Executive Director's Corner

Momentum and inertia in rural development

Posted on October 27, 2014 09:42:00 PM


Momentum and inertia in rural development


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M.A.P. Insights
Rolando Dy

IN MY TOUGH physics class at the University of the Philippines in Diliman many moons ago, I learned that the momentum of an object depends on how heavy the object is and how fast it is moving.
It is obvious that an object has a large momentum if both its mass and its velocity are large. By contrast, inertia is the natural tendency of objects to resist changes in their state of motion.

Banana Farm workers ensuring the quality of cavendish banana for export. — BW File Photo
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M.A.P. Insights — Rolando T. Dy: “Farmers need to look far into the horizon”
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M.A.P. Insights — Chit U. Juan: “What we need: Women directors”
M.A.P. Insights — Rolando T. Dy: “Why institutions are key to inclusive growth”

Let us apply these to Philippine rural development. Many governments worldwide are talking about inclusive growth. Given the high incidences of rural poverty, there is no need to look very far.

Recent data show that the poverty incidence of fishermen was at 41.4%, and that of farmers at 36.7% in 2009. The former worsened from 35% in 2003 and the latter was practically stagnant at 37% (Philippine Statistical Authority).

Development momentum and inertia can be applied to rural development. Let us take rice, coconut and banana.

Rice has momentum because of a large mass of government support. Coconut has inertia under slow motion due to low government support or hostage to the saga of levy recovery. Banana has the momentum: smaller mass but faster velocity, as it is driven by the private sector.

Given the dramatic differences in typical farm yields — at least six tons per hectare per year for irrigated rice and less than one ton of copra per year for coconut farms — the revenue differs widely: about P120,000 per hectare for rice and at best P30,000 per hectare for coconut. The former could net about P75,000 per hectare per year for an owner-operator, and the latter just about P20,000 per hectare per year for a typical farmer-lessor.

There are no official data on poverty rates by crop. My guess is: only about 20% of irrigated rice farmers are poor and close to 70% of coconut farmers and workers are poor. Why is this? Irrigated rice farms have better road network. They are in the lowlands, and therefore families are better educated and have access to non-farm and off-farm jobs. Coconut farms are mostly along the coasts, they have poorer roads, less likely to be well-educated and limited chances of finding off-farm jobs.

With respect to Cavendish banana, its area is small but exports are growing and very competitive. It earns about $10,000 per hectare per year as compared to less than $500 per hectare per year for coconut. Rice employs one worker for every two hectares, coconut every six hectares, but banana at one worker every one-half hectare.

Where is the momentum and inertia in the scheme of things?

The rice industry has momentum for several reasons. First is the massive investments in irrigation over the years, currently at P25 billion a year. Irrigation works are usually rehabilitated every five years, longer if well-maintained. Second is the presence of the dedicated and well-staffed Philippine Rice Research Institute. Third, rice is mostly in the lowlands where physical infrastructure is more developed. Fourth, advances in technology in inbred seeds and hybrid rice seeds, such as from SL Agritech, boosted yields and incomes. Fifth, a substantial part of farm credit and crop insurance go to rice.

By contrast, coconut has low inertia. Why? First, for decades, capital outlays for replanting and intercropping have been small. Second, there is no dedicated coconut research institute. The research program of the Philippine Coconut Authority is not well-funded. In Southeast Asia, major tree crops have dedicated research institutes. Third, coconuts are located along the coastlines and physical infrastructure is generally poor. Fourth, hybrid seedlings multiplication is at a snail’s pace. Fifth, little credit has flowed for fertilization and inter-cropping.

There are several reasons rice, with 2.7 million hectares of land, is getting more resources than coconut with 3.5 million hectares.

First, there is a wider constituency for rice than coconut among the urban class, the media, civil society and the politicians. A former Agriculture Secretary once said: “If you fail in rice and succeed in the rest, you fail as a secretary. On the other hand, if you succeed in rice and fail in the rest, you succeed.”

The math needs clarity. Of all the farmers and fishers, only about 25% are rice farmers while 75% are non-rice farmers and fishers. There are about three million workers in rice, and nine million workers in non-rice and fishing. The sense of proportion of the media and the politicians, however ingrained, is erroneous but it has persisted. This has been a big challenge to change.

Second, and this is a challenge, too, for economists: Investing in irrigation including maintenance subsidies is classified as “public investment.” Planting coconut is a “private investment.” Economics literature always include irrigation as part of public investments. But never planting tree crops for smallholders!

Third, for multilateral agencies such as the Asian Development Bank, International Fund for Agricultural Development, and the World Bank, irrigation projects are easier to package and faster to execute than tree-crop development. They believe, without saying, that the irrigation institutions in the country are better organized than the tree-crops institutions.

Fourth, rice advocacy groups are better organized than, say, coconut groups. They are better organized because they are concentrated in irrigated areas in the lowlands while coconut farmers are dispersed and less accessible.

After all the public pronouncements about the coconut levy fund, the money is still stuck in the National Treasury. Farmers who have waited for decades fulminate. The powers-that-be procrastinate.

Meanwhile, private investments in banana have made it the No. 2 world player, dominating markets in China, Japan, Korea, ASEAN and the Middle East. Multinationals helped in opening markets, but Filipino managers brought the industry to a higher level. The barrier to expansion appears to be land access which is government-policy related: land reform and poor infrastructure. Despite these constraints, the industry may reach $1 billion in five years or less.

Indeed, there is momentum and inertia in rural development, which are outcomes of government choices. The private sector can accelerate the speed of development but there are roadblocks in the way. It is the law of physics in policy-making.

Rolando T. Dy is the chair of the MAP Agribusiness and Countryside Development Committee, and the executive director of the Center for Food and AgriBusiness of the University of Asia & the Pacific.