Trade and Fiscal Incentives - National Agricultural and Fishery ...

4.2 TRADE AND FISCAL INCENTIVES
Rationale
4.2.1 Trade is a major component of agriculture and fisheries modernization. The
law adopts open trade regime as one of its frameworks. The law is also very
clear in its rationale to pursue trade as provided by Section 2, “Declaration of
Policy” that “the state shall adopt the market approach…and promote marketoriented
policies in agricultural production to encourage farmers to shift to more
profitable crops.”
4.2.2. Under the same section, at least two of the seven (7) principles have direct
relevance to trade. These specific principles are:
a. “Global Competitiveness-the State shall enhance the competitiveness of the
Agriculture and Fisheries sectors in both domestic and foreign markets” and
b. “Protection from unfair competition-the State shall protect small farmers and
fisherfolk from unfair competition such as monopolistic and oligopolistic practices
by promoting a policy environment that provides them priority access to credit
and strengthened cooperative-based marketing system.”
4.2.3. The more specific terms, under “TITLE 5, TRADE AND FISCAL
INCENTIVES,” Sections 108 and 109 of AFMA provide that “taxation policies
must not deter growth for value-adding activities in the rural areas.” Finally, the
law also provides under Section 109, for the granting of exemptions to all
enterprises of tariffs and duties for the importation of all types of agriculture and
fisheries inputs, equipment and machinery such as, but not limited to fertilizer,
insecticide, pesticide, tractors, trailers, trucks, farm implements and machine
harvesters, threshers, hybrid seeds, genetic materials, sprayers…” Provided that
the imported agricultural and fisheries inputs, equipment and machinery shall be
for the exclusive use of the importing enterprise.”
Objectives
4.2.4 The major objective of the trade and fiscal incentives analysis was to find
out whether AFMA has provided the enabling mechanisms to encourage
domestic and international trade during its implementation. The Team reviewed
and analyzed the effectivity of trade and fiscal incentives awarded to
agribusiness enterprises in terms of agriculture and fisheries outputs and inputs.
Analysis of the Agricultural Competitiveness Enhancement Fund (ACEF) and
domestic and international trade polices was also undertaken, including trend
analysis of trade flows and export diversification before and during AFMA’s
implementation. Likewise, the Regional consultations provided inputs in the
assessment of trade and fiscal incentive situations during the AFMA
implementation. Data from these 16 Regional consultations served as validation
of the national situation at the Regional levels the impact of AFMA components
to the agriculture and fisheries sector.
4.2 - 1

Targets
4.2.5 Relative to trade and fiscal incentives, the major target of AFMA is to
provide the enabling policy environment such that Philippine agriculture and
fishery products can have the competitive edge in terms of product quality, price,
and volume of output produced with the greatest relative efficiency in the use of
resources, as needed by the domestic and global markets.
Empirical Findings
General Trends in Agricultural Trade
4.2.6 Agricultural trade has two basic components in this analysis: export and
imports of agricultural outputs, and export and imports of agricultural inputs or
those used in the production of agricultural outputs. These two general trends in
agricultural output/input trade are analyzed before (1993-1998) the enactment of
AFMA and after (post) enactment (1999-2005) or during AFMA implementation.
4.2.7 The trend in total agriculture output exports before (1993-1998) and during
(1999-2005) AFMA implementation is shown in Figure 4.2.1. The average values
of agricultural output exports before and after AFMA were almost in the same US
(FOB) $2,000 million levels. Before AFMA, total value of agriculture export
averaged US (FOB) $2,052.3 million. In contrast, agricultural export value after
AFMA implementation averaged US (FOB) $ 2059 million. Several events
affected the agricultural export performance during the AFMA implementation
years. One was the lagged effect of the financial crisis in 1997-1998 which
brought uncertainty in the financial sector. The other more serious problem
during the period was the El Niño phenomenon in crop years 1998-1999,
affecting the volume of exports. During the period 2005 however, total
agricultural output export value peaked at US $ 2,552 million overtaking the
average export value during the pre-AFMA period (Figure 4.2.1).
4.2 - 2

Value (F.O.B in million US$)
Figure 4.2.1 Trends in Agricultural Trade of Agricultural Outputs Pre and Post AFMA
3000
2500
2000
1500
1000
500
0
PRE (1993-1998) POST (1999-2005)
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Import of Agricultural Outputs
Export of Agricultural Output
4.2.8 Value of total agricultural output imports on the other hand, rose from a low
of US $1,163 million in 1993 to a high of US $2,428 in 1996 during the pre-AFMA
period. Henceforth, output import values averaged US $2,300 million per annum
after AFMA. It is also interesting to note that before AFMA, during the years 1993
to 1995, value of total agricultural exports exceeded that of imports. However,
from 1996 onwards and during the entire period after AFMA, total value of output
imports exceeded exports (Figure 4.2.1).
4.2.9 On the average, agricultural output exports were dominated by food and
live animals before (91%) and post (67%) AFMA period. Tobacco became a
major commodity export after AFMA enactment sharing on the average 24% of
total output export receipts (Figure 4.2.2). Import values of agricultural imports
were dominated by food (cereals, cereal preparations, and dairy products) and
crude materials during the pre and post AFMA period (Figure 4.2.3).
4.2 - 3

Figure 4.2.2 Average Value of Major Exports of Agricultural Outputs, Pre and post AFMA
2% 6% 1%
6%
81%
11%
2%
91%
100% = US$ FOB Value
PRE AFMA (1993-1998) POST AFMA (1999-2005)
6%
3%
I. Food and Live Animals
24%
II. Tobacco & Tobacco Manufactures
III. Crude Materials
IV. Animal/Vegetable Oils & Fats
Figure 4.2.3 Average Value of Major Imports of Agricultural Outputs, Pre and post AFMA
100% = US$ FOB Value
PRE AFMA (1993-1998) POST AFMA (1999-2005)
7%
I. Food and Live Animals
9%
II. Tobacco & Tobacco Manufactures
III. Crude Materials
IV. Animal/Vegetable Oils & Fats
4%
80%
67%
4.2 - 4

4.2.10 Trends in the agricultural input trade is shown in Figure 4.2.4. Imports of
agricultural inputs surpassed significantly exports during pre and post AFMA
periods. Fertilizer (crude and manufactured) shared 53 to 59% of total value of
agricultural inputs export values during both pre and post AFMA periods.
Likewise, feeding stuff for animals shared a range of 33-36% of average
agricultural input export values during both periods (Figure 4.2.5). Major
agricultural input imports on the other hand, were dominated by feedstuff and
fertilizer with aggregate 72% share of average value during the pre-AFMA period.
In contrast, this aggregate share was almost steady (71%) during the post-AFMA
years but with the emerging imports of agricultural chemicals and materials
(22%) during the AFMA implementation years (Figure 4.2.6).
Value (F.O.B. in Million US$)
Figure 4.2.4 Trends in Agricultural Trade of Agricultural Inputs Pre and Post AFMA
1000
900
800
700
600
500
400
300
200
100
0
PRE (1993-1998) POST (1999-2005)
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Export of Agricultural Input
Import of Agricultural Inputs
4.2 - 5

Fig 4.2.5 Average Value of Major Exports of Agricultural Inputs Pre and Post
AFMA
100% = US$ FOB Value
36%
2%
3%
40%
PRE AFMA (1993-1998) POST-AFMA (1999-2005)
15%
13%
59%
32%
I. Fertilizer
33%
6%
II. Agricultural Chemicals & Materials
III. Agricultural Machinery
8%
IV. Feeding stuff for animal(excluding unmilled cereal)
Figure 4.2.6 Average Value of Major Imports of Agricultural Inputs, Pre and Post
AFMA
100% = US$ FOB Value
PRE AFMA (1993-1998) POST AFMA (1999-2005)
I. Fertilizer
44%
II. Agricultural Chemicals & Materials
III. Agricultural Machinery
7%
IV. Feeding stuff for animal(excluding unmilled cereal)
27%
22%
53%
4.2 - 6

Market Shares of Philippine Agricultural Exports
4.2.11 The weighted average market shares of selected Philippine agricultural
exports were also computed before and after AFMA implementation.
Coconut Oil
4.2.12 The major markets of coconut oil export before and after AFMA
implementation showed minimal dispersal of the market for coconut oil export
from the pre-AFMA to the AFMA period. The biggest markets remain to be the
USA and the Netherlands, comprising about 70-80% of the market (Figure
4.2.7).
Figure 4.2.7. Major Markets of Coconut Oil Exports, Pre and Post AFMA period
Malaysia
1%
Indonesia
6%
Japan
3%
Netherlands
(Holland)
36%
PRE AFMA (1993-1998) POST AFMA (1999-2005)
PRE (1993-1998)
POST (1999-2005)
Others
12%
USA
42%
Malaysia
7%
Japan
5%
Italy
1%
China, People's
Rep. Of
2%
Netherlands
(Holland)
35%
Others
12%
USA
38%
4.2 - 7

Fresh Banana
4.2.13 Figure 4.2.8 shows the major markets for fresh banana before and during
AFMA implementation. The chart shows that there is dispersal of the market,
although minimal after AFMA implementation. Japan’s average market share
before AFMA deceased from 63.13% to 56.04% after AFMA. As a result, other
countries like China, Taiwan, and Iran gained bigger average shares during this
period.
Saudi Arabia
6%
Korea,
Republic of
7%
United Arab
Emirates
8%
Figure 4.2.8 Major Markets of Banana Exports, Pre and Post AFMA period
PRE AFMA PRE (1993-1998)
POST AFMA POST (1999-2005)
China,
People's Rep.
Of
9%
Others
7%
Japan
63%
China, Rep. Of
Taiw an
8%
China, People's
Rep. Of
12%
Korea, Republic
of
7%
United Arab
Emirates
8%
Others
7%
Iran
2%
4.2 - 8
Japan
56%

Shrimps and Prawns
4.2.14 Figure 4.2.9 shows that before AFMA, Japan was the biggest market for
shrimp and prawn exports accounting for about 80% of the market, on the
average. With AFMA implementation, Japan’s average share in the export
declined to 63%. This gave way to the increase in Korea’s market share after
AFMA.
Figure 4.2.9 Major Markets of Shrimp and Prawn Exports, Pre and Post AFMA period
PRE AFMA (1993-1998) POST AFMA (1999-2005)
Korea, Republic
of
5%
USA
10%
Others
5%
Japan
80%
Korea,
Republic of
13%
USA
12%
Guam
1%
Spain
3%
Canada
1%
Others
6%
Japan
64%
4.2 - 9

Pineapple and Pineapple Products
4.2.15 There was a diversified market for pineapple and pineapple products
export after AFMA. Before implementation, only the USA and Japan had
substantial market shares in the export of Philippine pineapple and pineapple
products. With AFMA implementation, the Netherlands, Korea, and some other
countries increased their average share in absorbing the export commodity
(Figure 4.2.10).
Korea,
Republic of
3%
Canada
4%
Netherlands
(Holland)
5%
Figure 4.2.10 Major Markets of Pineapple Exports, Pre and Post AFMA period
PRE AFMA (1993-1998) (1993-1998)
Others
17%
Japan
18%
USA
53%
Belgium
0%
Korea,
Republic of
4%
POST AFMA POST (1999-2005)
Canada
2%
Spain
0% Others
17%
Netherlands
(Holland)
5%
Japan
19%
4.2 - 10
USA
53%

Tuna
4.2.16 The average market shares for tuna export before and during AFMA
implementation are shown in Figure 4.2.11. The chart shows that before AFMA,
the biggest markets of the Philippines’ tuna export were the USA, Japan, and
Germany. After AFMA, the average market share of this Philippine export to the
USA slightly increased, while that of Japan and Germany’s decreased. Other
countries such as Singapore and Taiwan, gained bigger average shares of the
export. Furthermore, the market for the product grew to include more countries,
although with smaller shares.
Singapore
2%
Figure 4.2.11 Major Markets of Tuna Exports, Pre and Post AFMA period
PRE AFMA (1993-1998) POST AFMA (1999-2005)
UK & Northern
Ireland
7%
South Africa,
Republic of
2%
Others
25%
Canada
8%
USA
23%
Germany,
Federal
Republic
12%
Japan
21%
Others
34%
China, Rep. Of
Taiw an
1%
Singapore
6%
Canada
8%
USA
31%
Japan
15%
Germany,
Federal Republic
5%
4.2 - 11

Desiccated Coconut
4.2.17 The markets for desiccated coconut before and after the AFMA are
illustrated in Figure 4.2.12. The chart for the period before AFMA shows that the
major market for desiccated coconut was the USA, accounting, on the average,
for about half of the export product. The other half was distributed among a few
other countries. With AFMA’s implementation, USA’s average share decreased
by about 10%. The remaining share is distributed among a more diverse number
of countries such as Belgium, Taiwan, and the Netherlands with more significant
shares in the value of export.
Figure 4.2.12 Major Markets of Desiccated Coconut Exports, Pre and Post AFMA
period
Canada
5%
Brazil
3%
Others
25%
Germany,
Federal
Republic
7%
PRE AFMA (1993-1998)
Australia
6%
UK & Northern
Ireland
8%
USA
46%
Netherlands
(Holland)
1%
Belgium
3%
POST AFMA (1999-2005)
China, Rep.
Of Taiwan
2%
Others
32%
Canada
8%
Germany,
Federal
Republic
4%
4.2 - 12
USA
38%
UK &
Northern
Ireland
10%
Australia
2%

Seaweeds and Carrageenan
4.2.18 The market of seaweed and carrageenan exports for the years before and
during AFMA implementation showed consistent diversity (Figure 4.2.13). The
country destinations include the USA, Denmark, Great Britain, and France.
4.2.19 In summary, the analysis indicated that imports of both agricultural output
and inputs exceeded exports during the AFMA implementation. Furthermore the
analysis also showed no major changes in the destinations of Philippine
agricultural exports before and post AFMA and despite Philippines’ membership
to GATT-WTO.
Figure 4.2.13 Major Markets of Seaweeds and Carrageenan Exports, Pre and Post
AFMA period
Korea
1%
Others
43%
Australia
3%
PRE AFMA (1993-1998)
PRE (1993-1998)
Denmark
Germany, 8%
Federal
Republic
1%
USA
15%
France
14%
UK & Northern
Ireland
15%
Others
45%
Canada
2%
POST AFMA POST (1999-2005)
Hongkong
2%
USA
14%
Denmark
16%
France
13%
UK &
Northern
Ireland
8%
4.2 - 13

Constraints to Philippine Agricultural Export Performance
4.2.20 AFMA was enacted in 1997 as an enabling legislation to enhance the
global competitiveness of Philippine Agricultural products. Before the enactment
of AFMA, the Philippines has become a member of the General Agreement on
Tariff and Trade – Uruguay Rounds (GATT-UR), now currently implemented by
the World Trade Organization (WTO). The implementation period of the WTO
agreement (1995-2004) overlapped with the implementation period (1998present)
of AFMA. Given this overlap, Philippine agricultural trade performance
can be viewed within the context of AFMA and the GATT-WTO, because by
definition the provisions of AFMA and the GATT-WTO were focused on how to
enhance the global competitiveness of Philippine agricultural products.
4.2.21 Two types of commitments were made by the Philippines in joining GATT-
WTO: external commitments of the Philippines in compliance with the
agreement, and internal commitments to Filipino farmers. Philippine
commitments to the external agreement include: enhanced market access,
removal of domestic support (13% reduction from 1995 to 2004 for trade
distorting support) and no use of export subsidies; tariffication of all quantitative
restrictions (QRs); prohibition of non-tariff measures (NTMs); minimum access
volumes (MAVs) of 3 percent of 1986 to 1988 consumption for 1995 and 5% of
1986 to 1988 consumption for 2004; reduction in tariff bindings by 24 percent
with minimum 10 percent cut per tariff line from 1995 to 2004; and plant variety
registration and protection (patent or sui generis system).
4.2.22 For its internal commitments to farmers, the Philippines promised to
provide an action and budget plan for GATT-UR adjustment measures (safety
nets); enactment of appropriate legislations (e.g. Agriculture and Fisheries
Modernization Act (AFMA)) to provide tariff reductions on inputs, as well as trade
remedies to act as safeguards against import surges, injuries to domestic
industries and dumping; reforms in the value added tax (VAT) for agroprocessors;
budgetary support to agriculture amounting to P73 billion from 1995
to 1998 under GATT-UR Action Plan; and support for irrigation, P28.4 billion from
1995 to 1998 and P6 billion/year from 1999 to 2004. The assessment of
Philippine compliance was substantial in terms of the external agreement but
mixed and inadequate under domestic or internal commitments, and less than
satisfactory under the AFMA (Habito, 1999).
4.2.23 Specifically, in the Philippine agricultural sector, the impact of globalization
(GATT-WTO) was generally a decline in global competitiveness among sensitive
Philippine agribusiness products as shown by selected studies of the STRIVE
Foundation (Gonzales, 1999; Gonzales et al., 2000). The global competitiveness
of 5 agricultural products (rice, corn, beef cattle, hogs, broiler and eggs) was
analyzed before (1994) and after (1999) accession to GATT-WTO under import
and export trade regimes and demonstrated decline in global cost
competitiveness.
4.2 - 14

4.2.24 Trade reforms in the Philippines were unilaterally pursued in search of
sustainable economic development. Agriculture together with the other sectors
was a major component of the trade liberalization strategy even before the
country’s accession to GATT-WTO. Of the four major areas of concern of the
GATT-WTO (market access, domestic subsidies, export subsidies, and sanitary
and phytosanitary or SPS measures), the major concerns of the Philippines are
market access and SPS measures. In line with market access, the Philippines
has removed quantitative restrictions (QRs) and converted them into tariffs, with
the exception of rice. The tariffication law of 1995 or Republic Act 8178 provided
for the establishment of minimum access volumes (MAVs) and the creation of the
Agricultural Competitiveness Enhancement Fund (ACEP) for the development of
the sector, especially those agricultural commodities detrimentally affected by the
GATT-WTO agreement.
4.2.25 The Philippine level of trade-distorting domestic support, in terms of input
subsidies and price support for rice, corn and sugar, totaled P6.0 billion from
1995-2000 or P1.0 billion per year. These subsidies are way below the de
minimis level of 10% of the value of production and, therefore, the Philippines is
not obligated to reduce such support. There has been, however, a conscious
effort to phase out input subsidies in favor of more enduring support for
productivity such as irrigation and market infrastructures.
4.2.26 The Philippines did not schedule any export subsidies in its WTO
commitments and therefore is not entitled to, nor does in use in practice, export
subsidies. Likewise, all export taxes on agricultural product exports ended in
1996. All export strategies and implementation is mainly pursued by the private
sector with minimum assistance from Government.
4.2.27 The Philippines is experiencing difficulties in accessing markets for its
banana and pineapple exports to Australia and mangoes to the US (although at
least mangoes from Guimaras island are now accepted in the US) and Japan.
These are more related on non-tariff barrier issues which is discussed below.
4.2.28 Harmonization of sanitary and phytosanitary measures with international
standards was one of the commitments of the Philippines with GATT-WTO.
Several studies of the Department of Agriculture APRAAP policy project
indicated that the Philippines has yet to establish its SPS standards for the
essential components, additives, contaminants, mycotoxin or aflatoxin levels for
meat, eggs, dairy products (Manuel, 1996); SPS measures for processed foods
(de Leon, 1996); SPS measures for fish and fishery products (Anzanza, 1996);
and SPS for fisheries and marine quarantines (Guerrero, 1996).
4.2.29 AFMA also called for the creation of the Bureau of Agriculture and
Fisheries Products Standards (BAFPS). The BAFPS shall set and implement
standards for fresh, primary- and secondary-processed agricultural and fishery
4.2 - 15

products. The BAFPS can: a) formulate and enforce standards of quality in the
processing, preservation, packaging, labeling, importation, exportation,
distribution, and advertising of agricultural and fisheries products; b) conduct
research and product standardization, alignment of local standards with
international standards; and c) conduct regular inspection of processing plants,
storage facilities, abattoirs, as well as public and private markets in order to
ensure freshness, safety and quality of products. These two pieces of legislation
lay out the overall policies on food safety and together form the legal backbone
by which food standards are established in the Philippines.
The Philippines to date has not received technical assistance in implementing
SPS measures.
4.2.30 The anticipated impact of the GATT-WTO Agreement was improved
market access for Philippine agricultural exports. In general, markets were
generally open for traditional exports within the already established markets in
developed countries. In these countries volume expansion is generally no
problem. However, despite the MFN status among GATT-WTO member
countries, trade expansion for new products in new markets within the GATT-
WTO membership is still very much a bilateral arrangement. In the case of the
Philippines, both tariff and non-tariff barriers (SPS) were reasons for nonexpansion
of Philippine agricultural export products among GATT-WTO
countries. Tuna is a case in point. Tariff rates of Philippine tuna exports to
Europe face a tariff of 24 percent, while exports from African and Caribbean
countries are charged zero tariff.
4.2.31 In the case of banana and pineapple exports to Australia, SPS
requirements hinder Philippine exports. Under the substantial equivalence
principle in the SPS harmonization agreement, the same quality banana exports
are acceptable in Japan. Australia’s posture in suddenly raising its SPS
standards to protect its inefficient banana and pineapple farmers is a clear
indication of restricted trade. To persuade Australia to seriously consider
dialogue on banana and pineapple exports, the Philippines had to suspend the
issuance of veterinary quarantine certificates (VQCs) in 1999 for Australia’s live
cattle exports. To date the issue is not yet resolved pending the verification of the
risk assessment by the Australian Government regarding banana exports.
4.2.32 The study done by Gonzales, Lacson and Marges (2005) indicated that
Philippine export products such as mango (to Japan) and pineapple and banana
(to Australia) have been constrained by SPS requirements by these two
countries. Preliminary estimates of the Authors on the impact of Japan’s SPS
measures in the current “positive list” were unrealized export receipt of
US$127million, loss of corporate income tax revenue of US$ 20 million, and
forgone farm employment income opportunities close to US$ 12 million. In the
Australian case the indicative estimates of opportunity losses were US$ 64million
in export receipt, US$ 11 million in corporate taxes, and US$ 12 million in farm
employment opportunities.
4.2 - 16

4.2.33 The interlocking issues related to market access, domestic support and
export competition has directly affected the agricultural export performance of the
Philippines. A recent study of Gonzales (2007) on trade performance of 11 less
developed countries (LDCs) and 10 developed countries (DCs) of the Asia
Pacific Region, indicated that the Philippines and Peru were laggards in terms of
export performance during the periods 1996-1999 and 2000-2005. The average
export receipts in the Philippines did not reach US$ 3 billion during the period. In
contrast other LDCs like China, Thailand, Russian Federation, Indonesia,
Malaysia Chile and Mexico had export revenues ranging from US$10 to 28 billion
in 2005 (Figure 4.2.14)
IV. Trade Performance
$ Billion
80
70
60
50
40
30
20
10
0
Agriculture Export, LDCs and DCs in
Asia-Pacific
Chile
1996-1999
Ave:LDC=8B;DC=33B
2000-2005
Ave:LDC=10B;DC=35B
China
Indonesia
Malaysia
Source: WTO Trade Statistics, 2007
Peru
Philippines
Russian Fed.
Thailand
Australia
Canada
New Zealand
United States
Figure 4.2.14 Agriculture Export Performance of LDCs and DCs in the Asia
Pacific Region
4.2.34 To date the WTO negotiations are in temporary standstill but majority of
members agreed to resume negotiations; technical discussions are taking place
among members in various formats in multilateral context with simultaneous
4.2 - 17

political guidance; but these discussions have no new set of deadlines and
window is limited (Dixit, 2007).
4.2.35 The difficulty in the negotiations emanates from the operationalization of
the key pillars of the agreement itself: a) Market access of tariffs and
tariffications including special safeguards and tariff quotas; b) Domestic support
which centers on the interpretation of the green box, blue box, and development
programs, and amber box including the di minimis principles; c) Export
Competition covering export subsidies, anticircumvention (e.g. state agency
exports) and export prohibitions and restrictions; and d) other rules: special and
differential treatments, peace clause (now expired), commitments to reforms,
Non food importing developed country decision, and agreement on the
application of Sanitary and Phytosanitary measures.
4.2.36 The Doha Development Agenda (DDA) considered by many as the most
ambitious undertaking initiated by less developed countries calls for a complete
and drastic changes in the following : 80% cut in the amber box aggregate
measure of support (AMS) which was only 20% cut during the UR, reduction of
amber box di minimis of 2.5% of the value of production under DDA as compared
to 5% value of production under the UR; 2.5 to 5% reduction under the blue box
provision which was unlimited during the UR, and elimination of all forms of
export subsidies not only for traditional export but other exports in quality and
budget outlay. How the negotiations under the DDA will be resolved will depend
on the political will of both developed and developing member countries of WTO.
Fiscal Incentives Under AFMA
4.2.37 Section 109 provision under AFMA provides the granting of exemptions to
all enterprises, of tariff and duties for the importation of agricultural inputs. From
1999 to 2005 some 344 firms were granted Tariff Exemptions for Fisheries and
Agriculture Modernization (TEFAM). Over two fifths of these exemptions were
concentrated in Regions 4 and 3 (Table 4.2.1). Regions 2, 4-B, 5, CAR, and
ARMM have not availed of TEFAM so far. During the AFMA implementation
period the aggregate value of imports of agricultural inputs totaled PhP 25.9
billion, with equivalent tariff revenue foregone by the government of PhP 777
million.
4.2 - 18

Table 4.2.1 Number of Firms that availed of Tariff Exemption for Fisheries
and Agricultural Modernization (TEFAM) 1999 to 2005, By Region,
Philippines
Region / Agency Number Percent
1 8 2.3
2 -
3 52 15.1
4-A 90 26.2
4-B -
5 -
6 23 6.7
7 27 7.8
8 1 0.3
9 7 2
10 18 5.2
11 41 11.9
12 9 2.6
Caraga 1 0.3
BOI 48 14
DTI 1 0.3
BFAR 18 5.2
Total 344 a
Source: DA
100
These firms had a total aggregate value of imports of P25.9 Billion.
4.2.38 Soybean meal dominated the percent share (66%) of import value under
TEFAM before 2003 and in 2005. The other imported inputs include machinery
and equipment (13%), feed supplement and biologics (9.5%), fertilizer (5.5%),
pesticide (2.9%), and the others were composed of fishmeal, livestock and
planting materials (Table 4.2.2). The top ten importers in 2005 under TEFAM
were: San Miguel Foods (37%); Dole Philippines, Inc. (8.98%) and the others
sharing to 2 to 7.6 percent of total import value in 2005 include: Philippine
Foremost Milling Corporation, Tyson Agro-Ventures, Inc., Nation Granary Inc.,
Pampanga Angeles Livestock, Southern Negros Development Corporation,
Philippine Super Feed Corporation, Fil-Am Foods, Inc. and Vitarich Corporation
(Table 4.2.3).
4.2 - 19

Table 4.2.2. Value and Percent Share of Importation by Commodity Under
E.O. 376, 2005
Commodity Value % Share
(in million PhP)
Soybean meal 10,199.90 66.1
Machinery & equipment 2,005.20 13
Feed supplement, vitamins & other veterinary products 1,469.10 9.5
Fertilizers 851.8 5.5
Pesticides 447.9 2.9
Fish meal/whey powder 277 1.8
Livestocks (catte & hogs) 154.9 1
Planting materials (Oil palm) 7.1 0
Others 8.1 0.1
Total 15,421.00 100
Table 4.2.3. Top Ten Importers Under EO 376, 2005.
Name of Enterprise Enterprise Activity Assets Value of Import Percent Tariff Waived
(PhP million) (PhP million) Share (in Million PhP)
1. San Miguel Foods, Inc. Poultry & livestock Prod. & feedmilling 10,641.90 5,713.70 37.04 171.4
2. Dole Phils, Inc. Processing 10,508.70 1,384.60 8.98 41.5
3. Philippine Foremost Milling Corporation Feed manufacturing 3,302.40 1,172.20 7.6 35.2
4. Tyson Agro-Ventures, Inc. Poultry raising 774.9 687.9 4.46 20.6
5. Nation Granary Inc. Post harvest facilities 1,352.30 613.6 3.98 18.4
6. Pampanga-Angeles Livestock Hog production 500 583.6 3.78 17.5
7. Southern Negros Devt. Corp. * Production of sugar 2,919.20 583 3.78 17.5
8. Philippine Super Feed, Corp. Feed manufacturing 624.4 531.5 3.45 15.9
9. Fil-Am Foods, Inc. Hog production 1,201.40 424 2.75 12.7
10. Vitarich Corporation Feed milling 4,264.00 386 2.5 11.6
Sub-total 12,080.20 78.32 362.4
Others** 3,340.90 21.68 100.2
Grand Total 15,421.00 100 462.6
Source: DA
4.2.39 It is worthwhile to note that among the 2005 top ten importers under
TEFAM, seven (7) were involved directly in poultry and livestock production and
feedmilling. Hence, the possible explanation why soybean meal imports, a crucial
ingredient in the manufacture of animal feeds had the highest value share among
the commodity imports of E.O 367. The three other importers were involved in
fruit processing, sugar production and post harvest facilities (Table4.2.3) The
major imports were dominated by large firms because small firms and
cooperatives were constrained by their inability to open letter of credit (LC).
The Agriculture Competitiveness Enhancement Fund (ACEF)
4.2.40 ACEF was created under RA 8178, known as the Agricultural Tarrification
Act of 1996. ACEF is a safety net measure that is supposed to enhance the
4.2 - 20

competitiveness of the agricultural sector due to the impact of globalization. It
was credited to special account 183 with automatic appropriation from the
General Fund. The ACEF funds are sourced from in-quota import tariff
collections of the Minimum Access Volume (MAV) of sensitive commodities such
as corn, sugar, poultry, pork, potatoes, and coffee.
4.2.41 Although ACEF is not a direct provision of AFMA it has congruence with
fiscal incentives/credit availment by agribusiness enterprises involved in external
trade. Availment of ACEF credit at the Regional level will enhance trade capacity
of stakeholders.
4.2.42 The financial status of ACEF allocation is shown in Table 4.2.4. As of
August 2005, the total actual collections in Fund 183 , since 1999 to 2003 was
PhP 5.484 billion. Of this amount, total ACEF-Executive Committee approved
projects totaling PhP 2.795 billion, composed of 81 regular ACEF projects and 93
sugar ACEF projects. The unallocated amount available in Fund 183 as of
August 2006 was PhP 2.688 billion (Table 4.2.4).
Table 4.2.4. Status of the Agricultural Competitiveness Enhancement Fund
(ACEF) Summary as of 15 August 2005
Particulars Amount
(PhP)
Total Actual Collections in Fund 183 (ACEF)* 5,483,872,670.20
MAV In-Quota Tariffs (RA 8178, 1996) 4,342,526,703.80
1999 Collections 153,087,725.00
2000 Collections 924,875,557.30
2001 Collections 761,487,265.20
2002 Collections 1,909,316, 391.20
Sugar Conversion Fees (EO 87, 1999) 1,141,345,966.40
Total Cost of ACEF-Executive Committee (EXECOM) Approved Projects 2,795,921,525.00
81 Regular ACEF Projects (AO 39 s.99/AO 10 s.00) 2,195,921,525.00
Released by DBM (for 80 Projects) 2,153,518,125.00
Request from DBM Deferred (for 1 Project) 27,370,000.00
Released by DBM (for NTS/MAVSec Admin. Fund) 5,033,400.00
FS Fund (Unused / Reverted) 10,000,000.00
93 Sugar-ACEF Projects (AO 28 s.00) 600,000,000.00
Released by DBM 599,543,000.00
Requested from DBM 457,000.00
Unallocated Amount Available in Fund 183 2,687,951,145.20
*Certified by the Bureau of Treasury (BTr)
Source: ACEF National Technical Committee
4.2.43 The analysis done by CFA-UAP and Supply Chain Academy of the
Philippines (2005) indicated the following: Of the total 80 regular ACEF projects
approved, Luzon has the most number of projects with 34. It was followed by
4.2 -
21

Mindanao and Visayas with 25 and 18 projects, respectively. Only three projects
were categorized as national in scope (Table 4.2.5).
Table 4.2.5. ACEF Loan Approved for Regular Projects by Area
(as of September 2005)
Area Number of Projects ACEF Loan Approved (PhP)
Luzon 34 555,237,212
Visayas 18 187,940,666
Mindanao 25 382,378,893
National 3 1,027,961,354
TOTAL 80 2,153,518,125
Source: ACEF National Technical Committee, as analyzed by CFA-UAP and Supply Chain
Academy of the Philippines (2005)
4.2.44 In terms of value, the ACEF regular projects covering the whole country
accounted for 47% (P1.03 billion for 3 projects) of the total loan. The P1.0 billion
was a wholesale loan to Quedancor for a fee 2% for retail lending to small
farmers at a ceiling of 9.5% (Source: ACEF Technical Committee). Meanwhile,
Luzon was 27% (P555.24 million for 34 projects) of the total loan. Mindanao has
17% (P382.38 million for 25 projects) and Visayas 9% (P187.94 million for 18
projects). By Region, the highest number of loans was in Region III (17). It was
followed by Region VI (10) and Region XI (9) (Table 4.2.6).
Table 4.2.6. Number of Loans by Loan Size by Region (As of September 2005)
Region Loan Size (in Php)
Less than 5M to less 10M to less 15M to less 20M to less 25M to less 30M and
5m than 10M than 15 M than 20M than 25M than 30M above
Total
CAR 2 2
I 1 1 2 1 5
II 1 2 3
III 5 3 3 1 3 1 1 17
IV-A 1 2 1 1 1 6
IV-B 1 1
V 0
VI 3 2 3 1 1 10
VII 2 1 1 4
VIII 2 2 4
IX 0
X 1 3 1 1 1 7
XI 1 4 1 2 1 9
XII 1 1 2 4
CARAGA 1 1
ARMM 1 1 1 1 4
NATIONWIDE 1 1 1(A) 3
TOTAL 14 16 18 9 8 8 6 80
Source: ACEF National Technical Committee, as analyzed by CFA-UAP and Supply Academy of the
Philippines
4.2 - 22

4.2.45 Apparently, ACEF Executive Committee is faced with difficulty in
dispensing the remaining PhP 2.7 billion unallocated amount for two reasons:
first, the DBM has put a cap of PhP 800,000 / year on all projects and second,
ACEF will expire by 2007. In this regard, the CFA-UAP and Supply Academy of
the Philippines study suggested four strategic options:
a. Extending ACEF to 2015;
b. Converting ACEF into an endowment fund;
c. Merging ACEF into an existing institution; and
d. Converting ACEF into a venture-capital / credit fund
The pros and cons of these options should be further studied in more detail to
arrive at the optimum strategic option(s).
AFMA Regional Consultations
4.2.46 The consultations covered 16 Regions. In addition, questionnaires were
given to participants before and during the workshop consultation meetings. The
individual / group questionnaires were focused on the individual perceptions on
the awareness of AFMA. This Regional analysis is focused on two fronts: first,
Regional participants’ individual perception on trade, tariff exemptions and the
ACEF; and second, group’s Regional workshop outputs on the general impact of
AFMA, in particular, the trade component, on major commodity / subsectors (rice,
corn, grains, high value commercial crops, livestock and poultry, and fisheries).
Stakeholders’ Perception on Trade-Related Issues
4.2.47 When stakeholders were asked to prioritize and rank components of
AFMA as central to agricultural modernization, individual respondents across
Regions ranked trade, on the average, at 7.6 (Table 4.2.7) the range was 4 th
(CARAGA) to 10 th rank (CAR, Regions 1 and 11). It is understandable why
stakeholders did not see the relative importance of trade at this stage of
Philippine agricultural development. They are more preoccupied with the basic
physical infrastructures (irrigation and postharvest facilities, other infrastructures,
e.g. farm to market roads) and support services such as credit, marketing
assistance, information support research and development, among others, that
are necessary conditions in achieving efficiency in external trade. Since the
envisioned complete package of investment interventions to ensure agricultural
transition to modernization did not take place, farmers were pragmatic in isolating
individual components of these modernization determinants as they see fit.
4.2 - 23

Table 4.2.7. Perceived Respondents' Priority Rankings of Trade as
Component of AFMA, By Region
Region Ranking
CAR 10
CARAGA 4
1 10
2 9.5
3 7.5
4a 6
4b 9
5 7
6 8
7 6
8 6
9 5.5
10 5
11 10
12 9
ARMM 9
Average 7.6
Source: AFMA Regional Consultation
4.2.48 Regarding respondents’ satisfaction with export performance of
agricultural products, only 32 percent across Regions were satisfied; 37%, not
satisfied; and the remaining 28% had no answer / didn’t know (Table 4.2.8).
Relative to their perception whether agricultural exports improved after AFMA,
only 8 percent of the 180 respondents answered yes; 31% no, and majority
(61%) responded didn’t know / no answer (Table 4.2.9). The above responses of
the 180 Regional respondents on trade performance were not farfetched from
national trends on trade and earlier analyzed in this report. The performance of
agricultural commodity exports during AFMA implementation was not as robust
as envisioned by the law. Finally only 8% of Regional respondents had
experienced unfair trade practices; 36% had no unfair experience, and majority
(56%) had aggregate response of don’t know and no answer (Table 4.2.10).
4.2 - 24

Table 4.2.8. Respondents Satisfaction with the Export Performance of
Agricultural Products
REGION Not Satisfied Satisfied Don’t Know No Answer Total %
CAR 3 2 2 0 7 3.95
CARAGA 8 2 6 16 9.04
1 8 3 0 0 11 6.21
2 4 2 6 4 16 9.04
3 3 3 0 2 8 4.52
4-A 5 2 0 3 10 5.65
4-B 3 0 0 4 7 3.95
5 6 6 0 3 15 8.47
6 4 7 6 1 18 10.17
7 3 3 0 0 6 3.39
8 2 1 0 6 9 5.08
9 2 2 0 0 4 2.26
10 11 5 2 1 19 10.73
11 0 8 1 0 9 5.08
12 0 8 1 0 9 5.08
ARMM 3 3 7 0 13 7.34
Total 65 57 25 30 177 100.00
% 36.72 32.20 14.12 16.95 100.00
Table 4.2.9. Respondents Perceptions of Agricultural Exports Improvement
under AFMA
REGION Yes No Don’t Know No Answer Total %
CAR 0 1 6 0 7 3.89
CARAGA 0 5 9 2 16 8.89
1 2 4 5 11 6.11
2 0 2 10 4 16 8.89
3 0 2 4 2 8 4.44
4-A 0 5 2 3 10 5.56
4-B 1 4 0 2 7 3.89
5 0 8 3 4 15 8.33
6 2 8 7 1 18 10.00
7 0 2 3 1 6 3.33
8 1 1 5 2 9 5.00
9 2 0 3 2 7 3.89
10 2 5 9 3 19 10.56
11 1 3 4 1 9 5.00
12 1 3 4 1 9 5.00
ARMM 2 3 7 1 13 7.22
Total 14 56 81 29 180 100.00
% 7.78 31.11 45.00 16.11 100.00
4.2 - 25

Table 4.2.10. Respondents' Experience of Unfair Trade Practices During
the Implementation of AFMA
REGION Yes No Don’t Know No Answer Total %
CAR 1 2 4 0 7 3.89
CARAGA 0 7 7 2 16 8.89
1 1 7 3 0 11 6.11
2 2 5 5 4 16 8.89
3 1 2 4 1 8 4.44
4-A 1 2 4 3 10 5.56
4-B 0 3 3 1 7 3.89
5 0 6 4 5 15 8.33
6 0 8 5 5 18 10.00
7 0 2 4 0 6 3.33
8 0 3 3 3 9 5.00
9 1 4 1 1 7 3.89
10 0 5 6 8 19 10.56
11 4 3 2 0 9 5.00
12 4 3 2 0 9 5.00
ARMM 0 3 5 5 13 7.22
Total 15 65 62 38 180 100.00
% 8.33 36.11 34.44 21.11 100.00
4.2.49 On tariff exemptions in the importation of agricultural inputs under AFMA,
only 4% of respondents affirmed their availment; 53 percent did not avail of tariff
exemptions and the rest didn’t know / had no answer (Table 4.2.11). It is worth
noting that only two of the 15 Regional respondents from Regions 3 and 4-B
were able to avail tariff exemptions when 41 percent of all firms granted with
agricultural input tariff came from these two Regions. Likewise, there were no
respondents from Regions 6 to 12 where 37% of the tariff exemptions were
issued from 1999 to 2005. Clearly, the trends indicated that tariff exemption in
the importation of agricultural inputs has not been availed off by majority of small
farmers / enterprises in the countryside.
4.2 - 26

Table 4.2.11. Respondents by Availment of Tariff Exemptions Under AFMA
REGION Yes No Don’t Know No Answer Total %
CAR 2 5 0 0 7 3.89
CARAGA 1 7 6 2 16 8.89
1 1 7 2 1 11 6.11
2 1 9 2 4 16 8.89
3 1 5 2 0 8 4.44
4-A 0 5 3 2 10 5.56
4-B 1 3 2 1 7 3.89
5 0 8 2 5 15 8.33
6 0 10 4 4 18 10.00
7 0 4 2 0 6 3.33
8 0 4 2 3 9 5.00
9 0 6 1 0 7 3.89
10 0 8 4 7 19 10.56
11 0 5 2 2 9 5.00
12 0 5 2 2 9 5.00
ARMM 0 4 5 4 13 7.22
Total 7 95 41 37 180 100.00
% 3.89 52.78 22.78 20.56 100.00
4.2.50 Regarding Agriculture Competitiveness Enhancement Fund (ACEF), 42
percent of Regional respondents were familiar with ACEF, 45% unfamiliar and
the remaining 13 percent had aggregate don’t know and no answer responses
(Table 4.2.12). Majority (63%) of the 180 respondents’ general impressions of
ACEF were “can be improved” and good (18%), while the remaining 1/5 of
respondents had no answer (Table 4.2.13). Majority (61%) of respondents did
not avail of ACEF loan while only 11% availed (Table 4.2.14). Finally, only 21
percent were satisfied with the performance of ACEF; 38% unsatisfied and the
remaining 41% did not know / had no answer (Table 4.2.15).
4.2 - 27

Table 4.2.12. Respondents Familiarity with the Agriculture Competitiveness
Enhancement Fund (ACEF)
REGION Yes No Don’t Know No Answer Total %
CAR 2 5 0 0 7 3.89
CARAGA 3 11 2 0 16 8.89
1 4 6 0 1 11 6.11
2 6 7 0 3 16 8.89
3 0 0 3 5 8 4.44
4-A 5 4 1 0 10 5.56
4-B 3 3 1 0 7 3.89
5 11 4 0 0 15 8.33
6 10 6 0 2 18 10.00
7 2 3 0 1 6 3.33
8 3 5 0 1 9 5.00
9 4 2 0 1 7 3.89
10 12 7 0 0 19 10.56
11 5 4 0 0 9 5.00
12 5 4 0 0 9 5.00
ARMM 0 10 0 3 13 7.22
Total 75 81 7 17 180 100.00
% 41.67 45.00 3.89 9.44 100.00
Table 4.2.13. Respondents General Impression of Agriculture
Competitiveness Enhancement Fund (ACEF)
Can be
REGION improved Good No Answer Total %
CAR 3 1 3 7 3.89
CARAGA 7 9 0 16 8.89
1 9 0 2 11 6.11
2 7 9 0 16 8.89
3 5 1 2 8 4.44
4-A 8 0 2 10 5.56
4-B 5 2 0 7 3.89
5 13 2 0 15 8.33
6 15 0 3 18 10.00
7 2 0 4 6 3.33
8 4 0 5 9 5.00
9 4 3 0 7 3.89
10 12 1 6 19 10.56
11 7 0 2 9 5.00
12 7 2 0 9 5.00
ARMM 5 2 6 13 7.22
Total 113 32 35 180 100.00
% 62.78 17.78 19.44 100.00
4.2 - 28

Table 4.2.14. Respondents by Availment of Agriculture Competitiveness
Enhancement Fund (ACEF) Loan
REGION Yes No Don’t Know No Answer Total %
CAR 2 5 0 0 7 3.89
CARAGA 0 8 2 6 16 8.89
1 1 8 1 1 11 6.11
2 2 7 7 0 16 8.89
3 3 0 1 4 8 4.44
4-A 1 7 0 2 10 5.56
4-B 2 5 0 0 7 3.89
5 0 13 2 0 15 8.33
6 0 15 0 3 18 10.00
7 0 4 1 1 6 3.33
8 0 7 1 1 9 5.00
9 4 0 0 3 7 3.89
10 1 16 0 2 19 10.56
11 3 1 2 3 9 5.00
12 0 7 2 0 9 5.00
ARMM 0 6 3 4 13 7.22
Total 19 109 22 30 180 100.00
% 10.56 60.56 12.22 16.67 100.00
Table 4.12.15. Respondents Satisfaction with Performance of Agriculture
Competitiveness Enhancement Fund (ACEF)
REGION Not Satisfied Satisfied Don’t Know No Answer Total %
CAR 2 1 2 2 7 3.98
CARAGA 6 1 0 9 16 9.09
1 1 3 5 2 11 6.25
2 5 3 2 6 16 9.09
3 3 5 0 0 8 4.55
4-A 4 1 3 2 10 5.68
4-B 1 2 3 1 7 3.98
5 7 5 0 3 15 8.52
6 11 3 0 0 14 7.95
7 1 2 0 3 6 3.41
8 2 1 0 6 9 5.11
9 4 0 0 3 7 3.98
10 12 3 1 3 19 10.80
11 5 4 0 0 9 5.11
12 2 1 6 0 9 5.11
ARMM 0 2 5 6 13 7.39
Total 66 37 27 46 176 100.00
% 37.50 21.02 15.34 26.14 100.00
4.2 - 29

4.2.51 The above results from respondents’ perceptions on ACEF, are reflective
of the general state of affairs of the ACEF credit facility. The fact that around PhP
2.7 billion are still unallocated, implies that the system of ACEF project loan
processing is flawed and has not really supported the agricultural modernization
efforts in the countryside.
Impact of AFMA Trade Component on Agriculture and Fisheries
4.2.52 The Regional consultations / workshops across the 16 Regions took two
days each. The workshops were focused on the general impact of AFMA
components (irrigation, postharvest, other infrastructures, credit, trade,
marketing, information, support, standardization and consumer safety, education,
research and development, and extension) taken as whole on at least five (5)
commodity groupings (rice, corn, (grains), high value commercial crops, livestock
and poultry, and fisheries). The AFMA impact assessment at the Regional level
covered discussions on general and qualitative impact, budget adequacy and
prioritization, assessment of level of implementation, priority issues and
concerns, priority focus of interventions, and proposals for improvement. The
succeeding discussions highlight the general assessment of the impact of trade
as a component of AFMA, on the five commodity groupings.
a. Trade and the Rice Subsector
4.2.53 The general impact of trade as a component of AFMA, reasons for impact,
and qualitative level of implementation, and proposals for improvement of trade
in the rice subsector are summarized in Table 4.2.16. Of the ten (10) Regions
that discussed the general impact of trade as a component of AFMA on the rice
subsector four (4) Regions (40%) indicated that trade component (including fiscal
incentives in terms of tariff free inputs of agricultural inputs) had no impact on the
rice subsector. The remaining 6 (60%) of the ten (10) Regions affirmed that trade
had low (1 to 3, on a scale of 10, 8 to 10 being high) impact on rice agribusiness
systems.
4.2.54 The major reasons cited for the no impact of trade on rice include: rice is
not competitive, high costs of fertilizer, rice smuggling (Region 2), no specific
program to address trade (Region 8), weak program (Region 10), untimely
importations and high costs of inputs (Region 11). On the other hand, the major
reasons cited for low impact of trade on the rice subsector were: rice importation
and its untimeliness have negative effect on rice production (Regions 4-B, 4-A,
11, and 12); high costs of inputs and limited availment of imported fertilizer
(Regions 9, 11, 12, and CARAGA); lack of information and awareness (Region
3); and guidelines of the rice program not properly implemented (CARAGA).
4.2 - 30

Table 4.2.16. Impact of AFMA Trade Component on the Rice Subsector, by Selected Regions
IMPACT IMPLEMENTATION
SELECTED General
REGION Impact Reasons Level Reasons
2 None Rice not competitive; high costs of Poor Inconsistent gov’t policies at the
fertilizer, smuggling importations
of rice
program level
3 Low Lack of information and awareness,
not competitive
4-A Low Farmers as importers program
benefited traders; gov’t importation is
not farmer friendly
4-B Low Importation has negative impact to a
rice surplus region like MIMAROPA;
rice is a political commodity; imports
should be done only during lean
months
Poor Rice remains uncompetitive, presence
of red tape
PROPOSED IMPROVEMENT
Revisit AFMA and other policies
Prepare the farmers and the product to be
competitive
Policy reforms, self-sufficiency hinders importation
Improve product quality to be competitive
Poor __ Gov’t subsidy for export should be provided for
farm infrastructure and support
Poor Policy on importation prematurely
announced, bad for the region
8 None No specific program to address trade Poor Smuggling / importations affect prices
of produce; high costs of farmer inputs
9 Low Limited availment of imported fertilizer
through NFA
Scrap farmer as importer program
Negate the effects of WTO
Timely importation during lean months only
Consolidation of farmers resources to import rice
through NFA, not individually
Abolish NFA (suggested by some stakeholders)
Gradual abolition of importation through legislation
Poor Selected beneficiaries only Prioritize and identify farmer receipts of duty free
importation of inputs
Utilize local organic / indigenous fertilizer
Request exclusion of Region 9 in import rice
distribution
4.2 - 31

IMPACT IMPLEMENTATION
SELECTED General
REGION Impact Reasons Level Reasons
10 None Weak program Poor High costs of inputs / timeliness of rice
importation
11 (Grains) None Untimely importations, high costs of
inputs
12 (Grains) Low Input prices remain high; dumping of
imported rice reduces prices; untimely
entry of imported rice
CARAGA Low Guidelines on programs not properly
implemented; high input costs;
smuggling not controlled; not
sustainable production
Source: AFMA Regional Consultations
Poor Laws unfriendly to farmers; too
focused on consumers than producers;
failure in establishing price system
PROPOSED IMPROVEMENT
Organize farmers for bulk importation
Conduct R&D in producing inorganic fertilizer
Imports should not come during harvest time
Promote sustainable system in irrigated rice
Farmer orgs should do importation
Adopt mitigating reasons to reduce impact of
globalization
Nationalize products
Strict monitoring of warehouses owned by cartels
Review policies on tariff rates
Create rice and corn board
Strengthen price stabilization council
Poor Lack of consultations with stakeholders PAFC should be part in recommending
importations
Poor Ineffective program implementation
Advocacy for inorganic fertilizer
Implement “abono Filipino” in the region
Increase rice production through new technologies,
increase area, increase productivity
Proper implementation of trade policies
4.2 - 32

4.2.55 In terms of level of program implementation, all the 10 Regions (100%)
rated it poor (score of 1 to 3) with 10 as the highest possible score. The major
reasons cited varied from inconsistencies of government policies (e.g. rice
imports’ timeliness and bias to consumers) affecting the program level;
government red tapes and ineffective program implementation; selective
beneficiaries of the program; and lack of consultations with stakeholders.
4.2.56 The Regional consultations also made several proposed improvements on
how to make the trade component of AFMA be more effective. These are
generally categorized into four: rice trade policies (export-imports, tariff and
competitiveness), efficiency and competitiveness in rice production through the
adoption of technologies and other measures, stakeholders’ participation, and
institutional reforms (Table 4.2.16).
b. Trade and the Corn Subsector
4.2.57 Seven Regions provided inputs in the analysis of trade impact on the corn
subsector. These are Regions 1, 2, 3, 4-A, 4-B, 5, and 7. Regional participants
indicated a range of none (no score), to high (score of 8 to 10) on the general
impact of trade on the corn subsector. Regions 2 and 7 affirmed no impact of
AFMA trade component on corn; had poor (score of 1 to 3) level of
implementation due to government corn importation, corn smuggling and
minimum government intervention. On the other hand, four Regions (1, 4-A, 4-B,
5) indicated low impact of AFMA trade component and poor level of program
implementation due to common reasons of: importation during peak harvest;
mostly for domestic use and no surplus for export; and minimum government
assistance (interventions) to corn farmers.
4.2.58 There was one Region (Region 3) however, whose participants affirmed
the high (score of 8 to 10) impact and good (score of 8 to 10) level of program
implementation of AFMA trade component on the corn sector. The reasons cited
for high impact were: the Region is strategically located in a high demand area
where market prices received by farmers are high. Likewise, the private sector
participation was cited as a major reason for good program implementation.
4.2.59 Finally, the proposed measures for improvement suggested by the
Regional participants include: strong political will to stop untimely imports and
smuggling; monetization of fertilizer donated by foreign countries; closer
monitoring of prices; subsidy on fertilizer and advocacy on the use of BIO-N
fertilizer; and intensification of e-trade project of DA (Table 4.2.17).
4.2 - 33

Table 4.2.17. Impact of AFMA Trade Component on the Corn Subsector, by Selected Regions
IMPACT IMPLEMENTATION
SELECTED General
PROPOSED IMPROVEMENT
REGION Impact Reasons Level Reasons
1 Low Importations during peak harvest Poor No assistance is provided on Fertilizer donated by other countries should be
reduce price
prevailing price of corn which
should help farmers sell their
produce
monetized and sold to farmers at lower prices
Closer monitoring of corn prices
Subsidize fertilizer or through self-loan;
promote use of BIO-N
Stop corn imports during peak harvest season
2 None Gov’t allows unnecessary corn Poor No intervention, corn smuggling in Strong political will
importation
North Cotabato
Corn importation allowed during
peak harvest
LGU / National gov’t should stop smuggling
Imports should only be allowed only during
lean months
3 High Region III strategically located in Good Presence of private sector Intensify e-trade project of DA through 7 e-
high demand centers
trading consultations amounting to P350,000
High market prices Existence of e-trade for corn
4-A Low No surplus for export, more for
domestic market
Poor No surplus for export __
4-B Low Quality of corn produced doesn’t
meet GATT-WTO standards
Poor No intervention reported __
5 Low No international export Poor No intervention done __
7 None Production only for domestic
market
Poor No known intervention __
Source: AFMA Regional Consultations
4.2 - 34

c. Trade and the High Value Commercial Crops (HVCC) Subsector
4.2.60 Participants from 12 out of 16 Regions indicated their assessment of the
impact of AFMA trade component on the HVCC subsector (Table 4.2.18).
Participants from Regions 1, 8, 10, and CARAGA were very direct in expressing
their “no impact” assessment of trade on the HVCC subsector. The major
reasons were not fully aware of the program due to poor information
dissemination and HVCC products are not yet in commercial production and
therefore not exported.
4.2.61 Participants from Regions 2, 4-B, 5, 11, and ARMM thought that the
impact of trade on HVCC stakeholders was “low” due to inadequate information
and awareness on trade; failure to meet quality requirements for export crops
(e.g. mango and calamansi); no improvement in market sales; and most farmers
are not commercial producers. Three Regions (3, 4-A, 4-B for abaca / coconut on
the other hand, expressed that the impact on trade on HVCC in their area was
“moderate” (score of 4 to 7). This “moderate” assessment was made due to
private sector participation, and despite stringent quality requirements of
importing countries, and lack of support mechanisms to take advantage of export
opportunities.
4.2.62 In terms of program implementation, Regions that generally signified
“none / low“ impact of trade also indicated poor (score of 1 to 4) level of
implementation. Lack of information dissemination, inadequate budget,
unorganized stakeholders, not felt in the Region specially by small farmers, and
questionable selection of participants in trade fairs were the major reasons given
for low levels of implementation. For the Regional workshop participants who
indicated fair level of program implementation, adequate fund support and many
development activities introduced by DOST, DTI / DOT through trade fairs and
trainings, were the reasons cited.
4.2.63 Several positive measures to improve the impact of trade on HVCC were
proposed by the stakeholders. These were: intensify information campaign
through trimedia; control smuggling; production of competitive products in volume
and quality; setting up of quality standards through basic support services (e.g.
quarantine and certification services, training on HACP) from government;
development of data bases (prices, markets, demand); and direct marketing
assistance to cooperative in the case of abaca (Table 4.2.18).
4.2 - 35

Table 4.2.18. Impact of AFMA Trade Component on the High Value Commercial Crops (HVCC) Subsector, by
Selected Regions
IMPACT IMPLEMENTATION
SELECTED General
PROPOSED IMPROVEMENT
REGION Impact Reasons Level Reasons
1 None Not Fully Aware of program; Poor Poor Lack of information from gov’t Intensify info campaign through trimedia
information dissemination
implementors
No budget for info campaign Concerned agencies should assist farmers
No product standardization Production of competitive products in volume and
quality
2 Low Failure to meet quality requirements Poor Limited support in technology, etc; Control smuggling
for export mango / calamansi
importation and smuggling
Strict implementation of quarantine
laws of importing countries
Forge market linkages
Strengthen safety nets for affected sectors
3 Moderate Quality requirements stringent in
importing / exporting countries
Fair Supported by adequate funds Establish good R&D facilities to check standards
Implement IPM to improve quality
4-A Moderate Lack of support mechanism to take Fair Absence of certifying bodies in organic Provide support mechanisms (certification
advantage of export opportunities,
products; (e.g. quarantine and services, quarantine) to enhance competitiveness
low awareness of program
certification services)
4-B HVCC Low awareness on support activities Poor Limited funding, unorganized Conduct training, Re: HACCP, POT and quality
(Low) for export
stakeholders
requirements
Abaca /
Coconut
(Moderate)
Private sector takes care of export
production of abaca fibers, VCO,
coconut oil, and other by- products
5 Low No change in sales before and after
AFMA, limited funding
Lack of marketing data on exports Develop data bases on prices, markets, demand,
etc.
Fair Not all producers adopt VCO standards Massive info dissemination for VCO standards;
expand domestic and international market
Quota set by buyer exports on value of
VCO
Pricing system disadvantageous to
farmers at the farm level for abaca
Fair Many activities are undertaken by
DOST / DTI / DOT through trade fairs
and skills training
Direct market assistance and cooperative
marketing for abaca farmers
BAFPS should formulate standards
4.2 - 36

SELECTED
REGION
IMPACT I MPLEMENTATION
General
Impact Reasons Level Reasons
8 None Not yet commercialized Poor No intervention known
10 None Most HVCC products are not
exported
11 Low Micro-enterprises not aware of trade
policies / opportunities
Poor Not felt in the locality; very few are
exporting
Poor Small farmers are not able to avail of
Program; lack of info dissemination
PROPOSED IMPROVEMENT
Provision for production services to increase area
Info dissemination of standards to farmers
Re focus agrarian reform from land acquisition to
support services
Provision of centralized data system; market
information
Common service facility for mango for export
Make Tagaloan International Container Port
operational
Fast track construction of international airport
Establishing trading posts in all provinces to
address export concerns
Strengthen one-stop shop processing of
documents for trade (DTI)
Massive info drive
Extend scope / range of clientele
Expand coverage of PITL, consultations
Enhance crop’s capability
12 Low No information about trade Poor Not aware of trade components Info dissemination
Provisions of necessary trade info to regional
CARAGA None No info on trade component of
AFMA
ARMM Low Most farmers are not commercial
producers
Poor Lack of info dissemination
levels for dissemination to HVCC farmers
Unified trading system
Questionable selection of participants
in trade fairs
Weak organization of HVCC farmers
within region and disintegrated
program on trade
Poor No information about trade, lack of
awareness about trade component of
AFMA
Allocation of funds for organizational linkages
Conduct information dissemination on trade
4.2 - 37

d. Trade and the Livestock and Poultry Subsector
4.2.64 The workshop discussions on the impact of AFMA in general, and trade in
particular, on the livestock and poultry subsector were conducted in 14 out of the
16 Regions (Table 4.2.19). Workshop participants from 7 Regions (1, 2, 4-B, 6, 7,
8 (none), 10, 12, and ARMM) who rated “low” impact of trade on the livestock
and poultry subsector, also indicated corresponding “poor” levels of program
implementation. The major reasons for the low impact of trade were: high
logistics costs and high costs of biologics, smuggling and dumping; low tariffs of
imported meat products; lack of information, facilities (e.g. storage, halal
certifying services) and infrastructure (port); and no export because of FMD.
These reasons mentioned above were generally the same reasons for poor
program implementation. On the other hand, participants from three Regions (3,
5, CARAGA) indicated “moderate” impact and “fair” to “good” levels of program
implementation, while workshop participants’ from Regions 4-A and 9 were
exceptional in assessing as “high,” the impact of trade on livestock and poultry
and “fair to good” levels of program implementation. For “high” impact and “fair”
to “good” level implementing Regions, the major reasons cited was availment of
tax free importations of equipments and inputs under Section 109 of AFMA.
(Table 4.2.19)
4.2.65 The proposed improvements to enhance the impact of AFMA trade
component on the livestock and poultry subsector were related to trade (imports,
tariffs of outputs and inputs); enforcement of existing laws affecting the livestock
subsector (anti-smuggling, quarantine laws); efficiency measures to enhance
global competitiveness of meat products (efficiency in corn / feed production;
incentives for investors / exporters; upgrading for quality standards in the meat
agribusiness supply chain, improvement of breeding stocks, animal health
measures, and postharvest and storage facilities); strengthen information
dissemination, and strict monitoring of developments in production and trade of
meat and livestock products (Table 4.2.19).
e. Trade and the Fisheries Subsector
4.2.66 Fourteen (14) out of 16 Regions covered by the Regional
consultation/workshops evaluated the general impact of trade and the level of
program implementation on the fisheries subsector (Table 4.2.20). Workshop
participants of Regions 5, 6, 11, and CARAGA (“no” impact) evaluated the
general impact of AFMA trade component as “low” with “poor” level of
implementation. The major reasons cited for this assessment were: fisheries
trade was controlled by traders; lack of capital for small fishermen; local market
not favorable in high density production and stakeholders have no access to
facilities. Participants from seven Regions (1,2, 3, 4-B, 7, 10, 12) on the other
hand, rated the general impact of trade as “moderate” (score of 5 to 7) with
“poor” to “good” program implementation.
4.2 - 38

Table 4.2.19. Impact of AFMA Trade Component on the Livestock and Poultry Subsector, by Selected Regions
IMPACT IMPLEMENTATION
SELECTED General
PROPOSED IMPROVEMENT
REGION Impact Reasons Level Reasons
1 Low High logistics costs Poor Smuggling of meat Stricter implementation of policies on meat imports
National level implemented but not
regionally
Strengthen coops to address competitiveness
Bias in implementation and corruption
in gov’t
Reduce tariffs of feed ingredients and other inputs
Conflict of interests of gov’t
Improve efficiency of corn production for
implementers
competitiveness
2 Low Low tariff of livestock / poultry Poor High cost of vet medicines Review tariff rates of imported meats affecting the
products
industry
High costs of imported vet medicines
and equipment
Smuggling Lower tariff for imported medicines / equipment
Smuggling Strict enforcement of anti-smuggling law
Pass quarantine law for imported meat and meat
products
3 Moderate Has saved on cost and encouraged Fair Some importers availed of tax Strengthen info dissemination
investments
exemptions for business purposes
Increase incentives for investors
Upgrade product quality and come out with
standards
Enforce anti-smuggling law
4-A High Low price and better quality of Good (same reasons as in impact) Review list of equipment under Appendix B of IRR
imported equipment
under EO 376
Accessibility of raw materials Develop / support local fabricators
Tax free importations
Job generation
Strict implementation of importation policies in
coordination with BOC
4.2 - 39

IMPACT IMPLEMENTATION
SELECTED General
PROPOSED IMPROVEMENT
REGION Impact Reasons Level Reasons
4-B Low High cost of production Poor (Same reasons as in impact) Upgrade local stocks and establish post harvest
facilities
Trade liberalization Conduct consultations on trade liberalization and
related matters
Non-compliance to importation
policies
Strict implementation of importation policies
Smuggling Impose sanctions on smugglers
5 Moderate Able to compete with international Fair Prices of imported goods are lower Upgrade breeder stocks
market
than local; high production cost and
insufficient supply of raw materials
Strict implementation of quarantine laws
Implement interventions to reduce production
costs
Strict adherence to MAV
6 Low Smuggling Poor Same reasons under impact Strengthen political will, strict enforcement of laws
Dumping of meat products Intensify info campaign
Lack of info Establish world class facilities
Lack of facilities Compliance with international standards
Need for international ports Provide adequate storage facilities
Need to comply with international
standards
High production / handling / shipping
costs
Limited storage facilities
Impose sanctions on smugglers
7 Low Globally uncompetitive Poor Same reasons under impact Provide export guidelines on export of new meat
products
No guidelines to be able to export
new products
Strengthen info dissemination on livestock trade
Rampant smuggling
Low tariff rates
Unstable currency
No budget to import genetically
improved livestock
Punish smugglers
4.2 - 40

IMPACT IMPLEMENTATION
SELECTED General
PROPOSED IMPROVEMENT
REGION Impact Reasons
Weak info dissemination
Level Reasons
8 None Small program in the region Poor No intervention felt Strict monitoring of importation of meat and meat
products
9 High Was granted tariff exemption under
Section 9 of AFMA to 2015
10 Low GATT-WTO more importations; high
production cost
Impose price ceiling on livestock
Fair High political intervention Intensify info dissemination; Limit political
intervention; lobby to support GMA Program on
Poor Importations discourage poultry raisers
to expand production
Goal 7; accelerating agribusiness development
Allow importation of cattle as fatteners
Impose regular tariffs on poultry;
Increase local production with soft credits and
breeding program
Lower tariffs for imported feed ingredients
Ban imports of meat and meat products in disease
stricken countries
12 Low No export because of FMD Poor No organized / federated raisers for Strengthen policy interventions and regulatory
Small farmers need gov’t assistance
to be able to import livestock
Gov’t allows importation of meat from
FMD countries (carabeef from India)
small and large ruminants
services
CARAGA Moderate __ Fair __ Provide tax holidays to breeders and exporters
Explore overseas market for our bird-flu free
production
ARMM Low Smuggling Poor REZA law not yet implemented Creation of halal certifying body
Low production Implementation of GRP-MNLF peace accord
No halal certifying body in the region Enforce quarantine and anti-smuggling laws
4.2 - 41

Table 4.2.20. Impact of AFMA Trade Component on Fisheries Subsector, by Selected Regions
IMPACT IMPLEMENTATION
SELECTED General
PROPOSED IMPROVEMENT
REGION Impact Reasons Level Reasons
1 Moderate Only small scale fishing, investors Good For seaweeds, sea urchins, and fish Promotion of investments in other sites
were discouraged
processing
Unstable business decisions
More conducive to invest in
Pangasinan
Plenty of investors, and good market
demand from Manila
2 Moderate Not enough production to meet local Fair Positive coverage of fishing area; good Observe fair trade laws
demand
domestic trade with regions 1, 3, and
CAR
Poor distribution system and multilayered
marketing channels
Supported by private sector Enhance measures to stabilize prices
Good exports of goby marine fish in
Taiwan, Japan, Korea, Hong Kong
Good distribution of freshwater and
marine fishes in the region
Encourage more private sector participation
3 Moderate Quality requirements (HACCP) are
met satisfactorily
Good Meet EU standard requirements Maintain quality standards
Enhance support services to expand production
and market
4-B Moderate Domestic trading is active; export Poor Local interests (LGUs) hamper Adherence to national trade laws should be
trading is indirect through existing
interpretation of laws on domestic and instituted
exporters
international trade
Access to capital for effective trading should be
made available
Appropriate trainings for entrepreneurs should be
done
CHED should design multi-level training for
entrepreneurs
4.2 - 42

IMPACT IMPLEMENTATION
SELECTED General
PROPOSED IMPROVEMENT
REGION Impact Reasons Level Reasons
5 Low Fisheries trade controlled by traders, Poor Lack of capital for small
Strict implementation of product standards
surplus in Tilapia locally
fisherfolks/traders
Limited partnership with DA Organize small fisherfolk for direct trading
Conduct trainings on values formation
6 Low Mostly private sector initiative; direct Poor Lack of market intelligence (demand, Target global market
importation by foreign buyers (firm to
firm transactions)
supply, price standards, markets)
Improve access to market information
7 Moderate Private sector led; foreign investors Good Good but not AFMA funded; joint gov’t- Establish one stop shop for exporters (DTI, DAprivate
sector initiative
BFAR, Customs, DOH
Support establishment of trade center in Cebu City
as proposed by DTI
Establish separate fisheries court
Upgrade and expand processing facilities for
seaweeds
Establish fund sourcing from local and foreign
sources
Improved productivity of seaweed farmers and
explore alternative products
Support seaweed industry
8 High Was able to access feeds free from Poor Plenty of seminars related to trade not Training to be done by BFAR
tariff/duties in Tacloban, Leyte
known
Fingerling supply adequate Trading linkage still to be set up Provide tax haven for pioneering activities
especially in the fisheries subsector
Needs assistance for trade Needs support services
10 Moderate Region has existing trade products
in prawns and seaweeds
Fair Basically initiated by private sector Improve extension services
Enhanced transport cost because of
the RORO transport system
Provide adequate facilities
4.2 - 43

IMPACT IMPLEMENTATION
SELECTED General
PROPOSED IMPROVEMENT
REGION Impact Reasons Level Reasons
11 Low Local market not favorable in high Fair Needs info dissemination on trade; Simplify requirements (One-stop shop)
density production
gov’t should extend trade promotion
only
Export market not developed for
small fishermen, only big companies
High input costs
Tuna products are handled only by
the private sector
LGUs and NGOs collaborate for trade info
12 Moderate Construction of roads increased Poor Capitalists are the ones benefiting from Transparency of safety nets and measures
trade
trade, while small fisherfolks are left
behind
implemented by LGUs
Investors coming in
Unscrupulous use of chemicals not
good for the subsector
Increased presence of traders
increased prices of fish
Gov’t favoring support to GOCCs
CARAGA None Not felt locally Poor Stakeholders have no access to
facilities
Provide access of the program to small fisherfolks
CAR High Monopoly of businessmen on prices
of feeds/fish
Poor Dependent on location of aquaculture Schedule harvests
Problem with marketing assistance;
Provide accessible credit to producers to avoid
high production costs in fish culture
harassment of traders
ARMM High ARMM produces 80% of seaweeds
plus fishes
Poor Chinese controlling seaweeds trade Set up seaweed semi-processing plants
Private sector initiative Many fly by night traders from Malaysia Federate / organize all seaweed producers
Gov’t not serious to help seaweeds
industry
DA should assist in marketing
4.2 - 44

4.2.67 The major reasons for this “moderate” impact were due mainly to high
private sector participation, high international and domestic market demands,
and adequate infrastructures reducing production and logistics costs. Some of
the exportable fishery products with high demand were seaweeds and sea
urchins (Region 1 and ARMM); seaweeds and prawns (Region 10); tilapia
(Region 3) and goby marine fish (Region 2). Similar reasons mentioned above
were given by participants from Regions 8, CAR, and ARMM, why they evaluated
the general impact of trade in fisheries as “high.”
4.2.68 To enhance the efficiency and competitiveness of the fisheries subsector,
especially, relative to trade, the participants proposed the following
improvements: more private sector participation, appropriate trainings for
entrepreneurs for quality standards by CHED and BFAR; enhancement of
support services and capital to expand production and markets; organization of
small fisherfolk for direct trading and better access to the program, establish
more access to market information and one stop shops for exporters; provide tax
incentives and establish fund sourcing from local and foreign sources; set up
processing and storage for seaweeds and fishery products; and other measures
related to production, processing, marketing, and storage efficiency of fishery
products (Table 4.2.20).
Conclusions
4.2.69 The analysis of the trade and fiscal incentives component of AFMA
indicated the following:
a. The trends in the export and import of agricultural outputs and inputs
showed that the Philippines had consistently become a net importer
during AFMA implementation period;
b. There were no major changes in the market destinations of Philippines’
major product exports before and post AFMA period. Some of the little
changes in market destinations occurred in pineapple and pineapple
products, tobacco and to some extent, tuna during AFMA
implementation period;
c. The agriculture export performance of the Philippines was partly
stymied by the WTO-Agreement. The difficulty in the negotiations
emanates from the operationalization of the key pillars of the
agreement itself: a) Market access of tariffs and tariffications including
special safeguards and tariff quotas; b) Domestic support which
centers on the interpretation of the green box, blue box, and
development programs, and amber box including the di minimis
principles; c) Export Competition covering export subsidies,
anticircumvention (e.g. state agency exports) and export prohibitions
4.2 - 45

and restrictions; and d) other rules: special and differential treatments,
peace clause (now expired), commitments to reforms, Non food
importing developed country decision, and agreement on the
application of Sanitary ad Phytosanitary measures;
d. The interlocking issues related to market access, domestic support and
export competition has directly affected the agricultural export
performance of the Philippines. A recent study of Gonzales (2007) on
trade performance of 11 less developed countries (LDCs) and 10
developed countries (DCs) of the Asia Pacific Region, indicated that
the Philippines and Peru were laggards in terms of export performance
during the periods 1996-1999 and 2000-2005. The average export
receipts in the Philippines did not reach US 3 billion during the period.
In contrast other LDCs like China, Thailand, Russian Federation,
Indonesia, Malaysia Chile and Mexico had export revenues ranging
from US$10 to 28 billion in 2005;
e. The Philippines is also faced with difficulties in accessing markets of
developed countries due to strict implementation of Sanitary and
Phytosanitary (SPS) measures The study done by Gonzales, Lacson
and Marges (2005) indicated that Philippine export products such as
mango (to Japan) and pineapple and banana (to Australia) have been
constrained by SPS requirements by these two countries. Preliminary
estimates of the Authors on the impact of Japan’s SPS measures and
the current “positive list” were unrealized export receipt of
US$127million, loss of corporate income tax revenue of US$ 20
million, and forgone farm employment income opportunities close to
US$ 12 million. In the Australian case the indicative estimates of
opportunity losses were US$ 64million in export receipt, US$ 11 million
in corporate taxes, and US$ 12 million in farm employment
opportunities
f. Availment of Tariff Exemptions on Fisheries and Agriculture
Modernization (TEFAM) was dominated by firms in Regions 4-A and 3,
during the post AFMA period. Likewise, big agribusiness firms were the
major recipients of TEFAM. Tariff waiver for soya bean meal imports
shared the major value (66%) of agricultural input imports, because 70
percent of the top ten agribusiness firms were engaged in poultrylivestock
production and feedmilling activities.
g. The Agriculture Competitiveness Enhancement Fund (ACEF), although
not a direct provision of AFMA, is supposed to augment AFMA’s thrust
in modernizing agriculture. However, it is beset with operational
problems. Around PhP 2.7 billion of ACEF credit facility are still
unallocated and must be disposed by 2007 if its existence is not
extended beyond this period.
4.2 - 46

h. The results of stakeholders’ interviews and 16 Regional
consultation/workshops indicated that trade as component of AFMA
was not ranked “high” by stakeholders in the Region. The major reason
for this, was the inadequacy of physical infrastructures and support
services, and “low” level of agricultural development in the countryside
that constrain the competitiveness of agricultural products in global
trade;
i. The general impact of trade as AFMA component, indicated generally
“none” and “low” impact and “poor” level of implementation across the
commodity subsectors. However, bright spots of export
competitiveness are emerging in high value crops and fishery
subsectors in some of the regions. The common ingredients of some of
the more successful programs relative to trade are active private sector
participation and market-driven orientation.
Recommendations
4.2.70 Given the empirical findings of the trade and fiscal incentives analysis, the
following recommendations are suggested:
a. Pursuance of a more vigorous macro and subsectoral policy
reforms and law enforcement relative to agricultural trade, to
enhance the evolving gains in export competitiveness during
AFMA implementation period. Enforcement of existing laws (e.g.
anti-smuggling, quarantine) and enhancement of domestic support
measures to gain competitiveness are in the right directions.
b. Continue stronger trade negotiation initiatives with other members
of the LDCs (Group of 20, Group of 33 and AFTA) of WTO to level
the playing field in agricultural trade. This Implies strengthening of
the Policy Analysis Division of DA to backstaff trade negotiations.
c. Assist small-medium enterprises and cooperatives in the regions to
avail of tariff exemptions of imported agricultural inputs, to enhance
their competitiveness in the export market.. The feasibility of
removing all forms of tariff that constrains agricultural
modernization should be explored as a policy.
d. Revisit the ACEF, extend its economic life if necessary, and study
alternative strategies to make it more effective as an enhancing
mechanism to global competitiveness in the agriculture and
fisheries sector;
e. Reprioritize the remaining budget of ACEF so that it can provide
funding for strategic public investments closest to the major project
areas of already ongoing ACEF projects and allocate grants to
special projects for technical assistance (Feasibility Studies,
Management Guidance, etc) among small farmers’ organizations
and cooperatives applying for funding under ACEF Facility.
f. Revisit the implementation mechanisms of ACEF to separate the
policy and oversight functions with the management
4.2 - 47

implementation of the facility. Some of the delays in project
approvals in the past were due to unclear interpretations of these
functions.
g. Trade issues should be integrated in the national development
agenda, especially those related to poverty reduction, increasing
productivity and competitiveness, providing compensation and
human development safeguards, and diversification of exports and
markets. At the regional / international development levels, trade
issues should build credible alliances, achieve fairer terms of trade,
target technical assistance, strengthen the SDT provisions of the
WTO Agreement, offer aid for trade and focus on human
development.
h. To make trade work for human development (UNDP 2007) the
following eight (8) point national agenda are recommended:
1. Invest for competitiveness – This implies public investment
in infrastructures, human capital, R&D and ICT;
2. Adopt strategic Trade Policies – select strategic goods /
services with great potential linkage with other industries;
3. Restore focus on Agriculture- agriculture should be the
core of development strategy to combat poverty and food
insecurity;
4. Combat Jobless Growth – Target agro industries that
promote sustainable rural employment not for short term
growth;
5. Prepare a new tax regime – progressive tax structure that
doesn’t hurt the poor (customs tax, corporate taxes)
should be encouraged to fund the process of adjustment
under trade liberalization
6. Maintain stable exchange rate – realistic rates to
encourage investments;
7. Persist with Multilateralism – avoid bilateral trade, go for
multilateral trade arrangements; and
8. Cooperate with neighbors- Regional Trade Agreements
complemented with other forms of cooperation (e.g.
financial arrangement)
i. Finally, since the findings on the general impact of AFMA are not
as robust as envisioned by the law, revisiting the law’s IRR is in
order, including a strong political will to provide budgetary
allocation to the agriculture and fisheries sector to make it more
competitive.
4.2 - 48