Assessment and policy recommendations

This Review, undertaken in close co-operation with the Philippine Department of Agriculture (DA), assesses the performance of agriculture in the Philippines over the last two decades, evaluates Philippine agricultural policy reforms and provides recommendations to address key challenges in the future. The evaluation is based on the OECD Committee for Agriculture’s approach that agriculture policy should be evidence-based and carefully designed and implemented to support productivity, competitiveness and sustainability, while avoiding unnecessary distortions to production decisions and to trade. At the DA’s request, the Review includes a special chapter highlighting key challenges to be addressed to improve the adaptive capacity of agriculture to climate change.

1. Environmental, economic and social context

With a territory of 0.3 million km2, the Philippines is a mid-size country in terms of land area, but its marine water area of 2.2 million km2 is about the 20th largest in the world. Its population of 100 million makes the Philippines the world’s 12th most populous country. The population growth rate at 1.6% in 2014 is one of the highest in Southeast Asia. Around half of the population lives in rural areas. Population density is high, at 332 persons/km2, close to that of Japan and Viet Nam.

The Philippines is relatively rich in water, but poor in land resources

The Philippines has abundant water resources, but shortages and even drought can occur during the dry season in some regions, which can be further exacerbated by climatic events. Agriculture is the main user of freshwater. In 2009, the sector accounted for 82% of total freshwater withdrawals, almost entirely for irrigation and animal production.

Mostly due to deforestation, agricultural land increased by 11% since 1990 and in 2012 covered 12.4 million ha, 42% of the Philippines’ land area. However, as the population increased by 54% over the same period, land availability per capita declined and in 2012 was just 0.13 ha, about one-sixth of the world average.

One of the most natural-disaster-prone countries in the world

According to the 2014 World Risk Index, the Philippines has the second highest risk of natural disasters (after Vanuatu), which makes its agricultural sector one of the most vulnerable worldwide (UNU-EHS, 2014). The country is located along the Pacific Ring of Fire, a seismically active belt of volcanoes and tectonic plate boundaries. As it also sits astride a typhoon belt, the Philippines experiences a high frequency of natural disasters each year, placing a strain on capital stock, food security and social development (Chapter 3).

Box 1. The Philippines: Contextual information
Figure 1. Main macroeconomic indicators, 1990-2014
picture

Source: ADB (2016), Key Indicators for Asia and the Pacific 2016; WB WDI (2016), World Development Indicators.

 http://dx.doi.org/10.1787/888933451978

Table 1. Contextual indicators, 1995, 2014

1995

20141

Economic context

GDP (billion USD in PPPs)

202

691

Population (million)

70

100

Land area (thousand km2)

298

298

Agricultural area (AA) (thousand ha)

11 015

12 440

Population density (inhabitants/km2)

234

332

GDP per capita, PPP (USD)

2 897

6 902

Trade as % of GDP2,3

67

46

Agriculture in the economy

Agriculture in GDP (%)

22

11

Agriculture share in employment (%)

44

30

Agro-food exports (% of total exports)3

11

11

Agro-food imports (% of total imports)3

9

13

Characteristics of the agricultural sector

Crop in total agricultural production (%)4

63

65

Livestock in total agricultural production (%)4

37

35

Share of arable land in AA (%)

48

45

Agriculture share of total energy use (%)

0.4

0.7

Share of agriculture in water consumption (%)

..

82

1. Or latest available year.

2. Ratio of the sum of exports and imports to GDP.

3. 1996 instead of 1995

4. 2000 instead of 1995.

Source: OECD statistical databases; WB WDI (2016), World Development Indicators; UN (2016), UN Comtrade Database; FAOSTAT (2016).

 http://dx.doi.org/10.1787/888933451969

Figure 2. Agro-food trade, 1996-2014
picture

Note: Agro-food trade includes fish and fish products.

Source: UN (2016), UN Comtrade Database.

 http://dx.doi.org/10.1787/888933451981

Figure 3. Composition of agro-food trade, 2010-14
picture

Source: UN (2016), UN Comtrade Database.

 http://dx.doi.org/10.1787/888933451992

Figure 4. Composition of agricultural output growth, 2003-12
picture

Source: Fuglie and Rada (2015).

 http://dx.doi.org/10.1787/888933452004

Sound macroeconomic environment

The Philippine economy has proven to be resilient under many pressures – financial crises, climatic upheavals and fluctuations in commodity prices. The country experienced unprecedented economic decline under Ferdinand Marcos in the 1980s. It changed course after Corazon Aquino was elected in 1986, but experienced hardship in 1990-91 and again in 1998 during the Asian Financial Crisis (Lim, 2006). The economy achieved robust rates of growth over 2003-07, but just 1.1% in 2009 due to the global economic crisis of 2008-09. However, the Philippines rebounded strongly in 2010 and, unlike many other members of the Association of Southeast Asian Nations (ASEAN), sustained the rebound in subsequent years, growing at 6.5% annually over 2012-15.

The country’s Gross Domestic Product (GDP) was USD 284.6 billion in 2014, which translates into USD 2 873 in per capita terms at the 2014 annual average exchange rate. Its Gross National Income (GNI) per capita of USD 3 500, using the World Bank Atlas conversion method, places the Philippines in the World Bank category of lower middle-income countries (WB WDI, 2016). Higher GNI than GDP in per capita terms is partly driven by substantial remittances from about 10 million overseas workers.

The Philippines is the third-largest recipient of personal remittances in absolute terms (USD 28.4 billion in 2014) after India and the People’s Republic of China (hereafter “China”), and is the leader in per capita terms (WB WDI, 2016). Remittances have accounted for around 10% of GDP since 2011. Remittances drive consumption growth and are integral to the economy’s stability; however, they may also create a culture of dependence and thereby provide a disincentive for productivity growth in the local economy (Nicolas, 2013). The inflow of remittances is a major contributor to the current account surplus and is also one of the drivers of the ongoing real appreciation of the peso. While in nominal terms Philippine Peso (PHP) appreciated from about PHP 55-58 per USD in late 2005 to about PHP 47 per USD in mid-2016, its real value increased by much more, taking into account the higher inflation rate in the Philippines than in the United States.

The appreciating peso has multiple consequences, including for the agricultural sector. Because holders of pesos have to pay less for imported commodities, the price competitiveness of domestically-produced goods declines. This enhances imports and exerts pressures on export-oriented sectors, thus contributing to a negative balance of trade, including in the agro-food sector.

Poverty rates have fallen

Economic growth helped cut the poverty rate from 27% in 1991 to 13% in 2012, as measured by the World Bank poverty definition of USD 1.9 at purchasing power parity per day per person. However, an additional quarter of the total population, while above the absolute poverty line, remains vulnerable to falling into absolute poverty if natural disasters occur or economic conditions deteriorate (WB WDI, 2016).

As in most countries, the poverty rate is much higher in rural than in urban areas. At the national poverty threshold, defined as the minimum income/expenditure required for a family or individual to meet basic food and non-food requirements, the national poverty rate in 2012 was 25%; 38% for farmers and 13% for the urban population (PSA, 2014).

Various forms of malnutrition persist

The Philippines was one of the 13 countries honoured in 2014 by the FAO for their outstanding progress in reducing hunger and meeting the Millennium Development Goals hunger targets, having halved the proportion of undernourished from 26.3% in 1990-92 to 11.5% in 2012-14, although more recent assessment would suggest that the rate increased to 13.5% in 2014-16 (FAO, 2015). The country has yet to succeed in reaching the 1996 World Food Summit’s (WFS) more ambitious target of halving the absolute number of hungry people by 2015 (FAO, 2014a): 13.7 million Filipinos still suffered from undernourishment in 2014-16 compared to 16.7 million in 1990-92, representing a fall of 18% (FAO, 2015). Moreover, the incidence of various forms of malnutrition remains very high. In particular, stunting still affects about 30% of children, both among 0-5 year olds and 5-10 year olds (PSA, 2015a). Among adults, concomitant problems of both under-nutrition and over-consumption exist. The proportion of adults with chronic energy deficiency has been declining and was 10% in 2013, but the share of those who are overweight and obese has been rapidly growing and had reached almost one-third of population in 2013 (FNRI, 2015).

The share of food in total household consumption expenditure provides an indication of food security: the lower the share, the greater the food security. Aggregate data show very little change from 43.6% in 2000 to 42.8% in 2012 (PSA, 2015a). On average, about half of food expenditure is on rice, indicating that Philippine households, in particular in low income brackets, are highly vulnerable to changes in rice prices. Per capita rice availability, used as a proxy for consumption, even increased from 103 kg in 2000 to 128 kg in 2009, before tapering off to 114-119 kg in 2010-13 (PSA, 2015b). Rice consumption is likely to fall further as the economy develops.

2. Agricultural policy trends and evaluation

Agriculture’s share in GDP is declining, but it still represents almost one-third of total employment

Despite the country’s recent overall economic success, the agricultural sector is underperforming, lagging behind those of other Southeast Asian countries in terms of production and productivity growth rates. Low productivity within the sector has been the result of decades of underinvestment (or mis-directed investment in some cases), policy distortions, uncertainties linked with the implementation of agrarian reform and periodic extreme weather conditions.

Between 1990 and 2013, the volume of agricultural output in the Philippines increased by 73% – less than in Viet Nam, China, Indonesia, Malaysia, Thailand and India. The non-agricultural economy has grown substantially faster than the agricultural sector, pushing down agriculture’s share in GDP from 22% in 1990 to 11% in 2014. Agriculture’s share in total employment declined from 45% to 30% over the same period.

Yet, the agriculture sector’s share in employment is almost three times its share in GDP, indicating relatively low labour productivity – one of the reasons for the low incomes of households dependent on farming. However, Philippine agriculture appears to have started shedding labour in absolute terms. While further analysis might be needed to better understand this new development, the importance of labour moving from agriculture to the non-agricultural sector in maintaining overall economic growth, increasing productivity and in reducing poverty cannot be overstated. Mobility of labour from the low-productivity agricultural sector to the higher-productivity non-agricultural sectors raises incomes for workers, contributes to higher incomes for families through the diversification of sources of income (including from remittances), raises the wage rate of agricultural labour remaining in the countryside as supply shrinks, and improves land and water availability for those who remain dependent on farming.

Food and beverage processing accounts for over 50% of the Philippines’ total manufactured output. The value of food and beverage output quadrupled in 2009-13, thus becoming the main driver of overall manufacturing growth (Singian, 2014). However, the sector has been unable to develop strong linkages with local producers, as shown by its high dependence on imported ingredients.

Food self-sufficiency is a major goal of the government’s agricultural policy

The main agricultural policy objectives over the past few decades have focused on food security and poverty alleviation, to be achieved through guaranteeing a stable supply of food at affordable prices. Food self-sufficiency, particularly in rice production, has been the major policy goal of the government.

Three phases of policy reform

Agricultural policy development since the 1970s can be divided into three stages:

  • 1970-86: Heavy government intervention in agricultural markets. The government had monopoly control over trade in rice, sugar and maize. At the same time, high-yielding rice technology was developed. Through provision of input subsidies, farmers were encouraged to use new high-yielding varieties of rice as well as fertilisers and pesticides. Public spending was also increased (particularly on irrigation), financed by a mix of taxes on major agricultural exports and foreign loans. Over the period 1978-83, the Philippines achieved rice self-sufficiency and became a net exporter of rice.

  • 1986-2000: Partial liberalisation. The private sector assumed a greater role in agricultural credit policy. Market interventions were reduced. However, the main instrument of agricultural policy remained the provision of input subsidies to farmers. The government adopted the Agriculture and Fisheries Modernization Act (AFMA) in 1997, which aimed at facilitating farmers’ adjustment to changes in trade policy as a result of the accession to the World Trade Organization (WTO). One strategic objective of the AFMA was to transform Philippine agriculture from being resource-based to becoming technology- and market-driven. The AFMA made self-sufficiency in rice official government policy. Public expenditure on agriculture declined substantially in the late 1990s, due to the tight fiscal policies adopted in the aftermath of the 1997 Asian Financial Crisis.

  • 2000 to date: Refocus on rice and substantial increase in, and re-allocation of, budgetary spending on agriculture. In the wake of the global food price crisis of 2008, budgetary expenditure on agriculture increased. The government concentrated on intensifying rice production enhancement programmes and on increasing public expenditures on irrigation and input subsidies to achieve self-sufficiency. The new National Development Plan for 2011-16 addressed the major challenges facing the agricultural sector, namely the high cost of agricultural inputs, inefficient supply chain and logistics systems, inadequate provision of irrigation infrastructure, a low rate of technology adoption, and limited access to formal credit. The Food Staples Sufficiency Program launched in 2011 retained the focus on rice and selected other staples, but shifted the emphasis away from input subsidies towards public services for agriculture like extension services and infrastructure (e.g. farm-to-market roads).

Agricultural policy instruments

Agricultural policy objectives are mainly pursued through the use of price support, input subsidies and payments for the provision of services to agriculture generally (Box 2).

Box 2. Overview of agricultural policy instruments applied in the Philippines

Domestic policy instruments

  • Price support measures: Price support policy affects mainly rice and sugar. The rice price support policy is implemented by the National Food Authority (NFA) through the following mechanisms: support price, release price, government procurement, and import restrictions. The Authority may also accumulate buffer stocks of rice to stabilise consumer price levels and ensure adequate and continuous supply. Price support and market regulation of sugar is implemented through sugar production quotas and regulation of foreign trade.

  • Reduction of input costs, variable and fixed: Input subsidies have traditionally been the main policy tools to achieve food self-sufficiency. From 2011, input subsidies for seeds and fertilisers have partly been replaced by roll-over schemes to encourage adoption of high-yielding seed varieties. The Rice Mechanization Program introduced in 2011 aims to improve production operations and reduce national average post-harvest losses by at least 5% by the end of 2016.

  • Credit programmes: Credit is provided under the umbrella of the Agriculture Modernization Credit and Financing Program and is targeted mainly to small-scale farmers. The focus is on facilitating farmers’ access to credit rather than providing credit subsidies.

  • Insurance: Crop insurance is meant to become one of the key tools to increase the sector’s resilience to risks. The area covered by various insurance schemes is still small, but increased four times over the period 2012-14 and in 2014 covered about 7% of total agricultural land. The system is fully dependent on the Philippines Crop Insurance Corporation, a government owned and controlled corporation under the DA.

  • Preferential tax policies: Until December 2015, agricultural enterprises were exempted from the payment of import duties on all types of imported agricultural inputs, equipment and machinery, provided that the imported agricultural input or equipment is for the exclusive use of the importing enterprise. Domestic sales or imports of unprocessed agricultural commodities are exempt from value-added tax.

General services provided to the agricultural sector as a whole

  • Irrigation: Over 2000-14, about a third of annual budgetary expenditure to support agriculture was dedicated to investments in irrigation, almost entirely for the benefit of rice producers.

  • Farm-to-market roads: Construction and upgrading of farm-to-market roads is a priority infrastructure intervention due to their significant impact on increasing agricultural productivity and reducing postharvest losses.

  • Research and development: The Philippines has a large agricultural research system, but the organisation of the system is complex, consisting of a multi-level institutional structure. Since 2010, government expenditure on agricultural research has increased substantially.

  • Extension services: The extension system was devolved to local governments in 1991. It suffers from low levels of financing, fragmentation and falling numbers of extension staff as well as weak links to technology development.

Trade policy instruments

  • Tariffs: Tariff protection remains the main tool of trade policy and until recently remained at a high level. Trade liberalisation has mainly occurred within regional trade agreements, particularly the ASEAN Free Trade Area. The simple average applied Most Favourite Nation (MFN) tariff on agricultural products was 9.9% in 2014. All tariff lines applied are ad valorem and range from 0-65%, with the highest applied to sugarcane. High protection is applied to sensitive products like rice, maize, pork and poultry meat, potatoes, onions, garlic and coffee.

  • Tariff quotas: Tariff quotas are applied for 14 agricultural products, with in-quota tariffs ranging from 30-50% and out-quota from 35-65%.

  • Special treatment clause for rice: When joining the WTO in 1995, the Philippines benefited from a special treatment clause (Article 5 of the Agreement on Agriculture) which allowed it to maintain quantitative restrictions on rice imports on the basis of food security until 2012. In return, the Philippines had to guarantee minimum market access in the form of a gradually increasing import quota (minimum access volume, MAV). The most recent extension of the MAV was requested in 2012. After two years of negotiations with the WTO, the Philippines was granted an extension on the condition that, after mid-2017, the Philippines would use tariffs only on rice imports.

  • Import licenses: Import licensing is intended to safeguard public health, national security and welfare and to meet international treaty obligations. Licences are also used to establish and maintain import quotas (i.e. rice) and agricultural tariff quotas.

  • Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT): Imports of agricultural products, live animals, plants, their products and by-products must be accompanied by a sanitary, phytosanitary or health certificate from their country of origin and are subject to inspection upon arrival. Generally, only SPS considerations are taken into account when issuing certificates; however, in some cases, the level of domestic supply is also considered (WTO, 2012), presumably leading to alleged discriminatory treatment due to non-research based requirements, mainly for animal products’ imports.

  • Export controls: Several agricultural commodities are subject to export controls and may require permits in addition to agency approval, namely rice, grains and grain products, sugar, molasses, muscavado, coffee, and live animals. Exports of rice and maize remain restricted and, in principle, controlled by the NFA.

  • Trade agreements: The Philippines is a founding member of the ASEAN and the WTO. In addition to trade agreements concluded between ASEAN and key partners in the region (Korea, China, Australia, New Zealand and India), the Philippines has concluded a bilateral trade agreement with Japan.

The level of support to agriculture is relatively high

Developments in agricultural policy can be assessed by changes in the level of support measured by the %PSE (Producer Support Estimate as a share of farmers’ gross receipts) and the %TSE (Total Support Estimate as a share of GDP). Over the period 2000-14, the %PSE has fluctuated markedly, ranging between 11% and 27%. These variations are driven almost exclusively by changes in relative levels of domestic and international prices. The Philippine’s %PSE averaged 25% in the three-year period 2012-14, indicating that one-quarter of gross farm receipts were generated by support policies. This was higher than the OECD average of 18% over the same period and highest among all emerging economies covered by the OECD support indicators. Compared to the other Asian countries, the level of support to producers in the Philippines is much lower than in Japan (52%) and Korea (50%), both high-income net importers of food products; it is relatively close to China (19%) and Indonesia (21%), both middle-income net importers of food; but it is more than eight times higher than in Viet Nam (3%), a strongly export-oriented country which is competitive in a wide range of crops.

The level of total support, both through market price support and budgetary transfers, to the Philippine agricultural sector in 2012-14, equivalent to 3.3% of GDP, is almost five times the OECD average of 0.7%, but just above that in China at 3% and slightly lower than in Indonesia at 3.4%. The high %TSE shows that for a developing country with a large agricultural sector, the cost of agricultural support to the economy can be very high. Such a high %TSE contrasts with the sector’s relatively poor performance in terms of productivity growth and highlights the need to ensure that the money is spent effectively.

Price support and input subsidies dominate

Market price support (MPS) is the dominant form of support to Philippine producers. The level and fluctuations of MPS for rice have a major impact on the level of and changes in the total MPS. This is due to the high share of rice in the total value of agricultural production and highly protective measures separating domestic prices for rice from those on international markets. Sugarcane and animal products are the other agricultural sectors that receive substantial market price support. Both sectors are protected through high tariffs. The price gap for coconuts was negative throughout the period 2000-14, mainly due to poorly functioning marketing channels and poor infrastructure.

The high level of MPS is reflected in the implicit tax on consumers and the food processing industry as measured by the %CSE (Consumer Support Estimate as a share of consumption expenditures). In 2012-14, the Philippine’s %CSE averaged -25% which indicates that policies to support farm prices increased consumer prices by 25% on aggregate.

Budgetary support to agricultural producers, both payments provided to farmers individually and to the agricultural sector as a whole (general services), as a ratio of agricultural value added is low at 0.05, slightly higher than in Indonesia at 0.03, but almost five times lower than the OECD average at 0.23 in 2012-14. Over the whole period under study, budgetary support was primarily provided in the form of input subsidies. During the 2000s, expenditures were mainly allocated to subsidise use of variable inputs, such as high-yielding seeds, fertilisers and other agricultural inputs. Since 2011, the importance of subsidies for farm mechanisation has greatly increased, both in absolute and relative terms. Expenditures on general services started to rise sharply at the end of the 2000s. The most important item is the development and maintenance of infrastructure, of which a major share is devoted to investments in irrigation systems. Expenditure on agricultural knowledge and innovation systems is the second most important item in general services.

3. Key challenges

Productivity growth lags behind other countries in the region

Throughout developing Asia, a change in the composition of agricultural output has been driven by a growing demand for animal products and high-value crops (Briones and Felipe, 2013). A shift from low-value commodities to those offering higher returns or occupying less land area is contributing to higher productivity and higher farmer incomes. This trend is apparent in developing Asian countries across a diversity of crops, but not in the Philippines, largely due to a set of distortive policies driven by the self-sufficiency objective in rice production (WB, 2007). The share of rice in the total value of agricultural production in the Philippines actually increased from 16% in 1991 to 22% in 2013 (FAOSTAT, 2016).

Labour productivity in agriculture is only one-sixth of that in industry, dragging down the overall average across the economy. Progress made by the Philippines in farm labour productivity is the slowest among major Asian peers. In terms of the level of productivity per farm worker, the Philippines ranked second just after Malaysia in 1990, but had been overtaken by China and Thailand by 2012. In 2012, Malaysia’s labour productivity was 6.2 times that of the Philippines and China’s was 1.4 times higher – an indication of differing levels of infrastructure, technology, mechanisation and investment in workforce skills and training (Fuglie and Rada, 2015). However, as agriculture in the Philippines has started to shed labour in absolute terms, there might now be an opportunity to accelerate internal restructuring of the farming sector and thus to enhance productivity growth, in particular if policies allow for more flexible reallocation of land resources across farms and crops.

Land productivity in the Philippines increased by 61% in 1990-2012, slightly more than in Thailand (56%), but less than in China (114%), Viet Nam (86%), Malaysia (77%), India (73%) and Indonesia (63%). In terms of the value of agricultural production per unit of land, the Philippines still performs well, at USD 1 529/ha in 2012 – better than Indonesia, Thailand and India. However, its relative position has been declining over the last three decades: currently, China, Malaysia and Viet Nam all outperform it (Fuglie and Rada, 2015).

Reflecting slow progress in land and farm labour productivity, performance in total factor productivity (TFP) has been weak, increasing by 39% in 1990-2012, an average of 1.5% per year. The Philippines ranks just below India and is well behind China, where TFP more than doubled over the same period (Fuglie and Rada, 2015). However, some progress occurred in the last decade, with the annual rate of growth accelerating to 1.8% in 2003-12, slightly above the world average (Box 1, Figure 4).

The agro-food sector’s integration with international markets is weak

The Philippines remained a net importer of agro-food products during 1996-2014. The agro-food sector remains relatively weakly integrated with international markets. In 2012-14, the average ratio of agro-food exports to agricultural GDP was 19%, while that of agro-food imports to agricultural GDP was 25%. Both ratios are similar to those for the whole economy, indicating that this relatively weak openness is not sector-specific, but rather typical for the Philippine economy.

Although the overall integration of the Philippine agro-food sector with the world market is weak, the country is a major exporter of some products. For example, the Philippines accounted for 67% of global exports of oil cake from coconuts, 43% of coconut oil, 18% of prepared pineapple, 15% of pineapple juice, 10% of bananas, and 10% of pineapples in 2012-14 (UN, 2016).

The Philippines’ agro-food imports consist of two major groups: feed for animal production and products to meet food demand from domestic consumers (wheat, dairy products, beef, rice in some years) and for further processing. More than half of imports go to the domestic food and beverages processing industry (Box 1, Figure 3). About 90% of the industry’s output is consumed domestically (Singian, 2014). As yet, imports for further processing and then export are small in the Philippines.

Social and economic effects of the agrarian reform are mixed

Central to the Philippine land tenure system for the last three decades has been the 1988 Comprehensive Agrarian Reform Program (CARP). Originally scheduled for completion in 1998, Congress extended the deadline to 2008 and, in 2009, CARP was extended again under the auspices of CARP Extension with Reform (CARPER), with completion set for mid-2014 (OG, 2014). CARPER has since lapsed and it is up to the Congress to decide whether or not another extension will be granted and for how long. The CARP defines agrarian reform as the redistribution of lands to farmers and regular farmworkers who are landless. The programme covers all public and private agricultural land, as well as any other land within the public domain suitable for agricultural purposes. The scope of land subject to redistribution has evolved over time, but an estimated 7.9 million ha of agricultural land were marked for redistribution in 2013, i.e. about three-fourths of total agricultural land and more than a quarter of the entire land area of the Philippines. By December 2015, the government had acquired and distributed almost 7.3 million ha of land, 92% of the total land subject to redistribution (DAR, 2016).

The redistribution of land within CARP/ER has almost been completed, but the property rights of beneficiaries remain unsettled. Conflicts frequently arise between previous owners and agrarian reform beneficiaries (ARBs), between landowners and leaseholders and between potential ARBs over competing claims for land. Conflicts between potential ARBs partly result from duplicating titles being provided by three agencies (Department of Environment and Natural Resources, Department of Agrarian Reform and Land Registration Authority under the Ministry of Justice) without close co-ordination. Moreover, at the end of 2015 almost half of beneficiaries were still covered by collective ownership certificates, with rights not yet distributed to individuals, limiting investment and credit opportunities (DAR, 2016). The economic and social effects of the reform are mixed. Evaluations vary depending on the criteria and the assessment method applied. A comprehensive review by the World Bank concluded that “CARP had a positive impact on poverty and growth. However, the available empirical evidence shows that the impact on poverty has been quite modest” (WB, 2009). This conclusion is largely in line with an earlier evaluation undertaken by the Asia-Pacific Policy Center (APPC, 2007). Moreover, some studies suggest that positive changes to the economic characteristics of the respondents were not necessarily attributable to CARP (Gordoncillo, 2012). Various restrictions on land-market transactions and insecure property rights have limited on-farm investment and undermined the expected economic benefits of the reform.

Farm structures are increasingly fragmented

Largely due to the agrarian reform, the total number of farms increased by almost two-thirds and the average farm size fell from 2.8 ha in 1980 to 1.3 ha in 2012. Moreover, while the total number of farms under 1 ha increased more than four times, the number of those of above 10 ha more than halved (PSA, 2015c and DA, 2015).

While the legislation supporting agrarian reforms does not allow post-reform consolidation of land ownership, the government encourages consolidation of farm operations in order to take advantage of economies of scale and create field shapes and sizes conducive to mechanisation. Accordingly, the 2013 Agricultural and Fisheries Mechanization Law empowers the DA and the Department of Agrarian Reform (DAR) to carry out contiguous farming projects promoting farm land clustering (minimum size of 50 ha), farm development planning, and the promotion or strengthening of farming co-operatives. The 2015 Sugarcane Industry Development Act introduces a “block farm programme” to consolidate small farms into larger farms with a minimum area of 30 ha to take advantage of economies of scale.

Some ARBs are entering into Agribusiness Venture Arrangements (AVA) – contracts with agribusiness firms that can make farming for smallholders more economically viable. Their creation and functioning are strictly regulated. Moreover, in June 2016 DAR introduced new regulations to protect ARBs. While the new regulations are aimed at creating more equitable relations between ARBs and investors, there is a risk that this more restrictive legislation might diminish the incentive for private investors to transact with ARBs, thus denying ARBs access to private sector expertise, marketing channels and to resources that the government is not able to provide.

Pressures on natural resources risk reducing long-term production growth

Rapid economic growth, combined with rising population, urbanisation and expanding agricultural production, are exerting massive pressure on natural resources. In particular, conversion of lowland agricultural land for residential, commercial and industrial activities has become a contentious issue.

With 60% of the population living along coastal low-land areas, urbanisation has become a threat to agricultural land. Uncertain land user rights and land conversion to non-agricultural (mainly urban) uses has led to farmer migration and expansion of agricultural land into upland lands, resulting in deforestation and soil degradation (NSCB, 1998 and Suarez and Sajise, 2010). Currently, the Philippines has the lowest percentage of forest cover of all Southeast Asian countries except Singapore (FAOSTAT, 2016). Although 15.8 million ha is defined as forest land, only 7.6 million ha is actually forested, accounting for 25% of the country’s area. Less than 0.9 million ha is primary forest.

The vulnerability of agricultural systems is further aggravated by environmental deterioration, pollution and over-exploitation of natural resources and ecosystems. Land and forest degradation have reduced the productive potential of soils and disrupted the hydrological cycle of watersheds, resulting in accelerated soil erosion, and the silting of rivers and reservoirs.

Damage to agriculture due to extreme weather-related events is likely to increase

The Philippines’ greater susceptibility to typhoons, tropical storms and flooding than its regional neighbours partially accounts for its relatively poor agricultural growth performance. The severity and intensity of typhoons have increased in recent years. The annual damage to agriculture from typhoons, droughts and floods is estimated to have reached an equivalent of 3% of total agricultural output (WB, 2013a).

Climate models indicate that the future climate of the Philippines is likely to be warmer and wetter, but climatic impacts will vary regionally and across commodities. Land use and yields are projected to be particularly affected by climate change, and this is likely to result in lower growth of productivity and farmer income, increased disruptions to food supplies, and a greater likelihood of damage to agricultural assets and infrastructure, which will in turn bring higher restoration costs. Notwithstanding the uncertainty associated with long-term projections, it is likely that extreme rainfall events will become more frequent, particularly in the important agricultural regions of Luzon and Visayas. Increased rainfall intensity may trigger landslides and flooding of coastal areas and could cause crop and livestock destruction and a reduction in the availability and quality of land due to erosion and landslides. In turn, intensified drought, especially during El Niño years, could result in soil degradation and changes in water quality due to salt-water intrusion.

Various crops show different sensitivities to potential impacts from climate change. It is likely that the negative effects of climate change will be relatively small (about 5% fall compared to the baseline) for yields of bananas, sugarcane and rice, and coconut yields are even likely to increase by 2%. However, a strong decrease in rice yields is projected in the Luzon region and maize yields, already under heat stress, are projected to fall by about one-fifth by 2050 as a result of projected temperature increases of between 1.8 and 2.4°C (Thomas et al., 2015).

The existing regulatory and policy framework in the Philippines reflects a substantial awareness of the threats posed by climate change and the need to address them. Explicit climate change adaptation efforts have intensified since 2007, following the formation of a task force on global warming. In 2009, the Philippines adopted the Climate Change Law, followed by the 2010-2022 National Framework Strategy on Climate Change (NFSCC) and the 2011-2028 National Climate Change Action Plan (NCCAP). The two most significant documents outlining climate change adaptation priorities are the NCCAP and the Philippine Development Plan (PDP). However, the Philippines’ climate regulatory and policy framework aimed at increasing resilience of agriculture to climate change is shaped by the overarching objective of rice self-sufficiency. The strong focus on rice production restricts farmers’ production choices, thereby actually limiting their adaptation capacity.

The prioritisation of climate change adaptation in the national policy framework is mirrored by an increase in funding sources at the international, national, sectoral and local levels. Although climate related appropriations are increasing each year, it is unclear whether this reflects more action on climate adaptation or simply a change in tagging guidelines, i.e. changes in the scope of Programs, Activities, and Projects (PAPs) defined as responsive to climate change adaptation and/or climate change mitigation.

4. Policy recommendations

The analysis undertaken in the Review suggests that Philippine agriculture might be entering a new stage of development characterised, among other things, by falling rice consumption per capita and a reduction in the total number of persons employed in agriculture. As the distribution of land under the agrarian reform nears completion and the macroeconomic environment remains strong, there may be an opportunity to re-focus policy settings centred on rice production and land distribution towards enhancing agricultural productivity growth, competitiveness, sustainability and adaptability to climate change.

While the recommendations below are focused on agricultural policy measures, key policy objectives, in particular food security and poverty alleviation, cannot be achieved through agricultural policy reforms alone. They will need to be accompanied by much wider reforms in education and health systems, labour markets, infrastructure development, well-functioning input and output markets, and improved governance systems. Such economy-wide reforms would improve the overall environment in which the food and agriculture sector operates and would enhance the effectiveness of agricultural policy reforms. The specific recommendations below are not exhaustive and should be interpreted as a starting point for government consideration, refinement and elaboration. In particular, choices will need to be made across this wide range of recommendations as to which policy actions can and should be implemented quickly, and which might be acted upon more gradually.

I. Improve agricultural policy performance to enhance the sector’s long-term productivity growth

1. Re-focus the policy package to improve food security

Enhance diversification of production, consumption and income. Over the last three decades, a wide range of trade and domestic agricultural policy measures have been focused on rice, resulting in an increased share of rice in land use and in the total value of agricultural production. While policies in many Asian countries are driven by a rice self-sufficiency objective, the reverse restructuring of farm production in the Philippines is unique in Asia. Diversification from rice production into high-value crops would: allow farmers to earn higher incomes from a given amount of land, thus improving their access to food; improve farmers’ capacity to adapt to climate change; enhance agricultural productivity growth; and release resources to increase supply of higher value products for domestic and international markets. Overall, diversification would improve the food security of the country.

Gradually remove restrictions on rice imports. Analysis undertaken in this Review suggests that rice trade liberalisation would decrease the rate of undernourishment in the Philippines by 3.2 percentage points (or 3.2 million people) by improving access to rice by poor households. While the currently applied trade policy supports the incomes of net rice producers, it taxes the majority of households, who are net rice consumers. According to the Survey of Food Demand for Agricultural Commodities 2012, approximately 72% of all Philippine households and 34% of rice producing households are net rice consumers. Thus, despite the policy objective of improving food security by increasing rice self-sufficiency and by preventing the transmission of price risks from the world market onto the domestic market, the current rice trade regime is in fact contributing to a more permanent state of food insecurity in the Philippines. Removing quantitative restrictions on rice imports, as the Philippines is committed to do in 2017 under the terms of its WTO accession, and allowing the private sector to take full and permanent responsibility for rice imports would benefit consumers. This should be followed by a gradual reduction of import tariffs on rice. These reforms would reduce the focus on rice-biased policy, thus allowing farmers to respond to market signals, diversify farm production towards more value-added crops, improve farmers’ capacity to adapt to climate change, and lower rice prices for consumers. Overall, such reforms would be pro-poor as many of the most vulnerable for whom food security is a concern would gain directly from lower rice prices. This approach should be supported by farm-level guidance provided by extension services and public investment in infrastructure to ease connections with new marketing channels for those who would opt for production diversification and by targeted income support for net rice producers likely to lose from lower rice prices.

Replace the NFA’s subsidised rice sales with conditional cash transfers and food vouchers. Targeted safety nets are a key component of policy measures to enhance food security, as they provide an effective means of ensuring sufficient access to food by the poor. Safety nets provide flexibility to deal with the impact of the price rises on poor households without disrupting the market and in particular without interfering with price signals to farmers. Once a safety net mechanism is in place, transfers can be raised when prices increase and can be lowered when prices fall (OECD, 2012). Currently, a key policy measure to improve access to food is the NFA’s rice distribution programme, based on the government-set price, below the domestic retail market price, but substantially higher than the international market price. The programme is costly and not well-targeted as rice is sold indiscriminately by accredited retailers and does not necessarily reach poor households. Moreover, it creates a negative incentive for a more diversified diet away from rice. A more efficient solution to improve food security and alleviate poverty would be to use safety net measures such as conditional cash transfers, as through the existing Pantawid Pamilyang Pilipino Program, and food vouchers. These programmes can be well-targeted to poor households, facilitate more diversified food consumption and do not require the government to procure and distribute rice. Moreover, the pro-poor effects of rice market reforms discussed above would potentially over time reduce the number of households eligible for support or the amounts transferred, thus diminishing the administrative and budgetary costs of the safety net.

Transform the NFA into a market-neutral agency managing emergency stocks. Considering high vulnerability of the Philippines to the effects of climate change, frequent natural disasters, the country’s archipelagic setting and poor infrastructure, the role of emergency stocks of basic foodstuffs, in particular rice, located relatively close to areas most exposed to catastrophic events or to areas for which such events have the greatest potential to disrupt supplies, cannot be overstated. While the NFA’s storage capacity spread all over the country could be used for this purpose, its operation could be partly transferred to private agents under the supervision of reformed NFA. The process could be divided into three steps:

  • A precondition for the success of the reform would be for the government to define the level of emergency stocks and their geographical location.

  • The second step would be to engage the private sector in the NFA emergency stock system. The NFA would be the owner of the stock, would provide storage facility and would cover the storage costs. To secure the quality of stored rice through an appropriate rotation system, regular auctions would need to be organised to sell the rice and to replenish the stock to the desired level. Auction prices would differ regionally depending on transportation costs and local market conditions. Private agents, including importers, wholesalers and processors would participate. Private agents would be allowed to acquire the stocked rice on the condition that they replenish the stock with the same quantity of rice within a certain period. This system would enable lower budgetary costs through the elimination of the market intervention component from the NFA mandate and by limiting the level of stocks to emergency levels. Moreover, competitive sales and purchases of rice would lower storage costs.

  • The third step could be transmitting the ownership of stocks to private agents, under predefined conditions and where feasible (where private storage demand exceeds the required levels of emergency stocks). The NFA would provide the storage facility, but the running cost of storage would be covered by private agents. The Singapore Rice Stockpile Scheme could provide an instructive example (Singapore Customs, 2016). The NFA could compel licenced private agents (in particular importers of rice and large private wholesalers), or incentivise them through the offer of free use of storage facilities, to store pre-determined quantities of rice in NFA-designated warehouses. The stockpiled quantities of rice would need to be constantly replaced with new stocks and would not be kept in the NFA-designated warehouses for more than a year. Each stockpile participant would be expected to rotate their stocks. The stocked rice would be owned by private stockpile participants, but the government, represented by the NFA, would have the right to acquire the rice with compensation in case of emergency events. Apart from the predetermined quantities of rice, the stockpile participants would also be allowed to keep their trading or excess stocks in their own or NFA warehouses. In this latter case, the NFA would continue to carry the facility, maintenance and operation costs.

2. Re-focus agrarian land policies from land distribution to securing property rights through land governance reforms

Establish confidence in land ownership rights. Despite being aimed at promoting social justice, the agrarian reform brought numerous uncertainties, undermined investment incentives (including for adaptation to climate change) and lowered productivity growth. Following the near completion of the land distribution process under CARP/ER, the focus should be on securing property rights. The World Bank has developed a list of reforms which could be considered to speed up this process, including: a) acceleration of the process of administration and systematic adjudication of property rights in rural and urban land, plot by plot; b) harmonisation or unification of various legal frameworks for land to reduce overlaps between agrarian, forestry, mining, ancestral domain, watershed and other lands; and c) reducing the complexity of land administration by passing an effective Land Administration Reform Act and National Land Use Act (WB, 2015 and WB, 2016).

Enhance post-reform consolidation of farm operations. Agrarian reform has contributed to significant farm fragmentation. It is both a problem of scale and of economies of scale. Land distribution has created farms that are too small to generate a decent standard of living and this problem will become worse as incomes grow in the rest of the economy. Moreover, for most agricultural commodities, there are economies of scale that help reduce some categories of farm costs. Larger operational scale of farming becomes more valuable when farm labour becomes expensive and when there are options to mechanise to save labour. Flexible and responsive land markets would help allocate land across various categories of farms. While the legislation does not allow consolidation of land ownership, various initiatives helping consolidation of farm operations should be further encouraged, such as cluster farming, AVAs or “block farm programmes” within the sugar industry. Recent more restrictive regulations on AVAs to protect ARBs risk diminishing the incentives for private investors to transact with ARBs, so the impacts of these regulations should be monitored carefully. Other measures which would support farm consolidation include improving the availability of farm credit and the quality and accessibility of rural education, training and extension services. The latter would also speed the adoption of efficient larger scale production technologies.

Develop a long-term strategy for farm restructuring. The Philippines requires a long-term vision of farm restructuring to adjust to the relative and absolute decline in employment in agriculture. In this respect, the OECD’s framework could help differentiate between types of farms and indicate relevant policy measures to address each type’s particular needs (Brooks, 2012). Such a policy package could distinguish four groups of farms: those which need some assistance to become more competitive; those which need to diversify income sources within and outside agriculture; those leaving the sector for non-farm work; and those unable to adjust and for which a relevant safety net should be identified or developed.

3. Focus budgetary support on long-term structural reform

Reallocate budgetary transfers from variable input subsidies to support sustainable productivity growth in the long term. While budgetary support to agriculture is relatively low, a large part of it consists of subsidies to variable and fixed inputs, potentially the most distorting type of support. The implementation of the Food Staples Sufficiency Program in 2011 phased out seed and fertiliser subsidies and replaced them with roll-over schemes; however, input subsidies are still considerable compared to other budgetary expenditures. Supporting the use of seeds, fertilisers, farm machinery and postharvest equipment, which are essentially private goods, does not improve resource allocation. Rather, it reduces farmers’ incentives to improve efficiency and does not have a lasting effect on productivity gains. Sustainable productivity growth can be achieved by shifting budgetary support towards public investments in infrastructure, agricultural research, extension services and food safety.

Improve supply chain connectivity. Agro-food supply chains in the Philippines are interrupted by infrastructure gaps, which remain widespread, in particular in such areas as road and rail connectivity, and logistics and energy. Improved connectivity is essential to lower post-harvest losses, increase farmer income, increase farmers’ incentive to produce, and for the creation of an efficient domestic market. The Philippine Development Plan 2011-16 recognised this issue and public spending on infrastructure increased substantially, but more needs to be done, including through further strengthening of the legal and institutional framework for public-private partnerships in infrastructure development. Within resources allocated to support agriculture, expenditure for irrigation work might be converted from solely enhancing rice production to also mitigating flood and drought damage to the entire ecosystem and to farm-to-market roads, storage and marketing facilities.

Avoid commodity-specific budgetary allocations. A large part of the DA’s budget consists of commodity-specific banner programmes. Such programmes contain various kinds of support, from the most distorting input support to investments in public goods. The approach of providing budgetary support by commodity distorts incentives and production choices. To ensure an effective allocation of resources and better adaptability to climate change, the commodity focus in budget allocations should be discontinued and be replaced with the broader provision of public goods.

4. Re-orient agricultural knowledge systems

Improve the institutional design of agricultural research and development. Investments in agricultural research and development enable the technological change that will result in productivity growth in the sector. Although in terms of number of staff, the Philippines has one of the largest agricultural research systems in Asia, the related budgetary expenditures have been low until recently and efficiency is further hampered by the system’s complex structure and overly narrow focus. The organisation of agricultural research and development is complex, consisting of a multi-level institutional structure in which three departments have roles in technology creation. In terms of focus, although more than half of agricultural research agencies conduct research on crops, research and development on rice is privileged. Improving the institutional design, increasing expenditure on research and development while reducing its focus on rice could further contribute to much-needed productivity growth in agriculture and, thereby also to the Philippines’ food security objective.

Improve the institutional structure of agricultural education and extension services. Knowledge gained through research has little value if it does not reach farmers, thus the efficiency of education and extension services is crucial. However, the Philippine agricultural extension system as well as its financing lacks co-ordination between the DA and local governments; local governments lack incentives to spend on trained and qualified extension staff; a commodity-by-commodity approach dominates limiting efficiencies; and the linkage to the research and development system is weak. The lack of co-ordination in extension services and fragmentation into commodity programmes also represents a major challenge for implementing climate change adaptation actions at the local level. While the importance of extension services is recognised by AFMA, further efforts should be made to consolidate these services to improve their capacity to transfer the knowledge and technologies created in research institutes to farmers. In particular, co-ordination on extension between DA, local governments, the Agricultural Training Institute and various state colleges and universities needs to be improved and the linkage to research strengthened.

Re-orient the focus of agricultural education and extension services to improve farm management skills. While the transmission of primary agro-technical knowledge is necessary, in particular for agrarian reform beneficiaries, the education and extension system should increasingly provide more holistic services and include such areas as: marketing skills, preparation of business plans, co-operation arrangements between farmers, and use of environmental-friendly methods of production.

II. Assess the effectiveness of current risk management tools and of alternatives to them

Adopt a holistic approach to risk management with a policy focus on catastrophic risks. Different layers of risks in agriculture require different responses (OECD, 2011). Optimal risk management strategies for different risk levels suggest that government policies should not provide support to deal with normal risks, such as normal variations in production, prices and weather. Such risks should be managed by farmers themselves as part of normal business strategy, through the diversification of production or the use of production technologies which make yields less variable. Income-smoothing through tax instruments for business is also part of normal risk management (OECD, 2011). At the other extreme, infrequent but catastrophic events that affect many or all farmers over a wide area will usually be beyond farmers’ or markets’ capacity to cope. Examples of such risk where governments may need to step in include severe and widespread drought, severe typhoon, widespread flood or the outbreak and spread of a highly contagious and damaging disease. In between the normal and the catastrophic risk layers lies a marketable risk layer that can be handled through market tools, such as insurance and futures markets or through co-operative arrangements among farmers. The Philippines has strengthened its approach to risk management and risk financing in recent years. As risk exposure will likely increase in a changing climate, further efforts should be made to reduce the pressure for ad-hoc governmental assistance after disasters occur. Raising awareness about the procedures, responsibilities and limits of the government will reduce the government’s implicit contingent liability and encourage individuals to adapt through risk-reduction measures. Facilitating good “start-up” conditions for the private sector – by providing information, regulation and training for the development of market-based risk management tools – will ease the financial burden on the government (OECD, 2011).

Assess insurance and cash-transfer schemes that can encourage adaptive decisions. The Philippines’ crop insurance programme has many features that impede adaptive and efficient decision-making, including: high transaction costs, lengthy waiting periods for payouts, moral hazard opportunities and distortive subsidies for rice producers. Two alternative financial products that could resolve these challenges are (i) a hybrid product that combines the current crop insurance with an index-based insurance product and (ii) a disaster-linked cash transfer programme for low-income farmers. The first option – the hybrid product – would reduce transaction costs by standardising the distribution of payouts; ease liquidity-related barriers to adaptation (by providing partial cash injections based on losses recorded in satellite images); curb moral hazard by linking payouts to shocks at a more aggregate level; and eliminate crop-specific subsidies that encourage poorly-adaptive crop choices (WB, 2012). The second option – a disaster-linked cash transfer programme targeting low-income farmers – would also avoid the abovementioned distortions that discourage adaptation and productivity-enhancing decisions. By registering participants in advance and establishing a quick cash disbursement mechanism (possibly building on existing channels), disaster-induced disruptions to production could be reduced, thus strengthening resilience and enabling farmers to make better investments (WB, 2014, 2013b).

III. Improve agricultural sector’s capacity to adapt to climate change

Aligning agricultural policies with climate change adaptation objectives is key to increasing the sector’s adaptation potential. Many of the recommendations discussed above are also important for increasing agriculture’s resilience to climate change; in particular:

  • production and income diversification to enlarge the scope of farmer choices to deal with climate change risks

  • strengthening land rights to incentivise on-farm investment

  • re-orientation of the agricultural knowledge system to better transmit research findings, including on climate change, to the farm level

  • harmonisation of risk management with adaptation policies to enhance both individual and sector-wide resilience.

This section focuses on specific actions, more directly targeting adaptation to climate change. That said, some recommendations, such as those related to more efficient use of water, clearly also have wider benefits, including for productivity growth, food security and farm incomes.

Make climate-adaptation policy objectives consistent across programmes and institutions. The harmonisation of these objectives would help prioritise the most efficient adaptation actions. As a first step, the strategic adaptation priorities of the Philippines Development Plan and the National Adaptation Plan should be harmonised. Such harmonisation would help implementing bodies, including the DA, design more effective action plans to achieve stated objectives. Both the overarching objectives and action plans should be regularly updated to take into account new information about climate change.

Develop clear guidance on climate-adaptation “tagging”. The Philippines has made considerable efforts to increase the transparency of climate change expenditure. However, with increased flows of international and national funds for adaptation, there is a need for a well-designed methodology to enable prioritising the most needed and most cost-efficient adaptation actions. In particular, clear guidance on defining and identifying transfers supporting adaptation actions (“tagging”) merits development.

Make sure that new infrastructure projects are “climate-proof”. Climate change should be considered in the construction of new infrastructure, but also while retrofitting existing installations. Climate-proof water- and road-networks will be crucial for the success of the Philippines’ efforts to build the resilience of agriculture to the effects of climate change. Relatively small upfront expenditures and design changes have the potential to reduce much higher costs in the future. A wide range of adaptation measures exist for infrastructure, some of which entail specific actions now, while others aim to incorporate flexibility to adjust to future challenges. In particular, regulation on water drainage and the use of temperature-resistant materials while designing new roads can significantly increase the climate resilience of this key infrastructure. Incorporating information about expected weather extremes may also extend the lifespan of new investments. That said, not all existing infrastructure should be “retrofitted”. In some cases, it may be cost-efficient to wait until the infrastructure reaches the end of its natural lifespan. For instance, in areas prone to long-term submergence of roads, relocating road facilities may be a better option than paving them.

Provide reliable climate information to farmers. Reliable climate information is essential to encourage farmers to undertake actions and investment to improve their resilience to natural disasters and better adapt to climate change. In particular, information on the nature and the probability of extreme events should be disseminated in a targeted and timely way and supported by clear guidelines on how to minimise damage to production.

Encourage more efficient use of water. Current irrigation practices remain inadequate to encourage more efficient use of water in response to climate change, in particular in regions likely to suffer from seasonal droughts. A positive feature of the national irrigation system is that farmers are obliged to pay an irrigation service fee (ISF) to cover the system’s operation and maintenance costs. However, the ISF is based on the size of irrigated area and not the amount of water used. Moreover, collection of fees depends mostly on the willingness of farmers to pay, which in turn is associated with their harvest in a given period and on their satisfaction with the provision of irrigation services. Thus collection rates are relatively low and are reported to have varied between 63% and 67% in recent years. The government should ensure that charges for water supplied to agriculture reflect all operation and maintenance costs and are based on actual usage. This would encourage farmers to apply water-efficient and water risk-resilient technologies and practices, including alternate wetting and drying, in particular in irrigated lowland rice. It would also ensure better quality irrigation services and would diminish ambiguity over the obligation to pay. Social and adjustment policies could be used to compensate the poorest farmers.

IV. Improve agricultural institutions and governance systems

Strengthen institutional co-ordination between the DA and other relevant departments and institutions that implement programmes supporting agriculture. In the Philippines, agricultural policy objectives and measures to address various concerns in the agricultural sector are covered by numerous development plans and programmes. However, their implementation could be improved. Implementation issues with policy reforms are due partly to the very complex system of institutions involved in agricultural policy design and implementation, including four departments with their sub-units, agencies and councils, as well as numerous Government-Owned and Controlled Corporations created to implement policies in strategic areas. Fragmentation of the institutional setup results in weak co-ordination, unclear communication procedures, and heightens risks of corruption. Closer co-ordination between the DA and other relevant departments and institutions and clear upfront definition of their roles and responsibilities would also increase the effectiveness of climate-adaptive actions in agriculture.

Strengthen transparency and accountability of publicly-funded programmes. Over the past few years, the transparency of budgetary data has improved. Budgeted amounts allocated to publicly funded programmes are published on the website of the Department of Budget and Management. However, data on amounts actually spent are not available. Given the multiple institutions involved in agricultural policy implementation, it would be advisable to consolidate the data on actual budgetary spending on agricultural programmes in the Department of Agriculture, including currently unavailable data on programmes financed by the local governments. Transparency would improve the assessment of the total budgetary support provided to agriculture, the monitoring of sub-national government performance by the DA, and the co-ordination of funding to achieve stated objectives.

Accelerate efforts to build a solid policy-relevant statistical system. Reliable and timely statistics are required to evaluate the results of policy measures, to formulate policy responses and to build evidence-based policy mixes for the future. User-orientation of agricultural statistics has been improving in the Philippines, but there are still areas which need further attention. In particular, as land distribution is near completion, it will be important to assess its consequences. Results of the 2012 agricultural census provide a set of useful information, but data on farm structures in terms of actual land use pattern remains inadequate. As post-reform reallocation of land across farms is likely to accelerate, it will be important to capture this process through timely statistical information. Moreover, to prepare the Philippines to introduce less distorting policy measures, such as decoupled land or farm revenue payments, the country needs to start creating systems and databases such as a credible land registry or databases with individualised farm revenue or income data. As agricultural land is under various pressures, timely and well-defined data on overall farmland versus urbanised area and forestland is necessary. Labour and demographic statistics may also need further improvement. For example, a flow of labour from rural to urban areas seems to be insufficiently captured by official statistics, as indicated by an apparent fall in the urbanisation rate.

Embed monitoring and evaluation mechanisms into the policy process. A more comprehensive and coherent system of monitoring, analysing and reporting of agricultural policies would help analyse, assess and improve policy performance, including in terms of agriculture’s adaptation to climate change. While DA’s agricultural statistics unit has been integrated into the Philippine Statistical Authority, the DA should maintain close links with that unit and build strong relations with agricultural policy research and analytical institutions to analyse data for the benefit of agricultural policy makers.

References

ADB (2016), Key Indicators for Asia and the Pacific 2016, Asian Development Bank.

APPC (2007), “Comprehensive Agrarian Reform Impact Assessment. Study on the Impact of CARP on Poverty Reduction and Prospects for Long-Term Growth. Final Report”, Asia-Pacific Policy Center, 22 October.

Briones, R.M. and J. Felipe (2013), “Agriculture and Structural Transformation in Developing Asia: Review and Outlook”, ADB Working Paper Series No. 363 (August), www.adb.org/sites/default/files/publication/30380/ewp-363.pdf.

Brooks, J. (2012), “A Strategic Framework for Strengthening Rural Incomes in Developing Countries”, in Agricultural Policies for Poverty Reduction, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264112902-5-en.

DA (2015), Unpublished policy information and data submitted for the OECD.

DAR (2016), Personal communication with Undersecretaries J.Z. Grageda and H.Z. Ongkiko, Quezon City, Department of Agrarian Reform, June.

FAO (2015), “The State of Food Insecurity in the World. Meeting the 2015 International Hunger Targets: Taking Stock of Uneven Progress”, http://www.fao.org/3/a4ef2d16-70a7-460a-a9ac-2a65a533269a/i4646e.pdf.

FAO (2014a), “Thirteen Countries Move Closer to Eradicating Hunger”, 30 November, www.fao.org/news/story/en/item/270380/icode/.

FAO (2014b), “The State of Food Insecurity in the World. Strengthening the Enabling Environment for Food Security and Nutrition”, www.fao.org/3/a-i4030e.pdf.

FAOSTAT (2016), FAOSTAT Database, http://faostat3.fao.org/home/E.

FNRI (2015), “An Assessment of the Nutrition Situation in the Philippines”, unpublished report submitted by the Food and Nutrition Research Institute, 13 October.

Fuglie, K. and N. Rada (2015), International Productivity Dataset, ERS, USDA.

Gordoncillo, P.U. (2012), “The Economic Effects of the Comprehensive Agrarian Reform Program in the Philippines”, Journal of the International Society for Southeast Asian Agricultural Sciences, Vol. 18, No. 1.

Lim, J. (2006), “Philippine Monetary Policy: A Critical Assessment and Search for Alternatives”, Political Economy Research Institute (PERI).

Nicolas, I.M. (2013), “Role of Financial Inclusion Policies for Remittances”, Global Forum on Remittances, Bangkok, Thailand, May 20-23, 2013.

NSCB (1998), “Integrated Environmental Management for Sustainable Development: Environmental and Natural Resources Accounting”, National Statistical Co-ordination Board.

OECD (2012), OECD Review of Agricultural Policies: Indonesia 2012, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264179011-en.

OECD (2011), Managing Risk in Agriculture: Policy Assessment and Design, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264116146-en.

OG (2014), “Q and A: The Comprehensive Agrarian Reform Program”, Official Gazette of the Republic of the Philippines, 30 June, www.gov.ph/2014/06/30/q-and-a-the-comprehensive-agrarian-reform-program/.

PSA (2015a), 2015 Philippine Statistical Yearbook, Philippine Statistics Authority, Manila.

PSA (2015b), “Philippines Food Security Information System”, http://philfsis.psa.gov.ph.

PSA (2015c), “Special Report – Highlights of the 2012 Census of Agriculture (2012 CA)”, Manila, 21 December, https://psa.gov.ph/content/special-report-highlights-2012-census-agriculture-2012-ca.

PSA (2014), 2014 Philippine Statistical Yearbook, Philippine Statistics Authority, Manila.

Singapore Customs (2016), “International Enterprise Singapore Board (IES) – Import and Export of Rice. Procedure for Import of Rice to Singapore”, http://www.customs.gov.sg/about-us/national-single-window/tradenet/competent-authorities-requirements-for-controlled-items/.

Singian, M.R.C. (2014), “Booming Philippine Food Processing Industry Provides Opportunities for U.S. Ingredients”, USDA GAIN Reports, 13 February.

Suarez, R.K. and P.E. Sajice (2010), “Deforestation, Swidden Agriculture and Philippine Biodiversity”, Philippine Science Letters, Vol. 3, No. 1, www.philsciletters.org/pdf/201012.pdf.

Thomas, T. et al. (2015), “A Biophysical Approach to Modelling Alternative Agricultural Futures Under Climate Change”, Chapter 10 in The Future of Philippine Agriculture; Scenarios, Policies and Investments under Climate Change.

UN (2016), UN Comtrade Database, http://comtrade.un.org/.

UNU-EHS (2014), “World Risk Report 2014”, Alliance Development Works, Berlin, and United Nations University-Institute for Environment and Human Security, Bonn, www.WorldRiskReport.org.

WB (2016), “Moving Full Speed Ahead: Accelerating Reforms to Create More and Better Jobs”, Philippine Economic Update, Report No. 104611-PH, April.

WB (2015), “Making Growth Better for Small Business”, Philippine Economic Update, Report No. 99648-PH, October.

WB (2014), Financial Production against Natural Disasters: An Operational Framework for Disaster Risk Financing and Insurance, Washington, DC.

WB (2013a), Getting a Grip on Climate Change in the Philippines, Washington, DC.

WB (2013b), “Building Resilience to Disaster and Climate Change through Social Protection”, Synthesis Note, Washington, DC.

WB (2012), “Weather Based Crop Insurance in India”, Policy Research Working Paper 5985, Washington, DC.

WB (2009), “Land Reform, Rural Development, and Poverty in the Philippines: Revisiting the Agenda”, Technical Working Paper 49503.

WB (2007), “Philippines: Agriculture Public Expenditure Review”, Technical Working Paper 40493.

WB WDI (2016), World Development Indicators, http://data.worldbank.org/data-catalog/world-development-indicators.

WTO (2012), Trade Policy Review of the Philippines, WT/TPR/S/261/Rev.2, 9 May 2012, www.wto.org/english/tratop_e/tpr_e/tp361_e.htm.