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Salceda warns of “dark clouds” over global economy and calls for agricultural modernization for “crisis-proofing”

June 16th, 2022

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) has called for agricultural modernization and a “Second Agricultural Revolution” as “crisis-proofing” for the Philippines, as the House tax chair sounded the alarm over what he says could be a global economic downturn due to US monetary policies to curtail inflation.

Salceda made the remarks in a keynote address he delivered during a University convocation in the University of the Philippines Los Banos, for the 47th anniversary of the Institute of Plant Breeding of the same institution on June 14, 2022.

During the forum, Salceda warned that a potential global economic crisis could come if the US decides to dramatically address inflation with monetary policies similar to those pursued during the early 1980s.

“We are now seeing the largest gap between Fed funds rate and adjusted core CPI since late 1970s, which prompted then Fed Chair Paul Volcker to purse aggressive disinflation policies,” Salceda pointed out from a National Bureau of Economic Research study released recently.

Quoting from the text, Salceda pointed out that “In order to return to 2 percent core CPI today, we need nearly the same 5 percentage points of disinflation that Volcker achieved.”

“Policies to create 5 percentage points of disinflation will be calamitous for the global economy. The global economy will shrink at least as much in output, and our GDP growth, in turn, will probably be lower by 3 percentage points when that happens.”

“So, we better prepare. And there is only one sector that can absorb all the excess liquidity in the world. And regardless of what happens in the world, people have to eat.”

Echoing a doctrine he says “animated the crisis-proofing strategies of the Arroyo administration” which he advised, Salceda said that “You must first make sure people have something to eat. The rest follows.”

Salceda said that agricultural modernization will be key to preparing for these “dark clouds.”

Salceda pointed out that the main problems in the Philippine agriculture sector are that there is not enough good irrigation and water management in the country, and that resources and government support are not devoted to the proper sectors. Salceda argues that the country has devoted too much spending on palay and not enough on other crops where we hold a competitive advantage, such as corn, banana, and other high-value sectors.

Salceda also recommended five key proposals  to modernize the country’s agriculture.

“ We need to expand irrigation coverage and explore micro-irrigation options, as well as more targeted, and more purposive irrigation. That means farmers control the flow, the pressure, and the amount of water they irrigate their crops with, unlike the current system where the 6% of our land area that is irrigated is watered with surges of water sometimes, and nearly nothing in other seasons.”

“We also need to govern water resources more effectively (NIA under DA for now, eventually under a Department of Water Resources)”

“We also need to make agricultural support more proportional to production output and potential of sectors.”

These , Salceda says, will include  Universal tariff-funded sectoral support programs, to provide more support to corn, banana, livestock and other high-output sectors, and proper use of the Coconut Industry Development Trust Fund of P75 billion “which could be gamechanger for coconut sector.”

Finally, Salceda recommended to “encourage foreign scientists and technology transfer.”

Discussions with agriculture experts

During the open forum, Salceda also agreed with Dr. Cielito Habito, former Socioeconomic Planning Secretary that the country needs to reform if not overhaul governance of the agriculture sector.

“I have called the Department of Agriculture the mother of all smuggling in the country. Imagine, we import 15 trillion kilograms of plant products every year. Assuming corruption of just 1 cent per kilo, that is already 150 billion pesos. We have seen problems in governance in palm oil imports, fish imports, garlic, and other sectors.”

“And the agency’s problems are long-standing, so that whoever is placed there as Secretary will be unable to fulfill their mandate well unless the agency also changes.”

Salceda also agreed with National Scientist Emil Javier that certain fixes to make irrigation under more effective control of farmers could solve some of the country’s irrigation problems.

“Dr. Javier is right that we need to make irrigation more purposive. Instead of one-time, big-time water supply from irrigation canals, we can pursue micro-irrigation linked with our big irrigation systems.”

The UPLB event was the first on-site convocation held by the institution since pandemic restrictions loosened

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