While the Asean Economic Community (AEC), the single market which came into force at the end of last year promises to remove all trade barriers and ease business among its 10 member states, competition between those states is likely to be get tougher. With a population of 600 million – 20% larger than the European Union – and a total GDP of US$2 trillion, this is a trade-area pie that everyone wants a piece of.
And so to the fittest will go the spoils and right now in the area of agribusiness, the Philippines is going to be hard pressed to put down its marker.
Backyard farming and infrastructure deficiencies – including transport costs of getting goods to port – will continue to stymie the sector’s development which remains uncompetitive.
And if it is unable to gear up and stand toe-to-toe with its neighbours, challenging them on quality of product, timely delivery and price, it runs the risk of becoming a dumping ground for low-cost imports from the other AEC states.
While the government is supporting rice and sugar production, as the tariff barriers come down on these commodities, the Philippines agricultural sector will find it increasingly hard to match the prices of major producers such as Thailand and Vietnam, where agriculture is heavily subsidised.
A big part of the problem which the sector faces is the need to upgrade production by installing better farming technology. For example, sugar – a major subsector employing around 800,000 workers (among the poorest in the national workforce) across 19 sugar-producing provinces – is output from aging sugar mills, most of which are half a century old and require radical modernisation.