‘Give provinces priority in ODA-funded infrastructure projects’



INFRASTRUCTURE projects financed through Official Development Assistance (ODA) and the national budget should all be channeled to various provinces to enable them to take the lead in growing the economy, especially the agriculture sector, according to experts.

In the 2022 midyear economic briefing of the Ateneo Center for Research and Development (ACERD), former National Economic and Development Authority (Neda) Cielito F. Habito said projects funded through the private sector by means of Public Private Partnerships (PPPs) would be better undertaken in highly urbanized areas.

Giving provinces and poorer regions a chance to get ODA and publicly-funded projects will help in developing agriculture in these areas, Habito pointed out. He said the country’s neighbors, Vietnam and Indonesia, have benefited from tapping local governments in agricultural development.

“In terms of making our farmers more capable, let our provinces take the lead in doing that, not a top down all the way from Diliman teaching our farmers down in Tawi-Tawi what to do. But you have to scale up what we call a province-led agriculture and fisheries extension system or PAFES for short,” Habito said.

Relying on agriculture as a major growth driver can lead to broad-based GDP growth. Ateneo Department of Economics Chairperson Alvin P. Ang said in his presentation that among production sectors, agriculture is present in many more regions nationwide.

However, efforts to help agriculture are needed as Ang said the structure of the country’s farm sector barely changed in over 20 years.

“Only agriculture is spread all over, therefore the key is to harness productive resources of agriculture to address problems of poverty, inequality, and unemployment,” Ang said in his presentation.

Copying neighbors

Habito said making provinces lead is just one of the ways forward, particularly in growing agriculture and fisheries, which he said can just be copied from the country’s neighbors.

For one, he said, the Philippines needs to look beyond farmgate prices. The country’s former Chief Economist said the government should look not only at the production but the entire value chain.

This is what is being done by Malaysia’s Ministry of Agriculture and Food Industries and Vietnam’s Ministry of Agriculture and Rural Development. This makes it easier for the governments to have a macro view of the supply chain.

“That’s unlike in the Pilipinas, where the DA would traditionally say, ‘if outside farmgate it’s DTI’s [concern]; and the problem is that the coordination between the two is not always perfect, which is an understatement. So really, we have to have now a single ministry looking at the entire value chain,” Habito explained.

Efforts to copy from neighbors, Habito said, include clustering and consolidating farm management, as practiced in Thailand and South Korea.

This focuses on agri-industry cooperatives, contract growing schemes that pave the way for economies of scale, and higher value-adding.

Habito also urged the government to consider financing small farmers, which is the practice in Thailand through its Bank of Agriculture and Agricultural Cooperatives.

The former Socioeconomic Planning Secretary also cited a need to raise the agriculture budget to the ASEAN average, which is above 2 percent of their national budget.

In the Philippines, Habito said, the agriculture budget accounts for 1.7 percent of the national budget while Indonesia allocates 3.4 percent; Thailand, 3.6 percent; and Vietnam, 6.5 percent.

However, he also flagged the need to redress the low absorptive capacity of the Department of Agriculture and channel the funds through provinces.

“I’ve said this before, we need to just copy our neighbors, [there are] so many things we can learn from them,” Habito said.

Inflation

Supporting agriculture will help prop up food supply, especially in light of rising inflation—also driven by external factors such as the logistics woes and the war in Ukraine.

Ang said increasing local production will make the economy more resilient to shocks. As it is, based on his “naive estimate,” a $1 increase in oil prices leads to a 0.11-percent increase in inflation and a similar increase in food inflation.

He said food accounts for 38 percent of the basket of goods or the Consumer Price Index (CPI). Of the food items that comprise food in the CPI, rice, meat, and fish account for the largest shares at 25 percent; 16 percent; and 15 percent, respectively.

Ang also said that if prices of energy and cereal prices, which include rice, continue to increase, this could lead to a 1 to 4 percent increase in poverty.

“If we don’t work in addressing food and energy prices, this is based on estimates of the World Bank, you will see that the combined effect of energy and cereal prices will increase poverty by 1 to 4 percent and the latest data from the PSA would have already shown that, that poverty has increased by almost 2 percentage points from 2018,” Ang explained.

Earlier, the Philippine Statistics Authority (PSA) said that 19.99 million Filipinos are considered poor, or a poverty incidence rate of 18.1 percent.

Socioeconomic Planning Secretary Arsenio M. Balisacan said the government will endeavor to pare down poverty incidence in 2021 by 5 percentage points by 2025, and another 4 percentage points by 2028.

To achieve this target, the government will use the 2021 poverty data as the administration’s baseline as it pushes to undo the damage inflicted by the pandemic on the Philippine economy.

The National Economic and Development Authority (Neda) chief said its efforts to achieve the target include resuming face-to-face classes and greater vaccine access for children and adults.

Image credits: Nonoy Lacza



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