Agriculture has been left behind

The next President should prioritize agriculture. It’s one solid way of giving meat and substance to the lofty goal of strong, sustainable and inclusive growth.

All talk about strong, inclusive economic growth will remain empty talk for as long as agriculture is being left behind. The consequences of ignoring agriculture are enormous. About one-third (11 million out of 37.4 million) of the country’s work force is employed in the agriculture sector. And more than half of poor Filipinos who live in rural areas depend on it.

A more productive agricultural sector will benefit the approximately 100 million Filipinos, especially the poor, in terms of cheaper food.

A more productive agriculture will also promote food manufacturing, and hence create a lot of decent jobs in industry, in two ways: first, agricultural inputs will be cheaper; and second, demands for higher wages will be tempered by lower food prices.

For a poor, labor-surplus economy like the Philippines, the need to prioritize agriculture should not be hard to justify. Policy makers should know that it is cheaper and easier to create jobs in agriculture as compared to those in business process outsourcing (BPO), financial sectors, or even construction.

Policy makers know that half of the poor are in the rural hinterland; hence the easiest way of reducing poverty is by creating jobs in agriculture and in farm-related small- and medium-scale industries. Yet political leaders continue to talk about mega projects in urban areas, all of which by the way remain unfinished.

By an ugly twist of fate, the agriculture sector has been neglected all these years. Four of five post-EDSA 1 presidents (Corazon Aquino, Fidel Ramos, Gloria Macapagal-Arroyo and Benigno S. C. Aquino III) have failed to prioritize agriculture.

Only President Joseph Estrada, during his truncated term, focused on agriculture. During Estrada’s watch, agriculture output grew, on average, much faster than GDP growth -- 6.5% versus 3.8%. In fact, during Estrada’s first year in office, when international expert William Dar was head of the Department of Agriculture (DA), the sector soared by a stunning 9.6%, the highest growth rate in the post-EDSA 1 period.

Agriculture was not only neglected, it has also become the favorite playground of corrupt government officials. Not coincidentally, the worst scandals in the use of public funds took place in the DA, the National Food Authority and the National Irrigation Administration: the fertilizer scam, the irrigation scandal, the rice importation scams, and pork-barrel funded farm-to-market roads (or is it farm-to-resort or farm-to-vacation-home roads?).

It is revolting that while a big chunk of the annual budgets has been appropriated for the Department of Agriculture and other related agencies, very little output has been produced. Blame it on the bloated agriculture bureaucracy. And blame also the inept Secretary of Agriculture.

Remember the promise that the country will be self-sufficient in rice by 2013?

Historically, agriculture has grown much slower than the overall economy. There were two exceptions: in 1991 (when the sector grew by a weak 1.5% while the economy contracted by 0.6%) and in 1999 (when agriculture climbed by a historic 9.6% while the economy grew 3.1%).

Ideally, for an economy that has grown at 6% during the last four years, agricultural output should grow by about 3.5% to 4%, comfortably higher than the population growth of about 2%. However, from 1986 to 2014 -- the entire post-EDSA 1 period -- agriculture grew, on average, by only 2.4%. Agricultural production has barely kept up with population explosion. No wonder, poverty and hunger persist.

Per administration, the country had the highest growth in agricultural output, on average, during Estrada’s term (6.5%). The sector grew 2.9% during Arroyo’s almost 10-year reign; by 2.1% during Noynoy Aquino’s term; and by 1.9% during Cory Aquino’s watch. It sunk to its lowest average growth of 0.8% during Ramos’ term.

Government statistics show that despite recent growth, fishermen and farmers remain to be the poorest groups in the country. Three of 10 farmers and almost half of fishermen live below the poverty threshold.

The following observations and conclusions appear warranted.

First, average GDP growth from one administration to another is improving. This is to be expected as reforms in previous administrations benefit the incumbent. Moreover, the steady inflow of remittances by overseas Filipino workers, now about $25 billion annually, has changed the dynamics of financing Philippine debt and its foreign exchange requirements. Unlike before, the country no longer runs out of foreign exchange whenever it is faced with a crisis.

Second, while overall GDP growth is improving, the growth of agriculture that affects the lives of a majority of Filipinos, especially the poor, is deteriorating. Not surprisingly, both unemployment and poverty have remained unacceptably high.

Strong economic growth cannot be sustained, and it cannot be inclusive, if agricultural output growth remains weak.

Third, the next President should hit the ground running by unveiling in his first 100 days in office a program of modernizing agriculture and his strategy of dealing with agrarian reform. The consensus among experts is that the latter is a major constraint to energizing agriculture in the Philippines.

Fourth, the next President should appoint an honest, competent, decisive and accountable man to head the Department of Agriculture. He should be an agriculture expert, not a politician. Under the Aquino administration, there appears to be no pressure to hold the Agriculture Secretary accountable for his poor performance. The outputs and outcomes of the agriculture bureaucracy do not tally with its annual appropriations.

Instead of firing the non-performing Agriculture Secretary, President Aquino III opted to appoint another “Super Secretary.” Instead of dealing with the problem head-on, he complicated it. The department is now in an idiotic situation where it is run by two heads, with the additional costs and duplicating functions that it entails. This is a clear case where two heads are not necessarily better than one.


Benjamin E. Diokno is a former secretary of Budget and Management.

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This column article originally appeared on Business World Online and is shared here with permission from the author.

Benjamin E. Diokno
Author: Benjamin E. Diokno
Professor Diokno is a professor of Economics at the University of the Philippines School of Economics. He served the Government of the Philippines in various capacities including as secretary of budget and management, fiscal adviser to the Philippine Senate, chairman and CEO of the Philippine National Oil Company and chairman of Local Water Utilities Administration. He provides policy advice and conducts research in the following areas of public economics: structure and scope of government; tax policies and tax reform; government expenditure analysis; national budget and public debt; fiscal decentralization; public expenditure management, and public policy analysis.