Underdevelopment inertia

By Satur C. Ocampo
At Ground Level | The Philippine Star

Besides the slowdown in the growth of gross domestic product last year (to 6.1% from 7.2% in 2013), government economic planners have acknowledged that national poverty incidence in the first half of 2014 rose to 25.8%, from 24.6% in first-half 2013.

In 10 of the 17 regions the Philippine Statistics Authority recorded double-digit spikes in poverty threshold —most significantly by14.2% in Region 8 (Leyte, Samar, Biliran) and 13.5% in the National Capital Region.

Blamed for the poverty rise was high inflation, specifically higher food prices, up by 6.5%.Furthermore, the National Economic and Development Authority blamed the 12% increase in the prices of rice — which eats up 20% of the budget of low-income families.The high inflation, NEDA pointed out, practically negated the 6.4% increment in per-capita income.

“At a time when the world price of rice was declining, the domestic price… was skyrocketing,” lamented NEDA director-general Arsenio M. Balisacan.To temper inflation and drive down poverty, he added, rice prices must be reduced.How?

Balisacan urged reversing a 20-year government policy: remove the limit on rice imports, called quantitative restriction or QR, which the Philippine negotiators fought hard to get approved by the World Trade Organization in 1995. The objective was to protect Filipino rice farmers and enable them to become competitive producers under a regime of agricultural trade liberalization. Upon appeal by the government, the QR has been extended twice, to remain in effect until 2017.

But the QR hasn’t worked.Over two decades we have been a net importer of rice — the world’s No. 1 importer by 2010. Just as shocking, we also import a great deal of the other most common foods that we eat: coffee (53.31% of consumption), mongo (50.96%), peanuts (43.71%), garlic (28.34%), pork (8.31%), and shrimps and prawns (7.99%), among others.

The declared objective to achieve rice self-sufficiency and food security has remained unfulfilled, absent a determined program to develop/modernize agriculture.

This year the National Food Authority is importing 500,000 metric tons of rice allegedly to augment locally-grown stock in the “lean season” starting July.Yet the PSA points out that of the January 2015 NFA stock of 520,000 MT, 97% was imported. And the UN Food and Agriculture Organization estimates that the government will again import 1.8 million MT this year because growth in domestic production will be either insignificant or nil.

Oddly, a PSA report, titled “Agricultural Indicators System Report on Food Sufficiency and Security,” says that our country’s dependence on imported rice dropped to 3.2% of total consumption (10.9 million MT) in 2013, from 7.8% in 2012.If the FAO estimate is accurate, the 1.8-million MT import will constitute about 10% of consumption.

And if Balisacan’s proposal to scrap the QR is adopted, rice imports will increase 10 times, according to the Philippine Institute for Development Studies, which backstops the NEDA.

That will be disastrous to the Filipino rice farmers, who constitute more than two million households reeling in poverty. As a recent PIDS study affirms, the benefits from the GDP growth in recent years haven’t “trickled down” to the poor, especially agriculture-dependent households. Whereas agriculture accounted for 12% of GDP and 1/3 of the labor force in 2010, poverty incidence in 2009 among agriculture-dependent households was 57% — compared with 17% in non-agricultural households.

But the PIDS, echoing Balisacan, claims that huge rice imports will significantly cut prices in the country. As a parallel move, the P-Noy government’s chief economic planner proposes to augment, corresponding to inflation rate, the P62.32-billion budget for the Conditional Cash Transfer program.

Evidently the exigency of checking the rise in poverty incidence — the Philippines has failed to meet the Millenium Development Goal to reduce poverty to 16% by 2015 — is prioritized over developing agriculture and attaining rice self-sufficiency and food security. Balisacan states the issue thus:

“While we definitely need to support the agriculture sector in general, we should also maximize the gains from trade and globalization.”

Maximizing the gains from neoliberal globalization has been the policy mantra since the Ramos administration two decades ago. Yet what gains have the successive governments to show for it?

Another PIDS study, titled “Is Poverty Really Decreasing? And if Not, Why Not?” critiques a PSA report suggesting that the CCT program, among other factors, induced a drop in poverty from first-half 2012 to first-half 2013.No clear evidence of that, the study avers.

Instead, PIDS cites three trends: 1) poverty rates remained unchanged in the first-semester periods of 2006-2012 (only minute differences within margins of error); 2) full-year poverty rates were also unchanged in 2006-2012; and 3) estimates of the proportion of the poor were lower in the full year than in the first semester due to 13th-month wages and bonuses received at yearend.

At bottom, recent GDP growth rates haven’t affected the persistence of poverty because the growth derives mainly from OFW remittances, lower interest rates, and investments in business process outsourcing or BPOs — not in marked increases in modern agricultural and industrial output, which we do not have.(Of the 6.1% growth rate in 2014, industry contributed 2.5%, agriculture, 0.2%.)

In its yearend 2014 briefing, IBON Foundation concludes:

“This is why (the growth rate’s) momentary impact has not been enough to offset the inertia of underdevelopment reflected in moderate-trend growth and in backward production, high unemployment, and deep poverty.”

Yes, very much more needs to be done for the Philippine economy to overcome the “inertia of underdevelopment.”

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E-mail: satur.ocampo@gmail.com
Published in The Philippine Star
March 14, 2015

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