Role of agro-industrial business corridors (Part 1)

Published August 3, 2021, 7:00 AM

by Dr. Bernardo M. Villegas

It is well known that the Achilles heel of the Philippine economy is the very low productivity of its agricultural sector, especially compared to its ASEAN neighbors like Thailand, Malaysia and Vietnam.    Accounting for about a quarter of the labor force, the agricultural sector contributes barely 10 percent to Gross Domestic Product.  Its growth has for a long time hovered at the level to 2 to 3 percent annually.  This under-development of the agricultural sector explains to a great extent the high rate of poverty incidence of the country, which during the pandemic may have gone back to over 20 percent of the population.  Some 75 percent of the poorest of the poor are in the rural areas, where agriculture is the predominant occupation.  The poor performance of the primary sector of the economy can be attributed to long-term neglect and unenlightened policies of past governments that failed to endow the small farmers with the appropriate infrastructures they needed to make their farms productive.  It was socially just to distribute to millions of farmers small plots of land during the period of agrarian reform in the 1970s and 1980s.  What went wrong was that after they obtained their respective small farms, they were literally abandoned to their own resources.  No farm-to-market roads, no post-harvest facilities, insufficient irrigation facilities, weak support services.  In fact, there is enough evidence that the farmer beneficiaries became worse off compared to the time when they were tenants.  Their landlords at least provided them with the necessary inputs to eke out a living from their farms.

Now that the Comprehensive Agrarian Reform Program has long expired, there is need for more creative approaches to improve agricultural productivity as the welfare of the small farmers is still considered a paramount goal of economic development.  One cannot talk about sustainable and inclusive development without making sure that our millions of farmers are able to improve their lot in tandem with the whole nation.  Fortunately, the pandemic that struck the whole world in 2020 to 2021 has heightened the consciousness of leaders in both the public and private sectors about the paramount importance of food security.  There is increased interest in searching for innovative ways of improving agricultural productivity while at the same time increasing the incomes of small farmers and other rural workers.  One innovative approach is the establishment of agro-industrial corridors or food hubs in strategic locations of the country.  These agro-industrial estates can serve to generate employment in what are called “rurban” regions (party rural and partly urban) such as CALABARZON, Central Luzon, Western Visayas, and the whole of Mindanao.

I have just read a study which focuses on the socio-economic impact and market conditions of a proposed agro-industrial business corridor at the new Clark City, Pampanga.  Funded by one of the leading agribusiness corporations in the country, Planters Product, it uses the tools of economic analysis to demonstrate the major impact of an agro-industrial estate on employment, household income, food security, food prices, investment opportunities  and the reduction of poverty.  The choice of the New Clark City in Pampanga is owed to its strategic location in Central Luzon which has a huge internal market of some 11.1 million consumers and strategically located to also cater to an even larger market of the National Capital Region which can reach as much as 13 million inhabitants.  With the Build, Build, Build program of the Duterte Administration, which is expected to even intensify in future governments, Central Luzon (consisting of the provinces of Bulacan, Pampanga, Nueva Ecija, Tarlac, Zambales, Bataan and Aurora) is being increasingly endowed with the needed infrastructures and connectivity that have been lacking in the past.  Region 3 is a perfect example of what we called a “rurban” area, partly rural and partly urban.  A great part of Bulacan and Pampanga are already extensions of the Metro Manila area while the rest of Central Luzon, especially Nueva Ecija,  Tarlac,  Zambales and Aurora are still predominantly rural, with vast tracts of agricultural land that are planted mainly to rice, corn, sugar and coconut but can be cultivated for high-value crops like vegetables, flowers and fruits.  There are also many livestock farms in the region.

The development of the Agro-Business Corridor (ABC) at the New Clark City in Pampanga Province is a timely and concrete effort to promote a sustainable urban-rural development in Central Luzon which is the hub’s defined territory.  The distinctive choice of New Clark City is owed to its steady and dynamic growth, leading to continuing investments in infrastructure and connectivity, especially in critical road networks, and agglomeration of vital industries and business.  Especially notable for connectivity with the even bigger market of the National Capital Region is the series of railroad projects that will connect Clark all the way to Metro Manila and even to the provinces of Laguna and Batangas.  The projects will be undertaken with the help of the Japanese and other local and foreign investor groups.

From the experiences of the more advanced agro-industrial economies such as Thailand, Malaysia and Vietnam, agro-industrial hubs have been developed to serve the purpose of connecting producers with both middle and large scale wholesale purchases, as well as individual customers in an efficient manner.  There is the hope that the policy and regulatory environment that will support the creation of the agro-industrial hub in Central Luzon will bring about excellent opportunities to expand agricultural production and incentivize value-adding activities, especially for micro, small and medium enterprises (MSMEs), not only in the region itself but in other promising markets both to the north and south of Region 3.  Agricultural production from the Ilocos and Cagayan regions can also take advantage of the facilities that will be made available in the agro-industrial business corridor of Clark City. It must be remembered that agribusiness goes beyond farming and includes such other phases of food and feed production as post-harvest, cold storage, logistics and transport, warehousing, food processing, and food retailing.  The agro-industrial corridor will provide the necessary synergy among all these phases of agribusiness and will allow the economies of scale needed to improve the farmers’ incomes.  With the facilities that will be established in the agro-industrial estate,  the farmers of the region can be encouraged to go beyond the traditional rice, sugar and corn and diversity into higher-value products such as vegetables, fruits and livestock, knowing that there are processing plants, warehouses, cold storage facilities and other value-adding facilities on which they can depend since these will be made available to them in the agro-industrial estate.   For comments, my email address is [email protected](To be continued)

 
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