22. Philippines
Support to Philippine farmers in 2018-20 averaged 27.5% of gross farm receipts. This is up from 22% at the beginning of the 2000s, higher than the OECD average and one of the highest levels among all emerging economies covered by this report.
Market price support (MPS), which reflects existing trade barriers (mainly tariffs and Tariff Rate Quotas [TRQs]), is the dominant form of support to Philippine producers, of which rice producers are the main beneficiaries. In addition to rice, import tariffs support the prices of sugarcane, pig meat, and poultry. As a result, domestic producer prices are 40% higher on average than prices on international markets. Payments to farmers support the use of inputs and investments, mainly in the rice sector. The MPS and payments for inputs are considered potentially most production- and trade-distorting, and represent around 90% of support to farmers.
Expenditures for general services (GSSE) more than doubled relative to agricultural value-added from 2000-02 to 2018-20, driven largely by higher investments in irrigation systems and extension programmes. Expenditures on public stockholding (mainly related to rice) are also an important GSSE expenditure. The overall cost of support to the Philippine agricultural sector was 2.5% of GDP in 2018-20, one of the highest across all countries measured, but down from 2.9% estimated for 2000-02.
In March 2019, the Philippines replaced quantitative restrictions on rice imports with tariffs. In order to offset the effect of this liberalisation, the government established a Rice Competitiveness Enhancement Fund (RCEF) with an annual PHP 10 billion (USD 192.3 million) appropriation over the following six years. Areas supported in 2020 include investments in machinery and equipment, breeding, and distribution of high quality rice seeds, credit and extension.
Furthermore, an excess rice tariff collection (above the PHP 10 billion financing the RCEF) was provided in the form of an unconditional cash transfer of PHP 5 000 (USD 101) per farm to benefit small rice farmers (less than 1 hectare planted for rice). In 2020, small producers of corn, coconut and sugar cane received a similar support from the budget in the form of cash and food assistance worth the same amount per farm.
In response to the COVID-19 pandemic, the government took several measures to support the agro-food sector. During the period of quarantine, all farmers, farm workers, fisher folk and agribusiness personnel were exempt from quarantine measures if they observed safety protocols. The Philippine Department of Agriculture implemented the Plant, Plant, Plant Programme to enhance food security in response to concerns amidst the COVID-19 pandemic. It is an all-encompassing programme for crops, livestock, poultry and fisheries, realised through specific interventions. The programme involves a Rice Resiliency Project aimed at increasing the country’s self-sufficiency level from 87% to 93%. The SURE Aid and Recovery Project extended additional loans and loan guarantees to small farmers. In order to avoid a sharp rise in retail food prices due to the COVID-19 pandemic, the government imposed retail price controls by implementing suggested retail prices (SRP) on basic food items sold in public markets.
The Philippines’ agricultural policy focuses on food security and poverty alleviation through a guaranteed supply of staple food (rice) at affordable prices. The goal of self-sufficiency in rice drives a range of policy measures supporting rice producers, in contrast to the trend, elsewhere in Southeast Asia, toward diversification into higher-value commodities. The extension of direct income support to small producers of commodities other than rice, implemented in 2020, is a step in the right direction.
Rice stocks operated by the National Food Authority (NFA) have the official role of emergency buffer stock. However, the NFA uses these stocks to support prices paid to farmers by buying at administered prices and reducing consumer prices by selling at subsidised prices on retail markets. Hence, these stocks de facto represent “intervention stocks” with significant implications for markets and the government budget. The budget financing these interventions could be spent on direct income support, and to finance general services to improve productivity in the sector.
From 2017, the Philippines reallocated some funding from subsidising variable inputs to infrastructure investments, and through the re-orientation of agricultural knowledge systems. Continuing efforts to refocus spending onto general services to the sector are key for promoting productivity growth, estimated at very low levels in the past decades.
In view of the Philippines’ high susceptibility to typhoons, tropical storms and flooding, the government should take a holistic approach to risk management that adapts policy objectives across programmes and institutions. Moreover, the effectiveness of current risk management tools should be assessed – in particular, the extent to which insurance and cash-transfer schemes encourage risk-reducing decision-making on the farm. Lastly, making information about local conditions, future projections and adaptive solutions more available would increase farmers’ awareness and capacity to prepare and adjust.
The Philippines is particularly vulnerable to climate change. To improve the agricultural sector’s capacity to adapt, the government should develop clear and measurable objectives on climate adaptation, and ensure a coherent set of measures to implement across policy programmes and public agencies.
Note: * Share of potentially most-distorting transfers in cumulated gross producer transfers.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Overview of policy trends
Heavy government interventions in agricultural markets within a closed economy characterised the period from 1970 to 1986. The government had monopoly control over trade in rice, sugar and maize, operated by the National Grains Authority (NGA) established in 1972 (later renamed the National Food Authority [NFA]). Sugar trade was nationalised under the National Sugar Trading Corporation. At the same time, high-yield rice varieties were introduced. Input subsidies encouraged farmers to use high-yield varieties of rice, as well as fertilisers and pesticides. Public spending in the sector increased (particularly on irrigation), financed by a mix of taxes on major agricultural exports and foreign loans. Access to credit was facilitated by legally obliging financial institutions to provide 25% of their loans to the agricultural sector. Budgetary expenditures financed extension services to the farming sector (OECD, 2017[1]).
Partial liberalisation of the sector was implemented gradually from 1986 to 2000. Reforms undertaken in the 1990s aimed to improve services provided to agriculture, particularly extension services, and infrastructure. Market interventions were gradually reduced, as were tariffs and non-tariff measures on agro-food imports. The policy of self-sufficiency in rice continued. The strategy continued the provision of input subsidies to farmers, mainly fertilisers and certified seeds, but also credit facilitation and support to public services for agriculture, such as investments in irrigation and farm-to-market roads. At the beginning of the 1990s, the Philippines negotiated a number of trade agreements (it is a founding member of the ASEAN free trade area). Upon joining the WTO in 1995, the country committed to removing quantitative restrictions on imports of sensitive agricultural products (with the exception of rice) and to gradual liberalisation of agro-food trade. Public expenditure on agriculture declined substantially in the late 1990s, due to tight fiscal policies adopted in the aftermath of the Asian Financial Crisis (OECD, 2017[1]).
Furthermore, since 1988, the Philippines has undertaken an ambitious agrarian reform to redistribute agricultural land to landless farmers and land workers. The reform covered close to three-quarters of the country’s agricultural area. By the end of 2015, the redistribution of land was almost complete, but property rights remain to be settled. Almost half of the reform beneficiaries still have collective ownership certificates instead of individual property rights.
During the 2000s, the government undertook policy measures to further reduce market interventions in agriculture. Subsidised credit programmes were terminated, and private traders allowed to import rice at limited levels. However, the focus on food (rice) self-sufficiency was further reinforced and, after the global food price crisis in 2008, spending on agriculture increased substantially. The government increased public expenditure on irrigation and input subsidies to achieve self-sufficiency. The Food Staples Sufficiency Programme launched in 2011 retained the focus on rice and selected other staples, but shifted emphasis away from input subsidies towards public services to agriculture such as extension and infrastructure (OECD, 2017[1]). Following the Uruguay Round Agreement on Agriculture, the system of quantitative restrictions for rice was abolished in March 2019.
Support to farmers as a share of gross farm receipts (percentage PSE) tended to slightly increase and then stabilise over the last 20 years. It is above the OECD average and one of the highest among the emerging economies included in this report. Market price support constitutes a major part of support to farms, while input subsidies and other budgetary payments play a secondary role (Figure 22.4).
Note: A/An/R/I:Area planted/Animal numbers/Receipts/Income
Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Main policy instruments
Various measures provide price support to Philippine producers. Price support policies mainly focus on rice and sugar, and comprise a combination of trade barriers (tariffs and TRQs) and domestic market regulations for rice. The NFA implements rice price support by buying buffer stocks at administered prices from domestic producers and selling these stocks at subsidised prices to consumers. For sugar, production quotas and trade barriers (tariffs and TRQs) provide producer price support and market regulation.
Tariff protection is the Philippines’ main trade policy tool. Trade liberalisation primarily occurs within regional trade agreements, particularly the ASEAN Free Trade Area. The simple average applied Most Favoured Nation (MFN) tariff on agricultural products was 9.8% in 2016. Tariff lines applied are ad valorem and range from 0% to 65%.
Tariff rate quotas are applied to 14 agricultural products, with in-quota tariffs ranging from 30% to 50% and out-of-quota from 35% to 65%. Products covered include live swine, goats and poultry and meat thereof, potatoes, coffee, maize, rice, and sugar. For three others (poultry meat, potatoes and coffee), TRQs only apply to a specific range of tariff lines. Import licensing is required for all regulated products (including those under TRQs), intended to safeguard public health, national security and welfare.
To comply with WTO obligations, the Philippines replaced quantitative restrictions on rice imports with an import tariff system as of March 2019, under the Rice Tariffication and Liberalisation Law (RA 1120). In place of a quota on imports from ASEAN countries, a single tariff of 35% applies. For imports from non-ASEAN countries, a TRQ applies. Applied MFN in-quota and out-of-quota tariffs for rice are set at 40% and 180%, respectively. Additionally, grains, grain products and sugar require export permits.
The Rice Tariffication and Liberalisation Law (2019) introduced measures related to the changes in rice trade and related domestic market regulation. The food safety regulatory function, and hence responsibility for issuing permits, licenses, or registering trade and importation of rice was transferred from the NFA to the Bureau of Plant Industry (BPI). Nowadays, the NFA’s main role consists of local paddy procurement from domestic producers and management of buffer-stocks, including sales to domestic markets.
To offset the effect of the liberalisation of rice imports on producers’ incomes, in 2019 the government established the RCEF with an annual appropriation of PHP 10 billion (USD 202 million) over the following six years (see next section).
Budgetary support to agricultural producers, both through payments provided to farmers individually and to the agricultural sector as a whole (general services), is small compared to the level of price support. Budgetary support to producers focuses on subsidising the use of variable inputs, including seed and fertiliser subsidies.
Domestic policy developments in 2020-21
In 2020, the NFA intervened on the domestic market by increased buying of rice into buffer (intervention) at a price set at PHP 19 (USD 0.38) per kg of rice, and also by selling domestic rice from its buffers at an administered price (generally below the market price) in order to lower consumer prices. Overall, the general strategy of the NFA is buying more rice from farmers and increasing the turnover of the stocks (i.e. more buying in and more selling to consumers from the stocks). Hence, these stocks play more a role of an “intervention stock” rather than an “emergency buffer stock” with two functions: (i) supporting domestic producer prices through buying stocks at administered prices; and (ii) reducing consumer prices in the market by releasing from stocks at subsidised prices.
In order to offset the effect of the liberalisation of rice imports on producers’ incomes, the government established in 2019 a Rice Competitiveness Enhancement Fund (RCEF) with an annual PHP 10 billion (USD 202 million) appropriation (financed from the receipts from rice import tariffs) through the following six years. In 2020, the expenditures were spent as follows: (i) PHP 5 billion for rice farm machinery and equipment; (ii) PHP 3 billion for rice seed development, propagation and promotion; (iii) PHP 1 billion for credit to farmers; and (iv) another PHP 1 billion for extension.
Furthermore, an excess rice tariff collection (above the PHP 10 billion financing the RCEF), estimated at PHP 5 billion (USD 101 million) in 2020, was provided in the form of an unconditional cash transfer of PHP 5 000 (USD 101) per farm to benefit small rice farmers (less than 1 hectare planted for rice). Starting from 2020, small producers of corn, coconut and sugar cane received a similar support from the budget in the form of cash and food assistance1 worth PHP 5 000 per farm.
The Department of Agriculture (DA) developed a new programme to assist farm and fishery co-operatives through a financial grant. The Enhanced Kadiwa Financial Grant programme aims to provide co-operatives with additional capital to purchase supplies and equipment, and help them sell their produce directly to consumers.
Domestic policy responses to the COVID-19 pandemic
In the period of quarantine, all farmers, farm workers, fisher folk and agribusiness personnel were exempted from quarantine measures, provided that they observed safety protocols.
The Philippine Department of Agriculture will be implementing a PHP 31 billion (USD 608 million) Plant, Plant, Plant Programme to enhance food security in response to concerns amidst the COVID-19 pandemic. It is an all-encompassing programme for crops, livestock, poultry and fisheries and is realised through the implementation of specific interventions including: 1) productivity enhancement projects; 2) income enhancement projects on food markets (logistics and processing); 3) social protection and amelioration projects; and 4) Cash for Work (C4W) projects for displaced workers and unemployed. The programme involves a PHP 8.5 billion (USD 171 million) ‘Rice Resiliency Project’ aimed at increasing the country’s self-sufficiency level from 87% to 93%. Parallel to this programme, the Philippine government plans to import 300 000 tonnes of rice through a government-to-government purchase arrangement.
From April 2020, the Agricultural Credit and Policy Council started to implement the expanded SURE Aid and Recovery Project (SURE COVID-19) for small farmers and fishermen (SFF) and agriculture and fishery micro and small enterprises (MSE) whose livelihoods, agribusiness operations, and incomes were affected by the COVID-19 pandemic. Under this project, additional loans and loan guarantees were extended to SFF and MSEs. Total funding of these programmes represented PHP 2.5 billion (USD 50 million).
The Department of Agriculture (DA) continues to implement major interventions to ensure adequate, accessible, and affordable food to Filipino households, particularly in Metro Manila and other major centres, during the COVID-19 pandemic. The DA is easing its rules on food pass issuance to ensure seamless movement of food and agri-fishery products and inputs especially in Metro Manila and other metropolitan areas in Luzon.
To ensure a stable supply of affordable food for Metro Manila, the DA implemented a Food Resiliency Action Plan. The plan monitors on a weekly basis the demand and supply (including the source of supply) for basic food commodities in Metro Manila. A network of government stores (“KADIWA ni A ni at Kita”) sells the basic food items to Metro Manila residents at regulated prices.
In order to avoid a sharp rise in retail food prices due to the COVID-19 pandemic, the government imposed a control of retail prices by implementing suggested retail prices (SRPs) on basic food items sold in public markets (pork, poultry, fish, sugar, onion, garlic). In November 2020, the DA extended the SRPs to other basic agriculture commodities (beef, selected vegetables). This followed the Luzon-wide price freeze imposed earlier in response to typhoons that generated significant damage across the country.
Trade policy developments in 2020-21
On 13 June 2019, the government issued Executive Order No. 82, reducing tariff rates for mechanically deboned or mechanically separated poultry from 40% to 5%, while those for frozen whole turkey were reduced from 40% to 20%. These rates were set to remain at the lower tariff until 31 December 2020. Executive Order No. 20, issued in 2017, prescribes the Most Favoured Nation (MFN) tariff schedule until 31 December 2020.
In September 2020, the DA has issued a temporary ban on the importation of domestic and wild pigs, pork products, and by-products from Germany. The ban was imposed as a reaction to the first case of African Swine Fever (ASF) affecting wild boar in Germany.
Trade policy responses to the COVID-19 pandemic
The Philippine Government agreed bilateral commitments with Viet Nam to ensure that the Philippines continues to be supplied with its rice requirement during the pandemic.
The Philippine Government imposed a temporary ban on Brazilian poultry products after the People’s Republic of China reported finding traces of the COVID-19 in chicken products from Brazil. The ban was issued as a precautionary measure to ensure the safety and health of Filipino consumers. The DA, through the Bureau of Animal Industry (BAI), is awaiting a reply from the Brazilian Ministry of Agriculture, Livestock and Supply (MAPA), particularly on the requested documents related to COVID-19 prevention and control procedures among Brazilian factory workers in poultry processing facilities.
The Philippines is a mid-size country in terms of land area, but its population of 108 million makes it the world’s 13th most populous country. At USD 9 277 in purchasing power parity (PPP), GDP per capita in the Philippines is less than half the average GDP per capita of all countries analysed in this report (Table 22.3). Agriculture is an important sector for the Philippines, accounting for almost a quarter of total employment and 9% of GDP (Table 22.3). Farms tend to be small-sized with the average land size at just 1.3 hectare (OECD, 2017[1]).
Since 2012, the Philippines has achieved relatively stable growth of around 6% annually, and enjoys comparatively low levels of unemployment at less than 4%. However, due to the COVID-19 pandemic, the GDP fell by around 10% in 2020. Inflation has been fluctuating and was 4% in 2019 and 2020 (Figure 22.5). Overall, the Philippine economy, including its agro-food sector, integrates well in international markets – as measured by the ratio of trade to GDP at 25% in 2019.
Sources: OECD statistical databases; World Bank, WDI; ILO estimates and projections; and Economist Intelligence Unit.
With limited land and a large population, the Philippines is a growing net importer of agro-food products. Of these imports, three-quarters are processed goods that are used directly for (final) consumption or as intermediate inputs by the processing industry. In contrast, almost half of its exports are primary goods for consumption, and close to a quarter of the exports are processed products going to final consumers (Figure 22.6).
Total Factor Productivity (TFP) in agriculture is estimated to have stalled over the past ten years, down from already low TFP growth during the 1990s. Agricultural output growth has remained relatively slow and has averaged 0.5% per year, well below the world average (Figure 22.7). It has been driven entirely by increased use of both primary factors and intermediary inputs.
Agricultural land resources are under strain from frequent natural disasters, population growth and urbanisation. The Philippines has abundant water resources, of which the agriculture sector is the main user – accounting for almost three-quarters of total freshwater withdrawals (Table 22.4). Nonetheless, shortages can occur during the dry season in some regions. The share of agriculture in total energy use has increased, but remains well below the OECD average. The Nitrogen balance has slightly increased, while that of Phosphorus has declined, but both remain about double the OECD average.
Reference
[1] OECD (2017), Agricultural Policies in the Philippines, OECD Food and Agricultural Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264269088-en.
Note
← 1. PHP 3 000 in cash and PHP 2 000 in kind (at PHP 1 000 for rice and PHP 1 000 for chicken and eggs). Beneficiaries can obtain rice, chicken, and eggs using an e-voucher system.