How do we cure the problem of anemic agricultural growth?

The growth of our agriculture sector normally follows a boom and bust pattern, with the bust often more prevalent and lasting longer than the boom. Moreover, the sector’s success or failure is still closely linked to the vagaries of the weather. Whither the weather goes, so goes the performance of agriculture (whether this assertion is justified or not is of course debatable).

At any rate, the mounting frustration of our economic managers at the dismal output of agriculture finally came to a head early this year.

The sector was branded “the missing link” in our quest for stable and sustainable gross domestic product expansion.

In fairness to the current administration, the subpar progress of agriculture has plagued the past five administrations.

The sector’s underperformance is therefore a constant, rather than an exception, no matter who is running the government.

One begins to wonder why this is so. Are we clinging to the same wrong formula to address the ills of the sector over and over again while expecting a different outcome every time? Worse, are we really facing up to the real problems of the sector or are we just in a continuous denial mode?

The health of the agriculture sector is immensely important to us on account of the following realities:

About 26 percent of our workforce are employed in agriculture, excluding the workers in agri-manufacturing (food, farm inputs, etc.) and agri-services (e.g. trucking).

A dramatic or even just a respectable rise in this sector’s production will mean so much to these workers and their families.

Most of the poor and the destitute reside in the rural areas, and are an integral part of the agriculture sector (e.g. farmers, farmworkers, fishermen, etc.).

We can, in no way, achieve our dream of “inclusive growth” unless we improve the growth trajectory of this major sector.

A stagnant agriculture sector has an indirect but considerable negative impact on the other sectors of the economy.

The long-term stability of the nation is anchored on solid agricultural development. This is evident when you consider food security.

Moreover, a strong agricultural base is the springboard to healthy and robust manufacturing and service sectors.

A robust agri sector is key to vibrant agri-food manufacturing. Agri provides raw materials for processing and exports.

Most experts agree that the underlying cause of our agriculture’s stagnation is the lack of adequate investment.

Without investments, especially from the private sector, agricultural modernization will be put on hold, resulting in low productivity and inefficiency.

Why can’t we attract enough investments in agriculture?

I have been attending numerous forums and conferences on the subject of poor agricultural growth for many years now.

Over those years, the organizers and the venues may change, but the speakers in attendance are almost always the same.

The discussions usually go through the following stages of back and forth argumentation:

First expert: The biggest obstacle to the flow of investment in agriculture is the Comprehensive Agrarian Reform Program (CARP). It doesn’t make sense to invest in the sector because you cannot have economies of scale. Five-hectare retention limit is too small to fund management and overhead. It is a barrier to mechanization. Moreover, the vast tracks of land we have are wasted because the farmer-beneficiaries don’t have the resources to develop their acquired lands. Also, the farmers’ expertise is limited to crop production. They have vague knowledge of modern management practices including marketing. CARP, as we all know, was a complete failure.

Second expert: CARP was not a failure. It was the program’s implementation that was the failure. The government focused on distributing lands but completely disregarded the more important aspect of providing support services to the farmers. Without adequate infrastructure, technical assistance and credit assistance, how can the farmers ever succeed?

Third expert: Actually, the culprits are the banks. They are biased against agriculture and won’t make credit available to the sector notwithstanding the enactment of the Agri-Agra law. The law mandates banks to lend 10 percent of their loanable funds to agrarian reform beneficiaries and 15 percent to farmers and fisherfolk.

But the banks would rather pay the penalty for noncompliance, or invest in alternative modes, rather than comply with the law. What the government should do, therefore, is to take away the alternative modes of compliance. In this way, banks would be forced to lend to agriculture.

Fourth expert: Banks are in the business of generating income for their stockholders and on safeguarding their depositors’ money. Why should they be forced to lend to a risky sector when the government’s bank itself, Landbank, does not fully comply with its mandate to lend to the farmers? Besides, it is not easy to generate small projects to even cover admin and supervision costs. The law is populist and should be amended. Lastly, the high risk the sector poses must first be mitigated, and the business climate therein improved. Only then will the banks lend heavily to agriculture even without the Agri-Agra law.

Fifth expert: One way to mitigate the risks in agriculture is through crop insurance or loan guarantee. We already have the Philippine Crop Insurance Corp. (PCIC) to handle this. Unfortunately, the agency’s resources are not sufficient to enable it to effectively pursue its mandate. The banks and the farmers alike are therefore hesitant to make use of PCIC’s facilities.

The forums usually end without any resolution on how to address the problems discussed. Even the answers to the following basic concerns are left hanging: (1) Is CARP a failure or not? If it is, how do we correct it? If not, how do we improve it? (2) How do we entice the banks to lend big to agriculture? (3) What is the ideal role for Landbank in stimulating agricultural growth? (4) How do we strengthen PCIC?

One is tempted to conclude that the end goal of the organizers is simply to roll out a forum rather than to come up with possible solutions to the problems tackled.

Some speakers, on the other hand, seemed to be there merely to fall in love with their own voices. They don’t appear open to contrary points of view of their fellow speakers.

In the last agriculture forum I attended, I challenged the organizers to come up with some definitive recommendations based on the inputs of the so-called experts. They promised to do so. That was more than a year ago. Well, as they say, “patience is a virtue.”

I guess I would just have to wait for the next forum to commence … or probably the next one after that. What a complete waste!