Friday, September 21, 2018
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Commentary

Management approach for abaca

“A better management approach is needed to help farmers take advantage of the increasing global environment consciousness that will boost abaca demand and increase abaca farmer incomes.”

This was the message of the DA-Fiber Industry Development Authority (Fida) executive director Kennedy Costales (0917-1280454) at a recent meeting of the Management Association of the Philippines-Agribusiness and Countryside Development Foundation. “This approach will improve production and productivity, as well as significantly increase the very low incomes of abaca farmers,” he added.

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Abaca is endemic to the Philippines. But countries like Indonesia, Costa Rica and Ecuador were able to obtain our planting materials and are now effectively promoting abaca. It will be a tragedy if they overtake us. This has happened with other countries taking our market shares for, among others, nata de coco and ilang-ilang.

Today, we serve 90 percent of world abaca demand. Abaca is widely known for making shipping ropes, fishing lines, and fishing nets. Less known uses include tea bags, sausage casings, pill coatings, paper products and surgical masks.

A Fida report states: “Given environmental degradation, countries like Japan are eliminating plastics and replacing PVC with natural fiber materials. Developments in the composite market require volumes of abaca for the production of telephones, sports needs and orthopedic materials such as joint replacements and fracture-healing implants.”

Last April 11, Agriculture Secretary Emmanuel Piñol said 55,000 additional abaca hectares had to be developed to meet current demand. Many more will be needed for the expected rise in global demand. The Philippines must not lose its leadership in this area.

This leadership cannot be maintained without the correct management approach. This is embedded in the Abaca Tuxi Buying Project. A “tuxi” is a stalk that joins the leaf to a stem. This project “aims to organize and empower farmers as a cooperative to produce their own abaca fibers. This will result in better quality, competitive prices and increase quantities of fibers.” It will reduce the 12 steps needed to produce quality abaca to six.

But this requires economies of scale and a management team run by professionals. This will increase the daily income of a farmer who produces 100 tuxi kilos from P700 to P1,250 a day. This is the minimum, because in Catanduanes, this approach has resulted in more than double the amount for each farmer.

Since Costales is a former manager reporting to multinationals in the abaca industry for more than 20 years, he knows the importance of marketing arrangements. He therefore formulated memorandums of agreement (MOAs) with the Associations of Abaca Pulp Millers and the Philippine Fiber Exporters Association, which accounts for 80 percent of the market.

However, Costales says he has difficulty in obtaining financing for this initiative. When he went to Land Bank of the Philippines (LBP), he could not get any loan. This was because the intended loan recipients did not have the track record LBP required.

I then called LBP president Alex Buenaventura, whose new thrust is: “Landbank now goes to the farmers, instead of farmers going to Landbank.” Buenaventura said he had created special lending windows where the LBP would no longer require track records, among others. LBP will instead help the farmers formulate financially feasible loan proposals with effective management approaches. He committed to personally meet Costales and abaca loan beneficiaries to discuss creative ways of preparing a financially feasible loan proposal.

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With LBP’s help, Costales must now create a template using the new management approach for submission to other financial institutions. This process of having financial experts help in formulating product templates with effective management schemes should be duplicated for other products. This way, the extremely low 2 percent rate of all loans going to agriculture will significantly increase, resulting in improved agriculture growth and increased farmer income.

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TAGS: abaca, DA-Fiber Industry Development Authority (Fida), farmer incomes, Kennedy Costales
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