Corn farmers have asked the Department of Agriculture (DA) to defer implementation of lower tariff on corn imports as this will be a “death sentence” to farmers given the prevailing low price of corn, bringing revenue loss of P10 billion. House Resolution 2289 has been filed by Cagayan de Oro Representative Rufus Rodriguez with the pleadings of the Philippine Maize Federation Inc. (Philmaize) and the United Broilers and Raisers Association (UBRA). The resolution was directed too as a petition to the National Economic Development Authority and the Tariff Commission. “The abundance of production did not increase the income of farmers which shows the ‘incompetence of the DA in promoting and managing our own agricultural resources’,” according to the House Resolution. Corn tariff is now low at 5% if importation is within the Asean Trade in Goods Agreement (ATIGA). It is slapped with a 35% duty within Minimum Access Volume (MAV) importation and 50% outside MAV. DA just created a Technical Working Group to study lowering of corn import duties in order to bring down animal feeds and livestock and poultry prices. Philmaize has debunked the assumption that feed prices will go down given lower corn price (consequently pulling down livestock and poultry price). “Philmaize stated that these corn prices do not have direct and immediate correlation to the decrease of feeds and meat price. In the last two years, corn price plunged to P8-9 per kilo, but there was no reduction in the price of feed and meat.” Rather, it is the huge importation of feed wheat and corn that caused the fall in local con price to its lowest level. This is based on a study of the Philippine Competition Commission, Philmaize cited. Philmaize attributes the fall of local corn price to the “uncontrolled, unabated and uncalibrated large arrivals of feed wheat and imported corn during the wet season harvest. This displaced local corn harvest from getting into warehouses and silos of livestock and feed mill sector.” Corn price plunged by a hefty 33% to P8-9 per kilo, far below the P13.25 per kilo support price established by the National Food Authority (NFA). The economic loss at P10 billion in revenue experienced by farmers was exarcerbated by the Covid 19 pandemic. Rodriguez said UBRA President Jose Elias Inciong also stressed that the price of poultry and livestock are “not dependent on the rate of corn tariffs but on the highly in-demand dynamics of the commodities.” Moreover, even the Bayanihan sa Agrikultura admitted a low import duty on corn does not guarantee significant reduction in the price of livestock and poultry. The resolution cited the Magna Carta for Small Farmers in invoking the low corn tariff, saying it is the state’s role to assure “equitable distribution of benefits and opportunities realized through empowerment of small farmers.” “The state should recognize the need to keep our local farmers motivated, encourage them to continue planting, and keep their production stable by implementing a more strategic approach to balance enterprise resource planning,” according to the resolution. (Melody Mendoza Aguiba)
Filipino-owned global firm Frabelle Fishing Corp. (FFC) has expressed interest in putting up tuna canning facilities in India as an expansion of Filipino companies’ already existing overseas canning operations in Papua New Guinea,
Speaking before the first virtual India Philippines Marine fisheries & Aquatic Business Conference (IPM-ABC), FFC President Francisco Tiu Laurel said India is a very prospective site for putting up canning facilities with its availability of tuna raw material.
“It is quite interesting for me to note that India has a potential of 230,000 metric tons of tuna annually of which 40% is skipjack and the rest is big eye and yellowfin. That’s something worth looking into by way of putting up the facility or at least buy more materials to feed existing Filipino-owned factories around the western and central Pacific,” said Tiu at the IPM-ABC.
Filipino companies are unique in a way that these have the fleet to catch the fish and the plant to process and can the fish. The biggest volume, 86%, is canned in pouch, and 14%, is in tuna loins.
“In the 1960s, boats were a lot smaller now. Now we compete with world’s best with purse seine large fishing vessels,” he said during the IPM-ABC co-organized by the Philippine Chamber of Agriculture and Food (PCAFI).
FFC is into deep-sea fishing, aquaculture, canning, food manufacturing, processing, food importation and trading, cold storage, shipyard operations, wharf development, real estate development, and power generation.
Since Filipino-owned companies already operate canning facilities overseas, it can further just expand to India whose available tuna supply can be processed right where the fish is caught. Filipino-owned tuna companies have existing canning plants in Papua New Guinea, Vietnam, and Indonesia.
Another expansion option, Tiu said, under this India-Philippines cooperation is for Filipino companies to expand their fleet and fish around India’s fishing ground. That is if they are permitted.
“We are willing to expand our tuna fleet where we are welcome to fish.That’s something quite encouraging to look at in India. The Philippines will be willing to invest as long as they’re are allowed to fish– if that’s possible,” said Tiu.
Frabelle is a world-class fishing company. It runs a fleet of over 100 vessels.The company employs 5,000 people. Its markets for seafood are Asia, Europe, the Middle East, South Africa, and the United States.
The Philippines exports the large chunk of 90% of its tuna production mainly to the European Union, 60% (where it enjoys preferential duty); United States, 40%; and to the Middle East, Japan and Australia, a combined 26%. Only 8-11% is marketed locally.
PCAFI President Danilo V. Fausto said expansion of the country’s fishery sector arising from the trade cooperation between India and the Philippines is expected to improve the lives of Filipino fishermen who depend on fishing for their livelihood.
“The fisheries sector provides employment to over 1.6 million people, 85% of whom were from the municipal fisheries and 1% from commercial fisheries, while the aquaculture sector employed 14%,” said Fausto.
“The Philippine fishing industry contributed around 2% of the country’s gross domestic product (GDP) and 15% of the total Philippine agriculture output “
Indian fishery authorities who attended the IPM-ABC said there are huge opportunities for value addition in India’s fishery sector.
“Tuna has great investment opportunity in India. We recognize the Philippines as a world leader in tuna processing. You come to India and directly invest,” said Cherian Cherian Kurian, managing director of India’s M/s HIC ABF Special Foods.
“The Indian government announced a policy to exploit these resources. Today we do canning in India, but volume is so low.”
Tuna is the Philippines’ biggest seafood export with value of $300 to $400 million yearly.
With the successful virtual business conference co-organized too by the Indian Embassy in the Philippines, Indian Ambassador Shambhu S. Kumaran said both agencies will host other conferences that will benefit both countries’ agriculture subsectors. Among the next business conference may be on the dairy and livestock sectors. (Melody Mendoza Aguiba)
The Philippines and India are jointly eyeing a $12 billion global market or 32 million metric tons (MT) for seaweeds as a bilateral cooperation takes off complementarily between both developing countries.
While China and Indonesia dominate by 80% the global market, the two countries are optimistic of commonly boosting production of seaweeds and its processed form, carrageenan, through business and technical cooperation.
The growing bilateral relations in marine fisheries and aquaculture is brought about by eagerness of private companies from both countries to invest in each other’s sector as a result of a pioneering work of the Philippine Chamber of Agriculture and Food Inc. (PCAFI).
PCAFI President DAnilo V. Fausto the industry is “happy and delighted” that Indian Ambassador to Philippines Shambhu S. Kumaran brought up the idea of the India Philippines Virtual Business Conference on Marine Fisheries and Aquaculture (IPBC-MFA). The first of such IPBC-MFA was held Thursday.
“Indian fisheries sector produces over 7 million tons of fish and shellfish from capture fisheries and aquaculture, almost double of that produced by the Philippines, representing nearly 5% of the world’s total fish production,” said Fausto.
Yet, Fausto said both countries can immensely benefit from exchange of resources, technology, know-how as Philippines also has much to offer.
“Philippine aquaculture has strong potential for further expansion and development with our vast resources 338,393 hectares of swampland, 14,531 hectares of freshwater fishponds, and 239,323 hectares of brackish water fishponds,” Fausto said.
“The Philippines sits at the heart of the coral triangle, the global center of marine biodiversity. The Verde Island Passage boasts the highest concentration of marine species with its reefs as home to nearly 60% of the world’s known fishes and 300 species of corals.”
During the business conference, Dr. Munisamy Shanmugham M/s Aqua Agro Processing Manamaduria (Tamil Nadu) vice president, said this is the time to invest in aquaculture, including seaweeds in India. Government, he said, has allotted budget of INR 640 crore ($88.34 million) to promote the industry and provides subsidy for seaweed cultivation.
“There is huge demand for seaweed hydrocolloids in India, but currently 50-90% is met through imports,” said Shanmughan.
There are new areas –Gulf of Mannar and Gulf of Kutch—that may be considered for seaweed cultivation to meet India’s demand.
India just started to establish in 2010 its processing facilities for producing carrageenan, a value-added processed form of seaweed. Carrageenan acts as emulsifier, thickener, additive, and preservative in food and consumer products. It is an input in manufacturing dairy, gelatin, and meat products and other high value consumer products such as toothpaste and gels.
The Philippines is a global leader in carrageenan and seaweeds and has put up its processing facilities way earlier than other countries. Its seaweeds and carrageenan exports totals to around $200 to $250 million yearly. It has strength in technology and know-how in carrageenan manufacturing. It was the first in the world to develop seaweed species Euchema and Kappaphycus for commercial cultivation for carrageenan.
Even with that, the Philippines still has huge expansion area of 140,000 hectares of potential seaweed farm for expansion, according to Alfredro Pedrosa III, Seaweed Industry Assn of the Philippines (SIAP), said in the same conference.
“These are the resources that sustain our industry. We have available farm area of 200,000 hectares along coastlines. Only 60,000 hectares are farmed. We have 500,000 hectares of deep-sea available farmable area,” said Pedrosa.
Opportunities for investments in the Philippines in seaweed industry are ripe, Pedrosa said, as domestic demand exceeds supply.
The following factors also augur well for seaweed investments, he said: ASEAN market integration, consumer preference for natural products such as seaweeds, and new climate change adaptation strategies and COVID pandemic recovery.
The Philippines has continuing research and development (R&D) activities on other seaweed species. Surprisingly, there is an abundance of 893 seaweed species in the Philippines, he said. But only a few are used for carrageenan of perhaps less than 10 species including Eucheuma, Gracilaria, Sargassum, and Kappaphycus. Other seaweeds species to be cultured are Halymenia, Porpyra, and Ulva Lactuca. (Melody Mendoza Aguiba)
The Philippines and India are looking at enormous opportunity for trade cooperation on marine fishery and aquaculture starting off with Philippines’ potential investments in putting up tuna processing facilities in India or importing its needed tuna raw materials from India.
India’s fishery industry players led by Indian Ambassador to the PHilippines Shambhu S. Kumaran have invited members of the Philippine Chamber of Agriculture and Fisheries Inc. (PCAFI) led by Chairman Philip L. Ong, also aquaculture feeds maker Santeh Feeds chairman, to look at investment and technology exchange in fisheries.
“It will be the start of a long process of linking to raise productivity. We invite you to look at business opportunities in India,” said Kumaran during the India Philippines Marine Fisheries & Aquaculture virtual business conference.
Cherian Kurian, managing director of India’s M/s HIC ABF Special Foods, there is a huge opportunity for tuna value addition in India as it produces largely tuna ready for canning. This is where Philippines’ global leadership in tuna processing and canning comes in. Tuna is one of the Philippines’ largest seafood export with a yearly value of $350-$400 million.
Frabelle Fishing Corp President Francisco Tiu Laurel Jr. said tuna fishing in India is also a potential opportunity for local fish producers.
“Tuna fleet is willing to expand when they’re woelcome to fish,” said Laurel.
Local tuna processors-canners can put up canning facilities in India.
However, Francisco Buencamino, Tuna Canners Assn of the Philippines executive director, said it may be advantageous rather to import India’s raw tuna production and process these locally. This is because the Philippines has preferential duty privileges to the European Union in tuna export.
Kurian said India’s oceanic tuna resource potential within its exclusive economic zone reaches to 2.13 million metric tons (MT) with yellowfin taking up 54% and skipjack 40% of total. Kurian said India can start exporting tuna to the Philippines in bigger volume. This way, the Philippines can maximize its processing-canning capabilities.
Another area of cooperation is shrimp as India may extend technology and research and development (R&D) to Philippines which suffers from difficulty handling shrimp diseases.
India is the world’s largest shrimp producer and exporter particularly the vannamei species. It exports 90% of shrimp production, exporting almost 50% to the United STates. Still, there is 9.7 million hectares of potential shrimp area in India. Of this, 8.5 million hectares are waterlogged saline areas and 1.2 million hectares of brackishwater.
Miguel Rene A. Dominguez, Alsons Agribusiness Unit vice president, said there is an opportunity to raise productivity in shrimp and mangrove crab production in the Philippines. India’s technology expertise in these technologies may potentially help raise Philippines’ shrimp and mangrove crab production. End
For the Philippines’s hatchery, there is a huge opportunity in Finfish, shrimp and crab. “The Philippines has a rich reservoir of resources both physical and know-how for aquaculture development.” (Melody Mendoza Aguiba)
The Philippines has posted an “embarrassingly high” poverty incidence among farmers of 31.6% and a whopping trade deficit of $5.9 billion that makes it the only net food deficit country in the ASEAN5.
Private sector leaders led by the Philippine Chamber of Agriculture and Food Inc. (PCAFI) deplored that the Philippines has been left behind by ASEAN5 (Association of Southeast Asian Nations) countries. That is despite its being equally endowed in natural resources and even in numerous labor.
Dr. Emil Q. Javier, chairman of the Coalition for Agricultural Modernization of the Philippines (CAM), an ally organization of PCAFI, said in a press briefing Thursday that Philippines’ food export just totaled to only $5.1 billion, a figure far exceeded by imports.
“All is not well in Philippine agriculture. We have food exports of only $5.1 billion but trade deficit of $5.9 billion, (That makes Philippines’) dubious distinction of being the only net food deficit country among ASEAN 5,” he said. The other progressive ASEAN countries are Thailand, Malaysia, Vietnam, Indonesia, and Singapore.
A “nearsighted” focus of government leaders on what can be accomplished during their short, political 6-year term has made Philippines the laggard among progressing neighbors, according to PCAFI President Danilo V. Fausto.
He urged the government to plan on a long-term basis, not on a reactive basis on just what happens in the global economy.
“Government leaders come and go based on their term. But we in the private sector are invested in. Our children and our children’s children depend on agriculture for business and livelihood. My appeal is for the government to consider agriculture not as charity but as a sustainable venture,” said Fausto.
As entrepreneurial founder of “Gatas ng Kalabaw” bottled carabao milk and other high-value dairy goods, Fausto said he has been in the dairy industry for 30 years.
Javier is optimistic though that the Philippines indeed has a modern farm sector ( of progressive farmers and corporate farms) with high productivity, profitable and competitive with imports. Having been a consultant for multinational pineapple processor Del Monte, Javier has known world-class operations of Filipino food producers.
“We can do better. It is the small farmers and fisherfolk (SFF) who constitute the majority that are dragging our averages down,” he said.
Fausto and Javier lamented that of the high 26% national poverty incidence as of 2018, the brunt of suffering goes to the farmers and people in the countryside. Poverty incidence among farmers tops at 31.6%; fisherfolks, 26.2% percent; and individuals residing in rural areas at 24.5%.
Javier is emphatic that government should adopt strategies that will make small farmers become “bigger” as they are organized into groups or clusters.
He said clustering is important because it will be the key to lifting SFF from poverty.
When clustered, small farmers can enter the global supply chain where margins are bigger.
They can negotiate for higher prices in big supermarkets, even multinational ones. They can also haggle to buy cheaper inputs when they buy fertilizers or seeds in bulk. Economies of scale can be achieved, bringing down cost, when services (like transportation, irrigation, post harvest facilities, storage facilities) are delivered in bulk.
“Farm consolidation will enable farmers to mechanize field operations to reduce costs; facilitate acquisition of inputs as well as credit; embark on value-adding (processing) at the community level; diversification into crops and other livelihood,” said Javier.
A former Department of Science and Technology (DOST) secretary and a recently awarded National Scientist, Javier stressed contract growing will be the key to making small farmers bigger.
“There should be promotion of contract growing as a business model. It involves buyer-driven value chains that are working in broilers, swine, banana, pineapple, papaya, tobacco, okra (industries),” he said.
He said contract growing provides incentives to agribusiness integrators (mills, food processors, exporters, supermarkets) to expand into other commodities.
Government should facilitate in “social mobilization of farmers” and helping in enforcement of contracts in a contract growing system.
Himself a contract grower (of hybrid rice and other agricultural produce), Javier said agriculture leaders especially in government (Department of Agriculture, Department of Agrarian Reform, and Local government units) should not give up their efforts to organize farmers.
“By organizing farmer associations e.g. coops, irrigators associations (IAS) agrarian reform beneficiaries organizations (ARBOs), the small farmers are in a better position to be partners/players in the value chains.”
“We should persevere (not give up!) in mobilizing, organizing farmers into cooperatives, IAS and ARBOs.”
PCAFI and CAMP has supported a strong LGU-led development of the agriculture sector.
Javier said the Province-led Agriculture and Fisheries Extension Service (PAFES), initiated by DA, should be strengthened as a national policy.
That is a mandate already firmly established by the Local Government Code of 1991 (RA 7160).
But capability building in LGUs is necessary to make this happen.
“Unfortunately, the municipal agriculture offices (MAOs) proved to be suboptimal operating units to deliver rural extension services for various reasons, the principal of which is lack of personnel, expertise, and operating funds (especially in third and sixth class municipalities)
“It is better to shift the locus of rural development planning, coordination and direction at the provincial level,” he said. (Melody Mendoza Aguiba)
The private sector has asked President Duterte to issue an executive order (EO) institutionalizing a provincial-led agricultural governmance especially as local government units (LGs) will soon be awash with cash. LGUs will have an additional P234.39 billion budget beginning in 2020 from the new Mandanas-Garcia ruling.
The Philippine Chamber of Agriculture and Food Inc (PCAFI) and the Coalition for Agricultural Modernization of the Philippines (CAMP) have expressed support for a national policy putting the burden of agricultural governance to LGUs.
The EO must be issued, rather than just putting all responsibility for the farm sector’s administration to Department of Agriculture (DA) alone as what is the prevailing system.
Dr. Emil Q. Javier, CAMP chairman, said in a press briefing that DA is in the right track in having set up a pilot program for this agriculture governance in the province. .
However, instead of just a DA administrative order (AO), an EO will be a stronger national policy that will accelerate use of funds for food security and agriculture. It will compel LGUs to put a major focus on agriculture and food security.
“The tactical program in agriculture should be coursed to provincial offices to encourage provincial government (to focus on agriculture.) We should organize extension officers in SUCs (state universities and colleges),” said Javier.
“(DA) Secretary (William Dar ) already adopted the proposal and has a pilot program for provincial agriculture office. But there should be more agriculture offices in the provinces. It’s a good opportunity to call attention of the president by way of issuing an EO.”
PCAFI President Danilo V. Fausto such EO should already be issued by Duterte considering that budget for 2022 is now being prepared.
The EO is just in the right timing for the national government’s implementation of the Mandanas-Garcia Ruling of the Supreme Court. The ruling ordered that LGUs should get a share of all national taxes, not only those collected by the Bureau of Internal Revenue, but all national tax collections.
With this ruling LGUs are seen to raise their budget by 26.61% equivalent to P234.39 billion.
PCAFI asserts that since the national government’s budget for DA will be reduced, it is just proper for LGUs to allocate 10% of their internal revenue allotment (IRA) for food security.
“It is the interest and responsibility of LGUs to invest in food security,” said Fausto
LGUs will have a total budget reaching to P1.083 trillion, given the new ruling’s implementation.
“To create fiscal space, it is expected that some of the projects of the national agencies will be un-funded. With the policy of the current administration giving low priority to agriculture, we can project that the unfair allocation of the national budget to DA will further aggravate,” said Fausto.
PCAFI has been asking for reform in budgeting for the agriculture sector. It has been pressing for an allocation of at least 10% budget for agriculture out of the country’s estimated gross domestic product (GDP) – since agriculture contributes 10% of GDP.
World Bank placed at US$ 367.36 Billion (₱17.82 Triilion @48.50) the country’s GDP as of 2020.
The Philippine Statistics Authority placed total agricultural production for 2020 at ₱1.78 trillion representing roughly 10 percent of the GDP.
“Out of the total national budget of ₱4.506 trillion, the share of agriculture is a measly 1.5 percent or ₱66.4 Billion, despite contributing 10 percent to total GDP, showing clear disparity in budget allocation and the lack of priority given by the administration to food production leading to food sufficiency and food security,” said Fausto.
As of March 2021, the agriculture sector employs 24.6 percent of Filipinos coming both from the labor force and not in the labor force equivalent to 18.5 million Filipinos, with those in the labor force representing 48.77 million workers and not in labor force of 26.26 million totaling 75 million Filipinos.
“But, according to a paper written by Dr. Ciel Habito, if one considers agro-processing and agricultural inputs, manufacturing and trading (i.e. agribusiness sectors) along with basic agricultural production, about 40 percent of GDP and two-thirds of jobs in the economy arise from agriculture,” said Fausto.
From the 2021 ₱66.4 Billion budget of the DA, livestock and poultry which contributes 28-31 percent of the total agriculture production, got ₱3.21 Billion or 3.68 percent of the total DA budget.
On the other hand, the rice program that contributes 22 percent to the agriculture production got a budget of ₱35.27 Billion, representing 40.45 percent of the DA budget. If we are to include the budget for irrigation which is ₱31.0 Billion, the rice program is getting ₱65 Billion from the national budget since almost 100 percent of water irrigation goes to the rice program. In 2020, rice contributed ₱390.2 Billion. (Melody Mendoza Aguiba)
The tariff cut that now prevails under Executive Order (EO) 128 is totally useless as pork price is seen to remain expensive, and pork import has already skyrocketed by 150.7% to 110.419 million kilos in the first quarter of 2021 even without the tariff cut.
The United Broilers and Raisers Association (UBRA) said in a position paper filed with the Senate that inflation will not really soften just because of a tariff cut on pork imports.
“The stated purpose of EO 128 to bring down pork prices to affordable levels and dampen inflation will not happen,“ according to UBRA President Lawyer Jose Elias “Bong” Inciong.
Data from the Bureau of animal Industry (BAI) showed that even if a tariff cut has not yet been implemented, there was already a substantial increase of 150.70% or 66.376 million kilos in pork imports early this year.
This is from an import volume of 44.031 million kilos from January to March 2020 to 110.419 million kilos in the same period of 2021.
For prime cuts like bellies and pork cuts, the increase in pork imports has also been significant at 254% or from 10.719 million kilos in January to March 2020 to 38.024 million in the same period of 2021.
It is notable that the period accounted for started even prior to the onset of the effects of the Covid 19 pandemic lockdowns.
“Covid was not yet a major problem during the first quarter of 2020. These increases in importation occurred without any cuts in tariff.”
The Department of Agriculture (DA) itself set a Suggested Retail Price (SRP) for imported pork that is not really significantly cheaper than prevailing prices. The SRP for kasim is P270 per kilo, and for liempo, P350 per kilo.
“If this is the expected retail price after reducing the tariff for pork, then there is no improvement in the situation of our consumers. Since there will be no significant change in retail prices, why forego badly needed revenues by reducing tariffs on imported pork?” said Inciong.
UBRA asserted government should rather let tariff rate at 30% in-quota and 40% out-quota.
The farmers’ group lamented that the current pork crisis is not only a result of the local hog industry’s contraction of African swine fever (ASF).
Rather, it is the natural consequence of the Philippine government’s intentional plan in the last 25 years to depend on importation and neglect its own Filipino farmers’ welfare.
“The executive branch was never serious about developing Philippine agriculture and fisheries.”
It is unfortunate that government really intended trade liberalization to keep retail prices of critical goods such as pork low.
When it joined World Trade Organization just before turn-of-the-century in 2000, government merely hoped free trade will compel local producers to be competitive.
However, this is a plan bound to fail.
“Retail prices have remained expensive for consumers because of a disconnect with farm gate prices and even with imports. Worse, many consumers lost their jobs and livelihoods and became OFWs (Overseas Filipino Workers.)”
While other countries took advantage of beneficial provisions of WTO’s free market offer, the Philippine government just opened up its industries to exposure to cheap imports.
But it neglected its own farm sector by failing to implement WTO’s provisions for domestic support, trade remedies, and Sanitary and Phytosanitary measures.
“The Philippines, unlike other government interpreted this (market access) to mean only import liberalization,” he said.
“Domestic support is about production and consumer subsidies and by extension, even export subsidies. This is an area where the Philippines has performed very poorly through the failure to implement laws like the AFMA (Agriculture and Fisheries Modernization Act).”
Neither did government implement trade remedies (anti-dumping, countervailing, safeguards measures) to protect local farmers against unfair trade.
“The government waits for the industries to suffer damage before acting,” he said.
A blatant government negligence is in its failure to put up the National Information Network (NIN) specifically mandated under AFMA’s Sections 38-45.
By such failure to establish a data system in trade and related information, government has failed to invoke trade remedies. This while other governments built their own data to establish evidences long before an unfair trade problem arises.
Even when it comes to SPS which should have protected the local pork industry from entry of ASF and other diseases, it failed.
Unfortunately, even up to now since the advent of trade liberalization more than 20 years ago, the Philippines does not yet have the first border inspection facility at the ports.
“The absence of a first border inspection area at customs is one of the most damning indication of the disinterest of government in agriculture. It is the reason ASF got inside our country.” (Melody Mendoza Aguiba)
The government should slash the onerous tax of 26-27% on non-life and agriculture insurance premium that blocks entry of cash-rich private sector investors that can significantly accelerate rural farm activity through financing.
The misery of Filipino farmers is often blamed on the dearth of facilities on micro-financing and its constant aid micro-insurance.
But agri-finance expert Dr. Jaime Aristotle Alip asserts in a webinar hosted by the Southeast Asian Regional Center for Graduate Study & Research in Agriculture (SEARCA) that cutting tax on insurance premium will significantly raise the number of private insurance offerings.
Alip is chairman emeritus and pioneering founder of the country’s largest microfinance firm CARD MRI (Center for Agriculture & Rural Development Inc.-Mutually Reinforcing Institutions).
He said tax on non-life insurance, including those for crop or agriculture insurance, should be around the rate of life insurance which is only at a minimal 2%. Other non-life insurance with high tax he cites are disaster insurance and health insurance.
“If you want private sector participation, you must level the playing field. You should lower down non-life premium tax (including tax for crop or agriculture insurance). I think there will be many private sector players (given this),” said Alip during SEARCA’s microinsurance forum.
SEARCA held the virtual forum “Agricultural Investment Risks: Empowering Smallholder Farmers through Micro-Insurance” as part of its thrust toward Accelerating Transformation Through Agricultural Innovation (ATTAIN).
Government does need to subsidize agri insurance because the regime will be market-driven.
“It will be the law of numbers and the law of efficiency (that will work). The gap must be addressed. Lawmakers should make non life insurance affordable,” Alip said.
Alip, a Ramon Magsaysay awardee (2008), stressed micro-insurance plays a significant role in boosting private sector investment in micro-financing or in extending loans to small farmers.
Once there is insurance or a guarantee program for farmers’ loans, banks are automatically willing to lend even to small farmers, Alip said.
CARD pays insurance claims fast — precisely because there has already been a pre-deposited insurance premium for the disaster, calamity, or typhoon.
“Within 8 hours we’ll pay. If there’s an issue (problems) involved, in 48 hours we will pay. The speed of payment shows how serious you are. Microinsurance should be believable. It should just be like a deposit when there’s a claim. You pay it right away,” he said.
Insurance or a loan guarantee is critically important in financing the marginalized farmers, in enabling them to get out of poverty.
If farmers are paid right away, they will be able to re-invest in agriculture again after a misfortune.
“Insurance is an important safety net so that the poor will not slide back to poverty. If we’re able to pay farmers right away, their loyalty and affinity to insurance will be there,” he said.
Because of digitization, CARD accelerated its payment systems. It now pays through mobile means (celfone).
With the Covid 19 pandemic’s lockdowns, its clients do not need to go to its offices. They can make payments, deposit, and withdraw online.
CARD was put up in December 1986. It has grown into a group of 23 mutually reinforcing institutions (MRI).
“My vision was for a bank owned and managed by the poor. I believe the reason why poor people are poor is not because of lack of access to resources. It is the lack of control over resources,” he said.
“After 10 years, we put up the first microfinance institution in the country, the CARD Bank, owned by its members. We completely turned banking system upside down.”
CARD Bank cut all bureaucracy in lending. It releases loans just two days from application.
It does not require collateral from borrowers.
Instead of requiring small borrowers financial projections or feasibility studies and numerous documents, it just requires a one-page form for loan application.
Now it has spin-off companies engaged in lending in both rural areas and urban areas.
It has the CARD MBA (mutual benefit association) owned by members and a non life insurance business linked with Pioneer Group
“All policies, all regulations within the standard of the Insrance Commission, are implemented by the owners. What is our value proposition for these companies? Since they own it, we have a very small premium,” he said.
Overhead cost of the company is only 1-2% while some insurance companies incur 40-60% overhead cost.
CARD now has 3,482 offices in 85 provinces covering 1,577 municipalities and cities and 40,440 barangays.
“The last frontier of the country is in Tawi Tawi, in Sitangkay. We are present there,–
30 minutes away from there by pumpboat, you are in Malaysia.”
It is in Balut Island in South Cotabato; 45 minutes to 1 hour from there, you are in Indonesia. It is also in Batanes, right near Taiwan.
It has 17,157 full-time staff. It has offices for OFWs (overseas Filipino workers) in HOngkong, Myanmar, Laos, Thailand, Cambodia, Indonesia, and Vietnam.
“This is how we are exporting the technology of CARD in micro-financing and micro-insurance.”
As of January 2021, it has so far served 7.43 million clients; insured 27.219 million individuals; has outstanding loan of P30.77 billion; savings of P28 billion; operational efficiency, 117.1%; financial sufficiency, 114.89%, number of stockholders, 120,252.
It accounts now for 20% percent of the entire microfinance industry in the country.
It has extended 14,761 scholarships; 9,783 graduate scholarships; and 4.693 million with access to its health services.
It accounts for around 80% of entire insured Filipinos. Those it insures are mostly in the poverty level who are given the chance to bounce back economically in times of difficulty and loss.
Its repayment rate before the pandemic was 99.9 percent. It faltered a bit due to the pandemic and is now recovering in repayment rate to a more stable 93-95%.
“ “We’re not just in the business of microfinance and imicroinsurance. Were in the business of poverty eradication,” said Alip. “Our major focus is on very poor women. If you’re able to help poor women to do business, their priority will always be the family, food for the children, education for the children.”
These are among its functions:
It owns hospitals, clinics and keeps doctors and nurses. It has a pharmacy company that supports clients with affordable and generic medicine.
It has a marketing support for farmers and businesses engaged in cottage products to help these expand and grow.
It has a school on microfinance and microinsurance.
It has health insurance and hospitalization insurance
It has training programs and a school for college courses offering Entrepreneurship, Accountancy, Information Technology, and Tourism. (Melody Mendoza Aguiba)
The Indian government has proposed a bilateral exchange with the Philippines involving agricultural technology and fintech (financial technology) believing that vital technologies revolutionizing small farms in India can benefit Filipino farmers.
On top of initially extending a $50,000 to the corn sector, Indian Ambassador to the Philippines Shambhu S. Kumaran said India can exchange technologies with the Philippines that are in the forefront of improving how small farms operate.
“We like to invite you to a discovery of India’s agritech ecosystem. We’ll look at a bilateral workshop so you will see this vibrancy in India. And India will see the positive developments in agri-tech in the Philippines. This will be a two-way street,” said Kumaran at a Philippine Chamber of Agriculture and Food Inc. (PCAFI) business meeting.
The bilateral meeting which may be co-organized by PCAFI and Indian Embassy may be held “sometime later this year.”
Philip L Ong, PCAFI chairman, this fintech venture with India may involve PCAFI’s own Agrifood Hub Project. The Agrifood Hub is also involved in technology that links farmers with the market.
Since its launch in July 2020, it has so far linked 37,343 farmers and 315 farmer groups, primary traders, and cooperatives to markets involving 109 municipalities.
It had posted over the internet through its website, www.agrifoodhub.com and hotline 09178215408, a total of 980 food and crop requirements and matched these requirements with 924 sellers. It has received 56 information requests and generated 55 active buyers per month, Ong reported.
Kumaran said the Indian government has already touched based with Philippines’ Finance Secretary Carlos Dominguez for a possible agritech and fintech exchange.
“An Indian company allows banks to use geospatial data, satellite data to make informed lending decision. You have the software, the tool which gets all data in a region. It allows banks to cut the risk and understand where and when credit dispersal is viable. They will have constant stream of data,” Kumaran said.
Because of this agri technology, an e-bank raised “half a billion dollar using this tool that brings about the revolutionary changes that I talked about.”
Indian fintech companies are not big, but they address the critical gaps in technology.
“We offer to Philippines the possibility that DBP (Development Bank of the Philippines) could have this tool without having to procure it. It will be free-of-charge. The revenue model allows that the creditors and software companies, all have the benefit from using the technology.”
Right now banks are afraid to lend to agriculture activities as they don’t have mitigation strategies and risk assessment tools to determine what is viable. But this software makes that possible.
From only a few agritech startups in 2013, India had 1,000 agri-tech startups as of 2020. These agritech startups are engaged in projects like addressing water stress and crop stress in farm production. They advise farmers on what crops to use.
The possible replication of an Indian financing system called “Viability Gap Fund” (VGP) has also been proposed by the Philippine Maize Federation Inc. This is to finance post harvest facilities critical to storing the corn production of farmers, according to PMFI President Roger V. Navarro.
The VGP was put up in India to fund viable projects by “unviable” proponents, meaning small and medium farmers.
Navarro said that the fund may come from the fund that form penalties from the Agri-Agra Law. The penalties, he said, amount to billions coming from penalizing banks that do not allocate 10 or 15 percent of their loanable amount for agriculture or agrarian reform funding as mandated.
As of 2019, given compliance of all banks, this agri-agra law fund would have been P1.384 trillion, according to the Department of Agriculture (DA).
Kumaran affirmed the need for the VGF in the country.
“We should have smart public policies. Food security is an absolute non-negotiable. We have lots of small and marginalized farmers in India. They find it hard to access common assets, so government needs to come in,” he said.
Kumaran said the bilateral meeting will have technical engagements, presentations, and contact building. It will create platforms for conversation.
Kumaran noted that while having been import-dependent for food in the 1960s, 1970s, now India is the largest producer of food grain. In addition to feeding its 1.3 billion population, it also exports some surplus.
These are India’s other proposals:
A partnership on training of skills where India may conduct “pilot projects for modest funding from india.”
Strong dialogue on market access considering Philippines is a big garlic importer, while India is a garlic producer.
Solar energy production. A lot of irrigation canals in India are now used as areas for lake solar panels. These supply of energy is used for farmers’ needs, and any excess electricity goes to the national grid.
Exchange in integrated farming strategies. Here, waste generated from farming is used for other farming processes (energy generation). This helps in combatting climate change and its adverse effects.
Partnerships in organic food production. (Melody Mendoza Aguiba)
At least 10% of the internal revenue allotment (IRA) of local government units (LGU) should be allocated for food security and agriculture to ensure rural development once national budget is devolved locally under President Duterte’s proposed executive order (EO).
The Philippine Chamber of Agriculture and Food Inc. (PCAFI) has reiterated its call for government to raise the budget for agriculture.
This is in consideration of agriculture’s big contribution of 9 to 10% to the Philippines’ gross domestic product (GDP).
PCAFI President Danilo V. Fausto said a minimum of 10% of the IRA of LGUs should be made mandatory allocation for agriculture if national government fund will be devolved to local governments.
“This is just proper since agriculture accounts for 10% of the GDP. Budget for agriculture should increase, rather than decrease,” said Fausto.
Senator Juan Miguel F. Zubiri, guest speaker of the PCAFI’s virtual membership meeting Friday, said given an increase in budget for agriculture, the proposed EO will play a significant role ensuring farmers’ welfare and agricultural production.
“Some of our LGU leaders are lawyers or doctors. That’s why it’s important to elect leaders who have the heart for agriculture,” said Zubiri.
Fausto has been stressing that the agriculture sector gets barely 2% of the total national budget while contributing 9-10% of the GDP. With the P4.5trillion 2021 budget, DA should get at least P405 billion in the national budget, he said.
Duterte’s draft EO ordering some executive functions’ transfer to local government supports implementation of the Supreme Court ruling on the Mandanas-Casas cases in 2022.
Zubiri said he is pushing for other important agriculture policies to be legislated in order to advance growth of the farm sector.
He noted that the proposed expansion of the minimum access volume (MAV) by eight times will cause a collapse of the local hog industry. This should not be allowed if the local hog industry has to recover from the devastation of the African swine flu in say 3 to5 years.
HE also supports an amendment to the Cabotage Law in order to allow entry of international players in the domestic shipping industry.
“It is cheaper to ship goods from New Delhi to the Philippines than to ship this from Bukidnon to Manila,” he said.
This shipping restriction must be one of the reasons why agricultural products such as pork and poultry products in Mindanao cannot be easily shipped to where the market is in Metro Manila.
In credit access, Zubiri said government will continue to prod Land Bank of the Philippines and Development Bank of the PHIlippines to minimize requirements for loans. This is for easier access to credit of the smallest of farmers who rather resort to borrowing from loan sharks that charge onerous interest of 20% per month.
Zubiri advised organic food producers to organize and establish a formal policing organization against unscrupulous food producers that claim to produce organic food that are not authentically organic certified.
Fausto said livestock and poultry should get at least P112.5B billion from the national budget.
Poultry and livestock plays a highly significant role in the economy as it has important multiple effect in many other sectors.
“The feed industry is a P510 billion industry. Assuming two-thirds (67%) of feeds go to livestock and poultry, that represents P340 billion,” said Fausto.
Fausto also said DA does not really need to raise imports of meat and poultry given adequate distribution nationwide of the supply.
The supply is enough to fill the local demand. The need is to channel poultry and meat production, particularly from Visayas and Mindanao where these are produced, to where these are needed—Metro Manila and other cities.
Poultry and livestock plays a highly significant role in the economy with its multiplier effect in many other sectors.
“The feed industry is a P510 billion industry. Assuming two-thirds (67%) of feeds go to livestock and poultry, that represents P340 billion,” said Fausto.
The Supreme Court ruling was based on a petition of Batangas Gov. Hermilando Mandanas and former Bataan Gov. Enrique Garcia Jr. to base LGU’s IRA on 40% of the collection of all national taxes. These include those collections of Bureau of Customs and Bureau of Internal Revenue. (Melody Mendoza Aguiba)