By Dr. Emil Q. Javier
President Rodrigo Duterte in so many words has given instructions to the Department of Agriculture (DA) to revive the Masagana 99 and Biyayang Dagat banner programs for rice and fisheries during the Marcos years to attain his administration’s goal of food sufficiency.
After a series of calamities during the crop years 1971-1973, severely threatening the country’s supply of its staple, the country was in a crisis mode. Masagana 99 which promoted wide scale adoption by farmers of a package of modern farming technology averted disaster by significantly increasing rice yield per hectare and total rice supply to the point that in 1975-76 the country attained rice self-sufficiency for the first time ever.
However, the success of Masagana 99 proved to be fleeting and unsustainable and in no time the country lapsed back to recurring rice imports. The inability to sustain the gains was not so much because of the heavy subsidies but due to failure of many farmers to pay back the loans they incurred in purchasing certified seeds, fertilizers and pesticides needed to grow decent, profitable crops of rice.
Thus, Masagana 99 redux, Duterte style, if it were to do better than its predecessor must find ways to encourage farmers to pay back bank loans. Otherwise, small farmers will be starved of credit as they are suffering now and will not apply the necessary inputs, particularly fertilizers, to raise farm productivity.
The gains in productivity in the original M-99 program more than made up for additional costs of certified seeds, fertilizers and pesticides. Thus farmers should have been able to pay. But why did so many farmers not pay back their bank loans?
The four common explanations/excuses were 1) diversion of loans from purchase of inputs to consumption and other family exigencies, 2) priority utilization of income from the rice crop for consumption and the other family needs to the detriment of bank repayment, 3) attitude of farmers that the rural bank loans were anyway drawn from the Central Bank (government) and therefore need not be repaid, and 4) catastrophic losses due to natural calamities like typhoons, floods and drought.
Making small farmers responsible borrowers
How would the Duterte administration make small farmers responsible borrowers?
We cannot do much with natural calamities but with much-improved PAGASA weather monitoring and prediction capacity, farmers now can be warned earlier of the approach and intensity of these events so they can prepare accordingly.
Insurance will help farmers bounce back from these natural hazards. Only a fraction of rice farmers take out insurance. Congress should raise the capitalization of the Philippine Crop Insurance Corporation (PCIC) from R2 billion to at least R10 billion to enable PCIC to provide universal coverage. Reimbursement of insurance claims should be prompt and timely so the farmers can turn around and replant immediately. Processing claims should not be on an individual basis but weather-indexed and area-based.
The rural financing institutions (RFIs) likewise need protection to keep them viable. The Agricultural Guarantee Loan Fund (AGLF) administered by the Land Bank of the Philippines (LBP) which guarantees 85 percent of loans of small farmers and fisherfolk should periodically and automatically be replenished from the income Land Bank. As a government-owned-and-controlled corporation (GOCC) Land Bank is required to remit half of its annual income to the national government. Land Bank should be exempted from that regulation and allowed to keep that half of its annual income to subsidize its rural financing operations. All that is needed is an executive order from the President.
Moreover in order to further minimize risk exposure of the rural lending institutions and thereby encourage them to lend more, the guarantee could be raised to 90 percent.
In both instances, for crop insurance and small famer loan guarantee, there is a strong case for government partial or full subsidy.
Strengthening rural Institutions, no to freebies
The first three explanations (actually excuses) are behavioral and can addressed by social preparation and discipline on the part of the farmer-borrowers and close supervision by government extension agents and credit supervisors of the lending institutions.
Small farmers and fisherfolk need not be hopeless credit risks. They can be responsible borrowers too as the few well-led, successful cooperatives, irrigators’ associations (IAs) and agrarian reform communities (ARCs) as well as microfinance institutions (MFIs) demonstrate. The reported repayment rates of MFI borrowers are over 95%.
Masagana 99 redux, Duterte style, must therefore, adopt the ways of successful cooperatives, IAs and ARC and MFIs in values formation, motivation and social preparation among their members. The subsidy from government should be mainly directed to training, human resource development and management support to these rural institutions rather than direct subsidy for the procurement and free distribution of private goods like seeds, fertilizers, pesticides, farm tractors and dryers. The costs to government will be much less and their impact more enduring if focused on building rural institutions. The subsidies will likewise be less wasteful and less prone to graft (ghost farmers, ghost deliveries, overpricing).
Social mobilization and building of rural institutions are necessarily long-term processes. The original Masagana 99 program did not have time for them and that was its Achilles heel. In the haste to meet the immediate food needs of country, the government extension technicians were instructed to enlist as many rice farmers into M-99 as they can. Supervision broke down and farmers were left every much on their own.
Paradigm shift from Rice sufficiency to raising Farmers’ incomes
Still and all, it will be a terrible mistake and a huge missed opportunity if the Duterte administration were to narrowly focus on rice sufficiency instead of the more forward-looking, more enduring and inclusive goal of increasing farmers’ incomes.
Even as we raise productivity of the rice crop with high yielding hybrids, more and better maintained irrigation systems and intensive culture to make our rice competitive with imports, greater total economic benefits can be secured from multiple cropping and diversification to higher value crops of all our lands under irrigation. The national research and extension service for rice should therefore be redirected to farming systems rather than narrowly rice monocropping.
The shift in primary objective to increasing farmers’ income from rice self-sufficiency, and the strengthening of rural institutions and the national research and extension service to accommodate this paradigm shift require time. A two-year time frame is unrealistic. Five years i.e. towards the end of the Duterte administration will be more doable and credible.
Dr. Emil Q. Javier is a Member of the National Academy of Science and Technology (NAST) and also Chair of the Coalition for Agriculture Modernization in the Philippines (CAMP). For any feedback , email email@example.com.