Public spending in agriculture: Is it enough?
In my recent piece entitled “Agriculture and Rural Push,” which was featured on Aug. 18 in BusinessWorld, I cited the factors why Philippine agriculture lags in the ASEAN in terms of productivity, diversification and exports. There are at least three main reasons:
1. limited land access under the Comprehensive Agrarian Reform Program which discourages private investments;
2. fragmented low-skill extension of the local government units; and,
3. lack of merit-based bureaucracy at the Department of Agriculture (DA).
Equally important is the comparatively low budget for agriculture.
The Department of Budget and Management (DBM) approved a budget ceiling of P66.4 billion for the DA in 2020 versus P79.9 billion in 2021. The DA asked for P282.4 billion but this was disallowed. It will receive an extra P42 billion from Bayanihan II, bringing the total to P121.9 billion.
In 2020, the DA has P66.4 billion or 1.7% of the total budget of P4.1 trillion. This has been a lucky year: the Rice Competitiveness Enhancement Program (RCEP) added P10 billion and farm-to-market roads another P10 billion, for a total of P86.4 billion or 2.1% of the total budget. Add the irrigation budget under the Department of Public Works and Highways (DPWH) of P36.9 billion. Altogether, P123.3 billion or 3% of 2020’s total budget went to agriculture.
Indonesia. The Ministry of Agriculture has a budget of Rp84 billion or 3% of the total budget of Rp2,529 trillion. There is a Village Fund of Rp2.25 billion equivalent, or about 0.1%, which brings the total agriculture and rural budget to Rp86.25 billion or 3.4%.
Malaysia. Several ministries are involved in agriculture. The Ministry of Agriculture and Agro-based Industry (MOA) has a total budget of MYR4.9 billion or 1.6% of the national budget including irrigation and drainage. There are also allocations for the land schemes: Federal Land Consolidation and Rehabilitation Authority (FELCRA) with MYR738 million under the Ministry of Finance; Rubber Smallholders Development Authority (RISDA) with MYR550 million under the Ministry of Economic Affairs; and the Federal Land Development Authority (FELDA) with MYR810 million under the Prime Minister Department. The subtotal of the three agencies amounted to MYR2.098 billion or 0.7%. Overall, the budget is about MYR7.0 billion or 2.3% of the total budget.
Thailand. The Ministry of Agriculture and Agricultural Cooperatives (MAAC) has a budget of 109 billion baht out of a total budget of 3,000 billion baht, equivalent to a share of 3.6% of the total budget. The amount includes the allocation for the Royal Irrigation Department.
Vietnam. The Ministry of Agriculture and Rural Development has a budget of VND98 trillion while the national budget is VND1,500 trillion.
For the five countries, rice accounts for a significant share of the agriculture budget with irrigation (mainly for rice) as the main item. Thailand and Vietnam are global rice exporters. And their costs are competitive. In the Philippines, irrigation accounts for about 40% of the sector budget.
The Philippines is behind its ASEAN neighbors in terms of agriculture share to total budget. In 2020, agriculture accounted for only 1.7% of the total budget, without the extraordinary additional appropriations from other sources. Its ASEAN counterparts, except for Malaysia, fared much better: Indonesia has 3.4%, Thailand 3.6%, and Vietnam 6.5%.
MOVING FORWARD
What needs to be done with the agriculture budget? Well, support for agriculture must be increased. Crops are not receiving the importance they deserve based on value added. Coconut, with the largest physical area, is not receiving support despite the P100 billion locked in levy funds.
The Philippine agriculture budget has been heavily rice-centric for a long time. As a result, other crops like coconut, tree crops, fisheries and aquaculture, and livestock are neglected. This long-term neglect of other crops translated to higher rural poverty.
Agriculture Secretary Willie Dar has sought a higher budget for other crops in 2021. While rice has a budget of P10 billion under the RCEP, there is less per area for the many others. But the Secretary’s move is in the right direction. It is imperative to increase support for other crops in order to make a more significant dent in reducing rural 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 “Rolly” 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.
