Agriculture, agriculture, agriculture

My former college economics professor, Dr. Bernie “Dr. Boom” Villegas, was once quoted chanting the mantra of “agriculture, agriculture, agriculture” when asked about the development direction of the country. Indeed, while the political Left were enamored with “nationalist industrialization,” and rent-seekers with “import-substituting industrialization,” Bernie was an outlier. After all, agriculture was unsexy, while industrialization, with its image of mighty steel mills and factory sinews, represented progress and modernization.
Guess what? It turns out Bernie was and is right, after all. Not that we shouldn’t pursue industrial modernity, but first things first, and that means agricultural development. Agricultural development is the foundation of sustainable, inclusive growth.
That truism has been brought to the fore with the recent economic data showing higher consumer inflation on the back of higher food prices and weak export performance, resulting in record trade deficits marked by faltering agricultural exports. In the last quarter, agricultural growth turned negative. As a result, agricultural production is estimated to be 1 to 1.5% for the year, way below population growth.
The weakness of our agricultural sector shows our vulnerability to all sorts of shocks, from natural disasters to oil price shocks. The pain of increasing oil prices would not have mattered so much if it weren’t accompanied by higher food prices. Further, our export base is undiversified. We have miniscule agricultural exports, unlike, say, Vietnam. A global recession can cause exports, primarily in import-intensive electronics, to spiral downward, further pressuring the peso and our ability to finance capital imports.
The beauty of agricultural development is manifold: It will address the problem of rural poverty since the poorest of the poor work in the countryside; it will create a domestic demand for wage goods since rising incomes in the countryside will make an expanding market for industry. It will also act as a buffer to the vagaries of global demand for exports, especially in this age of trade wars and anti-globalism; it will spawn agro-industries, i.e. factories processing raw agricultural products and transforming them to higher value-added goods.
Agricultural development will also have a collateral, but very important, benefit: it will help reduce insurgency and bad peace and order in the countryside, which, in turn, would lead to more investments and increased tourism. Moreover, a rising rural middle class will help check the proliferation of political dynasties and strengthen our democracy.
I know of very few countries which industrialized without agricultural development as the foundation of their modernization and industrialization. Land poor economies like Singapore and Hong Kong essentially developed by importing the agricultural productivity of other countries through free trade. However, for the rest, agricultural development goes hand in hand with industrialization. In fact, the United States’ economy is sustained by the high productivity of its agricultural sector. Just about 1% of the population feeds the rest and there’s even a bountiful surplus which it exports.
By the way, it’s not true that agricultural development leads to dead-end growth. The Netherlands is an example of how a country continues to derive increasingly higher value output from agriculture and, in the process, has become the second-largest agricultural exporter in the world despite being a tiny country. This is more true now in the age of biotech. Plants and animals can be transformed into factories of complex chemical, pharmaceutical, and environmental products. (E.g., Rice can be infused with Vitamin A through biotech. Plants can be turned into biofactories producing peptides for medicine.) In this, the Philippines has a competitive advantage, having one of the most diversified flora and fauna in the world.
And what about China? Deng’s first reform involved agriculture. Under Mao, the emphasis on heavy industry under the Great Leap Forward led to widespread famine and millions of deaths. When Deng took over, the first and most important reform he did was to change the property rights in agriculture: he decollectivized farming and instituted the household responsibility system. Essentially, Deng introduced capitalism in agriculture by allowing farming households to determine what to plant, sell to the market, and keep the fruits of their produce.
Deng’s agricultural reform was a Big Bang of sorts for China’s development: it resulted in dramatic increases in agricultural productivity, which in turn not only led to the reduction in rural poverty, but also led to agricultural savings that financed industrial development. While increased agricultural productivity led to surplus labor, displaced peasants and farm workers went into gainful employment in higher productivity manufacturing. Sharp devaluations of the Chinese yuan, an open door policy for foreign investments, flexible labor policies, and emphasis on infrastructure (ports, roads, bridges) for export-led manufacturing, enabled industry to take off.
In contrast, here in the Philippines, we have neglected and continue to neglect agriculture. Instead of productivity, the emphasis is on land distribution — of the wrong kind. CARP (Comprehensive Land Reform Program) has transformed landless peasants into, in the words of National Scientist Dr. Raul Fabella, “impoverished landowners.” Equity for farmer-peasants as a matter of social justice is fine, but the state has shackled them with all sorts of restrictions. They can’t borrow or sell their land within 10 years, or until their amortizations are paid. They can’t succeed too much either, because they or anybody else, for that matter, can’t own farmland beyond five hectares. Since farmers die, their heirs divide the land into ever smaller cuts of land. (The average size is now just a hectare.) To top it all, the state gave them collective CLOAs, a sort of communistic documentation of their land ownership with many farmer-beneficiaries covered under just one land title. (About 50% of all CARP lands are still under a collective title.)
What we need to do is to free the rural land market: free from the restrictions imposed by CARP and the overreach by the Department of Agrarian Reform over all types of rural land. The second stage of social justice, after distribution, is to give farmer beneficiaries control over their own land and not shackle them with all sorts of restrictions. Even China, which is socialist in name and doesn’t allow their farmers to own the land but to lease it, has given its farmers tradable leasing rights, which allow small farms to be consolidated. What Philippine agriculture needs is more capitalism, and not statism.
Unfortunately, the Duterte government has neglected agriculture. Agriculture Secretary Manny Piñol, Mr.” Missing in Action” after typhoons, is a populist politician and just rehashes old and tired policies: free irrigation, free fertilizer, and rice self-sufficiency. The result is what we see now: anemic agricultural growth, rising rice prices, and falling agricultural exports.
It’s not surprising, however, that the Agricultural department is bereft of imagination and innovation. It’s more known for corruption (remember the fertilizer and Napoles scams?) because the farmers are too poor and politically weak to protest. Its policies reek of control and giveaways that make it a fertile ground for corruption.
It would also have been better if BBB (Build, Build, Build) had been more oriented toward agricultural development in the rural areas. Instead of big-ticket white elephants like trains and subways, which take time to implement and could be economically infeasible, BBB could have incorporated more regional roads and regional ports which would be faster to implement and give access to metropolitan markets for agricultural produce. Again, regional roads and ports are unsexy while big ticket projects, especially Official Development Assistance (ODA)-funded ones, are easier to extract rent from.
The Duterte administration’s mantra is “Build, Build, Build.” I say, however, that it should listen and learn from the wise Dr. Villegas, who has chanted, quite correctly, “Agriculture, Agriculture, Agriculture!”
 
Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.
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