The Philippines is touted by international organizations such as the World Bank and the Asian Development Bank, not to mention private think tanks and banks, as one of the fastest-growing economies in the Indo-Pacific region, together with India and Vietnam. The harsh reality, however, as President BBM himself pointed out in his third SONA, is that such a high growth is meaningless if 16 percent of our population of some 120 people is still suffering from dehumanizing poverty. Agricultural productivity plays an important role in addressing this greatest challenge to Philippine society. Some 70 percent of the poor are in agriculture and rural areas. Whatever gains we may achieve in other sectors of the economy, it is difficult to bring down the poverty incidence to the targeted single-digit level of 9 % or below by 2028 unless we achieve a significant increase of output in the agricultural sector in the next three to four years.
Only a significant increase in the growth of the agricultural sector (through an increase in inputs or productivity or both) will enable the country to achieve the necessary eight percent or more growth in GDP needed to generate the necessary resources to combat mass poverty. The usual 6.0 to 7. percent which we have achieved for the last fifteen years (except during the pandemic period) will not suffice to fight poverty. In this article, I summarize a recent study by Ms. Annette Dacul, Director of the Center for Food and Agribusiness of the University of Asia and the Pacific (with the research assistance of Matteo Celdran, an undergraduate student from Brown University in the U.S.) on a comparative analysis of the productivity of the agriculture sectors of select ASEAN countries. The study shows in the clearest terms how the Philippines has the lowest agricultural productivity among its ASEAN peers. Instead of crying over spilled milk, we should use the study to identify lessons we can learn from our ASEAN neighbors, especially from Malaysia, Thailand, and Vietnam.
The paper of Dacul and Celdran starts with the bullish statement that agriculture output in the ASEAN region has grown significantly during the past four decades because of improvements in agricultural productivity. They cited a paper by Agnew and Hendery (2023) asserting that poverty reduction, malnutrition prevention, and environment resilience enhancement depend on increases in agricultural productivity, whose indicator is Agricultural Total Factor Productivity (TFP). Agri TFP compares the total inputs of land, labor, capital, and materials to the overall output of crops, animal products, and aquaculture produce. It includes a broader range of inputs, in contrast with other measures like crop yields per hectare or agricultural value added per worker, as it reflects the average productivity of all inputs used across agriculture and aquaculture production. Unfortunately, the Philippine agricultural sector sticks like a sore thumb in the ASEAN context when it comes to measures of Agricultural TFP.
The paper examines the growth of agricultural productivity in key ASEAN countries: Cambodia, Indonesia, Malaysia, the Philippines, Thailand and Vietnam. It discusses the sources of growth of agriculture and the trends in outputs, inputs, TFP of these countries over the past forty years, from 1981 to 2021. It also outlines the lessons that can be culled from the experiences of the selected upper-middle income countries, i.e. Indonesia, Malaysia and Thailand. These are the three ASEAN countries with substantial agricultural resources that have long surpassed us in per capita income. Vietnam left us behind in per capita income only in 2020.
Growth in agricultural output has two possible sources: increase in input and resource use and gains in productivity (TFP). Despite the increasing role of TFP in the increase in agricultural and aquacultural output, it has been mainly the increased use of inputs such as land, labor, capital including animals, machinery, fertilizers, and feed that has been the main driver of output growth. The rise in input use has resulted from a combination of greater activity intensification and the expansion of cultivated areas in the region. This is similar to the green revolution that preceded the first Industrial Revolution that occurred in England during the period 1770 to 1840. The largest contributor to agricultural output growth in the ASEAN region has been the conversion of land from forest and grass land to agriculture, with Indonesia and Laos leading this trend. ASEAN agricultural output increased at an annual average rate of 3.5 percent over the last forty years, from 1981 to 2021. This should be the target of the BBM administration: an increase in the output of our AFF sector at an annual average of 3.0 percent to 4.0 percent. This growth will greatly help in accelerating our total GDP growth to 8.0 percent or more and reducing our poverty incidence to a single digit of 9.0 percent or less. In the 1980s, when the Philippines was grappling with the thorny issue of the Comprehensive Agrarian Reform Program introduced by the Administration of President Cory Aquino, the ASEAN agricultural sector as a whole was experiencing intensified input use, which accounted for 92 percent of the output growth. Input use then was growing at an average of 3.0 percent annually. By the second decade of the 21st century, however, there was a dramatic shift to productivity improvement explaining most of output growth. From 2011 to 2021, productivity (TFP) growth contributed a whopping 66.8 percent to output growth in the ASEAN region, a substantial rise from 8.3 percent during the period 1981 to 1990. The contribution of TFP in the 1990s grew by roughly sixfold (46.7 percent) compared to the 1980s and further increased another 1.5 times (66.5 percent) in the 2000s, compared to the previous decade.
According to Lui et al. (2020), the crucial factors that contributed significantly to agricultural productivity increase in the ASEAN region during the period 2000 to 2016 were human capital, urbanization, and development flow to agriculture. Cambodia led the way in TFP growth with an exceptional increase of 5.1 percent from 2001 to 2021. Vietnam also showed significant increases with annual TFP growth peaking at 3.0 percent also during the 2001 to 2010 period. Indonesia experienced a period of improved agricultural productivity with an acceleration in TFP growth from -0.1 during the period 1991 – 2000 to 3.0 percent during the 2001-2010 and slowing down to 1.9 percent during 2011 – 2021. Thailand also experienced considerable improvements with an acceleration from an initial -1.3 percent TFP growth in 1981 -1990 to 2.4 percent in 1991 to 2000 and then slowing down to 0.7 percent in 2011 – 2021. The Philippines was clearly the laggard, consistently experiencing lower TFP growth rates relative to its ASEAN peers, peaking at 1.8 percent during 2001 to 2010 and slowing down to 0.3 percent during 2011 to 2021. During the entire period of 1991 to 2021, the Philippines had the slowest growth of TFP in the entire region at 1.1 percent compared to Vietnam at 2.2 percent and Thailand at 1.8 percent.
It would be worthwhile for the Philippines to study in greater detail the experiences of its neighboring ASEAN countries in increasing their TFP, especially Thailand, a top food exporter, because of its innovative use of technology, research, and on-the-farm learning. It has consistently raised the value of its agricultural produce by steadily raising farm productivity and developing technologies for processing and storage. By the end of the first decade of this century, it had already demonstrated its expertise in agribusiness, ranging from advanced research-driven methods to practical, cost-effective solutions applicable to small-scale farmers. Thailand is a major exporter of rice, fresh durian, and prepared and preserved tuna to the rest of the world. We can learn a great deal from Thailand in carrying out our long-term strategic plan of land consolidation, product diversification, digitalization, and industrialization in the agricultural sector.
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