An economic expert says high taxes, custom duties, and tariff rates, as well as difficulty in procuring licenses and raw materials are among the barriers to private investments in the agriculture sector.
Foundation for Economic Freedom Fellow Dr. Fermin Adriano made this observation in his presentation during a forum entitled, “Cultivating Investments in the Philippine Agro-Industrial Manufacturing for Food Security” organized by the Stratbase ADR Institute.
In his remarks, Adriano pointed out the need for more private sector investments to increase agricultural productivity.
“The limited private sector investment in Philippine agriculture, which is evident in the small percentage of establishments – only 1 percent engaged in the sector— contributes to consistently low farm productivity,” Adriano said.
“Without heavy private sector investment, our agriculture sector will not develop because the resources in the hands of the government is limited. The bulk of resources in this country is in the hands of the private sector. If they are not going to actively participate, I don’t see a future in the agriculture industry,” Adriano added.
Adriano also identified some of the main investment bottlenecks as far as the private sector is concerned.
“For those who are needing imported materials as raw materials, they complain about the high tariff rates of certain commodities. For example, you’re involved in animal feed milling, the tariff rate is about 35 percent lowest and it can go as high as 40 percent or above compared to Vietnam which is only about 2 percent,” Adriano explained.
Adriano said the high tariffs for raw materials such as corn for feeds result to higher cost of livestock in the Philippines.
“Our prices [of livestock] here are exorbitantly high—73 percent higher than Vietnam, probably double than Thailand. The main reason for that is the cost of raw materials here are very expensive. They produce corn in Thailand. Vietnam imports corn but at two percent, he noted.
According to him, the solution is to increase the farmers’ income or bring down the prices by lowering tariffs so that imported items including raw materials will come in, resulting in cheaper products.
Adriano also tagged difficulty in developing commercial farms, climate change, and the perceived inadequate government support in reducing or mitigating risks particularly in the spread of animal and plant diseases, as among the other main constraints to private sector investments.
President Ferdinand Marcos Jr. earlier affirmed the need to industrialize the agriculture sector amid the rising demand in agriculture products due to population density and the current geopolitical situation in the country.
“Investments in infrastructure and in the capacity of our people—whether in agriculture, education, health, or transportation—are crucial in driving our nation and our economy forward… we put a high premium on investments in agriculture, as it is the key to combatting hunger and poverty, and achieving our goal of food sufficiency and security across the country, the President said.
Agriculture Undersecretary Deogracias Victor Savellano said resolving regulatory matters for veterinary feeds, drugs, and biologicals, including vaccines is necessary to encourage more
investments in the agriculture sector, and ultimately, ensure food security in the country.
“The government wants to have coherent policies and definite answers to the stakeholders in agriculture. By having these, we hope to make them invest more. The regulatory matters have to be aligned to get the private sector to produce more food and ensure food security for
the nation,” Savellano explained.
To ensure stability in the food supply chain in the country, Stratbase Group chief operating officer Dindo Manhit said he supports lowering the tariff of raw materials in the meantime, while continuously providing assistance to local farmers.
He said there is a need to have proper forecasting to create a balance the importation and local production of agriculture products.
“The local industry stakeholders said they are capable of producing the demand of the Philippine market, as long as there is proper forecasting and enough data research,” Manhit explained.
“Large-scale corporate farming and other agricultural investments should also be encouraged to increase production and improve the quality of agricultural commodities used as raw materials for animal and human food manufacturing, which, in turn, will strengthen the country’s overall agricultural supply chain. These investments will effectively bridge the production gap in the agriculture sector. As
these investments come, we need, at the onset, a stable source of raw materials before we reach stability in our food supply chain. If we need to lower the tariffs of these raw materials, let us do so in the meantime until our production catches up.” Manhit said.