AFMP Revised Final Report Jan5-10

Fostering Our Farms, Fisheries and Food:
Technical Assistance for the Formulation of the Successor

Agriculture and Fisheries Modernization Plan (AFMP)
of the Department of Agriculture (DA)
Final Comprehensive Report1
Introduction
With 70% of the countrys poor coming from the rural areas where agriculture is the
dominant source of livelihood and employment, the importance of agriculture to the
Philippine economy cannot be overemphasized. Thus, the Medium Term Philippine
Development Plans (MTPDPs) of successive administrations have consistently
recognized the critical importance of energizing and modernizing the agricultural sector
in the overall pursuit of a vigorous and broad-based economic growth and development.
The newly-installed Aquino Administration is in the process of identifying its priority
concerns and strategies that would chart the countrys development direction for the
next six years, to be embodied in a new MTPDP for 2011-2016. As its contribution to
this new development blueprint, the Department of Agriculture is beginning to craft the
new Agriculture and Fisheries Modernization Plan (AFMP). Given the timeframe of the
MTPDP process, the key elements of the AFMP must be in place within the next 2-3
months, i.e., by mid-November. At the request of the DA Secretary, the World Bank
(WB) is providing technical assistance (TA) to ensure timely and quality formulation of
the AFMP. A team of five consultants, henceforth referred to as the AFMP Advisory
Team (or Team for short), has been assembled to facilitate the provision of this
technical assistance, organized along the themes of the Agriculture and Fisheries
Modernization Act (AFMA). This document comprises the Teams Integrated Final
Report, providing observations, analyses and recommendations on the challenges and
imperatives facing the Philippine agriculture sector.2
Objectives of the Study

The general objective of the TA is to provide technical inputs that would assist the DA in
formulating the successor AFMP in time for its incorporation into the new MTPDP of the
Aquino administration.
1
Submitted by Cielito F. Habito (Leader), Ramon Clarete, Beulah de la Pena, Danilo Israel and Eliseo
Ponce.
2 Agriculture and the agriculture sector, for purposes of this paper, is defined to cover crops, livestock
and poultry; fishery and forestry are referred to distinctly and separately. This study covers both
agriculture and fishery, but not forestry.
In particular, the TA aims to provide the DA with the following specific inputs for the
AFMP:
1. Evaluation and measurement of the state of progress of Philippine agriculture and
fisheries modernization as defined by the Agriculture and Fisheries Modernization
Act (AFMA);
2. Assessment of the major factors behind the above-cited performance including an
impact and effectiveness evaluation of the relevant major policies and programs of
the previous AFMP and MTPDP;
3. Identification of the ensuing priority development gaps and concerns and
imperatives for the sector, bearing in mind emerging global and local development
trends; and
4. Recommended priority set of strategies and programs to accelerate agriculture and
fisheries modernization in the next medium-term, 2011-2016 (How we shall get
there).
Organization of the Report

This report is organized in accordance with the above objectives of the Study. Chapter 1
discusses Where we have been, where we are now in assessing the state and
performance of Philippine agriculture and fisheries, amid the historical background of
trends and policies affecting the sector. Chapter 2 explains How we got to where we
are now to address the second objective of identifying factors and forces leading to the
performance described in the first chapter. Chapter 3 then discusses the imperatives
for the sector (Where we want to go) in the face of historical performance and future
trends. The recommended strategies and programs for the 2011-2016 period are then
detailed and summarized in Chapter 4, comprising an agenda for action in the short to
medium term for the Philippine agriculture and fisheries sector. Chapter 5 summarizes
and concludes the report.
Chapter 1
Where We Have Been,

Where We Are Now
Introduction
Philippine agriculture has lagged behind that of its more dynamic ASEAN neighbors over
recent decades, hampered by declining productivity, which had only recovered in the
latter 1990s. The result has been manifested in low farm incomes and low rural
employment evidenced by perennially high rural unemployment and underemployment
rates. Taken together with low incomes in the municipal fisheries sector,3 these have
directly led to a high incidence of rural poverty, with 70% of the countrys poor now
estimated to reside in the rural areas. There is also lack of food security and weak
competitiveness of the sector in general. Indeed, the country shifted from being a net
agricultural exporter to net importer in the mid-1990s.
Production, Productivity and Yields4

Agricultural production in the Philippines has been generally weaker relative to its
neighbors in terms of production growth, productivity and yields.
Up until the 1970s, the Philippines aggregate agricultural performance in terms of
growth rates of both agricultural gross value added (GVA) and agricultural exports
compared well with its neighbors and other Asian countries (Figure 1-1a). But since the
1980s, the country has lagged behind most of the countries in the region (Figures 1-1b,
1-1c and 1-1d). This came as agricultural output growth had slowed down dramatically
through the decades, recovering only in the 1990s (Figure 1-2). Still, the sectors growth
had been erratic in the 1990s, especially with the periodic occurrence of the the El Nio
Municipal fisheries refers to small-scale coastal fishers, as distinguished from commercial fisheries
which are operated by larger firms with higher levels of capital.
4 This section draws from and updates data presented in Habito and Briones (2005).
3
phenomenon that had appreciable impact on weather patterns, and consequently

agricultural performance.
Figure 1-1a. Growth Rates of Agriculture Value Added and Exports,

Selected Asian Countries, 1970-80
Figure 1-1b. Growth Rates of Agriculture Value Added and Exports,

Selected Asian Countries, 1980-90
Figure 1-1c. Growth Rates of Agriculture Value Added and Exports,

Selected Asian Countries, 1990-2000.
Figure 1-1d. Growth Rates of Agriculture Value Added and Exports,

Selected Asian Countries, 2000-2009.
18.0
GVA
EXPORTS
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
THAI
BDESH
RP
MAL
NEP
Source: ADB, WTO Websites
SLK
INDIA
CHI
INDO
PAK
Figure 1-2. Agriculture Value Added Growth Rate,

Philippines, 1967-2009
%
5.0
4.0
3.0
2.0
1.0
0.0
1967-1970
1970-1980
1980-1990
1990-2000
2000-2009
Source: BAS website
Table 1-1 shows the average annual growth in GVA of major agricultural commodities
between 1960 and 2009. What is apparent from the table is that growth rates of most
commodities, except for fishery, corn, bananas, had slowed down over time. The 1980s,
in particular, saw marked slowdowns and even declines in GVA growth. On the other
hand, the past decade since 2000 has seen a mix of improved and slower growth among
the major agriculture subsectors.
Table 1-1a. Agriculture Gross Value Added Growth Rates,
1960-2009
Commodity
Crops
Palay
Corn
Coconut
Sugar
Bananas
Others
Livestock and
Poultry
Livestock
Poultry
Fisheries
Forestry
1960-1970
3.9
4.5
5.3
2.3
4.8
5.5
3.6
19701980
6.1
4.3
5.2
7.8
5.2
13.9
8.1
19801990
2.1
2.9
3.4
-3.9
-1.8
-1.8
2.2
19902000
2.3
3.4
0.8
0.6
2.9
4.4
0.8
2000-2009
2.8
3.3
4.6
4.3
2.3
8.2
1.2
3.2
3.1
3.7
6.9
5.1
4.6
0.8
8.5
4.2
-2.7
6.2
4.8
7.5
4.1
-7.4
4.9
3.9
5.9
2.1
-13.2
2.6
1.9
3.3
6.1
0.7
Source: BAS website
The value of agricultural crops production increased by 29% or about 2.9% annually
over the period 2000-2009 (Table 1-1b). The crops sector accounted for about 47% of
agricultural production value in 2009, slightly down from its 49% share in 2000.
Banana and corn posted the biggest value increases with 6.9% and 5.1 % annual
growths over the period.
The increase in banana is mostly credited to export
expansions as the established exporters explored new markets. Corn growth is
attributed to the growing demand from the domestic livestock and poultry sector (see
Table 1-1c below) coupled with domestic investments to improve the sectors value
chain.
Table 1-1b. Value of Crops Production, Selected Years 2000-2009
Crops
Palay
Corn
Coconut
Sugarcane
Banana
Pineapple
Coffee
Mango
Tobacco
Abaca
Other Crops
Value
2009
632,034
238,354
76,952
64,663
29,907
88,868
8,522
5,529
18,114
3,058
2,355
95,712
Shares
2000
2009
49.6
46.8
16.8
16.1
5.5
6.3
8.2
7.2
3.2
2.3
3.6
4.9
1.2
1.2
1.2
0.7
2.5
1.7
0.3
0.2
0.2
0.1
6.8
6.2
Growth Rate
2005
2009
2.7
2.9
3.3
3.1
3.0
5.1
2.7
2.1
-1.3
-0.3
5.0
6.9
2.7
3.8
-3.5
-3.0
2.7
-1.2
-1.9
-3.4
-0.9
-1.8
2.6
2.4
Notes: Value at current prices; shares and growth rates based on constant prices
Growth rate is estimated compounded rate from year 2000
Palay, coconut, pineapple and other crops also increased by 3.1%, 2.1%, 3.8% and 2.4%
annual growths, respectively. Palay production grew following the massive support
given to the sector in pursuit of self-sufficiency. Coconut and pineapple managed to hold
on to their export markets with established exporting sectors. Meanwhile, mango
showed a declining growth following the initial opening of export markets and limited
domestic support for enhanced value chains to expand the exporting sector. Sugarcane
exhibited erratic movements, depending on domestic trade protection and the US quota
market for its growth. The growth of other crops is attributed to increased domestic
demand as well some export opening notably in citrus (calamansi), okra and other
vegetables. Coffee, tobacco and abaca posted declining production value. Abaca suffered
from the spread of the bunchy top and mosaic virus which curtailed its exports, while
coffee and tobacco faced stiff competition from imports in the domestic market.
The value of livestock and poultry production had a combined share of about 28% of
total agriculture production in 2009, slightly lower than its 29% share in 2000 (Table 11c). Livestock posted a 17% increase from 2000 to 2009 while poultry posted a higher
29% increase, translating to annual growth rates of 1.8% and 2.9%, respectively.
7
Chicken eggs, chicken and hog production posted the highest increases of 4.7%. 3.4%
and 2.4% annually. Growth in these sectors were made possible by expansions in
domestic corn production, its main input, and encouraged by the growing domestic
demand. Competing meat imports remained minimal for hog and poultry, accounting for
only 4.9% and 5.6% of the domestic market in 2008. Imports for beef and carabeef were
greater, sharing 21% and 39% of domestic supply, respectively, with expanding
domestic demand and the country having little grazing land to support growth in these
sectors.
Table 1-1c. Value of Livestock Production, Various Years 2000-2009
Value
2009
196,023
8,944
18,653
161,151
6,815
461
144,316
107,689
2,476
31,183
2,969
Livestock
Carabao
Cattle
Hog
Goat
Dairy
Poultry
Chicken
Duck
Chicken eggs
Duck eggs
Shares
2000
2009
14.5
12.5
0.6
0.5
2.2
1.4
11.3
10.2
0.4
0.3
0.0
0.0
15.1
14.3
11.0
10.5
0.7
0.4
2.9
3.2
0.5
0.3
2005
2.3
1.5
-1.9
3.1
0.4
3.9
4.0
4.1
-0.9
5.7
-0.1
Growth Rate
2008
2009
1.9
1.8
1.6
1.4
-1.6
-1.1
2.5
2.4
0.4
0.2
3.8
3.8
3.1
2.9
3.2
3.0
-3.4
-3.9
4.7
4.7
-2.8
-3.3
The yield levels of the Philippines most critical commodities, while increasing, have
tended to lag behind those of its ASEAN neighbours. In rice, for example, the yield
difference between the Philippines on one hand and Indonesia & Vietnam on the other is
about one metric ton per hectare (Figure 1-3). Closing such yield gap is enough to
eliminate the total rice imports of the country.
Figure 1-3. Cross ASEAN Country Comparison on
Rice Paddy Yield (mt/ha), 1990-2009
yield (mt/ha)
6.0
5.0
4.0
3.0
2.0
1.0
Indonesia
Malaysia
Thailand
Viet Nam
Philippines
0.0
1990
1992
1994
1996
1998
2000
Source: FAO Stat
2002
2004
2006
2008
The Philippine yield levels even on its export crops, except pineapple, has likewise
tended to lag behind those of its ASEAN neighbors (Figures 1-4 to 1-7).
Maize Yield (mt/ha), 1990-2009
yield (mt/ha)
6.0
Indonesia
Thailand
Malaysia
Viet Nam
Philippines
5.0
4.0
3.0
2.0
1.0
0.0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: FAO Stat

Coconut Yield (mt/ha), 1990-2009
yield (mt/ha)
10.0
Indonesia
Thailand
Malaysia
Viet Nam
Philippines
8.0
6.0
4.0
2.0
0.0
1990
1992
1994
1996
1998
2000
Source: FAO Stat
2002
2004
2006
2008

Banana Yield (mt/ha), 1990-2009
yield (mt/ha)
70.0
Indonesia
Thailand
Malaysia
Viet Nam
Philippines
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: FAO Stat

Pineapple Yield (mt/ha), 1990-2009
yield (mt/ha)
140.0
Indonesia
Thailand
Malaysia
Viet Nam
Philippines
120.0
100.0
80.0
60.0
40.0
20.0
0.0
1990
1992
1994
1996
1998
2000
Source: FAO Stat
10
2002
2004
2006
2008
Labor and land productivity in agriculture have been average,

with yields of major crops following erratic trends.
Despite mediocre growth in labor productivity, the 1990s actually represented a period
of mild recovery for the sector, after undergoing sharp decline in the 1980s. Closer
examination reveals that within agriculture, labor productivity has stagnated in the
crops subsector. The observed growth was therefore apparently due to increasing
productivity in livestock and poultry, where use of improved technologies and
increasing scale of production improved production efficiency considerably (David
2003).
Nonetheless, labor productivity in Philippine agriculture compares favorably with other
developing countries (Figure 1-8). The Philippines labor productivity remains far ahead
those of large, populous countries such as China and India; it is also greater than the
neighboring Southeast Asian countries of Vietnam, Indonesia, and even Thailand.
However labor productivity lags behind countries with higher per capita incomes, such
as Malaysia, Brazil, and Chile. Moreover, some of the low productivity countries (China,
India, and Vietnam) have experienced a more rapid labor productivity growth in the
1990s. It may be noted that the low growth rate of labor productivity reckoned in US$ in
the 1990s is probably due to the depreciation of the exchange rate, as the Philippines
was one of those hit by the currency crisis of the late 1990s.
Figure 1-8. Output Per Agricultural Worker (1990 US Dollars)

1990 US$
8000
7000
6000
5000
4000
3000
2000
1000
0
CHI
IN D IA
IN D O
TH AI
VIET
MAL
BRA
CHL
RP
C o u n try
International comparisons suggest that the country is an average performer in terms of

land productivity. According to Rosegrant and Hazell (2000), from 1967 to 1995, yield
growth in developing Asia averaged 3.3% per year, with the highest growth experienced
by China, Indonesia, Pakistan, and Vietnam. The lowest growth performance occurred in
Nepal; the Philippines is somewhat in the middle. As in Indonesia, Korea, Malaysia, Sri
Lanka, and Thailand, yield growth in the Philippines coincided with the period of the
Green Revolution. In the South Asian countries, yield growth accelerated in the 1980s.
11
The same is true for Vietnam, when the country initiated a regime of agricultural
liberalization.
Yield performance of major crops, particularly rice, corn, coconut, sugarcane, and
banana, has followed a mixed history in the last 50 years. Rice yields grew fastest in the
1960s, and slowed down in the 1970s as the Green Revolution technology diffused and
neared 100% adoption (Table 1-2). However, rice productivity growth picked up again
in the 1980s before its recent slowdown. Corn follows a similar pattern marked by
rapid growth in the 1960s, a slowdown in the 1970s, and subsequently picking up again.
Unlike rice, corn has kept its yield growth fairly steady, with the spread of hybrid yellow
corn, concentration of corn in productive areas, and withdrawal of marginal land from
subsistence farming of white corn (David 2003).
Table 1-2. Yield Growth for Major Crops, Annual
Average by Decade, 1961-2009
Crops
1961-1970
Rice
4.30
Corn
3.19
Coconuts
-2.56
Sugarcane
0.08
Bananas
0.95
1971-1980
2.61
1.54
1.68
0.01
13.44
1981-1990
3.26
2.85
4.91
2.76
-0.59
1991-2000
0.41
3.61
3.11
-1.89
2.70
2001-2009
1.79
4.37
1.15
0.01
3.64
Source: FAOStat (2010)
Fisheries have made an increasing contribution to the output of the

overall Agriculture, Fishery and Foresty (AFF) sector.
With the countrys abundant water resources and long coastlines as an archipelagic
country, the Philippine fisheries sector has made a significant contribution to fisheries
output worldwide. In 2008, for instance, the country posted a total output of 4.4 million
metric tons which was about 3.2% of total world fisheries production and the 8th largest
(FAO).
At the national level, however, the fisheries sector has performed only moderately in
recent decades. Gross Value Added (GVA) in fisheries in constant terms grew from P21.5
billion in 1980 to P61.8 billion in 2008 registering an average annual growth rate of
4.0%. Growth in fisheries GVA was on average faster in the 2000s than in the 1980s and
the 1990s. The share of fisheries GVA to GDP, on the other hand, ranged from 3.5% to
5.0% from 1980 to 2008, having peaked in 1987 and reached its lowest in 2000 and
2001 (Figure 1-9). The share grew the fastest in the 1980s at an average annual rate of
2.2%, subsequently declining in the 1990s, before it increased again the 2000s. The
average share of fisheries GVA to GDP from 1980 to 2008 was 4.3%.
In the last three decades, the fisheries sector has been a significant contributor to the
GVA in agriculture, fishery and forestry (AFF). The share of fisheries GVA to GVA in AFF
12
rose from 15% in 1980 to 28.8% in 2008 when it was at its highest (Figure 1-10). The
share grew the fastest in the 1980s and 2000s when it rose at an average annual rate of
2.7%. In 2008, the share of fisheries GVA to agriculture, fisheries and forestry GVA in
2008 was second only to agricultural crops.
Figure 1-9. Share of GVA in Fisheries to GDP,

1980 2009 (Percent)
6.0
5.0
Percent
4.0
3.0
2.0
1.0
0.0
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
Years
Source of data: Annex Table 2
Figure 1-10. Share of GVA in Fisheries to GVA in Agriculture,

Fishery and Forestry, in Constant Prices, 1980 2009
30.0
25.0
Percent
20.0
15.0
10.0
5.0
0.0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Years
Source of Data: Annex Table 3
In volume of production and by subsector, municipal fisheries dominated the fisheries

sector from 1990 until the middle of the decade when it was surpassed by aquaculture
(Figure 1-11 and Annex Table 6). Commercial fisheries and aquaculture grew faster in
the 2000s compared to the 1990s while municipal fisheries declined in the 1990s but
13
rose again in the following decade. In 2008, the shares of aquaculture, municipal
fisheries and commercial fisheries to total fisheries production in volume were 48%,
27% and 25% respectively (BFAR 2009).
Figure 1-11. Volume of Fisheries Production in the Philippines,
by Sub-sector, 1990-2008 (Thousand Metric Tons)
In value of production by subsector, aquaculture generally dominated in the 1990s, was

about at par with commercial and municipal fisheries in the early 2000s and dominated
again in 2007 and 2008 (Figure 1-12 and Annex Table 7). Aquaculture and municipal
fisheries grew faster in the 2000s than in the 1990s while the reverse was true for
commercial fisheries. In 2008, the shares of aquaculture, municipal fisheries and
commercial fisheries to total fisheries production were 38%, 33% and 28% respectively
(BFAR 2009).
Figure 1-12. Value of Fisheries Production by Sub-sector, 1990-2009 (M Pesos)
Million Pesos
250,000
All Sectors
200,000
Commercial
Municipal
150,000
Aquaculture
100,000
50,000
0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Years
In sum, the aforementioned trends in the fisheries sector indicate the early dominance
and subsequent decline of the municipal fisheries subsector. During the early 1950s,
municipal fisheries comprised the bulk of fisheries production, which was 150% greater
14
than that of commercial fisheries (Trinidad et al 2002). Then, the contribution of

municipal fisheries to total fisheries production dropped progressively in recent years.
Based on data presented in Annex Tables 6 and 7, it decreased from 45% in 1990 to
27% in 2008 in volume while it fell from 37% in 1990 to 33% in 2008 in value. Even so,
municipal fisheries remain the biggest contributor in terms of fisheries employment. In
recent years, municipal fisheries accounted for almost 85 percent of the total
employment in fisheries while aquaculture and commercial fisheries added only 14
percent and 1 percent, respectively (BFAR, Various Years).
Poverty and Employment

Agricultures lackluster and erratic performance over the past two decades has
contributed to persistently high rural poverty in the country.
Balisacan (2003) estimated that in 2000, poverty incidence in agriculture was 46%, the
highest among the major sectors (with the exception of mining). It also contributed
61.3% to population poverty, far exceeding the next biggest sectors (construction, at
7.7%, and the unemployed, at 7.3%).
Overall, the Philippines track record on poverty reduction is among the poorest in the
ASEAN region (Table 1-3). A critical issue is the continuing low productivity and
profitability of the commodities produced by the poor, such as coconut, rainfed rice,
white corn, root crops, and municipal fisheries. Exacerbating this is the relatively low
level of primary producer prices for farm and fishery products. There are indications
that the ratio of farmgate prices to wholesale prices of common farm commodities tends
to be lower in the Philippines compared to many of its Asian neighbors, suggesting the
presence of unique circumstances that drive farm prices down in the Philippines. In
Table 1-4, for example, the ratio of rice farm gate price to wholesale price has been
markedly higher in India, Thailand, China, Pakistan and Myanmar; the Philippine ratio is
comparable to those in Indonesia and Bangladesh, suggesting that we share similar
market inefficiencies with those two countries.
At the same time, the poor have to contend with food prices that are among the highest
in the region (see Figure 1-13). Given that food expenditures account for the largest
share on family expenditure, accounting for the bulk in the case of the poor, high food
prices have a direct bearing on widespread poverty. In particular, cereals especially rice
and corn comprise almost half of household expenditures among the lower income
groups.
Table 1-3. Poverty Incidence in Selected ASEAN Countries
Country
19611970
19711980
15
19811990
19912000
Thailand
Indonesia
Malaysia
Philippines
52.5
58.5
58.6
75.7
36.2
51.0
47.8
66.1
27.3
29.8
22.9
62.2
11.4
23.1
17.4
54.8
Source: National Statistical Data from Government Sources
Table 1-4. Ratio of Rice Farm Gate Price to Wholesale Price

COUNTRY (CURRENCY)
1995
1998
2001
2002
2003
2004
2005
Bangladesh (taka)
Indonesia (000 rupiah)
Philippines (peso)
India (rupee)
Thailand (baht)
China (yuan)
Pakistan (rupee)
Myanmar (kyat)
0.50
0.47
0.48
0.71
0.56
0.68
0.70
0.47
0.38
0.38
0.48
0.52
0.49
1.15
0.73
0.64
0.38
0.46
0.46
0.64
0.68
0.76
0.94
1.84
0.42
0.43
0.48
NA
0.66
0.72
1.05
1.25
0.36
0.39
0.48
NA
0.68
0.94
0.93
NA
0.50
0.49
0.49
NA
0.72
1.18
NA
NA
0.52
NA
0.46
NA
0.60
1.16
NA
NA
Source of Basic Data: FAOStat, IRRI
Figure 1-13. Cross-ASEAN Country Comparison on

Price of Rice, 1991-2008
350
Producer Price (USD/ton)
300
250
200
150
100
50
Indonesia
Philippines
Malaysia
Thailand
0
1991
1994
1997
2000
*3-year average centered at year shown

Source of raw data: FAO Statistics database
Source: FAO
16
2003
2006
Growth in Philippine agriculture and fisheries has been largely confined to the
favorable environments that are generally farmed by better-off producers.
This situation has served to further perpetuate poverty and inequity in the sector. The
agriculture of the poorthose in the rainfed areas, municipal waters, and hillylands
continues to lag behind and drags the over-all performance of the sector. In the fisheries
sector, over-all performance has been largely driven by the phenomenal growth of
aquaculture (as seen in Figure 1-11), which is largely owned by economically better-off
producers. In contrast, municipal fisheries, where the poorest of the sector earn their
livelihood, has seen almost static growth. In the case of the poultry sector, growth
occurs largely on chicken (broiler) and chicken eggs, which are generally controlled by
better-off producers (Figure 1-14). Growth in the value added in the duck industry
appears to have seen an overall decline during the last decade. In the cereal sector, the
yield levels of rainfed rice and white corn crops that are mainly produced by poor
have been very low, seriously dragging the over-all performance of the sector.
Further exacerbating the situation is the observation that the agriculture budget tends
to benefit the better-off farmers at the expense of small farmers in most need of
assistance (see Figure 1-15). In the allocation of the budget provided by the Agriculture
and Fisheries Modernization Act (AFMA), very little has gone to coconut, which has the
highest poverty incidence within the sector. In contrast, the bulk of the budget is
devoted to rice, which has the lowest poverty incidence.
Figure 1-14. Value of Poultry Production by Subsector,

Philippines, 1990-2009
in million pesos
40,000.00
35,000.00
30,000.00
Chicken
25,000.00
Duck
20,000.00
Chicken eggs
15,000.00
Duck eggs
10,000.00
5,000.00
0.00
1990
1992
1994
1996
1998
Source: FAO
17
2000
2002
2004
2006
2008
Figure 1-15. AFMA Budget Allocation
Poverty incidence (%)
90
COCONUT
1.4 M farm s
CORN
0.68 M farm s
45
Average
FISHERIES
1.37 M sm all fishers
RICE
1.35 M farm s
0
0100 1200
1070
2400
3600
4800
6000 7000
7200
8400
AFMA Budget Allocation

(PhP per hectare/fisher)
Source: World Bank (2007)
Poverty incidence in the fisheries sector, particularly in municipal fisheries, is

among the worst in Philippine society.
On paper, fisheries policy in the Philippines professes to be pro-poor. Both the AFMA
and FC emphasize poverty and social equity alleviation as development objectives. The
AFMA (Section 1) declares that The State shall ensure that the poorer sectors of society
have equitable access to resources, income opportunities, basic and support services
and infrastructure especially in areas where productivity is low as a means of improving
their quality of life compared with other sectors of society. For its part, the FC (Section
2) declares as one of the state objectives in the fishery sector the alleviation of poverty
and provision of supplementary livelihood among municipal fishermen.
At the level of the fisheries plans and programs, the CNFIDP did not specifically state the
reduction of poverty and promotion of equity in fisheries as objectives although some of
its stated objectives are clearly intentioned to address these issues indirectly. The GMA
Program for Fisheries states the alleviation of poverty and supplemental livelihood to
fisherfolk as one of its objectives.
Notwithstanding the above, there is deteriorating poverty and inequity in the sector,
indicating problems with implementing official policy. Small farmers and artisanal
fishermen comprise over 90% of all farmers and fishermen in the Philippines (ACPC
2003), with the artisanal fishermen being among the most economically disadvantaged
18
in society. This group, however, is not alone as the poor in fisheries also includes the
overseers, regularly paid workers and seasonal workers in the aquaculture; regularly
paid-workers and share fishers in the commercial fisheries; and the regularly paid
workers, share fishers, non-boat owners, gleaners, shell gatherers, fish trappers, and fish
vendors in the municipal fisheries.
In 2006, poverty incidence among households whose heads are fishers and households
whose heads work in the fisheries industry were significantly higher at 51.8% and
50.7% respectively, compared to an overall poverty incidence in households in the
Philippines at 26.9% (Table 1-5).
Table 1-5. Selected Characteristics of Households in the Fisheries Sector
and All Households of the Philippines, 2006
Household Characteristics
Poverty Incidence
By educational attainment
of household head
No Grade Completed
Elementary Graduate
High School Graduate
College Graduate
Access to safe water
Access to sanitary toilet
facility
Access to electricity
Proportion who are
squatting
Mean family size (number)
Mean income (Pesos/year)
Mean expenditure
(Pesos/year)
% Expenditures on Food
% Households Whose Heads Are:

Fishers
In Fishing Industry
All
Households
(%)
51.8
50.7
26.9
6.6
27.9
12.1
1.0
61.9
5.7
27.8
12.1
1.2
63.0
2.7
18.9
21.8
10.3
81.1
57.7
62.7
59.2
65.4
84.7
82.1
8.0
5.4
90,497
7.6
5.4
92,856
3.8
4.8
172,730
84,807
86,573
147,180
55.3
54.6
41.4
Source of data: NSO (2006)
Comparatively, households of fishers and of other workers in the fishery industry (e.g.,
in processing, storage) also had lower education; lower access to safe drinking water,
sanitary toilet facility and electricity; higher proportion who are squatting; bigger family
sizes; lower incomes and expenditures; and higher proportions of expenditures in food.
19
It is interesting to note that while poverty incidence in fisheries for 2006 as presented in
Table 1-4 was lower than in 2000,5 the incidence of fishermen households and
households in the fishing industry remained significantly worse compared to
households in general. The available evidence further indicates that not only was
poverty in the fisheries sector higher than elsewhere at the national level, it was also
higher regionally compared to other sectors and particularly in the poorest regions
(Briones 2007). Moreover, there is evidence that regions that accounted for greater
shares of the fishery population had very high rates of poverty among fisheries workers
than other regions.
Commercial fishers and aquaculture operators are significantly better off

economically than their municipal fisher counterparts.
Great disparities exist among the subsectors in fisheries. As the previous data show, the
relative shares of the richer commercial fishermen and aquaculture operators have
increased while that of the poorer municipal fishermen has fallen over the years
(Figures 1-11 and 1-12 and Annex Tables 6 and 7). The growing inequality in the
distribution of the economic benefits from fisheries activities has regional dimensions as
well. For instance, fishermen in Western Visayas and ARMM and Mindanao were
generally poorer compared to fishermen in other regions (Briones 2007).
While poverty and inequality are worse among municipal fishermen, this subsector
receives the least government attention. The inequitable attention afforded to
municipal fisheries can be seen in the budget appropriations of fisheries plans and
programs. For instance, although not implemented, the CNFIDP has a planned budget
that provided only an insignificant share of financial resources totally and annually to
municipal fisheries of about 5% or less compared to aquaculture and commercial
fisheries. This neglect is especially glaring since the municipal fisheries subsector
contributes relatively much more to fish production.
Municipal fishermen lack supplemental livelihood options beyond just catching fish.
Many small-scale fishers are tied exclusively to fishing as an occupation and do not
involve themselves into processing and marketing that can add value to their product.
With very limited income generating options, they are destined to be poor from
generation to generation. This situation is unfortunate not only because diversification
and value-addition gives additional income to fishermen but also results to a more open
and competitive environment as more players and products get into the market.
Programs and projects in the fisheries sector appear not to be widely evaluated, and are
not sustainable beyond their project lives. Those that were assessed were found
ineffective or had limited success. Not much work has been done that evaluates
fisheries programs and projects, particularly government-funded, vis a vis their overall
objectives and specifically poverty alleviation and social equity. A review of community5
Based on 2000 figures presented in Israel (2004).
20
based coastal resources management (CBCRM) activities showed projects only have
limited success including in poverty alleviation. They also have limited area coverage
and involve only a small proportion of the population.
Programs and programs in fisheries have also not extended beyond their project
lifetimes. A reason put forward is the financial and managerial inability of LGUs and
local communities to sustain government programs and projects after project life. There
are also other factors including short three-year duration of the terms of local
government officials; b) changing development and personal priorities of local leaders;
c) limited institutional capacity and logistical resources among LGUs and other local
stakeholders; d) potential opposition from certain influential interest groups who are
against the continuation of the activities; and high transaction costs and free rider
problems.
Perverse subsidies further perpetuate income inequality, overcapacity

and unsustainable resources exploitation in fisheries.
Subsidies granted commercial fishermen include direct and indirect subsidies, tax
breaks and rebate on fuel oil tax through the Department of Finance. Imports of boats
over 40 gross tons, sonars, fish finders and other fishing equipment are exempt from
taxes and other import duties while the owner of a 30 gross ton commercial fishing boat
pays a minimal license fee. Since they are given to only large-scale commercial fisheries,
they do not help the municipal fisheries but instead widened the economic gap between
the two subsectors. When commercial fishermen illegally intrude into municipal waters
using subsidized boats and equipment, the subsidies indirectly contribute to the
perpetuation of the unfair situation. Moreover, the subsidies promote further the
problem of excess capacity in commercial fisheries and over-exploitation of fisheries
resources.
Meanwhile, commercial fishers are commonly known to fish illegally in municipal
waters within 15 kilometers from the coastline, in contravention of the Local
Government Code (LGC), which limits such waters to municipal fishers. The FC
amended this provision and allowed small and medium-scale commercial fishers to also
fish from 10 to 15 kilometers of the coastline. However, there have been consistent
reports that large-scale fishers also fish in municipal waters illegally.
Overfishing and climate change threaten the sustainability

of the countrys fisheries.
Early works have indicated that fishery resources of the Philippines, particularly
demersal and small pelagic species, had already been overfished. A later study on tuna
similarly indicated that fishing pressure on the species was high. The main reason put
forward for the overfishing of fish stocks was excessive fishing effort accompanied by
21
coastal area degradation. The Catch Per Unit Effort (CPUE) of pelagic municipal fisheries
has declined dramatically from 1948 to the present indicating resource overexploitation.
Meanwhile, laws, plans and programs in the fisheries sector have so far largely neglected
the threat of climate change. The AFMA, FC and their corresponding plans and programs
generally did not include climate change. Some efforts to address some aspects on the
problems of climate change in the Philippines have been implemented but only a few
concentrate on the impacts of climate change in the coastal system. Being a more recent
phenomenon, there is nothing yet in the literature that evaluates the effectiveness of
fisheries programs and projects addressing climate change issues.
Employment in agriculture has been stagnant, while employment in the

fisheries sector has increased over the past 10 years.
Even as overall employment continues to grow at a rate of about 2.4% per year from the
1990s onward, employment in agriculture has not appreciably increased. Hence,
between 1993 and 2003, the share of agriculture in total employment had significantly
declined from 44% to 36.4%. This has helped keep average labor productivity in
agriculture growing at modest rates, roughly in pace with total employment growth
(Figure 1-16). In common with other countries in Southeast Asia (such as Thailand and
Indonesia), migration from agriculture to non-agriculture has been driven by wage
differentials across sectors, although weakness in employment absorption in the other
sectors has constrained convergence of labor incomes (Butzer, Mundlak and Larson
2003).
Figure 1-16. Labor Productivity in Agriculture, 1991-2008
(Pesos/Worker)
25,000
20,000
15,000
10,000
5,000
1991
1993
1995
1997
1999
2001
2003
2005
Source: Philippine Industry Yearbook of Labor Statistics, DOLE website
22
2007 r
http://www.bles.dole.gov.ph/2009%20Publications/PIYB/
Labor%20Productivity /LABPROD%20Coverage.htm
Figure 1-17. Share of Employment in Fisheries to Total Employment

in All Industries in the Philippines, 1999-2009
5.0
4.5
Percent
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Years
Source: Annex Table 6
Meanwhile, fisheries employment grew at an annual average rate of 5.1% from 1999 to
2008. With an aggregate population growth rate of slightly over 2 percent (and
presumably similar rate of growth in total labor force) in the same period, this implies
that that workers are flocking to fishing as an occupation much faster than the total
number of workers is growing. It thus appears that fishing has been a favored refuge
for those unable to find gainful work elsewhere. The share of fisheries employment to
total employment in all industries has consequently increased (Annex Table 6 and
Figure 1-17). As mentioned earlier, most (85%) of the employment in fisheries was in
municipal fisheries. While direct employment in the fisheries sector was only about 4%
to total employment, about 12% of the population derived their livelihood from
fisheries-related activities. These trends cannot be sustainable, as the overfishing that
results depletes the very resources that more and more people turn to as a last resort,
squeezing the incomes of all who depend on it.
Food Security
Food security means more than having adequate food supply, and
includes food availability, access, and safe utilization.
The Food and Agriculture Organization (FAO) defines food security as a situation in
which the population of a given country has sustained access to food to enable them to
23
have healthy and productive lives. In the 1970s, the meaning dwelled on food
availability, emphasizing the enhancement of farm yields and storage. The prevailing
thinking about food security came out of the 1996 World Food Summit in 1996, which
defined it as a situation wherein all people, at all times, have physical, social and
economic access to sufficient, safe and nutritious food that meets their dietary needs and
food preferences for an active and healthy life (FAO, 1996). Embedded in the current
meaning are three dimensions of food security, which include food availability, access,
and safe utilization.
The change came about in the 1980s and 1990s when the FAO endorsed a broader view
of food security. Besides food availability that depended on programs enhancing
agricultural production yields, a country becomes more food secure if the majority of its
population is income secure and have access to well functioning and cost-effective food
markets. In the 1990s, the nutritional and safety dimensions of food security started to
attract support, which continues to be integral parts of the mainstream definition of food
security. Thus, food security now covers various dimensions including availability,
adequacy, accessibility and affordability of food supply within and in all parts of the
country.
More recently, food price stability has emerged as a key objective of food policy.
Timmer (2009) asserts that the challenge in Asia is for national governments to get
national food prices within the range expected by their respective constituencies in the
most efficient way possible. In 2007/2008, exporting countries like Vietnam and India
restricted their exports of rice in order to keep rice prices stable and affordable. At the
other side of the market, importing countries like the Philippines accelerated their rice
procurement in the hope of dampening the increase of domestic rice prices. These
moves inadvertently increased world rice prices to the detriment of the rest of the riceconsuming world.
For a rice-importing country, seeking to produce all of its rice requirements may be
regarded as insurance against three types of food insecurity risks. One type is that rice
imports may introduce the price volatility of the world market into the country. Second,
rice trade is relatively thin and conducted inefficiently such that import arrivals can be
delayed. Third, exporting countries unilaterally restrict rice exports as what transpired
in 2008. In the following, each risk is examined in the context of the Philippine historical
experience.
Rice prices have been more stable in domestic Philippine
markets than in the export markets.
World rice prices have had their ups and downs through the years, and a few of these
episodes that involve sharp increases are dubbed to be rice crises. Timmer (2009)
observes that on average there are 3 food crises per century. In Figure 1-18, there
appears to be a cycle of rice price surges at least one in a decade in the world since the
1960s. Those in the 1970s and the 1980s were sharper than those in the1960s and the
24
1990s. After declining in the late 1990s and early 2000s, rice prices modestly rose, then
spiked in 2008.
Table 1-6 compares the average annual rice price volatilities6 of Philippine wholesale
and export prices of rice in the world market. The estimated average coefficients of
variation of domestic rice prices are lower than those for the world rice prices. Except in
the 1990s. It may be said that Philippine rice prices exhibited more stability compared
to world export prices. The government has placed a premium to rice price stability
and to keeping out of the country excessive price swings elsewhere in the world.
Figure 1-18. Export Price of Rice, 1961-2009
Table 1-6. Volatility of Annual Prices of Rice, 1961-2007 (In percent)

Period
1961-1969
1970-1979
1980-1989
1990-1999
2000-2007
Philippines
Wholesale
82.76
57.17
56.35
51.13
29.72
World Export
(FOBA)
33.82
124.78
70.68
35.56
40.69
Source: World Bank
The question arises whether or not rice self-sufficiency has contributed to this result.
Policy analysts differ as to the meaning of self-sufficiency. Ordinarily, the term means
that the country produces all the rice that it consumes and has zero imports. This fails to
take into account the conditions how the country had become self-sufficient.
Price volatility is measured as the standard deviation of the natural logarithm of yearly changes in prices,
multiplied by the square root of the total number of observations.
25
Economists would define self-sufficiency in the same way but attaches the condition that
domestic prices are aligned with world prices of rice. Such a standard places exporting
countries to be truly self-sufficient in rice.
The two price spikes in the 1970s and early 1980s reflected the increase of oil prices,
which in turn pushed fertilizer prices and transportation costs up. Higher fertilizer
prices reduced farm yields and dampened the growth of rice supply, causing rice price to
increase. Higher transport cost contributed as well to the increase. The available rice
supply became costly to move across borders.
Since the Philippines has been importing oil and fertilizers, one would expect that local
prices of rice would have been as volatile as those in the world market. However, the
degree of instability of local prices was actually about 46% lower. Several factors may
explain this observation. In the 1970s and 1980s, the country has been exporting small
amounts of rice. Secondly, the government at that time had the oil price stabilization
program, which mitigated the adverse effect of the oil price hikes in the early and late
1970s on the Philippine economy.
The success of the Philippines in the 1970s and 1980s to become self-sufficient and to
marginally export rice until 19837 occurred with substantial public spending to increase
the yields of rice farms. Higher yielding varieties were introduced, and the government
extended farm credit in order to encourage adoption of the technology by the countrys
rice farmers. However the productivity gains could not be sustained. When the
Philippines encountered balance of payments problems in 1982, the government had to
cut back on spending to keep the fiscal deficit down; the rice program was consequently
scaled down.
The countrys experience in the 1970s and 1980s indicates that self-sufficiency made
possible with heavy public spending cannot be sustained. Once the government
withdrew its support, the country went back to where it used to be in the 1960s,
deficient in rice. Productivity gains, sans the scale of public spending as in the 1970s,
had failed to catch up with growing local demand for rice. Sustained self-sufficiency has
to do with the country having a comparative advantage in producing rice and with
relatively lower demand for rice. Exporting countries like Thailand and Vietnam are
self-sufficient in rice for at least two reasons. Compared to the Philippines, these
countries have larger land areas devoted for rice production. Secondly, their use of rice
is less than their outputs due to its smaller population compared to the Philippines.
Philippine experience has shown that self-sufficiency is neither necessary nor sufficient
in keeping rice price volatility elsewhere in the world out of the country, i.e. that
coefficient of variations of domestic rice prices is lower than that of world rice prices. In
the 1990s, domestic rice prices were less stable than those in the world. The price
volatility of the former was 51.13 % and 35.56 % of the latter. It is tempting to attribute
The country continued to export until 1992 but only occasionally and to replace the rice it borrowed
from the rest of the world.
26
this to the countrys no longer being self sufficient in rice. But in the 2000s, the country
continued to be rice deficient, but local prices in the latter period were relatively more
stable than those in the international markets. As the discussion below points out, the
difference is traced to the reluctance of the government to import rice in the 1990s,
which was not the case in the 2000s.
The reluctance of the Philippine government to rely on rice imports particularly in the
late 1980s and for the most part of the 1990s is consistent with its bid to regain the
productivity gains it had in the 1970s and early 1980s. With the change of government
in 1986, the Philippines saw the need of importing rice to keep domestic rice
fluctuations down. However from 1986 to 1998, the government tended to hold the
volume of imports as low as possible. The larger domestic rice price swings compared
to world prices reflected a policy of relying on rice imports as a last resort. It restricted
its private sector from importing rice, when the commodity was adequately available in
the world market. It took the sole responsibility of solely importing rice, but tended to
under-estimate the deficiency apparently so as not to admit its weaknesses in its drive
to regain the self-sufficiency, the country enjoyed in the 1970s and first half of the1980s.
In Figure 1-19, which compares Philippine wholesale rice prices with the CIF prices of
Thai rice, the former tended to exceed the latter. Philippine prices could have been
brought closer to Thailands with adequate access to imports by its private sector. In
1995, the Philippines suffered more severe price instability. Observers of the event
pointed to mistakes made by the DA in assessing how much and when to import rice.
When it realized that it needed to import more rice, the decision to do so came too late.
Imported rice was not in country when it was needed most, and so the rice price crisis in
1995 occurred as it did. Had the private sector been allowed to import, the market
would already have internalized the developing supply deficiency and imported the rice
needed to fill the gap. That could have mitigated the rice price increase in that year.
Figure 1-19. Wholesale Prices of Milled Rice in the Philippines
and Thailand, 1961-2007
27
The El Nio weather phenomenon in 1997 followed that event. With the obvious reason
given by nature that the country could not be self-sufficient, the DA had become more
open to importing rice. However, the estimated rice imports brought in appeared to be
less than needed to bring national rice prices down closer to the border price of rice.
Significant deviations of national from world prices indicate that the country failed to
adequately avail of trade as a solution to rice deficit problems, when it could have done
so. Consumers bear the burden of these mistakes, which impaired their economic access
to rice.
Import restriction in the Philippines is in the form of a statutory monopoly of rice
imports vested in the NFA. The government owned company, along with the DA and the
BAS, determine how much rice imports are allowed into the country. Mistakes made in
assessing the severity of the supply shortage or in the timing when rice imports need to
be in country could have been avoided if the Philippines had allowed the private sector
to import rice along with the NFA. With many importing entities, the likelihood of
committing the mistakes made could have been reduced. Besides, it would have cost the
Philippine taxpayers less since the private sector could have shared with the
government the burden of financing the rice imports.
Since the late 1990s, the governments attitude towards rice imports changed. The
country became increasingly reliant on rice imports. In Figure 1-20, no rice imports
were recorded from the middle of the 1970s till about 1983. Then the government
entered a period of being an off and on rice importer. In 1995, domestic rice prices went
up but the rice imports came in delayed. A large volume of rice imports came in 1998 to
mitigate the adverse effects of the drought in 1997. Since 2001, rice imports steadily
climbed depicting the change of attitude of the government with respect to rice imports.
In 2005, the Philippines became the worlds largest rice importer but slid down to
second in 2006. Starting 2007, it consistently became the top rice importer with a share
of nearly 12 % of total rice imports of the world in 2008.
The El Nio weather phenomenon in 1997 followed that event. With the obvious reason
given by nature that the country could not be self-sufficient, the DA had become more
open to importing rice. However, the estimated rice imports brought in appeared to be
less than needed to bring national rice prices down closer to the border price of rice.
Significant deviations of national from world prices indicate that the country failed to
adequately avail of trade as a solution to rice deficit problems, when it could have done
so. Consumers bear the burden of these mistakes, which impaired their economic access
to rice.
The record shows that relative price stability can be attained even if the country is not
self-sufficient in rice as commonly regarded. In the 2000s, domestic price volatility was
lower than that for export prices. Interestingly, domestic wholesale and export prices of
rice in Thailand appeared to move in tandem with one another (refer back to Figure 119), which may be attributed to increasing reliance on rice imports to stabilize rice
28
prices. The price instability in the 1990s was attributable to poor management of the
countrys rice balance resulting in underestimating import requirements.
Figure 1-20. Philippine Rice Imports and Exports, 1970-2008
There is wide scope for expansion of world rice trade, hence available supplies.
The shallow level of rice trade would make it appear less reliable for the food security
needs of rice-deficit countries, and for that reason, countries tend to increase their
respective national sufficiency levels of rice. Rice trade in proportion to world
production has been the smallest among the top three cereals as the data in Table 1-7
shows. From 1962 to 2007, the export to output ratio (XOR) in the world was 4.53 % for
rice; wheat and maize had 18.51 % and 13.64 %, respectively. A similar pattern applies
to the import to output ratio (IOR).
Table 1-7. Average Cereal Price Volatility and Trade to
Output Ratios: 1962 to 2007 (In percent)
Period
1962-1970
1971-1980
1981-1990
1991-2000
2001-2007
1962-2007
1962-1970
1971-1980
1981-1990
Rice
Wheat
Maize
Volatility
XOR
Volatility
XOR
Volatility
XOR
45.02
120.81
64.64
39.18
73.86
166.71
4.30
3.70
3.77
5.03
6.45
4.53
21.30
89.87
50.34
41.06
64.93
130.12
16.87
17.51
19.59
18.97
20.09
18.51
25.61
67.79
59.66
53.94
57.25
120.70
10.10
15.79
15.67
13.19
13.36
13.64
Volatility
IOR
Volatility
IOR
Volatility
IOR
45.02
120.81
64.64
3.88
3.62
3.42
21.30
89.87
50.34
16.73
17.25
19.36
25.61
67.79
59.66
9.95
15.53
15.78
29
1991-2000
2001-2007
1962-2007
39.18
73.86
166.71
4.18
5.11
3.97
41.06
64.93
130.12
18.87
19.68
18.30
53.94
57.25
120.70
13.02
13.19
13.51
OR Export to Output ratio; IOR Import to Output ratio

Source: Authors computation using trade data of the FAO and price data of the World Bank.
The low level of rice trade in the world perpetuates itself. Because regional rice trade is
thin, rice-deficit countries tend to be less confident in using trade to ensure rice
availability and price stability for their respective populations. The strategy that
governments in rice deficient countries pursue, has been to produce all of their
respective rice requirements, which in turn further reduces rice trade levels. Rice trade
has become more of a last resort of rice deficient countries to ensure adequate rice
supply and stable prices.
If rice deficient countries trust little of trade, fearing its low level may be inadequate to
meet their import demands particularly if there is a region-wide setback in output, it is
worth noting that level of imports, not exports, constrains rice trade as the data in
Figure 1-21 show. From 1960 to 2008, annual world exports tended to exceed world
imports of rice. The observation is made clearer by the data on ASEAN rice trade. The
expansion of the capacity of the ASEAN region to export rice was due to the entry of
Vietnam in the league of the worlds top five rice exporters. In the 2000s, ASEAN rice
imports hardly increased, unlike its exports. Regional rice exports have increasingly
been sold to markets outside the region. Timmer (2009) pointed out that the world
export supply of rice is adequate to meet existing levels of world import demands.
Exporting countries have the capacity to expand their exports if there are added
demands for rice in the world market. Like Vietnam, Myanmar and Cambodia have the
potential to augment the regional supply of rice. With adequate rice demand and
investments in the supply chain in and out of these countries, the rice export supply
capacity of the region can increase. In Cambodia, investments to modernize its road
infrastructure, logistics, and its rice mills have the potential of increasing the countrys
marketable surplus to the world. However, if the rice self-sufficiency objective
dominates food policy in the region, then rice-deficient countries only further induce the
obvious result that rice trade becomes thin and unreliable.
Figure 1-21. Rice Imports and Exports in the World and
ASEAN Market, 1960-2008
The expansion of trade in rice would have added benefits for food security. Had rice
30
trade been as large as those of wheat and corn, rice price fluctuations induced by
temporary setbacks of production, most of which are due to natural causes, are
mitigated. The deeper the trade the more stable its market price. Table 1-6 shows that
annual price volatility is inversely related to tradability. For the entire period from 1962
to 2009, rice had the largest price volatility at 167 % compared to wheat (130 %) and
maize (121 %). Maize turned out to have the lowest price volatility. Rice, which is the
least traded, exhibits the largest coefficient of prices among the three cereals.
This added price stability in crops like wheat and maize is made possible by market
institutions designed to mitigate the adverse effects of output fluctuations. Without a
vibrant and deep regional trade of the commodity, rice futures markets needed in coping
with economic access risks are not feasible. From time to time, rice producing countries
encounter temporary setbacks in production due to localized weather variations.
Export cutbacks by rice surplus countries are based more on political

and not fundamental economic reasons.
The more serious risk that rice-deficient countries may face is that exporting countries
deliberately cut back on rice exports, as what transpired in 2008 when two major
exporting countries, Vietnam and India restricted rice exports. However, as Timmer
(2009) noted, the explosion of rice prices in 2008 could have been avoided because the
market fundamentals did not support the price surge. Rather the uneven level and
quality of information about the true state of the market among the millions of players of
the international rice market in the backdrop of the gradual increase of rice prices
since the early 2000s and the possible supply shortage of rice in Vietnam triggered
panics and herd psychology. Hoarding behavior everywhere pushed up rice prices.
Three factors, all man-made rather than natural, caused the rice price hike in 2008 as
Figure 1-22 shows (Slayton 2009). The first was that India in 2007 restricted its exports
of rice for political reasons. The government in its bid to be re-elected restricted wheat
imports; and to fill the gap in the food balance sheet it restricted exports of non-Basmati
rice. India supplies the world more than five million tons of rice per year. Meanwhile,
the drive for profits explained Vietnams contribution to the rice price crisis in 2008.
Initially anticipating rice shortages due to prolonged cold spell threatening the rice
harvest at the Red River Delta in January 2007, Vietnam restricted its rice exports. Only
Vinafood 2 and few provincial exporters participated to supply the NFA imports of that
year, according to Slayton. As rice prices in the world climbed in the first half of 2008,
Vietnam once again banned its exports, after a brief lifting of the policy export sales ban.
Local traders held on to their rice inventories in anticipation of higher export prices.
Finally, the Philippines added to the growing price crisis by issuing unprecedentedly
large rice tenders. In that year, the Philippines imported about 2.4 million tons, most of
which came from Vietnam. In Figure 1-22, rice prices shot up to $1,100 a ton due to
panic buying.
31
Figure 1-22. Rice Price Movements in 2008 and Export Restrictions
The actions of India to restrict exports in 2007 and 2008 illustrated the overlay of
political to economic considerations in deciding its level of its participation in the world
market. Timmer and Falcon (1975) noted that exporting countries have the similar
tendency of regarding the world rice market as the disposal unit of its surpluses. They
have the mandates as well to stabilize domestic rice or food prices, and if they needed so
restrict exports in times when their national output dips due to natural causes. In
Indias case, its decision to ban wheat importation in order win the votes of farmers had
required it to restrict rice exports. Without structured trade in rice market, each
national government makes decisions to meet their respective political or economic
objectives without realizing that such decisions had the adverse spillover into the rest of
the world market, emulating a global reduction of rice output.
In Vietnams case, there was the initial concern that its rice harvest might be adversely
affected by the dry-spell in the North. But when that fear failed to materialize, the rice
consumers and exporters in Vietnam already faced a world rice price spiral that induced
added pre-cautionary household inventories.8 Like in other countries, the government
of Vietnam is mandated to stabilize its national rice prices at affordable levels to its
population and thus restricted exports.
However, it is not only the Vietnamese households but also the private rice traders, who
held on to their inventories in anticipation that they be allowed to participate in the
export markets when export restrictions would have been lifted. Export restrictions
reduce domestic prices of rice, and that is to the benefit of Vietnams rice consumers.
But if the local demand of rice in Vietnam in those months increased as rice traders
accumulated inventories for higher profits in the future, then benefit of rice consumers
from export restrictions was partly captured by the traders including Vinafood 2. The
Timmer (2009) reported how consumers of rice in Saigon cleaned up rice shelves in supermarkets in
two days.
32
bad news unfortunately was that those inventories lost values when world rice prices
sharply went down in the second half of 2008.
The crisis in 2008 which exporting countries triggered could have been eased. Two
regional cooperation measures could have been used to help dampen the rice price
increase in 2008. One, the information about the world rice market was largely uneven.
As seen in Figure 1-18, world prices of rice started their modest climb in the first half of
the 2000s from their low level at $ 200 per ton. Timmer (2008) attributed that
movement to portfolio investments spilling over into commodities after the housing
market bubble burst in the US, among other factors9. Rice prices could have likely
stabilized at $500 per ton had it not been for the export restrictions by Vietnam and
India, and the panic buying by the Philippines in 2007 and 2008.
With inadequate information, rice market players act on the basis of the information
about the market situation that they may have as rice prices start to climb. Had the
correct information on the rice supply and demand balance been widely disseminated,
rice traders in Vietnam would likely not have sat on rice inventories, and the NFA would
not have issued the amount of rice tenders the way it did in 2008. Households, who
heard about the developing rice price crisis in 2008, would not have seen any need for
stocking up. The ASEAN countries are in the position of causing the leveling of
information about the world and regional rice market.
Furthermore, reducing the market shares of government trading companies like the NFA
and Vinafood 2 in favor of the private sector has the potential of moderating any
unwarranted increases of rice prices such as in 2008, especially if rice trades are
conducted transparently. Private market players are out to maximize profits. If market
players can view the rice transactions that transpire, importers seek out and transact
with the least cost exporters; and the latter tend to move their rice supply to buyers
willing to pay the higher prices.10 The dynamic interaction between a sizable number of
buyers and sellers results in the convergence of price offers and requests into the
equilibrium price that truly reflects the underlying scarcity of rice.
The NFA and Vinafood 2 are two of the largest players in the regional rice market. The
two largely accounted for at least half of the regional rice trade in 2008. It is certain that
if they commit mistakes in assessing the market, these errors are incorporated into the
government-to- government rice procurement agreements they made into in 2008. For
example, the NFA acting on a mistaken assessment that a full-blown rice shortage in
2008 had transpired, issued unprecedentedly large tenders of rice in the world market.
Errors like these can be at least made less likely to happen or completely avoided with
more private sector importers bringing in the volume of rice that the country needed.
These include rising standards of living in China and India; competition for land provided by crops for
bio-fuels; depreciation of the US dollar; and high prices of oil and petroleum products.
10 Stock markets and commodity exchanges are told to allow market players get accurate picture about the
direction of the market. The Agriculture Futures Exchange of Thailand has yet to reach the level of
maturity of commodity exchanges elsewhere. Short of this, the ASEAN may opt to cause the electronic
listing of rice transactions; enforcement of such regulation remains a challenge.
9
33
The rice crisis in 2008 did not proceed from a fairly sharp drop of rice output, such that
the exportable surplus of rice exporting countries is eliminated. While this global
contraction of rice supply cannot be ruled out, the event is least likely. The record of rice
trade in over 40 years shows that such a sharp, widespread setback of rice outputs in the
world had not occurred. Local rice output contraction did occur without bringing down
significantly the total global supply. Rice deficient countries going through this situation
can find relief with imported rice. As explained above, the export restrictions of surplus
countries, and the panic buying of supply deficient countries like the Philippines were
caused by factors other than a global wide contraction in rice output.
The catastrophic situation everyone seems to fear most rice production setbacks in
major rice producing countries could occur, but this is a situation where rice self
sufficiency cannot be a response to the problem. For example, suppose that the dire
projections on rice supplies or agricultural production in general become a reality as in
climate change. If and when they materialize, countries that would be self-sufficient in
rice in those times would also be adversely affected by it and lose their self-sufficiency
status. Exporting countries may at that point sharply reduce their exportable surplus,
and they are expected to restrict exports unless trade coordination rules are formed in
favor of export disciplines. If the adverse effect of climate change on rice production
becomes substantially real, rice deficient countries may have to think of strategies like
food diversification, more than rice self-sufficiency. Indeed that is when they need to
rely on rice trade even more as food diversification may still take some time to have its
mitigating effect for food security.
Competition and Competitiveness

The competitiveness of the Philippine agriculture and fisheries sectors has been
constrained over the years by a number of factors discussed below.
Poor infrastructure remains the greatest bottleneck.
Infrastructure for transport, power, water and communications are basic for increasing
productivity and competitiveness. Unfortunately, the countrys infrastructure is
reported to be among the lowest-ranked in Southeast Asia. The Asia Pacific Millennium
Development Goal Report for 2010 and 2011 rates the quality of Philippine
infrastructure at 2.8 against Singapores 6.7, Malaysias 5.6, Thailands 4.8, Cambodias
3.1 and the global average of 3.8. The World Banks Philippine Development Report
2009 places the Philippines infrastructure in the Logistics Performance Index at 2.5
against Singapores 4.3, Malaysias 2.5 and Thailands 3.1.
Inadequate and poor quality roads and ports increase transport and distribution costs
and adversely affect agriculture productivity and trade. With good transport
34
infrastructure, agricultural produce could reach the consumers in less time, at less cost,
with minimal postharvest losses, and at good quality (Delos Reyes et al. 2010) allowing
both consumers and producers better prices. Likewise, farm inputs can reach farmers at
less cost allowing the optimum use of inputs and increased productivity. Important as
transport systems are, about half of rural villages in the country lack all-weather access
to the main transport system (Dongges, Espano and Palarca 2006). Only about 17% of
the 183,252 km local road network is paved. Gravel roads make up about 51% while
31% are earthen roads (DPWH 2010)
Shipping is also an issue. Banana, an established export crop, still suffers from the
inefficiencies of the transport system, with problems in port access; the high cost of sea
freight; the unpredictability of shipping schedules; lack of space in the ship hold,
improper stowage with some fruit-laden vans being placed near the engine whose heat
leads to the premature ripening of fruits; lack of licensed and skilled arrastre at the
ports; lack or unavailability of container vans; and low priority given to agricultural
produce in the allocation of stowage space. Moreover, at the Manila ports, it takes 4-6
hours before the vans are released due to inadequate port facilities. (Lantican and
Esguerra 2010).
It is thus no wonder that marketing margins11 in the country are high, posting higher
than farmgate prices for most fruits and about 60% for rice and urea fertilizer in 2009
Table 1-8). Margins are influenced by transport expenses, post-harvest losses, number
of traders and the number of layers in the supply chain, all of which are affected by the
quality of transport infrastructure.
Table 1-8. Marketing Margins in Selected Products, 2000-2009
Product
Rice premium
Corngrain Yellow
Banana Lakatan
Banana Latundan
Banana Saba
Calamansi
Mango Carabao
Mango Piko
Papaya Hawaiian
Pineapple Hawaiian
Urea
2000
0.68
1.00
2.03
1.90
1.90
1.92
1.31
1.35
0.56
0.66
0.27
2001
0.73
1.06
1.98
2.04
1.75
2.87
1.53
2.03
0.67
0.88
0.37
2002
0.65
1.10
1.78
1.99
1.73
1.47
1.23
2.18
0.92
1.09
0.34
2003
0.68
0.95
1.67
1.61
1.23
2.35
1.46
2.28
0.80
0.46
0.18
2004
0.62
0.70
1.47
1.39
1.51
1.40
1.04
1.22
0.66
1.23
0.27
2005
0.56
0.90
1.40
1.29
1.58
1.33
0.96
1.40
0.49
1.10
0.32
2006
0.60
0.61
1.45
1.29
1.69
1.19
1.06
1.40
0.73
1.68
0.39
2007
0.56
0.56
1.57
1.40
1.81
1.70
1.00
1.37
1.10
1.50
0.20
2008
0.65
0.68
1.47
1.35
1.74
1.82
1.10
1.39
1.50
1.55
0.31
2009
0.67
0.91
1.32
1.23
1.46
1.11
1.09
1.60
0.76
1.55
0.61
Sources of data: BAS for farmgate and retail crop prices and urea domestic prices; WB quoted in http://beta.irri.org
for urea FOB Price in Europe
Notes: estimated CIF price of urea is FOB price plus $30 per MT; Urea prices in 2009 are Jan to July only
11
Retail price divided by farmgate price minus 1 for farm produce and estimated CIF cost divided by dealers
price less 1 for fertilizer.
35
The development of the nautical highway with its Roll on-Roll off (RoRo) system had
positive impacts on transport costs, especially against the backdrop of very inefficient
and antiquated shipping and ports services. A study on agriculture transport logistics,
for instance, cites that the transport cost of calamansi growers and traders in Mindoro
was lowered from 84% of costs to 44% with the RoRo system (Delos Reyes et al. 2010).
Transporting tomatoes from Misamis Oriental to Manila is 33% cheaper while the cost
of shipping cows (in a 6 wheeler truck) from Negros to Manila is 43% lower (Yap 2010).
These gains are obtained in spite of the fact that RoRo operators gave priority to
passenger buses over agriculture cargo and that the design of RoRo vessels do not allow
adequate ventilation necessary to stem quality deterioration during transport (Delos
Reyes et al. 2010).
Better technology has not been accessible to small farmers.

Technology related problems in production and post-harvest abound. These problems
result in actual yields way below potential as well as very high post-harvest losses, , by
most estimates ranging from 15% to 50% for fruits and vegetables, 15% for rice and 5%
for corn (Briones, 2009; Lantican and Esguerra 2010; Salvador 2010).
The following examples of technology-related problems in fruits and vegetables are
culled from various studies:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Lack of good quality and pest-free seed and planting materials;

Lack of information on existing or need for superior varieties;
Lack of information on better cultural practices such as fertilization, irrigation,
control, pruning and cropping systems;
Pest control and disease problems and lack of information on/ materials for
optimum pest and disease management;
Wrong determination of harvesting period or harvesting of immature or over-ripe
crops;
Inability to use or lack of information on appropriate packaging materials;
Improper handling through the various stages of product marketing and distribution;
Lack of information on suitable post harvest treatment and processing technologies;
and
Non-implementation and lack of knowledge about existing national quality
standards.
Some of these problems result in part from the inability of R&D to generate the
technologies appropriate for and compatible with field conditions and market demand,
However, most persist because of the failure of the extension system to successfully
bring matured technologies to the users and the lack of support services and resources
required by producers to adopt these technologies.
36
Public and private investments in the sector are inadequate.

The lack of meaningful investment is apparent not only in inadequate transport
infrastructure and poor uptake of better technologies. It is also obvious in the lack of
irrigation and other on-farm and postharvest facilities. On the government side,
investment has focused on irrigation for rice, taking up 27 % of the DAs P 48 billion
budget in 2010. From 2001 to 2009, some P80 billion was allocated to rice irrigation
under NIA while less than half, P 32.46 billion, was recorded used by DPWH, DAR and
DA for sector-neutral farm to market roads (Yap 2010).
Private sector investment in agriculture is not encouraging either. The BOI, which
administers the grant of investment incentives, reports that approved investments in
agriculture from 2000 to 2009 came up to P34 billion or an average P3.8 billion a year
(BOI 2010). This is a mere 0.7% of total BOI-approved investments averaging 485 billion
a year in the same period and less than 20% of the P20 billion estimated annual DA
budgetary requirements under AFMA.
In the fruits and vegetables sector, the lack of meaningful investments hinders the ability
to expand exports. Lantican and Esguerra (2010) lists the following critical
inadequacies:
1.
2.
3.
4.
Collection centers or packing houses where the preparatory activities such as

sorting, trimming, delatexing, sizing and grading, and packing, are usually
undertaken.
Disinfection facilities such as those for hot water and vapor heat treatment
Cold storage facilities and refrigerated vans (cold chain system) further constrained
by the limited capacity of the ports as well as ships and vessels to accommodate
refrigerated vans and the spotty availability of electricity in the major collection
centers
Laboratories for the analysis of pesticides and other chemical and microbial
contaminants, with the NPAL of the BPI as the sole accredited laboratory for
microbial and chemical testing and certification.
Threshing, drying, milling and storage together account for 80% of the 15% estimated
post-harvest losses in rice which can be corrected with investments in appropriate
equipment.
Support systems are inadequate.
A number of support systems are critical for producers to meet market demand. Two of
the more important, also identified in AFMA, are market assistance and information
systems and product standards and quality systems.
The DA has not put in the resources that will make the market assistance and
information system significant for agricultures competitiveness. Market assistance and
37
information systems include institutions and services related to market promotion,

market information and supply chain development. DA pursues market promotion
through the conduct of and support for private sector participation in trade shows,
exhibits, congresses and investment fora while supply chain development includes
support for postharvest facilities (cold chain facilities) and market infrastructure
(bagsakan centers) with a focus on the non-traditional commodities. Market information
services remains limited though the beginnings of a system was implemented in selected
regions under the World Banks Diversified Farm Income and Market Development
Project (DFIMDP) paving the way for the design of the Agriculture and Fisheries Market
Information Service (AFMIS) and its launch last June 2010.
Government is not currently set-up to provide product standards and quality systems
adequately. It does not have the proper organizations, mandates and technical staff
complements for services to assist producer and exporters comply with product and
process standards for food safety and pest and disease control. The system is big and
technically demanding. It involves not just the Bureau of Agriculture and Fisheries
Product Standards (BAFPS) that AFMA created but also a number of DA inspection and
quarantine agencies and laboratories. Its functions include the development of product
standards, risk assessment, crafting of inspection and testing protocols, product
inspection, product testing, and product certification. As many importing countries are
adopting process standards (e.g. GAP, GMP, HACCP) in addition to product standards
among its requirements for imports, the system also involves the development of
process standards, accreditation of firms, and monitoring and regular inspection of
accredited firms, which includes testing of water and other materials used in the
process. The function also includes what to do when an unacceptable risk is determined
to be present which are pest and disease control and management, product recall, and
product quarantine and treatment, as necessary. The next section discusses the need for
legislation that will provide the appropriate organizations and important mandates for
these services.
Some regulations also need review. Before the emphasis on product safety and quality,
regulations focused on licensing and registration for industry monitoring and revenue
generation. Some of these unnecessarily burdensome licensing regulations persist,
unduly increasing the cost of doing business. For example, the Fertilizer and Pesticide
Authority (FPA) licenses all fertilizer handlers importers, manufacturers, exporters,
indentors, processors, formulators, repackers, distributors, area distributors, bulk
handlers, and dealerships and their facilities. It also registers all fertilizer products,
including inorganic fertilizer, organic fertilizer, soil conditioners, plant growth
promoters, specialty fertilizer and their raw material. A handler license is renewed
annually while a product registration, every three years. The documentary requirements
are exacting while the fees are not uniform, depending on membership in industry
organizations and company capitalization (FPA website).
A number of policy gaps remain to be addressed.

38
There has been much progress in trade liberalization in terms of reducing the range and
level of the countrys tariffs but two sectors remain highly protected. For rice and sugar,
MFN and CEPT tariffs are still high and significant import restrictions remain in place12.
The continued higher protection for these products makes them relatively more
attractive thus drawing away potential resources for producing other commodities.
More important, in the case of sugar, the protection keeps its price high limiting the
profitability, growth and competitiveness of sugar-using products like processed fruits.
The high cost of sugar is cited as a critical constraint for the fruit processing industry
(Lantican and Esguerra 2010).
The AFMA provides a comprehensive blueprint for modernizing Philippine agriculture.
However, while it defines food security in terms of availability and affordability, it also
decrees that the production of rice and white corn shall be optimized to meet our local
consumption and shall be given adequate support by the State. Unfortunately, the
AFMAs implementation saw the effort to attain rice self-sufficiency eclipsing all the
other mandated modernization objectives and competitiveness strategies and starving
other sectors of much-needed support.
The slow pace of agrarian reform decreed under CARP has created lingering
uncertainties in the land market that restricts credit access and discourages meaningful
investments for agriculture. Land transfer is restricted for lands yet to be transferred as
well as lands already awarded, except to government, the LBP and other qualified CARP
beneficiaries, effectively eroding the land market and lowering the collateral value of
agricultural land (Llanto and Ballesteros 2002). In addition, the cost of land
consolidation under land leases has increased as there are too many landowners to
negotiate with. Also, LGUs lost their tax base because cooperatives of beneficiaries are
exempted from land and property taxes (Dy 2009).
With increasing trade and globalization, food safety has become a major concern for
importers and challenge for exporters. Importing countries are using increasingly
stringent food safety and sanitary and phyto-sanitary (SPS) regulations to protect its
consumers and agriculture from unsafe food products and harmful pests and diseases.
However, the Philippines does not have a comprehensive legal framework for food
safety and SPS measures. Various agencies of the government, including a number under
the DA, hold some mandate for this function but the mandates are overlapping in some
areas and deficient in many, especially with respect to food safety (EMERGE 2006). The
distribution of mandates also engenders significant conflicts of interest as most of the
involved institutions are tasked to both make and enforce the regulations without
outside review or monitoring. The agencies have responded through a patchwork of
administrative measures meant to address the need for regulation while staying within
the parameters of existing outdated laws.
Meat products and select vegetables like onions, potatoes and garlic also have higher MFN tariffs but
their CEPT tariffs have been brought down.
12
39
Farmers need to be better organized.

Most Philippine farms are small, averaging less than 3 hectares. This should not be an
issue because there is a proliferation of schemes to organize producers and link them to
processors and markets. Non-traditional supply chains that involve private joint
undertakings such as contract farming, adopt a farm, cooperative farming and
marketing, joint ventures and the like have emerged to address the market access
problems of small producers on one hand and supply issues of processors and markets
on the other. Briones (2009) classifies some of these arrangements for the fruits and
vegetables sector:
1. The market specialist chain, where brand name suppliers provide a wide range of
products to a supermarket chain (e.g. Gomez Farms). This is obtained from a variety
of sources, such as farmers and marketing agents. The supermarket typically
identifies a preferred supplier, who in turn commits to a schedule for delivering an
assortment of products of specified quantity and quality.
2. The product specialist chain. This chain also spans a range of sources, but product
specialization is evident. In the case of FreshCorp, tomato farmers who wish to
supply to the company sign a marketing contract over a specific weekly volume and
price band. The quantities are determined by the farmer, who agrees to the ceiling
price; meanwhile FreshCorp agrees to sell the product with a floor price, and with a
brokerage commission. FreshCorp also informs farmers about quality specifications.
3. The processor-managed chain, which emerged to meet the requirements of fast food
operators, which demands pre-cut and washed salad vegetables and processed
coleslaw. Their suppliers either found reliable processors, or evolved into processors
themselves.
4. The producer-managed chain, of which an archetypal example is NorminVeggies of
Northern Mindanao. This group was organized by farmers as a marketing cluster,
able to realize scale economies in transport, gain access to development assistance
from NGOs and government, and share technologies and market intelligence. The
cluster established a corporation called NorminCorp to function as a marketing arm,
in return for a sales commission. Unlike in the other chains, farmers obtain the entire
revenue paid by the institutional buyer, or the vegetable wholesaler.
The product-specialist chain and the processor-managed chain are the more popular
and practical arrangement for exporting and is seen in banana, pineapple, okra, mangoes
and even fish products. The product specialist or the processor is accredited as the
exporter who then takes major responsibility for quality control, grading, packing and
treatment to meet the stringent and costly quality standards and testing demanded by
markets.
40
Cooperatives or producers organizations are among the organization models that can
continue to be pursued. In spite of the many cases of reported past failures, there are a
number of success stories that suggest their potential, under the right circumstances,
for strengthening and democratizing the value chain through farmer clustering, such as
NorminVeggies,
the LIMCOMA Multi-purpose Cooperative and Cavite Farmers
Feedmilling and Marketing Cooperative.
Emerging developments pose additional challenges.
Some of the challenges that can also spell opportunities for the countrys agriculture and
exports are13:
1. Increasing pressure on food supply because of the growing domestic population. This
means that as the country strives for increasing productivity in cereals, it will also
need to increasingly make available a variety of food that can provide not only the
required calories but also the important nutrients;
2. Increasing demand for quality food because of a growing middle class in China, India
and the ASEAN region;
3. Rising energy prices that heighten the need to improve the rest of the logistics
system;
4. Rising fertilizer prices due to the non-renewable nature of raw material sources
which will require more investments for organic and bio-fertilizers as well as more
efficient nutrient capture in production processes;
5. Increasing scarcity of land and water for agriculture due to demand growth and
competing uses which should be compensated with higher farm productivity and
better crop choices;
6. Increased concern for product safety and quality and the growing demand for
product traceability;
7. Expanding market for healthy, environment-friendly, natural and organic products;
and
8. Threats from climate change which requires serious effort on adaptation measures.
Various issues undermine competitiveness in the fisheries subsector.
A number of issues need to be addressed to in order to improve the competitiveness of
the domestic fishery industry. These include the following:
13
See Dy (2009).
41
1. The impact of fisheries trade on fisheries resources has been negative and significant
as exportation exacerbated the overfishing. Tuna and other exported stocks of the
country have diminished following the extensive use of aggregating devices and
other catch efficient fishing gears. Likewise, shrimp aquaculture for exports has led
to the destruction of over 300,000 hectares of mangroves which in turn affected the
nursery areas for all varieties of fish as well as exposed coasts to the vagaries of the
weather.
2. A significant portion of exported fish products are in fresh and frozen forms and
lacks value addition. This limits economic benefits of the country from international
trade as it becomes to a large extent only a source of raw materials for the fish
processing industries of importing countries.
3. Some exported fish products are rejected since they do not meet international
product quality standards. Another issue related to exportation is compliance to
international product standards and requirements. Of particular concern is meeting
fish food safety and environmental standards where compliance only favors largescale operations that enjoy economies of scale in processing.
4. The fish processing industry generally is oligopsonistic with only a few players.
While fishermen and fish growers who sell fish are numerous, fish processors and
fish exporters who process and export the fish are relatively few. This gives rise to
potential price collusion on the part of the fish buyers making the fish for export
market monopsonistic or oligopsonistic.
5. At the fishing ports, the marketing of fish is controlled by few consignacions or fish
brokers and involved various middlemen. The marketing of fish in fishing ports and
fish landings is controlled by consignacions after which the fish passes through
several wholesalers, retailers and other fish traders and middlemen before reaching
the final buyer. This long chain has increased the final price paid.
Even as competitiveness has declined, there is scope for export growth in some
commodities wherein the country enjoys comparative advantage.
One important effect of the relatively low yield level of Philippine export crops as
discussed earlier is the countrys declining agriculture competiveness both in the
domestic and export markets, as indicated in trade data. Aggregate agriculture imports
have been increasing relative to total imports and were higher than agriculture import
shares in other ASEAN countries and the world. On the other hand, the share of
agriculture exports in total exports dropped in 1996 and has not recovered since,
posting levels lower than in other ASEAN countries and rest of the world in 2007 (Table
1-8).
42

AFMP Revised Final Report Jan5-10

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

AFMP Revised Final Report Jan5-10

Uploaded by

Copyright:

Available Formats

Fostering Our Farms, Fisheries and Food:

Technical Assistance for the Formulation of the Successor

Objectives of the Study

Organization of the Report

Where We Have Been,

Production, Productivity and Yields4

phenomenon that had appreciable impact on weather patterns, and consequently

Figure 1-1a. Growth Rates of Agriculture Value Added and Exports,

Figure 1-1b. Growth Rates of Agriculture Value Added and Exports,

Figure 1-1c. Growth Rates of Agriculture Value Added and Exports,

Figure 1-1d. Growth Rates of Agriculture Value Added and Exports,

Source: ADB, WTO Websites

Figure 1-2. Agriculture Value Added Growth Rate,

Source: BAS website

Source: BAS website

Source: FAO Stat

Source: FAO Stat

Figure 1-5. Cross ASEAN Country Comparison on

Source: FAO Stat

Figure 1-6. Cross ASEAN Country Comparison on

Source: FAO Stat

Figure 1-7. Cross ASEAN Country Comparison on

Source: FAO Stat

Labor and land productivity in agriculture have been average,

Figure 1-8. Output Per Agricultural Worker (1990 US Dollars)

International comparisons suggest that the country is an average performer in terms of

Source: FAOStat (2010)

Fisheries have made an increasing contribution to the output of the

Figure 1-9. Share of GVA in Fisheries to GDP,

Source of data: Annex Table 2

Figure 1-10. Share of GVA in Fisheries to GVA in Agriculture,

Source of Data: Annex Table 3

In volume of production and by subsector, municipal fisheries dominated the fisheries

Source of data: Annex Table 6

In value of production by subsector, aquaculture generally dominated in the 1990s, was

Source of data: Annex Table 4

than that of commercial fisheries (Trinidad et al 2002). Then, the contribution of

Poverty and Employment

Source: National Statistical Data from Government Sources

Table 1-4. Ratio of Rice Farm Gate Price to Wholesale Price

Source of Basic Data: FAOStat, IRRI

Figure 1-13. Cross-ASEAN Country Comparison on

Producer Price (USD/ton)

*3-year average centered at year shown

Figure 1-14. Value of Poultry Production by Subsector,

Figure 1-15. AFMA Budget Allocation

Poverty incidence (%)

AFMA Budget Allocation

Source: World Bank (2007)

Poverty incidence in the fisheries sector, particularly in municipal fisheries, is

% Households Whose Heads Are:

Source of data: NSO (2006)

Commercial fishers and aquaculture operators are significantly better off

Based on 2000 figures presented in Israel (2004).

Perverse subsidies further perpetuate income inequality, overcapacity

Overfishing and climate change threaten the sustainability

Employment in agriculture has been stagnant, while employment in the

Source: Philippine Industry Yearbook of Labor Statistics, DOLE website

Figure 1-17. Share of Employment in Fisheries to Total Employment

Source: Annex Table 6

Table 1-6. Volatility of Annual Prices of Rice, 1961-2007 (In percent)

Source: World Bank

OR Export to Output ratio; IOR Import to Output ratio

Export cutbacks by rice surplus countries are based more on political