Agri sector: Laggard, as usual

Here in Cebu, we always brag that every January tourism peaks (obviously referring to the Sinulog Festival) and all other industries directly or indirectly related to it are cashing in as well.

True enough, every year, in the week leading to the Mardi Gras, hotels are full and restaurants and bars are overflowing.

One thing we certainly forget, however, is the fact that it only happens once a year. Therefore, as a whole, festivals that are annually done, like the Sinulog, contribute too little to our economy. Thus, if we should talk about economic growth, we should rethink and look for other approaches.

To recall, just last week, the Philippine Statistics Authority (PSA) reported that the country’s economy “expanded 6.1% in the fourth quarter at a pace slower than expectations, even as it remained above the six-percent mark.”

It further reported that “the October-December outcome was higher than the previous quarter’s revised 6%, but slower than the 6.5% growth recorded a year earlier.” With this fourth quarter scenario obtaining, the country’s 2018 “economy slowed down to 6.2%”, the PSA added.

One thing we should remember is that the last time that we grew only by 6% was in 2015. Since then, annually, our economy expanded beyond that. So that, as PSA further reported, this growth is the country’s weakest in three years. It was quickly justified though that this was due to the rising inflation and currency fall.

As usual, this growth was largely driven by the industry sector (grew by 6.9%). Though slower than the 7% recorded in the same period last year, it was the construction subsector that made significant contributions with 21.3%, the fastest since the first quarter of 2013. Chief Economic Planner Pernia further reported that “for the fourth quarter, construction contributed 3.8 percentage points to the industry sector’s growth.” He largely credited the “Build Build Build” program for it.

Notably though, the manufacturing sector, which only grow by 3.2% (slower than the 7.9% during the same period in 2017) is “an area of concern”, he stressed. He quickly (in a joint statement) cited “weak business sentiment and policy uncertainties along with lethargic demand amid a slowing global economy as the causes of manufacturing’s underperformance.”

While this observation is very valid, historically, the manufacturing sector had proven that it can rise again from years of bad performances. The same is true with the service sector. The sector’s full-year growth was at 6.6% (decelerating from 2017’s 6.8%). What is troubling really is the agriculture sector.  Remember, the government’s policy decision as far as the agriculture sector is concern is always towards growth. Yet, for decades we’ve been performing poorly. This year’s performance confirms this. As reported, agriculture, hunting, forestry and fishing grew 1.7% in the fourth quarter. For the year, it grew 0.8% compared to 4% in 2017.

This is a very sad development. With our population growing at the vicinity of 1.7 percent a year or close to 1.8 million, food shortages shall become permanent. Therefore, it will never come as a surprise if in the near future, what used to be our temporary solution of importing rice from Vietnam and Thailand shall become permanent.

Yes, our population maybe partly blamed, but the point we are driving is that rice and corn production is practically inefficient. Rightly so because, almost always, improvements are noted in, among others, banana, pineapple and cassava. If we try to figure it out, these are produced by huge companies that have their own platoons of good farm managers. Therefore, while our government automatically blames the weather for the inefficiencies of our rice and corn farmers (who are mostly inadequately funded and inefficient), the well-managed companies (they practically share the same weather/climate) have continued to grow.

Indeed, in dissecting our GDP, it is quite obvious that about 90% is contributed by the service and industry sectors. It is apparent too that the agriculture sector contributes just a measly 11% to our GDP. What is worst is, 31% or about 1/3 of our labor force is in the agriculture sector. That simply means, this sector is inefficient.

Thus, in addressing this concern, we should develop successful new farmers by providing them experience-based production and sound business-management as well as marketing trainings. To ensure success, this government must also provide the necessary infrastructure, such as, irrigation, storage facilities, transport equipment, packing and processing facilities. Moreover, supervised loans may also be considered to finance farm inputs. Done well, only then will we be able to let them till their lands profitably and help improve our economy.