PRESIDENT-ELECT Ferdinand R. Marcos, Jr.’s campaign promise to bring rice prices down to P20 per kilo is premised on the necessary step of thoroughly modernizing the industry, though the costs could be overwhelming, economists said.
“(In) transforming a campaign promise (into) reality, there are constraints that have to be addressed,” Asian Institute of Management economist John Paolo R. Rivera said. “There really is a need to modernize the agriculture sector so that it can produce sufficient rice for domestic consumption and export.”
On Thursday, Mr. Marcos began laying the groundwork for achieving P20 rice, noting the opportunity to attract young people to farming via the employment of technology. He also signaled his intention to ensure farmers are protected by carefully reviewing the impact of the Regional Comprehensive Economic Partnership (RCEP).
Economists said one way of meeting the P20 pledge will depend on modernizing agriculture and joining RCEP.
Mr. Rivera said modernization will entail broader use of technology and greater efficiencies in the transport of produce.
“In the short run, government subsidies will be needed, but there will be (a) question of funding,” he said.
Mr. Rivera said the Philippines has much to gain from RCEP such as technology and know-how from other countries.
RCEP is a free trade agreement that covers the Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia, and New Zealand. It aims to reduce red tape and significantly lower tariffs on products, facilitating easier trade.
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said that the incoming administration is in a “great position” to modernize the agriculture sector, citing the Rice Tariffication Law (RTL).
“However, I do know that there will be challenges going after this goal and there should be a clear and effective plan or road map that needs to be determined.”
Mr. Asuncion added that the need to modernize should not be solely centered on rice, but should extend to other forms of produce. He considers the focus on rice “a good step forward.”
Mr. Asuncion said because the Philippines cannot compete with subsidized agriculture in developed RCEP countries, the best course of action would be “to strengthen our own local agriculture sector first,” and eventually export should surpluses arise, he added.
“However, demand for high-value crops like bananas and others should further be encouraged and supported to help these expand and thrive,” he added. “Overall, the incoming administration would be very wise to pick its battles and make sure that trade will not only be free, but most importantly, fair to all parties as well.”
Economics Professor Leonardo A. Lanzona, who teaches at the Ateneo de Manila, said he was worried about what such a program would cost.
“Scientifically, I do not see any way this will work. If ever we are going to undertake this, the costs will be enormous,” Mr. Lanzona said, adding that attempting to return to “self-sufficiency” would cause rice shortages and give rise to corruption.
“Our agricultural sector can be competitive, but this means we have to remain open to trade,” Mr. Lanzona added. “The concept of infant industry and protectionism is already (out of date). The goal now should be to allow markets to determine the products where we have comparative advantage. In this case, trade with RCEP is a crucial element.”
Mr. Lanzona said that the “engine of growth” lies in other sectors, primarily in services and manufacturing.
“Spillovers from the growth in these sectors can spur agricultural production, but not the other way around as seen from our own history as well in other countries,” he added, citing the failure of the Masagana 99 agriculture program in 1973.
To address the Philippines’ inability to compete with more advanced agriculture industries, Mr. Lanzona said that “we can nonetheless develop niche markets in agriculture where production does not have to be large scale, but this will involve producing processed commodities combined with the manufacturing and service sectors, not just raw products.”
Last week, Socioeconomic Planning Secretary Karl Kendrick T. Chua and Trade Secretary Ramon M. Lopez backed RCEP participation, amid concerns from industry groups about the possible negative impact on the agriculture sector.
“In 1978, the population of the Philippines was around 46 million. Today, the population is 110 million. However, our land area is not going to increase. Imports are part of a temporary solution to address hunger and food shortages while we improve agricultural productivity,” Mr. Chua was quoted as saying.
“Joining RCEP will preserve 98.1% of tariff lines, which corresponds to 228 commodities or $16.9 billion of imports. Only 15 agricultural commodities representing 33 tariff lines will see lower tariff rates,” NEDA said.
President Rodrigo R. Duterte signed the RCEP agreement last year, but the Senate has yet to give its concurrence. — Tobias Jared Tomas