Why are Filipinos hungry?

by Ernesto M. Ordoez Sunday, January 2nd, 2005

Photo courtesy of The Manila Times THAT WASNT your imagination, that was really the sound of your seatmates stomach growling. Or maybe it was yours. Its already a given that more and more Filipinos are going hungry. The question, however, is why. Recently, the Social Weather Stations (SWS) revealed that fewer Filipinos went hungry in the last quarter of 2004 compared to the previous quarter the same year. But perhaps that was only because it was the Christmas holidays, which means feasting at whatever cost in this country. The SWS also noted that people have been lowering their standards of living and trying to make do with even less. The situation doesnt get better when seen from a five-year perspective. By comparing August/September SWS hunger findings from 2000 to 2004, things look like they have deteriorated, save for a fluke of a year that was 2003, when only 5.1 percent of the respondents told SWS they had gone hungry. In 2000, that figure was at 8.8 percent; by 2004, it was up at 15.1 percent. In this issue:

Food, glorious food The tastes that bind The big picture Mini-size me Sidebar: All that trash Wheres the beef? Green dining Why are Filipinos hungry? At the kitchen of divine mercy Republic of pancit

But the problem may even be bigger than we think. Mario Capanzana, head of the Food and Nutrition Research Institute (FNRI), says the perception of hunger reported by the SWS is different from the objective measurement of per-capita food thresholds. In 2000, the National Statistics Office estimated the food threshold at P7,810 per capita, meaning that each person needed at least P21 worth of food daily in order to survive. In 2000, the proportion of the population not reaching the food threshold 21.2 percent was more than double the SWS hunger perception measure of 8.8 percent that year. There may be more growling stomachs out there than what the surveys reflect, but since the government takes a national census only every five years, more current figures are unavailable. There are three possible reasons for the growing hunger among Filipinos: 1. Food production may not be keeping up with our growing population. There simply is not enough food. 2. By the time the food produced at the farm level gets to the consumer, food prices are too high. Many cannot buy at these high retail prices. 3. Some cannot purchase the food they need because they have too little income or what income they have for food has largely been eaten up by inflation. Lets look at each possible cause in detail. First, food production: from 1990 to 1999, the Philippine population grew at 2.3 percent while agriculture growth averaged only 2.1 percent. In other words, food production didnt keep up with the growing population. From 2000 to 2004, however, this was no longer the case. The agricultural growth rates were 3.6 percent in 2000, 3.9 in both 2001 and 2002 (a mild El Nio year), 3.7 percent in 2003, and an expected five percent in 2004. These rates are all higher than the 2.3 population growth rate. If thats the case, why has hunger increased rather than decreased? Remember that the agricultural growth rates reported by government are at the farmgate level, not at the retail level, says Romeo Recide, agriculture statistics bureau director of the Department of Agriculture (DA). But hunger is felt by consumers who buy food at the retail level. Thus, we must examine what happens from the time the food is actually produced at the farmgate to the time when the consumer actually buys the food at retail, or at the palengke or supermarket. Table 1 shows a not-so-pretty picture, at least from the hungry consumers point of view. Compared to other countries, the margins between the farmgate and retail prices in this country are excessive. For carrots and pork, for example, the retail prices are more than double the farmgate prices. TABLE 1: Farmgate vs retail prices PRODUCT FARMGATE RETAIL PRICE MARGIN FARMGATE % OF RETAIL Carrots P10 P25 P15 40%

Pork Rice (converted from palay) Chicken Bangus

P53 P12 P63 P53

P109 P20 P89 P75

P56 P8 P26 P22

49% 60% 71% 71%

Hunger is not determined by food production alone, says Capanzana. It is also determined by food availability and affordability. Although many consumers can easily afford the farmgate prices of the different food products, these products must first be available to them. This is at the retail level, not at the farmgate. By the time the food reaches the consumer at retail, the prices have increased tremendously. Still, while the big disparity between farmgate and retail prices is a cause of hunger, this gap has not changed much over the last few years. Therefore, Capanzana concludes, it is not a major cause for the increase in hunger experienced today. SO WHAT has changed that has caused the increase in hunger? Certainly one answer to that question is the decrease in purchasing power and with it, the capacity of consumers to buy food. Affecting the affordability of food, which today takes up approximately 60 percent to 70 percent of the average persons total income, are unemployment and underemployment as well as both overall inflation and food inflation. Table 2 shows changes in these factors over the last five years. TABLE 2: Unemployment, underemployment, and inflation 2000 2001 2002 2003 2004 COMBINED UNEMPLOYMENT and UNDEREMPLOYMENT Rate Level INFLATION Overall Food 32.9% 28.3% 28.4% 28.4% 29.4% 9,414 8,659 8,983 9,157 9,822 4.5% 6.1% 3.0% 3.0% 5.5% 1.9% 3.9% 1.9% 2.0% 5.8%

In terms of level of unemployed and underemployed, the 29.4-percent rate is the worst in the last four years. With less income from employment, people would obviously have less money to buy food. Lets not even go to where they are getting the money they are spending. But those who still have steady income may not be that happy either. Overall inflation, after all, decreases their purchasing power. From 2000 to 2003, food inflation was always less than overall inflation. But in 2004, this was reversed. The 5.8-percent food inflation rate was higher than the 5.5 percent overall inflation rate. It is also the highest for the last five years. With the double whammy of higher unemployment and underemployment, as well as higher inflation, hunger will inevitably increase.

What makes matters worse is that we have inequitable growth. About half our income goes to only 20 percent of our population. The latest figures available puts the poverty incidence for 2000 at 34 percent, versus the 33 percent recorded in 1997. There are many more poor people now as compared to 2000, so it is unlikely that the poverty rate has improved. Yet even during the period from 1985 to 1997 when the poverty incidence dropped from 44 percent to 33 percent, the poorest 20 percent of the population improved their income by only 0.5 percent for every one-percent growth in average income, according to an Asian Development Bank study. Clearly, we should also work on more equitable distribution of income. TO SOLVE the problem of hunger, agriculture policy, together with the corresponding agriculture programs, must address all three areas identified earlier: food production, supply chain management, and food affordability through more employment and less inflation. TABLE 3: Agriculture comparative advantage ranking among five ASEAN countries COUNTRY 1970 1980 1990 2000 Philippines 2nd 2nd 4th 5th Thailand 1ST 1ST 2nd 2nd Vietnam 5th 4th 1ST 1ST Malaysia 2nd 2nd 3rd 4th Indonesia 2nd 5th 5th 3rd As an overview, DA Undersecretary Segfredo Serrano says, The agriculture sector has gotten out of its boom-and-bust cycle, which showed only a 2.1-percent growth in the 1990s. Indeed, from 2000 to 2004, the country achieved relatively stable growth, averaging four percent annually. But the combined effect for the last two decades still puts us in last place when compared to four other Southeast countries. A study released in June 2004 by Eliseo Ponce and Cristina David ranks the Philippines agriculture comparative advantage against these countries, among them Indonesia, which has been usually been identified as one of the regions economic laggards. As Table 3

shows, the Philippine performance has been dismal for more than a decade now, with the country dropping to the bottom in 2000. Heres the thing: even though the Philippines was weak in comparative advantage, it opened its markets and decreased its agriculture tariffs. For example, for several vegetables, this country went from quantitative restrictions to a seven-percent tariff rate. This rate is far lower than the tariff rates of comparable developing countries and way below the 40- percent bound rate allowed by the World Trade Organization (WTO). What the Philippines did is the opposite of the recommended direction made in a 2004 study by Ha-Joon Chang and Ilene Grabel. This study shows that the economically successful countries, with few exceptions, did not practice free trade during their development phase. Instead, they nurtured their economies until they attained comparative advantage. Only when they were strong enough did they decrease their tariffs significantly. We engaged in unilateral disarmament, says Omi Royandoyan, executive director of the Philippine Peasant Institute. We volunteered lower rates than were required by the WTO and got little in return. What is worse is that we did this when we were completely unprepared for subsidized cheap imports. As a result, the countrys ratio of agricultural imports and exports worsened. Between 1992 and 1993, when the Philippines was a net exporter of food, that ratio was at an average of 84 percent. In the last four years, the country has deteriorated into being a net importer of food with an average ratio of 147 percent. Simply put, says Royandoyan, for every $100 we exported, we imported $147. Today we are asked to decrease even further our already low agricultural tariffs. But since protection is measured by both tariffs and the subsidies given, we should not lower our tariffs if the developed countries do not comply with their commitments to decrease their subsidies. Federation of Free Farmers Cooperatives chair Raul Montemayor says that despite some government officials giving glowing reports of the July 30, 2004 WTO Framework Agreement, the developed countries once again benefited more than the Philippines did. It is true that there is a 20-percent cut in subsidies from the prior WTO Doha Round. But the new amount of $165.9 billion for the United States, the European Union, and Japan is still much higher than their actual 2000 subsidy level of $104.8 billion. Compare that to the $300-million subsidy of the Philippines, and the growl you hear this time around may be emanating from your throat. Unless the developed countries appropriately decrease their subsidies, the Philippines must have an agricultural tariff standstill for its agricultural outputs. Once it strengthens its comparative advantage, the Philippines can then embark on a selective and gradual tariff reduction scheme. At the very least, the government should provide the physical and business infrastructure that other countries give their farmers in order to compete

globally. To achieve this, the government should provide the appropriate amount of funds and then make sure these funds are used wisely. Ernesto M. Ordoez chairs Agriwatch, a private sector initiative. He was a former undersecretary of agriculture and trade and industry, and former chair and Cabinet secretary for Presidential Flagship Programs and Projects. He is currently the national coordinator of the Alyansa Agrikultura.