Local banana industry faces serious problems

While banana growing remains one of the more lucrative ventures in agriculture, recent developments indicate that the local banana industry will be facing some serious challenges which can threaten its viability. As such, leaders of the local banana industry are asking the government for help.

In recent years banana plantations have played an increasingly important part in the Philippine economy, particularly in Mindanao. According to the Department of Trade and Industry, bananas comprise about 60 percent of the income from the exports in the Southern Mindanao.

It all began in the 1960s when Standard Fruit Corp., a subsidiary of Castle and Cooke, an American corporation, brought the first Cavendish banana to the Philippines. By 1968, Standard Fruit was joined by the Del Monte and United Fruits and the Philippine banana industry was well and truly on its way.

With Japan as its initial target market, Philippine banana growers soon overtook Ecuador and Taiwan as the major suppliers, commanding over 80 percent of the Japanese market from 1975 onwards.

Today, aside from Japan, Philippine bananas are also shipped to China, Korea, Hong Kong, the Middle East, Singapore, Russia and New Zealand bringing in more $200 million into the country annually. This makes bananas second most important agricultural export of the Philippines next to coco oil.

But unlike coconut which utilizes more than three million hectares of land, bananas only account for 20,000 hectares – mostly concentrated in the "banana belt" of Davao del Norte. This means that productivity-wise bananas contribute more dollars per hectare than any other Philippine agricultural product.

International banana trade

World banana trade is an important component of the world market for fruit second only to grapes, and has many unique characteristics due to the nature of the producers (mostly tropical developing countries) and consumers (predominantly in the industrialized world). Many of the main banana exporting countries are highly dependent on a small number of basic agricultural commodities to generate a significant portion of their foreign exchange earnings (Lead, 1996). For example in 1986, four of the major Latin American exporting countries: Costa Rica, Ecuador, Honduras and Panama, earned more than 20 percent of their foreign exchange by exporting bananas.

Production and marketing of bananas are highly integrated and concentrated activities. Ten countries account for over 60 percent of the world production, while the top five produce over half of the world’s banana production. These are Brazil, India, the Philippines, Ecuador and Colombia (Lead, 1996). However, only 15 percent of the world’s total production is traded internationally. Seven countries (Ecuador, Costa Rica, the Philippines, Colombia, Honduras, Panama and Guatemala) produce about 80 percent of the world’s banana exports. However, the two top producers of bananas (Brazil and India) do not figure among the top seven exporters (Lead, 1996).

The total share of production has shifted between different regions during the last three decades, with an increase for the Latin American and Asian producers vis-a-vis African and Caribbean producers, many of which are former European colonies and therefore, protected by the Lome Convention (World Development Movement, 1997). This is a critically important fact to understand some of the recent trends in the market development, such as the decision by the European Economic Community (EEC) to impose quotas on Latin America banana exports starting 1993 (Lead, 1996). At the beginning of the ’60s Central and South America accounted for 66 percent of exports and this figure rose recently above 71 percent. Exports from the Philippines, which were insignificant in 1950, reached almost 12 percent today (Lead, 1996).

Imports are also highly concentrated. The United States, Canada and European countries account for over 75 percent of world imports. This concentration partially explains the tight control over markets and distribution exercised by the three largest US multinationals: United Brands (now known as Chiquita Brands), Castle and Cooke (Dole) and Del Monte Corp. The big three also control maritime transport of their fruit as well as the distribution processes in the key markets.

Problems affecting RP banana industry

The recent slowdown in the economy of Japan spells problems for the Philippine banana industry. In a report, the DTI Region XI office noted that since Japan takes in the bulk of our banana exports, a slump in their demand would significantly affect the industry and the regional economy. And while steps are being undertaken to exploit or open up other markets, more should be done by the government to protect the industry. However, instead of coming to the aid of the banana growers, the government seems to be taking for granted the contributions of the sector. One proof of this is that no law has ever been passed for the benefit of the industry. While on the other hand, regulations such as the imposition of higher tariff on plastics adds to the burden that the industry has to bear. Annually, banana plantations use an average of 16,000 metric tons of plastic products in the form of seed bags, polytwines, banana inserts, opaque polybags and banana skirts.

Another particularly contentious area for the industry is the haphazard implementation of land reform in banana plantations. While most owners of banana lands have voluntarily submitted their properties to CARP, there is still a lively-sometimes violent-debate on who the beneficiaries will be. According to RA 6657, or the Comprehensive Agrarian Reform Law (CARL) those that have priority over the lands are "agricultural lessees and share tenants, regular farm workers, seasonal farm workers, other farm workers, actual tillers or occupants of public lands, collectives or cooperatives of the above beneficiaries and others directly working on the land." But in a recent decision, the Department of Agrarian Reform allowed the inclusion of "retrenched, retired and separated" farm workers in to the Agrarian Reform Beneficiaries list contrary to two DAR Administrative Orders (AO #6 and AO #9), which disqualify these same claimants. Predictably, the regular farm workers are up in arms over this decision, further depressing the level of productivity of many banana plantations.

In one of the most violent examples of these clashes between land claimants, in April 1999 the dispute between two factions of ARB’s at the Hijo plantation in Madaum, Tagum City, Davao del Norte, erupted in violence, leaving one ARB dead and five others wounded.

Today, a similar situation exists in many plantations threatening the hard earned prosperity of the banana industry.

One of few bright spots

The banana industry, despite its relatively small land area, has contributed significantly to the nation’s economy. For the past four decades, the industry has grown despite little or no assistance from the government.

Today, as the Philippines faces it worst economic and political crises, the banana industry remains one of the few bright spots on the horizon. Yet, instead of protecting and providing support to the industry, the government still continues to neglect the banana growers.

The Arroyo administration is in a unique position to arrest the potential decline of the banana industry. By carefully reviewing past policies, including those that have been enumerated here, the government can assess how it can maximize the industry’s contribution to the economy. And with the immediate question of funding for the President’s many programs still up in the air, a steady and stable banana industry will surely help in settling the issue favorably.