Reforms to make farm sector profitable pushed

BOLDER reforms are needed to turn Philippine agriculture from being a risky proposition into a profitable venture that can help address the government’s goals of generating quality jobs and ensuring an inclusive economic growth.

In a policy note issued on Tuesday, the Joint Foreign Chambers (JFC) said such reforms would be critical to “open up markets, unleash capital, address land reforms, improve infrastructure, and rationalize extension services,” and would allow the resurgence of the agriculture sector over the next decade.

“The country has not fully exploited its comparative advantage in agriculture, especially in the breadbasket of Mindanao. Beginning with high input costs during production, agribusinesses in the Philippines must also contend with a supply chain that progressively erodes the sector’s competitiveness en route to consumer markets. Along this supply chain, a staggering 20 to 50 percent of fresh produce is estimated to be lost in transit from the farm to consumers,” according to the note. “Formidable challenges and constraints along the supply chain continue to hamper the sector’s full potential including the high and variable cost of production inputs; lack of mechanization to improve productivity; limited access to finance to scale up operations; inadequate provision of infrastructure particularly for irrigation; inefficient logistics and limited connectivity exacerbating post harvest losses,” the JFC said.

Natural disasters, flawed policies and weak institutions have also continued to make agriculture largely uncompetitive, the JFC added.

As part of its broader Arangkada Philippines project, the JFC has put forward a number of reform measures that were expected to give the local agriculture sector the much needed boost between now and the next decade.

In terms of access to financing, the JFC said the government, rather than mandating loan quotas, should focus more on ways to reduce the risks inherent to the agriculture sector.

The Agri-Agra Law, which requires banks to set aside 25 percent of their loan portfolio to the farm sector, has failed to address the core issues that render the sector unattractive to lenders.

Government financial institutions, according to the JFC, can play a much larger role in this area.

“In 2013, the charter for Land Bank of the Philippines was renewed. However, its amendments lacked provisions to strengthen the bank’s mandate of providing financing for the agricultural sector and related support activities. The refocusing of LBP’s scope of business from universal banking to supporting the agricultural sector should be considered,” the JFC said.

The group is also advocating a more comprehensive approach to crop insurance, which “can help mitigate the numerous environmental risks (e.g., typhoons, droughts) that many smallholder farmers face on a perennial basis. Crop insurance continues piecemeal.

To derisk the agriculture sector, the Philippines requires a bold initiative for crop insurance that reaches a large swatch of the underserved market segment.”

Other reform measures focus on ensuring market access for farmers; freeing up the land market through the lifting of limits on landholding and consolidation; attracting large scale investments to rehabilitate, modernize and restructure the country’s irrigation schemes, and rationalizing the structure of extension services (which include initiatives to disseminate information on best, innovative farming practices).