Competitiveness is a serious problem in our manufacturing sector. The recent departures of such iconic names as Intel and Goodyear among many others because their manufacturing facilities here are no longer competitive attest to this fact. Now we are being told we have the same competitiveness problem in agriculture… not that we didn’t suspect it.
A paper on the subject of agricultural competitiveness was recently made public by agri-business economists from the University of Asia and the Pacific (UAP). According to Rolando T. Dy, executive director of the UAP’s Center for Food and Agribusiness, our agricultural produce will not be competitive even in the Asean region due to high production cost and lack of technical efficiency.
Competitiveness in agriculture has become extra important in the light of lower tariffs that will take effect in Southeast Asia next year. “When tariffs go down to zero, many commodities will have a tough time competing like sugar and corn, or will not be competitive at all like rice,” Dr. Dy and the UAP economists wrote in the paper.
We are committed under the Association of Southeast Asian Nations’ Free Trade Area-Common Effective Preferential Tariff (AFTA-CEPT) scheme to drop duties on a whole range of agricultural goods to 0 percent-5 percent in January next year from current levels, such as 30 percent for corn, 28 percent for sugar, and 20 percent for live and dressed chicken and pork.
Let us not even talk of taking advantage of the scheme to export our produce to our neighbors. We will be hard pressed to defend our local market from them. “The name of the game,” Dr. Dy e-mailed me in response to my questions, “is productivity, cost control, and supply chain efficiency.”
We can invoke temporary exclusions in relation to certain “sensitive” products but even these will eventually see their tariff reduced to 0-5 percent. Sensitive agricultural products refer to agricultural raw materials, unprocessed products and products with simple processing such as rice for which tariffs will be lowered to 0-5 percent by 2010.
In the Philippines, Dr. Dy pointed out, 80 percent of our products in the inclusion list are already at zero-tariff. Moreover, the sensitive agricultural products have been phased-in into the inclusion list which will have an ending rate of 5 percent. In the case of our rice sector, the only commodity classified as highly sensitive, tariff cuts will be implemented by 2012.
The full implementation of AFTA by 2010 will require competitive adjustment measures for various industries, including agriculture. “To improve competitiveness, there is need to improve yield levels (e.g. rice, sugar, corn, coconut, vegetables) and technical efficiencies (e.g. livestock, poultry), lower costs of fertilizers and chemicals as well as feeds, provide adequate post-harvest facilities (e.g. corn, vegetables), reduce costs of logistics, and encourage investments (e.g. coconut),” Dr. Dy advised.
But we all know these are long-standing issues that everyone knows need urgent attention and strong political will. It is unreasonable to expect positive changes in time to meet the challenge we have to face next year. A number of companies (few maybe) have prepared. Sadly, Dr. Dy observed, many small and medium producers are not ready despite long lead times of AFTA.
It is interesting to note that even in our more exportable agricultural produce like banana, growth prospects are no longer as bright. Growth in banana slowed down to single-digit levels in the first quarter of the year from double-digit levels in the comparable period in 2008. As a result, Dr. Dy sees overall growth for 2009 will likely soften.
The performance of banana was impressive in 2008, with growth staying at double-digit levels, Dr. Dy reports. The key drivers included the increase in the number of bearing hills especially in Mimaropa; bigger fruit bunches, more bearing hills and area expansions in Central Visayas; as well as higher demand in Northern Mindanao, Davao Region and Soccksargen. Better farm gate prices also helped production.
Banana exports reached 2.1 million tons valued at $397 million in 2008. Shipments declined by almost 3 percent on volume and 0.9 percent on value during the year. Exports continued to grow in Japan, the country’s biggest market which absorbed half of the total volume of banana exports in 2008. Export volume to the said country increased by 18 percent, mainly owing to the “banana morning diet” health craze.
But there is weakening of demand in key markets abroad as the impact of the global financial crisis gets more felt. Dr. Dy also blamed the continuing increases in fuel prices as well as input costs (fertilizers, chemicals) for banana’s expected less than stellar performance. The sector is expected to grow at the single digit levels of 4.5-5.5 percent.
In coconut, cumulative exports of the major coconut products have been down in the first five months of 2009 but for a good reason… there is an increased domestic demand for biodiesel feedstock with the mandated increase this year to 2 percent blend. Some quarters are also considering a 5 percent blend in biodiesel for the domestic market.
The good news for coconut is the relatively favorable weather conditions in major coconut areas with above normal rainfall last year. This is seen to lift industry production for a second straight year in 2009. The good weather is complemented by the government’s effort to fund programs for participatory coconut planting. There have also been positive developments in the chemical and biological control of the Brontispa pest or coconut leaf beetle. Barring adverse weather conditions for the rest of 2009 and the timely release of program funds, Dr. Dy sees growth continuing in 2010 for coconut although at a slower rate.
Dr. Dy does not see a good year for sugarcane as growth in the first quarter declined by 3 percent. Bad performance was attributed to decrease in area harvested particularly in Tarlac and Nueva Ecija. The present cropping is affected by excessive rainfall and lack of sunlight which will further lead to lower sugar productivity this year. Poor peace and order situation in some sugarcane areas in Mindanao also affected declining productivity. Growth this year will be minimal at 1.5-2.5 percent. Growth in 2010 will be the same as some sugarcane planters shift to cassava.
The performance of other crops continued to be weak in the first quarter, pulled down by the negative growth rates posted for garlic, mongo, calamansi, mango, rubber, coffee and onion, Dr. Dy reports. He sees growth improving in 2010 as the holding of the presidential elections in May is expected to drive demand for food and hence, the demand for other crops.
Dr. Dy sees pressure from various sectors to postpone the full implementation of AFTA in 2010. Doing so will however affect the country’s credibility in carrying out a long term commitment. AFTA is something we knew was coming and should have prepared for a long time ago. But not unsurprisingly, we did not and from the looks of it, other ASEAN countries do not seem to be sympathetic, Dr. Dy observed.
Ultimately, implementing it is a political decision. Dr. Dy cited reports that the entry of low-priced wheat has already affected corn prices. On the part of the consumers, Dr. Dy pointed out “they can benefit from liberalized trade brought about by AFTA (and WTO) only if jobs are provided and disposable incomes are improved.”
Eventually, Dr. Dy thinks “the installation of a new President is always a cause for optimism.”
Old ladies
From Lal Chatlani.
Three old ladies were sitting side by side in their retirement home reminiscing.
The first lady recalled shopping at the green grocers and demonstrated with her hands, the length and thickness of a cucumber she could buy for a penny.
The second old lady nodded, adding that onions used to be much bigger and cheaper also, and demonstrated the size of two big onions she could buy for a penny a piece.
The third old lady remarked, “I can’t hear a word you’re saying, but I remember the guy you’re talking about.”
Boo Chanco’s e-mail address is bchanco@gmail.com. This and some past columns can also be viewed at www.boochanco.com