Monday, October 08, 2007

It's the farm, stupid!

LAST week Sen. Edgardo Angara called for the extension of the Agriculture Competitiveness Enhancement Fund (Acef), which is due to expire next year. We support that call.

The Acef comes from the proceeds of the importation of minimum access volumes (MAV) that we promised our trade partners under the Uruguay Round of Trade Agreements that eventually ushered in the World Trade Organization.

In that agreement, countries committed to convert quantitative restrictions (QRs) on imports into high or equivalent tariff, but allowed small volumes of minimum access imports to facilitate trade. That was not the best way to encourage trade, but it was the most convenient way to incrementally reform policies that, for a long time, have been hampering import and export of farm products.

Local farmers’ group naturally opposed the “tariffication” of QRs. They eventually budged when the government promised greater funding for “safety nets” which the Department of Agriculture (DA) called “competitiveness enhancement funds.” Part of the money was to come from the proceeds of the MAV, an amount that DA spin masters later called the Acef.

Simply put, the Acef is part of the promise to the farmers and fishers who, during that time, were thought to be among those at risk from a liberal trading order. That promise for safety nets was never really sustained as the DA budget waned a few years after the GATT-Uruguay Round Agreement was ratified.

Nevertheless, the Acef has provided some money for important farm and fishery projects like irrigation, farm-to-market roads, postharvest equipment and facilities, research and development, and marketing infrastructure, among others.

Four years after the fund was made available to farmers, the Acef, according to Angara, financed 93 sugar projects and 56 other projects in livestock, poultry, fruits and vegetables.

“As of 2006, Acef still had a balance of P5.81 billion and funded 173 projects worth P2.76 billion that year,” he said. “An additional 55 projects worth P1.14 billion was approved by the Acef committee this year.”

The Acef money, amounting to P1.9 billion this year, has also been also used to finance small farmers’ credit needs.

With the expiration of the Acef fund this year, however, this kind of money will revert to the national treasury, thus depriving farmers the much-needed resources for countryside development.

Of course, we don’t really know how effective the DA has used those billions of Acef money. It’s about to expire, and yet we never saw any effort to tell the public whether or not the money was really mobilized effectively and equitably.

Like most public monies being handled by the machineries of the state, there are temptations that some bureaucrats would dispense of the money for political and personal reasons. The fertilizer fund of Joc-joc Bolante, former undersecretary of the DA, easily comes to mind.

It’s also possible that some of this money may have been used to finance projects by rich and politically connected “farmers,” and not those who really need them. In this case it would be necessary for the DA or some civil-society groups to scrutinize them and show the results to the public.

Given this consideration, however, nothing yet beats the idea that the farm sector needs the Acef to enhance its competitiveness. In fact, this is just the best time to put more attention to the farm sector now that the economy has shown greater resiliency.

In the last several years, Philippine GDP has been growing quite decently and government planners have been wondering how to spread the growth to the less fortunate. The solution, really, is simple: pour more resources into the countryside, assuming enough safeguards are put in place to prevent a similar Bolante caper.

There’s no other way: close to 35 percent of the country’s labor force is employed in agriculture and fisheries.

Meanwhile, one truly beleaguered sector is asking the DA’s help for accessing the Acef, and its situation might be worth reviewing. The main story in this paper’s Monday issue focused on the plight of food exporters who have been reeling from the impact of a steadily appreciating peso.
Roberto Amores, the chairman of the Philippine Food Processors and Exporters Organization Inc. (Philfoodex), told the BusinessMirror in an interview that the government, specifically the DA, “should step up Acef releases so that it can be used for productivity enhancement.”

According to Amores, small and medium enterprises in their subsector have complained of a difficult time in availing themselves of the Acef because of the “tedious” process. Clearly, these are people who have been among the hardest hit by the impact of a strong peso; and in fact, nearly a third have scaled down operations, if we’re to believe Amores.

Carefully reviewing their situation might be a good start for officials looking at what to do to make the Acef more relevant. (Written as editorial for BusinessMirror, 9 Oct 2007)

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