The Philippines should take agriculture seriously

Michael Alan Hamlin

Posted on July 11, 2012

It’s easy to overlook agriculture. It accounts for just 12.3% of the economy, and is dwarfed by industry (33.3%) and services (54.4%). After years languishing as Asia’s embarrassing backwater economy, Goldman Sachs now estimates that the Philippine economy will jump from the 46th largest in the world to the 14th by 2050. HSBC makes a similar forecast, placing the Philippines 16th globally, fifth in Asia, and number one in Southeast Asia.

Neither forecast places much emphasis on agriculture. They suggest that economically, the Philippines is successfully transitioning from an agricultural economy to a largely services economy. There are calls—most notably from the Asian Development Bank—to expand the industrial sector to ease over-reliance on services and provide more jobs for the Philippines’ large, largely unskilled labor pool.

Over sixty percent of the Philippines’ 90 plus million population is of productive age. Not surprisingly, about 33% of the labor force is employed in the services sector. Although industry accounts for a third of the economy, it generates employment for just 15% of the workforce. Agriculture is by far the most efficient job generator despite its relatively small contribution to the economy. It accounts for one third of all jobs, but they are almost all low-paying, low-value despite high basic food prices in the Philippines compared to its neighbors.

All those workers are packed into a relatively small agriculturally productive area. Consider rice, for instance, the Philippines’ principal staple. According to International Rice Research Institute (IRRI) deputy director Bruce Tolentino, in 2010 the Philippines’ harvested rice area was just 4.4 million hectares. That compares to 11 million hectares devoted to rice production in Thailand, and 7.5 million hectares in Vietnam, the Philippines’ principle sources for imported rice.

Dr. Tolentino spoke during last week’s CSR Expo 2012, organized by the 73-member League of Corporate Foundations (LCF). (Disclosure: My firm is a member of LCF and was engaged to organize the Expo.) This year’s Expo theme was “Transforming the Business of Giving Back.” By transforming giving back, the organizers were referring to ensuring sustainability of corporate social responsibility (CSR) initiatives undertaken by LCF members.

Speaking in a session on “Protecting the Essentials from Climate Change,” Dr. Tolentino pointed out that despite pervasive poverty in the agricultural sector, Filipino farmers themselves are highly productive, and for many years were the most productive rice producers in Southeast Asia. That’s begun to change. But the Philippines still out-farmed Thailand 3.6 tons per hectare to 2.9 tons per hectare, in terms of yield, respectively, in 2010.

Since the turn of the century, Vietnam has out-farmed the Philippines, however. In 2010, Vietnam harvested 5.3 tons per hectare. But Dr. Tolentino is quick to point out that compared to the Philippines’ rice production, rice produced by Vietnam is of substantially lower quality both in terms of taste and nutrition. That means it is cheap, and helps explain why Vietnam has surpassed Thailand as the Philippines’ principal source of rice imports.

The real story here—and an important factor that keeps Filipino farmers poor—is in total rice production. Despite the Philippines’ relative productivity per hectare in terms of yield, it produces a total of just 15.8 million tons of rice annually. Thailand produces twice as much. Vietnam does even better, producing 40 million tons in 2010. What accounts for the impressive performance—aside from quality output—of Vietnam?

Dr. Tolentino believes that irrigation explains the glaring differential. While Filipino farmers use sophisticated rice varieties, and carefully nurture their crops, failure to provide modern irrigation systems means that paddies cannot be farmed as often as they can in Vietnam and Thailand. The Philippines’ perennial water shortage may explain why it’s so difficult and expensive to build modern irrigation systems.

Decades of government obfuscation is also a likely factor. If the tradeoff is between ensuring potable water supply for the Philippines’ fast-growing population and increasing annual rice production, water supply appears to be the priority. Rice can be imported. Water can’t.

But as we see from employment, this difficult tradeoff isn’t that simple. The sad reality is that the Philippines’ creaky educational infrastructure—which is being addressed but will take a quarter century to fix—can’t provide quality education for the children of 15 million agricultural workers that will qualify them for services sector jobs. If these families are going to be lifted out of poverty, they will need jobs in the agricultural sector that can support an enhanced quality of life. Industry alone can’t take up the slack because industrial jobs are hugely expensive to create.

The irony of high food prices and pervasive poverty is a separate if related issue, but making farmlands—rather than farmers—more productive can begin to address that anomaly. More importantly, it can make rural lives worth living.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author and commentator. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at mahamlin@teamasia.com and follow him on TwitterFacebook and LinkedIn. Copyright © 2012 Michael Alan Hamlin. All Rights Reserved.)

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