F Inancing Agriculture Modernization: Risks & Opportunities Policy Brief Senate Economic Planning Office

The importance of promoting growth and eliminating poverty in the rural sector has been well documented in the literature of Philippine economic development. Yet the rural sector in the country seems to be often left behind during periods when the country would experience modest growth and is also often hardest hit during periods of crisis. Seventy percent of the poor still live in the rural areas with the majority of them dependent on agriculture and agriculture-related industries for their jobs and incomes. Even urban poverty is an indirect effect of rural poverty, since low rural incomes have been noted to push migrants into the cities. One could possibly attribute this to the fact that public policy in this country has often been biased in favor of industrial development at the expense of agriculture and that public expenditure tends to favor urban centers over the rural periphery. The Medium-Term Philippine Development Plan itself points out that rural poverty remains tied to the state of agriculture and fisheries and conversely, agricultural performance remains crucial to economic growth and poverty reduction. The passage of the Agriculture and Fisheries Modernization Act (AFMA) in 1997 was supposed to be a turning point in Philippine agriculture. The AFMA is a comprehensive blueprint for agriculture modernization and rural development. The AFMA aims to transform the rural economy through the introduction of modern technology, increasing availability of rural financing, increasing investments in agricultural infrastructure, improving the links between farmers and markets, both domestic and international, and others. However, after almost 12 years since the passage of the law, Philippine agriculture is still facing much of the same problems it did prior to the existence of the AFMA. It remains predominantly small, Eleven years after the passage of the Agriculture and Fisheries Modernization Act (AFMA), Philippine agriculture is still facing much of the same problems it did prior to the existence of the said law. The lack of financial support for the AFMA, as well the inappropriate allocation of meager resources has contributed significantly to the current situation.