The Asean agri-food trade: How is the Philippines faring?

This article takes a snapshot of Philippines and Asean trade in 2016.
The country’s major trading partners were: Indonesia, Malaysia, Singapore, Thailand and Vietnam.

Data used were from the trading partners’ standpoint, not from the Philippine standpoint. Why? Philippine data is less accurate because of smuggling and under-recording.

Overall

The five Asean countries exported to the Philippines some $23.4 billion free-on-board (FOB) worth of goods while importing only $10.7 billion (cost plus insurance and freight or CIF) for a trade surplus of $12.6 billion in 2016.

Note: The official Philippine data showed imports of $22.5 billion CIF, and Philippine exports of $8.4 billion FOB, for a deficit of $14.1 billion. In principle, Philippine imports should be higher at CIF basis as these left the five countries at $23.4 billion. About five percent can be added to reach $24.5 billion. This brings trade deficit to about $16.1 billion.

With respect to agri export, all the five countries exported $3.8 billion while importing only $0.6 billion, giving a lopsided surplus of $3.2 billion. Note: Official data showed Philippine imports from the five countries at only $3.4 billion CIF and exports of $0.5 billion FOB for a trade deficit of $2.8 billion. Using Asean exports to the Philippines at CIF basis, imports would reach $4.0 billion, or a trade deficit of $3.5 billion.

On the non-agri side, although not the focus of this article, the five countries exported $15.2 billion and imported $10.1 billion, for a surplus of $9.5 billion.

In both categories, the five countries posted surpluses.

ASEAN-Philippines Trade, 2016
US$ million
Exports to the Philippines Imports from the Philippines Surplus
(Deficit)
Agri Export 3,821 597 3,224
Non-Agri Export 19,615 10,141 9,474
All Exports 23,436 10,738 12,698
(a) Vietnam: 2015 data
Source: UN Trademap, UA&P Analytics

Indonesia-Philippines trade

In 2016, Indonesia exported $900 million worth of agri goods and imported a measly $7.3 million. Miscellaneous food preparations consisted the largest exports ($348 million), principally coffee extracts in sachets, e.g. Kopiko. Next were palm oil ($274 million), sugar confectionery like molasses and candies ($54 million), cereal preparation ($51 million), and beverages ($48 million).

Indonesia – Philippines Trade, 2016
US$ million
Exports to the Philippines Imports from the Philippines Surplus
(Deficit)
Agri Export 900 7 893
Non-agri Export 4,371 815 3,556
All products 5,271 822 4,449
Source: UN Trademap, UA&P Analytics

Malaysia-Philippines trade

Malaysia exported $793 million worth of agri products while importing only $210 million. The dominating export was palm oil ($516 million), followed far behind by cereal preparations ($96 million), other food preparations ($67 million) and cigarettes ($46 million). Palm oil was the main item in the vegetable exports.

In the cereal preparation category, malt extract cornered $59 million; natural rubber, $54 million; and vegetable oils, mainly coconut oil ($38 million). Malaysia is the major destination of the Philippines’ natural rubber exports.

Malaysia – Philippines Trade, 2016
US$ million
Exports to the Philippines Imports from the Philippines Surplus
(Deficit)
Agri Export 793 210 583
Non-agri Export 2,496 1,380 1,116
All products 3,288 1,590 1,699
Source: UN Trademap, UA&P Analytics

Singapore-Philippines trade

Singapore, with little agriculture, exported $539 million while importing only $171 million. The main exports were from miscellaneous food preparations, mainly powdered concentrates ($259 million), alcoholic beverages ($81 million) and cereal preparations ($75 million).

Main imports were cigarettes ($45 million) and fruits such as bananas, pineapples and mangoes ($24 million).

Singapore – Philippines Trade, 2016
US$ million

Exports to the Philippines Imports from the Philippines Surplus
(Deficit)
Agri Export 539 171 368
Non-agri Export 5,970 4,528 1,443
All products 6,510 4,699 1,811
Source: UN Trademap, UA&P Analytics

Thailand – Philippines trade

Thailand exported $818 million worth of agri products and imported only $133 million. Exports were highly diversified. The main exports were corn and rice ($238 million); food preparations such as powdered concentrates, creamer and sauces ($168 million); sugar and molasses ($141 million), fruit preparations ($40 million), and cassava starch ($37 million).

The country’s main imports were cigarettes ($52 million), frozen fish for canning ($23 million), and cereal preparations ($19 million).

Thailand – Philippines Trade, 2016
US$ million
Exports to the Philippines Imports from the Philippines Surplus
(Deficit)
Agri Export 818 133 685
Non-Agri Export 5,533 2,596 2,938
All products 6,351 2,729 3,623
Source: UN Trademap, UA&P Analytics

Vietnam-Philippines trade

Vietnam’s agri exports reached $771 million while imports were only at $76 million. Main exports were rice ($471 million), dory fish ($72 million), food preparations such as coffee sachets and wheat flour ($50 million) and cereal preparations such as starches and wheat flour ($47 million).

The key imports were beverages ($23 million) and cigarettes ($16 million).

Vietnam – Philippines Trade, 2015
US$ million
Exports to the Philippines Imports from the Philippines Surplus
(Deficit)
Agri Export 771 76 695
Non-agri Export 1,245 823 422
All products 2,016 899 1,118
Source: UN Trademap, UA&P Analytics

Lessons

Asean countries compete when it comes to selling many products. But, why is the Philippines lagging in agri-food exports among its Asean peers?

The answer is easy.

First, the Philippines is behind in farm productivity across most crops.

Second, it has a poor track record in crop diversification. Its three crops—coconut, rice, and corn—occupy some 80 percent of farm lands.

Third, it has neglected aquaculture development. Its exports in this category is the lowest in the Asean region.

Fourth, because of the above, the country also has a weak agri-food manufacturing sector affecting exports and import substitution.

There are underlying issues: Neglect of research and development, poor extension service, poor infrastructure, lack of long-term financing for tree crops, and lack of meritorious bureaucracy. Land access for investors also remains a barrier.

All these have contributed to the country’s uncompetitive agriculture and agro-industry, resulting in a national poverty incidence of 21.6 percent and rural poverty incidence of 30 percent in 2015, the highest in the Asean. The Philippine Development Plan 2017-2022 targets to reduce rural poverty to 20 percent by 2022.

There are export and import substitution opportunities, but structural problems caused by past neglect and lack of resolve will limit the country’s ability to fully respond. Let us hope that the Duterte administration will go overdrive to address these concerns.