First of two parts
“The more laws there are, the less justice there is.” (Marcus Tullius Cicero)
THE main cause of the underdevelopment or backwardness of our agricultural sector is that it has been over-regulated by the government. These regulations have become entrenched in our institutions and have become structural obstacles to agricultural development. They have stifled the creativity, efficiency and competitiveness of our agricultural actors and discouraged the private sector from investing in agriculture. Allow me to cite a few examples.
First, we have the Comprehensive Agrarian Reform Program (CARP) which has been implemented for over 30 years now. It is probably the longest land reform program in the world compared to the successful land reform programs in Japan and Taiwan, which were completed in less than a decade.
Here, the government regulates land ownership to a maximum of 5 hectares for a couple and 3 hectares each for up to four children. But since the adoption of CARP in 1988, this land allocated to the original farming couple and their children has already been inherited and distributed among their children. As a result, the average land ownership in the country today is about one hectare for each cultivator.
Apparently economies of scale in agricultural production cannot be achieved with this tiny size of land. Not surprisingly, a series of studies have shown that the larger the cultivated area, the higher its productivity compared to a small farm.
CARP has discouraged the private sector from investing in agriculture because they cannot guarantee the appropriate amount of land that will make their agricultural enterprise economically viable. It has also discouraged private banks from providing loans to small farmers because they cannot accept their farmland as collateral due to uncertainty over its ultimate ownership due to CARP. And for the landowners whose lands were targeted for distribution, they decapitalized their lands (cut down all the trees that are valuable to sell, just like in the coconut areas) and stopped investing in them.
Code of local authorities and agricultural extension
Then there is the provision of the Local Government Code (LGC) of 1991 delegating all agricultural extension officers to local government units (LGUs). It’s not a bad law per se, but the problem is that it didn’t clearly inform the public of LGU’s responsibilities to the Department of Agriculture (DA) and didn’t make LGU responsible for any shortcomings in their performance. .
This is also the main reason for the disconnect between our research activities and our extension efforts. Since research is centralized in entities with expertise in the relevant areas, its results (to derive maximum benefit) need to be disseminated to farmers. If our agricultural extension officers are not qualified for the job and do not value research dissemination because they are answerable to their LGU officers and not the DA, then the benefits of research in terms increased productivity will not benefit our farming communities. . Research results will most likely gather dust in the library or remain implemented only at the pilot level, which is happening today.
In addition, the LGC gave the LGUs the power to generate additional revenue and enacted local laws that will govern the use of local resources. Given these additional powers, any private sector investor will now have to consider in their calculations the cost of additional local taxes, whether they will have a comfortable relationship with local authorities and what are the chances of those local authorities being re-elected every three years.
In addition, it is worth mentioning the commonplace observation that due to LGC, corruption in the country has also been decentralized. An investor has to pay his way from the national to the local officials, down to the lowly barangay (village) officials, to ensure the establishment of the business and the continuation of its operations.
Another regulation concerns our trade policy of maintaining high tariffs on agricultural imports. Tariff protection for manufactured/industrial goods was higher than for agricultural goods before 2000 due to the overshoot of our Import Substitution Industrialization (ISI) policy in the 1960s and beyond. Our policy then was to protect our local industrialists. After 2000 and beyond, the terms of trade began to turn in favor of the agricultural sector, which means that agricultural products enjoy greater tariff protection than manufactured goods, which aims to protect our agricultural producers.
Just as in the industrial sector during the ISI period where high tariff protection only led to inefficient and uncompetitive industries, high tariffs on agricultural products led to inefficient agricultural producers. So, while our Southeast Asian neighbors have become successful farmers and agribusinesses through the gradual lowering of tariffs on agricultural products and the provision of appropriate support to their farmers, ours became lazy and spoiled because they were assured of high prices due to high tariffs imposed on competing agricultural imports. The lack of competition from low-priced imports has discouraged local producers from becoming more efficient and productive. It is much easier to pressure legislators, policy makers and the uninformed public, and appeal to their so-called sense of nationalism and patriotism to keep tariffs high than to improve productivity and competitiveness.
Another clever way to stop the entry of agricultural imports, which is another regulatory measure, is to impose quantitative restrictions (QRs) through the use of sanitary and phytosanitary (SPS) measures to protect public health, animal and plant. The problem is its arbitrary application (like the QR on sugar imports despite violating World Trade Organization rules on the matter) because a number of them lack a solid scientific basis.
A good example is the requirement that frozen meat cannot be sold on the wet market unless the trader has cold storage. Yet the same requirement is not placed on local meat products which are displayed throughout the day without the benefit of a cold storage facility. This is undoubtedly in violation of the national treatment provision of the WTO (World Trade Organization) agreement that imports from other countries should receive the same treatment as locally produced products.
The end result of all this arbitrary application of the SPS rule is to prevent the entry of imported products that could have lowered food prices, controlled inflation and forced local producers to become more efficient.