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Philippines Agricultural Production and Government Policy
The percentage of the population living in rural areas
declined from 68 percent in 1970 to 57 percent in 1990, and the
share of the labor force engaged in agriculture, forestry, and
fishing also decreased to less than 50 percent by the late 1980s.
Roughly two-thirds of agricultural households farmed their own
land or were tenants; the others were landless agricultural
workers. Some 75 percent of agricultural
value added (see Glossary)
came from crops and livestock. The remaining 25 percent
came from forestry and fishing (see
table 8, Appendix). Value
added in agricultural crops grew rapidly in the early 1970s,
averaging growth rates of 7.7 percent (see
table 9, Appendix). In
the 1980s, however, with the exception of corn, which was in
growing demand as an animal feed, the growth rate of agricultural
production declined and was sometimes negative for bananas and
sugarcane. Low world prices combined with the high cost of inputs
such as fertilizers were two of the most important reasons.
The government pursued sometimes contradictory goals of
maintaining cheap food and raw material prices, high farm income,
food security, and stable prices, at times through direct
intervention in agricultural markets. In 1981 the National Food
Authority was created. It was empowered to regulate the marketing
of all food and given monopoly privileges to import grains,
soybeans, and other feedstuffs. The ability of the National Food
Authority and its predecessor organizations to stabilize prices
and keep them within the established price bands, at either the
farm gate or the retail market, has been quite limited because of
insufficient funds to affect the market, strict purchasing
requirements, and corrupt practices among authority personnel. In
1985 the role of the National Food Authority was reduced, and
price ceilings on rice were lifted. Beginning in the 1950s,
government efforts to stimulate industrial development, such as
tariffs on manufactured goods, overvaluation of the currency,
export taxes on agricultural commodities, and price controls had
a deleterious effect on the agricultural sector, making it
relatively unprofitable. On the other hand, irrigation water was
distributed at below-cost prices, and fertilizer manufacturing
was subsidized.
Beginning in the latter half of the 1970s, the Marcos regime
gave increased attention to agriculture and the rural sector in
general, including agribusiness development. The Aquino
government continued that emphasis, although its policy evolved
from a commodity-specific orientation to a general, cropdiversification approach that relied more on market signals to
guide crop selection. The rice-price stabilization program
remained in effect, and a program was implemented to increase
small-farmer access to postharvest facilities such as warehouses,
rice mills, driers, and threshers.
Providing credit to the agricultural sector, particularly to
small-sized and medium-sized farmers had been a government policy
since the early 1950s, one that met with mixed success at best.
By the early 1980s, there were approximately 900 privately owned,
rural banks, which were the principal implementors of
government-sponsored, supervised credit schemes. The Masagana 99
program was initiated in the early 1970s to encourage adoption of
new, high-yielding rice varieties. No-collateral, low-interest
loans were made available to small farmers, mainly by privately
owned, rural banks, with the government guaranteeing 85 percent
of any losses suffered by the banks. In general, however,
regulated interest rates made rural banks unattractive to
depositors.
In 1975 more than 500,000 farmers participated in the
Masagana 99 program. By 1985, however, the program had expired
because of high arrearage and the tight monetary policy
instituted as part of an agreement with the IMF. The program was
revived in the Aquino administration's Medium-Term Development
Plan, 1987-92. According to a government report, however, as of
1988 the program had not yet reached most of the intended
beneficiaries. Government efforts were also underway to
rehabilitate rural banks, the majority of which had experienced
severe difficulties during the economic crisis of the early 1980s
and the subsequent monetary squeeze.
Data as of June 1991
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