Organizing for results : the Philippine agricultural sector

Abstract

Philippine agriculture performed poorly in the 1980s. The average annual growth rate declined from 4.8 percent in the 1970s to 2.1 percent, lower than the population growth rate. As a result, export surpluses dwindled and agricultural imports rose. Although depressed world commodity markets undoubtedly lowered agriculture's growth performance, other Asian countries managed to grow faster, and most of them at a rate even higher than in the 1970s (Table 1). The country's poor performance can be largely attributed to the slow growth of crop productivity, eroding Philippine competitive advantage (Fig. la). Among the traditional commodities, only yields of rice and, to a lesser extent, corn grew significantly. As Philippine coconut and sugar yields stagnated, Malaysian oil palm and Thai sugar expanded their shares of world markets. (Fig. lb). With the closing of the land frontier and continued high population growth, agricultural development will have to come from technological change and irrigation expansion that can increase productivity and effective crop area. Yet government interventions in agriculture over the past four decades have relied primarily on short-term price and trade regulations to lower food prices, raise farmers' income, and achieve food self-sufficiency; regulations are easier to implement, have short-term impact, and generate resources for the agency concerned. Market regulations, however, have often protected consumers at the expense of farmers, raised production costs, distorted incentives against commodities where our comparative advantage lies,and misallocated government resources from growth-enhancing investments to unproductive bureaucratic costs without achieving their stated objectives. On the other hand, too few resources have been allocated to the more cost-effective, sustainable long-term policy instruments that raise agricultural productivity and lower unit cost of production, such as agricultural research and irrigation, to attain these conflicting objectives.