What free irrigation can mean for us all
LOST amid the other screaming headlines last week was a game changer for many of us rural folk – the removal of irrigation fees for small farmers; a fulfilled campaign promise signaling hope for pushing greater productivity, more food, and increased rural incomes to combat cartels and terror, and breed a new generation of younger farmers.
Republic Act No. 10969, the Free Irrigation Service Act, exempts farmers with landholdings of eight hectares and below from paying irrigation service fees for water derived from both national and communal irrigation systems. It also condones loans and past due accounts of these small farmers and irrigators associations (IAs) to the National Irrigation Administration (NIA). It mandates the state to make sure that “support services are made available, particularly irrigation service, through the continued construction, repair and maintenance of necessary irrigation facilities, to increase production of agricultural crops, encourage productivity, and increase the incomes of farmers,”(https://news.mb.com. ph/2018/02/10/duterte-signs-law-forfree-irrigation-to-small-farmers/)
What does all mean? Simply put, it means that a large cost item will no longer be a factor in setting the farmgate price of palay, which can go from 10 to 15 pesos per kilo depending on the season. Rice is a crop that depends heavily on available irrigation. In contrast, Thailand and Vietnam’s farmgate prices hover at 9 pesos only, owing to abundant water flowing through their paddies in the Mekong delta .
On the macro level, this gives hope to arrest the shrinkage of the agriculture sector that employs about 10 million rural families in the poorest regions. At the end of the second Aquino administration, agriculture suffered a 4%-5% decline, reducing its share of GDP to a mere 9%, down from 20% in the 1970s. With the reversal of this decline starting in 2017, the new irrigation law promises to boost productivity further.
There are other implications to this new law: It is hoped that better productivity will also help break the cartels that, sadly, still control the trade and distribution of palay in many areas. It may also help drive peace initiatives in the Philippine south, as more food will go a long way to lessen conflict, removing the need for rural residents to support local terrorists.
Likewise, Secretary Manny Piñol faces a formidable challenge to combat rice hoarders, further increase agricultural productivity to reverse past declines and help empower smaller farmers, many of whom are now aging. Will these new programs breed a new generation of farmer- entrepreneurs? For many in the south, these are exciting possibilities.
What remains now is to make sure that the Department of Agriculture does the rest: push productivity and ensure better access to other markets. What it also means is that small farmers, many of them agrarian reform beneficiaries, will feel the might of the long sought after support needed to create more productive farms that was the hope of land reforms.
The tax incentives now enjoyed by many foreign investors, such as a five-year income tax holiday and being free from VAT were meant to encourage their expansion and generate jobs and add value to what we currently produce, and drive them into other areas where industries are absent. Have these tax incentives done so?
These incentives have long been enjoyed, giving them a leg up against Filipino industries who pay full tax. Incentives are a privilege meant for everyone not just the few who seek exclusive enjoyment of the same.
Thus, it is sometimes unnerving to hear some business groups complaining about tax reforms and how they fear it will “drive away business” and force them to “lay off workers.” with some of them blaming tax reforms like TRAIN. At the same time, I often hear them complaining of the lack of infrastructure they demand government to provide so that they can expand.
It only makes many others feel that some of these groups prioritize the individual benefit of their members at the expense of ensuring higher quality social services and infrastructure that they also use- like our ports and airports, the highways on which their trucks bring their goods, and the police and fire protection services that come free to them.
It also bears noting that a majority of these incentivized investments are located around Metro Manila where costs are also highest. Only a few among them ever considered the Visayas and Mindanao as investment locations. Obviously, incentives alone failed to push their entry into the countrysides. A lack of infrastructure and political perception issues dissuaded them.
The real challenge to this expansion is the ease of doing business, primarily our weak infrastructure that taxes will fund. Perhaps they too, should share the burden of raising the revenue needed that will also help them expand.
Benchmarking against other ASEAN countries like Malaysia and Thailand that have comparable tax incentive schemes, that factor that encouraged greater foreign direct investment to enter their economies is that their infrastructure is superior to ours. Pay them a visit, take a look at their industrial zones and verify.
Thus, it would be good to review and make some changes in our business and tax incentives to allow us to deepen and spread the promise of inclusive growth, to fund the infrastructure and the resulting connectivity to encourage capacity and regional expansion into areas like the Visayas and Mindanao.
Moreover, we hope that future changes encourage not only investors seeking lower labor costs, but high tech industries like as robotics design & manufacture, as well as advanced health care, renewable energy and technologies that will allow us to leap frog over other countries to create higher value manufacturing to harness Filipino talent and broaden our manufacturing base. For reactions: