SMEs and rural mobilization

People in the provinces today are less poor than they were a couple of decades ago, thanks to the redistribution of incomes brought about mostly by the dispersal of economic activity, specifically of SMEs, but this is not to say that everyone is now well off in the rural areas. It would be safe to assume that probably about one-third of the families in the 17 or so regions in the country are still below the poverty line. A useful indicator is the presence of political instability. When you have a substantial presence of the Muslim separatists or the New People’s Army, you can be sure that you have conditions of grinding poverty in the area, as in the case of Eastern Visayas and parts of Mindanao where the armed forces have the most serious challenges.

Against such a bleak background of rural poverty, the government must by necessity address the problem of rural under-productivity which is the root cause of the economic malaise of the regions. Promoting rural agro-industrialization will be cost-effective because the fight against poverty will also be a campaign against insurgency. In short, we will be killing two birds with one stone.

Specifically, the remedy to rural poverty is the dispersal of SMEs throughout the countryside. In other countries, by promoting the dispersal of SMEs in the countryside, satellite cities formed rings around metropolitan districts effectively curbing the flow of the unemployed into the metropolitan areas and causing untold social problems there. Today satellite cities housing SMEs have stretched from Malolos in the north to Calauan in Laguna, Ternate and Tagaytay City, Cavite and Santo Tomas, Batangas in the south and to Tanay in the east.

As industrial centers become the nucleus of urban conglomerates with their large-scale industrial projects generating thousands of employment opportunities, the vision is that these developments will trigger the expansion of SMEs around these establishments through production outsourcing activities. We already see this happening around mega cities like Metro-Manila, Cebu, Davao, Iloilo, Cagayan de Oro and General Santos City.

These SMEs will be the result of agro-industrial complemen-tation. The vertical integration of agricultural activities or what economists call the forward and backward linkages which unfortunately the import substitution industrialization did not provide. It must be pointed out that the import substitution policy only created a few assembly operations for imported items which activities only provided labor inputs as value-added. This led a cynic to describe one such operation as a beauty parlor.

The import-substitution policy created industries that were located close to ports because their raw materials were mostly imported thereby discouraging the dispersal of industries to the countryside. Had we complemented our import substitution policy with agro-industrialization we could have generated comparative advantage for our export industries while creating more workplaces for our people.

If today we continue to import a lot of our foodstuff, including staple products like rice, it is because of our penchant for consumer import substitution which did not in any way improve levels of productivity, incomes and employment in the countryside.

Instead of TVs, cars and modern appliances we should have embarked in the production of ploughs, small tractors, irrigation pipes, small silos and other equipment needed in the farms. These items by the way are produced in other countries by SMEs.

Most of the poor in this country are to be found among subsistence farmers and very small landholders. Their small plots of land which are shared by tenants and even sub-tenants.

The poor are also found among agricultural workers. These rural folk suffer from an underdeveloped input delivery system, a circuitous marketing channel for their produce, the lack of adequate farm equipment, inadequate farm–to-market roads, little or no access to credit and irrigation systems, primitive farm technology—the list is endless.

What is needed today is rural-mindedness on the part of the economic planners and the commitment to embark on the mobilization of the rural areas as a counterfoil to the revolutionary agrarianism now being waged by our brothers of leftist leanings in the hills and the separatist movements by our Muslim brothers in the south. This rebellion is rooted in rural immobilism and the benign neglect of agriculture. I hope we will not have to wait for the next administration to embark on this big challenge. –Jose V. Romero Jr. Ph.D., Manila Times

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