Gains in the sector have been achieved, but its full potential is unrealized.

Growth below target. During the period 2004-2010, the average growth, while positive at 2.6 percent annually, has been below the target of the previous Plan, which is a sustained growth of 4.4 percent to 5.4 percent. The occurrence of the global financial crisis, a fuel price spike in 2008, and climate-related events in 2009 (e.g., E1 Niño, typhoons) all contributed to the non-attainment of the target. The devastation from the typhoons Ondoy and Pepeng resulted in damage to agriculture and fisheries estimated at PhP24.7 billion in 2009 pulling down the sector's growth to only one-tenth of a percent in the same year.

Table 4.6. Land Productivity in Selected Southeast Asian Countries (in mt/hectare)

Source: Food and Agriculture Organization Corporate Statistical Database

Note: *2008 data; 2009 is preliminary data

Table 4.7. Revealed Comparative Advantage (RCA) in Selected ASEAN Countries: 2007

Source: Habito et al., 2010

Declining productivity and competitiveness. While the productivity of the agricultural workforce has increased annually by an average of 1.66 percent from PhP19,894 in 2004 to PhP21,553 in 2010, land productivity in terms of yields of traditional crops (e.g., rice, corn, sugarcane and coconut) has stagnated or declined.

The Philippines ranked fourth in rice, coconut, sugarcane and fifth in corn out of five ASEAN countries namely Indonesia, Malaysia, Philippines, Thailand and Vietnam (Table 4.6). In terms of price (producer price), rice in the Philippines is the most expensive (US$318.8/MT), which can be attributed to the lack of factor endowments such as a contiguous land area and big river systems. Furthermore, the growth of total factor productivity (TFP) growth in agriculture has remained at a low level in the Philippines, namely 0.2 percent per year over the past two decades, compared to 1.0 percent per year in Thailand, 1.5 percent per year in Indonesia, and 4.7 percent in China (WB, 2010).

Comparative advantage not fully exploited. The country actually has a revealed comparative advantage (RCA)2 not only in its lead exports such as coconut, banana, mango, pineapple, but also in sugar, abaca, papaya, dried tropical fruit, fresh fruit and fresh vegetables (Table 4.7). Despite the export potential of these commodities, however, particularly the emerging crops, the country's share (8.3%) and value of agricultural products (US$3.2 billion) to total exports is among the lowest in comparable ASEAN countries.

The country also continues to be the only agricultural net-importer among comparable ASEAN members, with an agricultural trade deficit of US$2.4 billion in 2009 (Table 4.8). The total value of agricultural imports amounted to US$5.6 billion, the top six agricultural imports being rice, wheat, soya bean products, milk and cream products, tobacco, and urea. The value of agricultural exports in 2009 for the Philippines was only US$3.2 billion3 (WTO, 2010). This is small compared to those of Indonesia, Malaysia and Thailand which had over US$20 billion each.

Elusive rice self-sufficiency. For the period 2004-2010, domestic rice production has met only 84.71 percent of the country's annual average rice requirements, notwithstanding substantial public investments in the rice sector (DA, 2011). During the global food crisis in 2008, the Philippines imported some 2.4 million MT of rice valued at US$1.9 billion to supplement its domestic rice stocks.

Increase in food commodities prices. The average increase in the prices of rice and corn were the highest among basic commodities for the period 2004-2010, at 7.8 percent and 7.5 percent, respectively (Table 4.9). This is largely due to the global food crisis in 2008 which saw the retail price of rice increased by as much as 29.1 percent. The 6.4-percent inflation in selected food commodities prices is higher compared to the national headline inflation rate of 5.6 percent. Higher prices of food commodities erode purchasing power, especially among the poor, and highlight the grave threats to food security due to extreme shocks, affecting not only production, but also marketing systems.

Table 4.8. International Trade of Agricultural Products: 2000 and 2009 (value in $US billion)

Source: World Trade Organization

Table 4.9. Inflation Rates by Commodity for All Households (in percent)

Source: NSO, 2011

Table 4.10. Poverty Incidence and Magnitude on the Philippines: 2003, 2006 and 2009

Source: NSO, 2011

Stagnant poverty headcount. Despite positive growth and gains in productivity in some subsectors, there has been almost no change in the welfare of almost 6.4 million farmers, fisherfolk and other workers dependent on the sector. The poverty incidence of families has changed slightly between 2003 and 2009 at 20.0 percent and 20.9 percent, respectively (Table 4.10), while poverty in terms of population has increased from 24.9 percent to 26.5 percent, respectively. This is despite an increase in average income of the bottom 30 percent of families of 8.3 percent in real terms from 2006 to 2009.4

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2  RCA is the share of a product in total Philippine exports as a ratio of the share of the same product in total world exports.

3  This is slightly higher than the value of exports in Table 4.8 since WTO category is broader than the figures released by NSO.

4  The poverty estimation methodology was refined by the NSCB in February 1, 2011. However, urban-rural disaggregation is not yet available when the official poverty statistics was released last February 8, 2011.