Philippine Business Magazine: Volume 8 No. 3 - Policy
The Future of Farming
There are business opportunities in all areas of farming and agribusiness but there is a need to modernize the sector

Agriculture Secretary Leonardo Montemayor

In challenging the business community to help government modernize agriculture, Agriculture Secretary Leonardo Montemayor says agriculturual modernization will translate to food security, improved incomes, and people empowerment. Excerpts of speech delivered before the Makati Business Club on 26 June 2001:

We face daunting, almost overwhelming, problems in the agricultural sector. Growth in farm productivity over the past decade has been stagnant and even declining. Referring to 1990 as the base year, over-all productivity has grown at barely over 1% per year. In contrast, the agricultural sectors of Thailand and Vietnam have zoomed upward in growth by at least 6-8% per year. Our population has grown faster than agricultural production, while our agricultural land has declined due to increasing urbanization.

The twin pressures of rapid population growth and stagnant productivity have forced us to import larger amounts of rice. Over the past decade, our rice imports have averaged about 15% of total consumption per year. And despite the added supplies arising from imports, rice prices faced by Filipino households are about two times Vietnamese households. Partly because of high food prices, crushing poverty remains – particularly in the countryside and in our urban slums. Eighty percent of our people spend at least half of their budgets on food. Therefore, any increases in food prices are tantamount to cuts in wages, exacerbating labor unrest.

Implement AFMA
We must start with the law, the codified mandate by which we pursue our vision and goals and we should all take it to heart. I cannot state it strongly enough. We must implement R.A. 8435, the Agriculture and Fisheries Modernization Law, in full. I should stress that the AFMA is not only about funding. The AFMA also establishes mechanisms and strategies for the more efficient use of available funds and emphasizes the primacy of private enterprise in agricultural modernization and growth.

For example, AFMA mandates that public investments in support of productive enterprise should be concentrated in the SAFDZs – the Strategic Agriculture and Fisheries Development Zones. Another example is the identification of “Centers of Excellence” among State Universities and Colleges that will be the focus of support for world-class agricultural education and research. Still, another efficiency-boosting strategy enshrined in the AFMA is the empowerment of civil society and Local Government Units (LGUs) to provide area-specific extension services, instead of continued reliance on the weakened national extension structure.

The AFMA also sets our priorities in public investment – principally communal irrigation, operated and sustained through collaboration between irrigators’ associations and LGUs. Thus, the National Irrigation Administration will, over time, specialize in giving technical and engineering support to LGUs and independent agencies. In turn, the LGUs and IAs will take on larger roles in the construction, operation, and maintenance of communal irrigation systems.

Modernize Agriculture
AFMA places production technology at the heart of our drive toward revitalized agricultural and rural growth. Indeed, we must capture all the benefits from the latest and more productive advances in agricultural technology. Hence, the AFMA requires maximized investment budgets in research and development, to the tune of at least 1% of agricultural gross value added.

In sum, AFMA sets the framework by which we shall achieve sustainable food security and a modernized agriculture: revitalized productivity for a more abundant food supply, coupled with more efficient deployment of resources and the building of genuine partnerships between government and the private sector. In order that the job is done, and done successfully, we all need to work together. As we all are painfully aware, our government’s resources and management skills are very limited. We have seen too many efforts launched, only to be prematurely aborted due to lack of resources and management skill. Therefore, I appeal for your support, your cooperation, your talents, and resources. We cannot do it alone. At the very least, we need your loud, consistent, and repeated advocacy for the full implementation of AFMA.

“We face a large market for high-value commodities -- particularly meat, horticulture, aquaculture, and processed agricultural products”

Invest in the Countryside
I appeal to all businessmen to render direct assistance to help relieve crushing poverty in the countryside. Certain business foundations have already provided schoolhouses and medical clinics to communities on a grant basis. So why not establish basic agricultural facilities for the poorest farming and fishing communities? Such small, low-cost but high-payoff facilities include small water impounding dams, pumps or pipes; fisheries landing wharves; training rooms or courses for technology transfer; high-yielding seeds; and basic tools and equipment.

But on a more sustainable basis, we start with the view that farming is a business. I propose that the business community seriously look upon the various aspects of the agriculture and rural program and the AFMA as business opportunities — tempered by social responsibility. All public investments are, by their nature, enabling instruments for private enterprise ultimately for the public good. Public roads cut down private costs. Public irrigation provides water to private farms. Public regulations either restrict or benefit private enterprise. This is the essence of the roles of the public and private sectors in our partnership for development.

Money in Agribusiness
Irrigation expands agricultural productivity and promotes rural employment and food security. From the immediate into the long-term, irrigation is good business. Let me challenge the entrepreneurial instincts of the business sector to propose mutually beneficial mechanisms for joint ventures in the provision of irrigation services. What are the opportunities in Build-Operate-Transfer schemes for irrigation works and services?

Certainly, there are business opportunities in all areas of farming and agribusiness: contracting, procurement and services from hydrological assessments, mapping, engineering, supervision, monitoring and design, technical training, construction, management and user training, and the simple provision of the endless list of parts and equipment: seeds, feeds, breeds, chemicals, fertilizer and pesticides, construction materials, pumps, pipes, hoses, motors, fuel, electricity, farm machineries, tools, and so forth and so on.

Sales to government of supplies and equipment are straightforward. But much more than that, I imagine that opportunities also abound in contracting, forward procurement; tie-in arrangements, countertrade, creative financing and other innovations in agribusiness and rural enterprise.

As you know, our country was, worldwide, a pioneer in the formulation of contract-growing arrangements in poultry. Innovative and profitable contracts can also be designed for other crops and ventures. Path-breaking partnerships have already been launched in various locations that demonstrate the commercial feasibility of joint ventures between private business and farming communities. Some of you are, in fact, engaged in such partnership ventures in high-value crops in Bukidnon, South Cotabato, Ilocos Norte, Pangasinan, Bulacan, Mindoro and Laguna, to name just a few.

Private sector initiative and ingenuity are badly needed for investment in productive technology and extension. Clearly, the public research and development system cannot by itself uncover and bring to commercial success the best in technology. Are there options for private investment in research and development? Can contracts and agreements be formulated that will enable private investment in technology research which will eventually generate public benefits? Can joint ventures in R&D be fashioned between private businesses and the public agricultural research institutes and state universities and colleges? We call on your creativity, your sense of enterprise and nationhood to propose ideas in this regard.

CARP Beneficiaries
I should add that the partnerships that have been formed between farmers and businesses also demonstrate the feasibility of creative contracts and schemes formulated in response to the equity mandate of agrarian reform. Secretary Braganza of the Department of Agrarian Reform told us that a team of international-caliber analysts completed an assessment of the impact of agrarian reform. The study had been commissioned with support from the donors to the Comprehensive Agrarian Reform Program. In summary, the assessments conclude that after 13 years of CARP implementation, agrarian reform communities and agrarian reform beneficiaries are better off, thus furthering the equity-promotion objectives of RA 6657, the Comprehensive Agrarian Reform Law.

The Right Global Trade Policy
A final and urgent area of partnership among government, business, and civil society is in the formulation and execution of appropriate global agricultural trade policy. Like it or not, we must trade and exchange with the rest of the world. Unavoidably, we are exposed to the ebbs and flows of international currencies and commerce. In this increasingly interconnected and interdependent world, there is no feasible alternative to intelligent, entrepreneurial and profitable commerce in the international context.

We face a large market for high-value commodities — particularly in meat, horticulture, aquaculture, and processed agricultural products. Yet, we face serious competitive challenges to our traditional commodities: rice, corn, sugar, and coconut. How do we take advantage of the international opportunities, and at the same time, assist in the transition of our traditional crops to more profitable ventures and protect the impoverished farming sector from more harm?

The answers to these questions in international trade policy do not come easily. I will be the first to say that we in government must not be left to answer them alone. Business must be vigilant and ever ready to contribute positively to the debates. In the end, we must bond together for the benefit of not only a few but of all Filipinos, now and in future generations, to shape the negotiating strategy that will bring long-term, sustainable returns to our people.

A Call to Partnership
So, feel free to propose good rural and agricultural businesses, enterprises, and ventures. On policy and strategy, you should participate actively in the various sectoral and regional committees of the National Agriculture and Fisheries Council. The NAFC and the Agribusiness and Marketing Assistance Service are ready to provide business linkages, organize trade fairs, and help you navigate and tap the bureaucracy. In turn, we will endeavor to join your regular activities, conferences, and summits. We trust that you will keep your doors open, when we call to seek your advice and help. And even when we fail to call, please offer, since there are times when we do not realize that we need help.

The opportunities for beneficial partnerships in agricultural and agribusiness ventures are almost limitless. I dare say that any constraints to these partnerships are dictated only by the limits, sometimes self-imposed, on our imagination, commitment and courage to contribute to nation building and to the common good.