That is, the rates of poverty reduction are faster in areas or sectors of the Philippine society where the incidence and severity of poverty are highest. For example, across the three big island-groups in the country, the reduction would be highest in Mindanao where current poverty incidence level is also the highest. Similarly, the impact is greater for wage earners and self-employed workers in agriculture than for those in non-agriculture.
The simulation results suggest that agricultural and rural development is central to any strategy for broadly based growth and rapid poverty reduction, especially since the poor are largely dependent on agriculture and related industries for employment and income. Trade reforms to comply with the WTO prescription for greater trade liberalization will not achieve that broad-based growth alone. Domestic policy reforms have to simultaneously take place in the form of intensified public investment in irrigation, research and development, education, transport infrastructure, and in capacity building for Local Government Units. Likewise, stronger attention must be given to the adoption of locally appropriate and enabling policies that strengthen the response of rural non-farm sector to agriculture growth and sustain economic expansion.
In conclusion, the country’s food problem is a domestically generated one, not an outcome of globalization or of the agricultural policies of the developed countries. As such, its solution depends on us making a concerted domestic effort to unshackle the policy and institutional bottlenecks preventing the agricultural sector from realizing its potentials. Put differently, to win the war against chronic food insecurity and poverty, government must put its resources where its mouth is. It must invest in agriculture and rural development and must improve governance relating to it and the rest of the economy.
Note:
This article is largely based on A.M. Balisacan, L.S. Sebastian, and Associates, Securing Rice, Reducing Poverty: Challenges and Policy Directions (Los Baños, Philippines: SEARCA, PhilRICE and DA-BAR, 2006.
The author is the Director of the Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), the center of excellence for agriculture and rural development of the Southeast Asian Ministers of Education Organization (SEAMEO). He is also a Professor at the School of Economics, University of the Philippines Diliman.
