(First of three parts)
The holding of the Asean Agricultural Summit 2017 revealed that there are a lot of people and quarters who also believe that agripreneurship is the key to elevating the country’s agriculture sector, putting into place inclusive growth, and creating more wealth for the country.
During the summit, we put forth the idea of “Modernizing and industrializing the agriculture sector anchored on an ecosystem for entrepreneurship,” and the speakers also put forth mechanisms, systems, formulas and concepts for agripreneurship to take root in the Philippines. That is truly inspiring for those who are currently spearheading agripreneurship efforts like Joey Concepcion 3rd of GoNegosyo who is also the chairman of the Asean Business Advisory Council and the Presidential Adviser on Agripreneurship, and Dr. Rolando Dy, executive director of the Center for Food and AgriBusiness of UA&P and vice president of the Philippine Chamber of Agriculture and Food Management Association of the Philippines. And yours truly.
There are many more names I will mention in this column-series as I present their ideas on agripreneurship.
For this column, let us study carefully Dr. Dy’s ideas on agripreneurship that he presented during the summit.
Dr. Dy had this to say: “agribusiness promotes inclusive growth by stimulating production, creating farm and non-farm employment, and reducing rural poverty.”
Multiplier effect of agribusiness
He showed in his powerpoint during the summit the linkages that agribusiness can create, which can result in the creation of more jobs not only in agro-processing firms but also in the supply of farm inputs and even machines, storage and transport, banking and other professional services.
So let me also elaborate.
Agribusiness actually impacts a lot of businesses both downstream and upstream, and this can help stimulate growth in the countryside especially if the enterprises formed to process or value-add raw farm produce are located also in the rural areas.
Among the upstream industries in agribusiness is the supplying of inputs like fertilizers, seeds, pesticides. Although much of the country’s fertilizer and pesticide needs are imported, the seed requirements can be easily grown in the Philippines that provide them a more profitable venture of growing the products of seed companies.
Seed companies can also intensify their research and development (R&D) activities if more farmers see the virtues of using improved varieties, which will result in the employment of more agriculture graduates in the industry.
More profitable farm operations will eventually result in more earnings and capital build-up for smallholder farmers and cooperatives, which will enable them to acquire, preferably with some government assistance, farm machineries some of which can be manufactured in the Philippines.
I learned from the Philippine Center for Postharvest Development and Mechanization (PhilMech) that the country has more than 400 small- to medium-scale companies fabricating farm machines, most of which employ the “cut and weld” system of manufacturing. Also realizing the potential employment from the local farm machinery industry, PhilMech is currently undertaking efforts to improve the capabilities of industry.
When it comes to the downstream industries, agribusiness can give birth to companies to process and value-add raw farm products either in finished form for the consumer market or semi-processed form for industries.
Agribusiness, like any other industry, will also need banking and other professional services, and even suppliers for their packaging needs.
Lagging in total productivity factor
Dr. Dy listed the following as drivers for agribusiness competitiveness: Total factor productivity (TFP); farm productivity; farm productivity increases; agri-food exports; and crop diversification.
I said in my column last week that United States Department of Agriculture (USDA) data shows the TFP for the Philippine agriculture sector was 1.87 percent from 2001 to 2013, which is a big improvement over the 0.18 percent during the 1980s and 0.53 percent during the 1990s. However, during the 1990s, Malaysia’s TFP was 3.01 percent, 1.88 in the 1990s, and 2.85 from 2001 to 2013. Vietnam’s was 1.17 in the 1980s, 2.33 percent in the 1990s and 2.53 percent from 2001 to 2013.
Also based on the USDA, TFP covers land, labor, capital and material resources used in the production of crops and livestock. I believe the Philippines lags behind in this aspect, because of low crop yields and low value adding, which brings us to the second factor: farm productivity.
Compared to their Asean counterparts, farms in the Philippines still have low yields; Food and Agricultural Organization statistics gathered by Dr. Dy show the country ranks No. 1 in pineapple yields but lags or is No. 5 in cassava, coconuts, coffee, corn and rubber yields when compared to Asean counterparts. In rice production, the country ranked No. 3.
I have outlined many solutions in my past columns on how to increase farm yields, and among them is to transfer R&D outputs to private businesses and to smallholder farmers, and to form production blocs to achieve economies of scale. So that brings us to the next factor: farm productivity increases.
Unless farm yields increase, agribusiness cannot be a profitable undertaking because raw material inputs for agro-processing will always come at higher price. So the formula here is simple: efficient farm operations results in more competitively priced raw materials for agro-processing, which will result in agri-food exports.
I must cite again and again how much behind the Philippines is when it comes of agri-food exports, because we only can boast of two commodities that generate at least $1 billion in export receipts annually: bananas and coconuts (in kernel oil form). We also do not have any other farm export generating at least $500 million in export receipts annually.
On the other hand, Thailand boasts of 17 farm products generating at least $500 million in export receipts annually with natural rubber yielding $4.4 billion; Indonesia, 10 farm products with palm oil topping the list with $14.4 billion; and Vietnam nine with coffee leading with $3.3 billion.
Dr. Dy listed crop diversification as the last driver for agribusiness competitiveness, and I fully agree with this having said many times that more smallholder farmers should venture into high-value crops.
The number of farm export products that Thailand, Indonesia and Vietnam have that rake in huge export dollars clearly show how diversified their cropping systems are. In the Philippines, more than 80 percent of the country’s farmlands are devoted to rice, corn and coconut, all of which do not have competitive yields.
In my next column, I will discuss strategies outlined by the other speakers in the summit on how to improve farm yields, establish an agro-processing complex in the Philippines, and export more farm products.