Why many Filipinos are poor (2)

TO RECALL the first part of this topic, the World Bank’s latest report on the country, titled “The Philippines: Fostering More Inclusive Growth,” started its analysis of poverty in our country by asking: “Who are the poor, what are the characteristics of the poorest Filipinos?” The World Bank’s answer: first, the typical poor Filipino belongs to a large family of five members; second, he lives in a rural area.

My past two columns dealt with the first part of the answer: Our unbridled population growth has become one of the major factors causing poverty. We focus now on the second characteristic of the poor: Seventy-one percent of poor Filipinos live in rural areas. Poverty is mainly a rural phenomenon.

The country’s population problem is itself is a major factor causing rural poverty. Already for centuries mainly consisting of small farms of two hectares or less, average farm size has been further reduced because of population growth, with parents having to divide their already small farms to distribute to their children. “Agricultural productivity has stagnated over the past three decades [also because] of the gradual decline in farm size, due to rapid population growth in rural areas,” the World Bank report said.

The report concluded that rural poverty has also been worsened by agrarian reform, as this encouraged further reduction in farm sizes (partly as landlords try to evade the program) at the same time that it frightened off not only capital investments in rural areas.

Other aspects of the World Bank’s analysis aren’t really new, among them, that rural poverty has been due to insufficient government investments (e.g., for irrigation, farm-to-market roads), not enough urban manufacturing or service jobs, and very little investment in human capital in rural areas (i.e., health and education).

But the report is flawed because it treated Philippine agriculture as one homogenous industry, with no differentiation among the different crops, which is crucial in the analysis of rural poverty. It is well-known that farmers of irrigated rice lands or of mango orchards are nearly of middle-class status.

Note the regions which have the highest poverty incidence, according to the report: the Autonomous Region for Muslim Mindanao (62 percent of population are poor), Caraga (Agusan and Surigao provinces, 52 percent), Bicol (51 percent) and Eastern Visayas (48 percent). What are the common characteristics of these provinces?

First, these are predominantly coconut-producing provinces, where coconuts or more precisely its dried coconut kernels called copra make up the main product. Coconut production is an industry that has created, and continues to create, a structure of impoverishment in rural areas.

Second, these provinces have or had raging violent insurgencies waged by the communist New Peoples’ Army (Bicol and the Samar areas, among them), the Moro National Liberation Front in the 1980s (the Muslim Mindanao areas), and in the 1990s the Moro Islamic Liberation Front. A vicious cycle has been generated in these areas. The insurgents exploit poor people’s anger against government, and recruit enough rebels to challenge the government. This creates a violent situation that discourages economic activity and the area’s impoverishment worsens further, giving the rebel fuel to stoke revolutionary fervor. Poverty incidence in war-torn Muslim Mindanao, for instance, increased from 55 percent in 2000 to 62 percent in 2006.

Why has the coconut industry caused poverty? It is essentially a “primitive” crop, the dominant Philippine variety of which does not lend itself to increased productivity through fertilizer use or mechanization of harvest. Its value therefore could not be increased (and has in fact decreased) over the decades, resulting in the stagnation and even relative decline of its prices—i.e., its real, inflation-adjusted price remains the same or even declines, even as prices of other essential consumer commodities increase.

Another reason is that production comes from small, unorganized farms, making an oligopolistic structure inescapable where the small number of traders and especially the elite group of exporters and oil millers impose low copra prices.

Worse, a coconut tree’s productivity peaks at 25 years, and most of trees in these poor regions are 30 or even 50 years old, so that the output has been declining, yielding lower and lower incomes for farmers.
Why can’t coconut farmers modernize their farms by planting new, more productive trees? They’re in a quagmire. Without enough money even for food, they certainly don’t have the capital to purchase and plant new trees to replace their aging ones. Furthermore, they cannot forego their main income while waiting for the new varieties to bear fruit, which takes at least three years.

Within this context, a rethinking of the much-maligned “coconut monopoly” which imposed a fee on copra trading—the so-called “coconut levy” issue—in the closing years of the Marcos regime should be undertaken. I wrote a 1981 monograph on the topic (“The Philippine Coconut Industry: Looking into Coconuts”) which strongly criticized the monopoly. However, in retrospect, an objective analysis shows that it was basically a project to pull coconut farmers out of the quagmire they were in. The levy it imposed would have raised the huge funds needed to replant with new varieties and to subsidize farmers as they waited for the new trees to bear fruit.

Indeed, there were many babies that we threw out with the bathwater when we toppled the Marcos regime.

From the Philippine Daily Inquirer

Filed under: Economics & Business, Inquirer Columns

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