MAP Insights

The Philippine Development Plan targets the reduction of the national poverty headcount to 14% in 2022 from 21.6% in 2015. Relatedly, rural poverty is expected to fall to 20% from 30%.

Are the targets doable? It is not a walk in the park and will require smart work.

It is 2019 now and the President has three years to go. The Philippine Statistics Authority’s full 2018 report is coming out soon and it does not look like poverty would go down below 20%. Therefore, the remaining years must reduce incidence by two percentage-points a year to reach 14%.

The ASEAN poverty average of Indonesia, Thailand, and Vietnam is 8.5%, weighted by population. Never mind Malaysia with almost zero poverty. This means the Philippine poverty rate is 2.5 times higher.

Poverty is dominant in the agriculture sector in the Philippines. Rural poverty is 30%. About three-quarters of the poor are rural. Obviously, poverty in the country is an agriculture phenomenon. Poverty in the cities is only about 10%.

Some lessons:

Lesson 1: My engineering instructor claimed that a three-legged stool is the most stable even on uneven floor. It has something to do with the center of gravity.

Lesson 2: The 80:20 Rule. Also known as the Pareto Principle, it suggests that 20% of your activities will account for 80% of your results.

Lesson 3: Investment drives economic growth, and, more importantly, the productive capacity of the economy.

In terms of development, three legs can also be identified as crucial: Leadership at the national level, the Legislature, and the Local government units (LGUs). The private sector — small to large producers — responds to the investment climate created by national policy and by the LGUs, down to the barangays.

The ASEAN’s poverty reduction success is rock solid. Rural poverty can be solved with sustained national resolve. In the past four decades, the Philippines’ rural poverty reduction drive faltered badly. Agriculture lagged in productivity measures across major crops. There was an ingrained belief that with rice sufficiency, rural poverty will be reduced. Empirically, this is not so.

Rice only accounts for a third of farmland, coconut, another third. The rest are planted to corn, sugarcane, banana, other fruits, coffee, rubber, tobacco, and vegetables. In gross value added, crops account for 60%, with livestock and poultry, and fisheries and aquaculture, 20% each. And yet resource focus was only on a few commodities.

The leadership to achieve inclusive growth must make sure the right resources are invested in projects with the highest economic and social returns.

The laws include, among many: the Local Government Code (LGC) of 1991 which devolved agriculture extension to the municipal LGUs, and the Comprehensive Agrarian Reform Law of 1986.

The Acts of the Legislature affect implementation. It is worth noting that:

• 28 years have passed since the enactment of the LGC. A law can be amended after five years of effectivity. Big oversight.

The “ideal” extension hub is at the provincial capital. It has economies of manpower, career service and multiple specialists on agronomy, soils, pests control, water management, and marketing.

• Agrarian reform has not promoted investments. If it did, farm productivity should have increased since 1986. The five-hectare retention limit is too small for private investors. Too small for mechanization. The gross profits barely return the investments if overhead such as manager’s salaries are taken into account. Small farms can be consolidated but there is a crying need for management and resources. It is time to raise retention limits to a viable size.

The LGUs are the front lines of rural development. They have the internal revenue allotment (IRA). They can raise taxes. The LGC mandates that 20% of IRA will be allotted to fund economic development.

Sadly, only a few municipal LGUs are development-driven.

One is Piddig, Ilocos Norte. It has gone into rice farm consolidation, coffee estates and processing, small farm reservoirs, and farm tourism. It has reduced poverty incidence.

Another is Alabat, Quezon thanks to Mayor Fernando Misa with his broad-based development programs. Noted economist Ciel Habito cites cacao production and processing, coconut sugar production, honeybee culture, and production of hot chili pepper for food service chains.

At the provincial level, the proof of concept is Bataan: It has achieved the lowest poverty headcount of 2% among all localities in the country including Metro Manila (3.9%). It advocated for balance sectors.

The Department of Interior and Local Government (DILG) Seal of Good Governance is a great way of benchmarking. In 2018, only 207 municipalities out of 1,489 passed while 17 of the 81 provinces passed. The criteria cover: financial administration, disaster preparedness, social protection, business friendliness and competitiveness, environmental management, tourism, culture and the arts.

Elected legislators and LGUs pledged their support to the President’s plan to reduce poverty. Where are the proofs of concept? Action is needed now and less talk.

A dramatic reduction in poverty can be the greatest legacy of President Duterte. It hits the pockets of over 20 million Filipinos, most of them in agriculture. It is also good for business. The strategic metric is poverty reduction by the provinces and municipalities.

The legs of development must work in seamless tandem to bring investments to the countryside and achieve the reduction of mass poverty.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP.


Rolando T. Dy is the Co-Vice Chair of the MAP AgriBusiness Committee, and the Executive Director of the Center for Food and AgriBusiness of the University of Asia & the Pacific.