Agriculture key to inclusive growth

THE KEY to strong, sustained and inclusive growth in the Philippines is the performance of the agriculture sector. Agriculture accounts for a significant, though decreasing, share of gross domestic product (GDP) and is the source of employment of roughly 40% of Filipino workers. A great majority of the poor, approximately 70%, live in rural hinterlands and their livelihood are tied up with agriculture, fishery, or forestry.

Yet, policymakers continue to ignore the strategic value of agriculture to economic output, employment, and poverty reduction. Approximately four of 10 workers are engaged in agriculture and basic food processing. The sector provides the cheapest mode of employment — cheaper than construction, finance, business process outsourcing, and others.

A strong performing agriculture output helps feed our people at more affordable prices. This is especially helpful to the poor whose typical commodity basket predominantly consists of food.

On the other hand, an anemic agriculture sector worsens rural poverty, forcing farm workers to migrate to urban centers. This, in turn, leads to congestion, rising informal settlers, and extreme joblessness. Not surprisingly, the National Capital Region has the highest unemployment rate in the country. In October 2012, unemployment rate in NCR was a horrendous 11.0%.

Because of policy neglect, flawed implementation of agrarian reform, and restrictive laws on foreign land ownership, the growth of agricultural output continues to struggle. For the first three quarters of the 2012, nominal agricultural output shrunk by 0.1% (-1.3% in Q1, -3.1% in Q2 and 4.1% in Q3) but, surprisingly, managed to grow by 1.9% in real terms (0.6% in Q1, 1.0% in Q2, and 4.1% in Q4).

Surprising? How can the sector grow by 1.9%, after correcting for inflation, and at the same time shrink 0.1%, in nominal terms? Puzzling. But that’s for government official statisticians to explain.

IN DENIAL
Public authorities prefer to celebrate the 7.1% growth in GDP in the third quarter of 2012, while tuning off what’s awfully wrong in our laws and policies affecting agricultural development.

The Constitution forbids foreign ownership of land. This alone retards the modernization of agriculture through heavy investment in farm infrastructure, and extensive use of modern technology.

Agrarian reform, which has been going on for half a century, has been a dismal failure. Its implementation has been hampered by vested interests. The agrarian reform rules restrict the size of landholdings and prevents the development of a land market by making transfers of title illegal.

The ban on foreign ownership of land and the restrictive agrarian reform rules prevents the emergence of commercial farming, which requires economies of scale in agriculture, large-scale investments, and long gestation.

As a nation, we’ve taken the short-sighted road. We’ve focused on land distribution, with all its flaws and limitations, while sacrificing efficiency and effectiveness in agriculture production and employment.

MILLIONS OF FILIPINOS LEFT BEHIND
Not surprisingly, with the uneven growth, a lot of Filipinos are being left behind.

With joblessness rising and poverty incidence worsening, the 7.1% GDP growth in the third quarter of 2012 seems irrelevant.

The results of the fourth quarter 2012 survey by the Social Weather Stations (SWS) showed that 54% (estimated 10.9 million) households consider themselves Poor. This is the highest proportion of families who consider themselves Poor since June 2008, the approximate period world crisis reached Philippine shores.

Since the quarterly SWS survey results are “noisy,” it might be more useful to look at the annual average of self-rated survey results in recent years. The average annual self-rated poverty was 49% in 2009, 48% in 2010, 49% in 2011, and 52% in 2012.

In recent quarters, more than half of families surveyed feel that they are poor: 55% in March, 51% in May, 47% in August and 54% in December 2012.

Based on these numbers, a reasonable conclusion is that self-rated poverty has worsened during the last three years; or, at best, that there has been no improvement in the lives of most Filipinos in recent years.

With joblessness increasing, and self-rated poverty worsening, one is justified to ask: who benefited from the 6.5% GDP growth in the first nine months of 2012? —
Benjamin E. Diokno, BUsinessworld

(Benjamin Diokno was Secretary of Budget and Management from 1998 to 2001. He is Professor of Economics at the U.P. School of Economics.)