A CRITICAL issue confronting the Philippine economy today is identifying future drivers of expansion to sustain respectable growth rates. Maintaining high economic momentum is key to generating more jobs and investments, reducing poverty and attaining a higher development status.
This concern over future sources of economic growth stems from an anticipated decline in revenues from business process outsourcing and remittances from overseas Filipino workers. The former is expected to be adversely affected by dramatic advances in artificial intelligence (AI) as machines increasingly replace human agents in call centers. As for remittances, inflows are threatened in the short-term by the ongoing Middle East conflict — which restricts the deployment of Filipino workers to the region — along with ever-tightening immigration policies in traditional destination countries.
It is in this context that the proposed Pax Silica project to be located at Clark, Pampanga is generating excitement among senior government officials. The project is a US-led initiative to secure a global chain for advanced technologies such as semiconductors, AI and critical minerals as a way of lessening dependence on China.
Expectedly, members of our affluent class are generally supportive of the project, noting that it will generate more jobs, revenues and push the development of the country’s technological frontiers. They see opportunities for themselves to become junior investment partners, which will allow them to further accumulate wealth.
On the other hand, concerns have been aired by leftist groups, civil society, people’s organizations and academics who point out the lack of a detailed plan. They have noted that Pax Silica will require enormous amount of power, which we lack, and abundant fresh water, which will compete with demand for potable water and irrigation needs.
They add that the project will have limited value added as it will largely be confined to extracting exhaustible rare earth minerals, that its labor-absorption capacity is limited because we do not have the highly skilled manpower to run advanced technologies, and — expectedly — that the bulk of the benefits will be enjoyed by the US. In addition, it might incur the ire of neighboring China.
An alternative to Pax Silica being offered is to develop our manufacturing industry. But there is consensus among economists that we have lost our comparative advantage in labor-intensive industries because of relatively high labor costs, uncertainty over industrial policy and widespread corruption at the local level.
Also, China is increasingly applying robot technology in manufacturing assembly lines, displacing a lot of workers while dramatically raising industry productivity. The result is cheaper but quality products and labor-intensive industries located elsewhere can hardly compete.
It is in this search for a viable source of future economic growth that agri-industrialization is being mentioned as a possible linchpin for our development efforts. The Philippines produces high-value crops such as banana, pineapple, coffee, cacao, coconut, mango, avocado, moringa, pili, durian, papaya, dragon fruit and, lately, ube, which if properly produced and processed can generate enormous revenues. The global demand for these products is huge (as shown in the cases of Philippine banana and pineapple) that their development can truly generate jobs for our people and revenues for the country.
Agri-industrialization has the added positive feature of broad-based economic growth because it holds the prospect of employing our farmers who are among the poorest of the poor. It will also promote balanced regional development by bolstering economic activities in places far away from Metro Manila.
To be honest, past development plans identified agri-industrialization as the main anchor of our agricultural development. It is not a new idea as our planners and policymakers are great in generating concepts. The main problem is that they fell short of executing good ideas because they simply did not have the determination, nor the courage, to institute reforms in the political economy of Philippine agriculture.
Why can’t we successfully implement agri-industrialization while other countries like Malaysia, Thailand, Indonesia and Vietnam did so?
First and foremost is that our politicians or policymakers do not have the guts to finally declare the completion of the agrarian reform program, which has been implemented for almost 40 years now. They are simply afraid that they might lose votes from leftist and populist groups and even the bleeding-heart members of the church.
For as long as there is no certainty over the final ownership, an investor will find it difficult to consolidate lands. Agri-industrialization will require vast tracts of contiguous lands to operate. One cannot possibly promote the use of modern farm equipment and technologies by cultivating a hectare or even 10 hectares. Agri-industrialization requires thousands of hectares for crop production, processing, packaging and marketing to achieve scale economies.
Undeniably, small farms can participate in agri-industrialization if they are consolidated into one production area. China and Vietnam demonstrated that a partnership between small farmers and agribusiness investors could be forged under a contract-growing arrangement. But this will require proper and continual training and education of small farmers as to the value of collective action.
Right now, there are hardly any investments by the government, both national and local, in community organizing. A few agribusiness firms have engaged in this task as part of their corporate social responsibility mantra. But these are far and few, hardly making a dent in the overall problem of declining agricultural activity.
It is high time for the government to create a body, like the previous National Development Corporation, that will actively promote land consolidation among small farmers to partner with potential agribusiness investors. The agency should also ensure that small farmers are provided with a guaranteed decent price for their land and produce.
But for this happen, there has to be courageous politicians and policy makers. This will send a clear signal to potential investors that we are now ready for the next phase of Philippine agricultural development.
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