price stabilization measures and its effects on - Philippine Institute ...

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while the two industries contributed substantially to the total export receipts, they are also themajor users of such receipts through imports of their raw material requirements. In net terms,their contribution to the total export value has been minimal.Although total exports grew by about 17 percent in 1997-98, the traditional exportproducts (e.g., coconut, sugar, fru<strong>its</strong> <strong>and</strong> vegetable, etc.), have generally been in a dismal stagewith only sugar <strong>and</strong> sugar products showing a positive growth rate of 1.01 percent in 1997-98(Table 5).In the last two years, machinery <strong>and</strong> transport equipment replaced the garment industry asthe second largest contributor to the total export value. In 1998, it contributed 11 percent of thetotal export receipts. The electronics industry, however, continues to contribute substantially tothe growth of the export sector. In fact, it contributed about 58 percent of the total export valuein 1998.Although the Philippines showed the highest export growth in 1998 compared to otherAsian countries, it is one of the few (including India <strong>and</strong> Sri-Lanka) countries still experiencing anegative balance of trade. This continuous negative balance of trade despite a significant increasein export is due to the import dependence of the export sector for their inputs.POLICY REFORMS TO STABILIZE PRICES AND SUSTAINECONOMIC GROWTHUnder a free market system, <strong>price</strong>s of basic commodities are determined by dem<strong>and</strong> <strong>and</strong>supply conditions. Domestic supply, is, in turn, determined by domestic production <strong>and</strong>foreign trade. Measures that promote, therefore, domestic production <strong>and</strong> improve access toforeign supplies of commodities can help stabilize <strong>price</strong>s. This implies that a more liberalizedtrade regime is beneficial towards <strong>price</strong> stability.The government, through <strong>its</strong> various agencies, is pursuing production-related programs<strong>and</strong> has instituted policies to enhance productivity, efficiency, <strong>and</strong> competitiveness. Theseinclude production programs, training, provision of basic infrastructure like irrigation <strong>and</strong> farmto-market roads, shipping ports, storage <strong>and</strong> post harvest facilities, credit, etc. There are alsolong- term programs such as increased agricultural research expenditures. For agriculture, theproductivity <strong>and</strong> efficiency enhancing <strong>measures</strong> are contained in the Agricultural <strong>and</strong> FisheriesModernization Act (AFMA).Measures to improve competitiveness such as improved productivity <strong>and</strong> efficiency ofthe country's products in the world market are also beneficial in terms of <strong>price</strong> stability. Therecent commitment of the country to the World Trade Organization (WTO) has, thereforeimproved the country's chances of achieving <strong>price</strong> stability through trade liberalizationparticularly of basic commodities. When the country is in short supply of a certain commodity, amore liberalized trade regime would prevent a large hike in domestic <strong>price</strong>s.14
It appears then that while <strong>price</strong> <strong>stabilization</strong> is the prime responsibility of the BSPthrough the prudent use of monetary policies, fiscal policy also plays an important role, not onlyin terms of appropriate tax <strong>and</strong> expenditure policies but also specifically in fostering a moreconducive economic environment within which producers in agriculture <strong>and</strong> non-agriculture areoperating. The possible <strong>measures</strong> which can help combat inflation <strong>and</strong> promote <strong>price</strong> stabilitywithin the country are as follows:Production-related MeasuresFor the years 1993-1998, the agriculture sector exhibited relatively low levels <strong>and</strong> growthof productivity. Average annual growth rates in yield for palay <strong>and</strong> corn were only 0.6 percent<strong>and</strong> 2.8 percent respectively. Abaca, coconut, <strong>and</strong> sugarcane had negative rates; 5.6 percent, 0.2percent <strong>and</strong> 5.3 percent, respectively, pulling the agricultural sub-sector's productivity to anegative rate of 7.2 percent. (Table 6). The limited <strong>and</strong> inefficient provision of support serviceswas a significant factor to low level <strong>and</strong> growth of agricultural productivity in the country.Irrigated l<strong>and</strong> only slightly increased. Inadequate postharvest facilities were manifested insignificant postharvest losses <strong>and</strong> the poor infrastructure impeded the flow of agriculturalcommodities (Medium-Term Development Plan 1999 - 2004, NEDA).Table 6. Average growth in yield (MT/ha.) for agricultural crops, Philippines, 1993-1997Sub-sectorAverage Annual Growth1993-1997AGRICULTURAL CROPS (7.2)MAJOR CROPSPalayCornCoconutSugarcaneBananaPineappleCoffeeMangoTobaccoAbacaOther Crops(12.2)0.62.8(0.2)(5.3)1.917.6(0.8)6.00.4(5.6)7.0Source: Report on the Performance of Agriculture, Bureau of Agricultural Statistics.15
Page 2 and 3: udget subsidy needed to implement t
Page 5: prices of imported
Page 10 and 11: Inflation can also erode the profit
Page 12 and 13: Table 1. Average rates of inflation
Page 14: Table 3. Contribution to inflation
Page 17: Table 5. Philippine exports by majo
Page 23 and 24: The expected increase in productivi
Page 25 and 26: With the devaluation of the peso, h
Page 27 and 28: Before advocating the adoption of c
Page 29: Masson, Paul R., Miguel A. Savastan

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