Unit III NOTES

Agricultural Economics 32

A. Conflicts in Agricultural Policy Objectives

Agricultural policy objectives may become conflicting; and when this happens,
efforts aimed at achieving one objective undermine the other(s).

A.1. Types of policy conflicts:

1. The logical or analytical conflict
2. The group dynamics conflict (or inter-group conflict)

1. The logical or analytical conflict

 A logical conflict in objectives arises where there is implied conflict or contradiction
in the logical structure of the objectives.
 Examples:
 The objectives of stabilizing producer prices and ensuring fair income for
farmers.
Under certain price elasticity of demand conditions, stable prices may lead to
lowered income and incentives for producers. Moreover, profit-seeking farmers
and business people usually prefer some element of speculation and
uncertainty in the price of their products in order to obtain higher returns.
 the objective of increasing self-reliance through food import substitution
may be conflicting with a policy of structural adjustment that liberalizes food
imports thereby dampening inventive for domestic food producers.
 the objective of increasing the availability of raw materials for agro- allied
industries may be conflicting with the objective of increasing smallholder food
security if the same set of crops are involved.
For instance, maize, groundnut, tomatoes, and palm oil are used for both staple
consumption and industrial processing. Therefore, increased use of these crops
for one purpose decreases the quantities available for other uses.
 When objectives are logically conflicting, one of the objectives will be achieved
only at the expense of the other. This requires that nations should properly
prioritize their objectives to give greater weights to the more preferred objective.
2. The group dynamics conflict (or inter-group conflict)
 This type of conflict arises out of the social dynamics of competing group interests
in agricultural policy. It is a fact of life that different social and political groups in
the society have competing, contending, and often conflicting interests
regarding their expectations from food policy. Thus, agricultural policy
objectives come to mean different things to different group of people in the
society. These different group may be geographically, occupationally, ethnically,
culturally, or socio-economically distinct and identifiable. Examples of these groups
will include farmers, merchants, lenders, artisans, borrowers, the poor, civil
servants, communities, etc.
 Examples of this group dynamics conflict are as explained below:
 The objective of ensuring fair prices that act as incentive for farmers and
food producers.
 This objective almost invariably conflicts with the objective of reducing food
costs to the consumers. Farmers (food producers) and food consumers belong
to different socio-economic groups with conflicting interests and expectations in
the food economy. While farmers want high food prices to ensure reasonable
returns on their investment, consumers expect cheaper foods from a viable
agricultural policy.
 The policy objective of minimum wage legislation in the food industry, which
may conflict, with the objective of increasing investment in the industry by profit-
seeking entrepreneurs. This is because minimum wage increases food
production costs thereby increasing the propensity to invest in the industry.
 the objective of providing cheap agricultural credit or credit subsidy to
farmers could dampen incentives by financial institutions to lend to the
agricultural sector.

B. RESOLVING CONFLICT IN AGRICULTURAL POLICY OBJECTIVES

B.1. Guidelines for resolving logical or analytical conflicts
For the logical or analytical conflict, the following guidelines are recommended:
1. In setting objectives, potential areas of analytical or logical conflict should be
minimized by re-examining the logical structure of the objectives.
 Example: In most cases incomes and low (or stable) prices are not logically
positively related.
Consequently, objectives directed at simultaneously achieving both outcomes may
be conflicting. Similarly, the objective of promoting the adoption of purchased
inputs among farmers, may become conflicting with efforts aimed at preserving
traditional farming systems.
2. Where a given policy objective could produce unintended results, policy-makers or
decision-makers should be so informed. Also, the possible consequences of such
unintended results should be highlighted.
 Example: a policy of agricultural credit guarantee could slacken incentives by
banks to monitor loans and ensure repayment. This may produce the unintended
result that majority of agricultural loans are unrepaid. If that is the case, the policy
of agricultural credit guarantee ostensibly intended to increase the flow of credit to
the sector, ends up reducing credit to the sector through accumulated bad debts!
These possible consequences should be highlighted to policy-makers along with
possible remedial measures.
3. Inevitable conflicts in agricultural policy objectives can be mitigated by the adoption
of complementary public policies.
 The policy of credit insurance to increase the flow of credits to farmers will create
less repayment problems for banks if complementary public policies are adopted.
The essence of such policies would be to reduce the occurrence of the unintended
or undesirable outcomes. Such complementary measure might include the joint
monitoring of farmers projects by both the lending bank and the credit guarantee
agency (usually the central bank), periodic inspection of the bad debts returns of
banks by the apex bank, and the raising of farm productivity through
encouragement of the adoption by farmers, of productivity enhancing technologies
disseminated by the agricultural extension system.
4. When policy objectives are still conflicting, in spite of (1), (2), and (3) above, policy-
makers should be able to rank-order or prioritize objectives based on the
underlying philosophy of the country or her current economic situation. The objective
that is of greater strategic importance should be preferred.

B.2. Resolving the group dynamics conflicts (or inter-group conflict)

1. Conflict can be resolved by examining more carefully the benefits and costs
imposed by policy objectives on different groups of people. This may entail some
form of stakeholder analysis in which ex ante assessment of the impact of public
policy on the major stakeholders are identified.
 Example: Establishment of farm settlement project in a community. The possible
impact of the project (both positive and negative) on farmers, the participants, the
local community, neighboring communities, banks, input merchants, the
government (through the budget), extension system, and other relevant
stakeholders, should be analyzed. Based on this analysis, a suitable
compensation principle should be employed to compensate for the effect of the
project on loser groups.
2. Adoption of participatory approach among the major stakeholders in the policy
formulation process.
 Conflicts in policy objectives can be minimized where the policy formulation
process adopts participatory approach so that major stakeholders are adequately
consulted and their inputs sought to the overall policy.
The participatory approach enables the various stakeholders to negotiate a common
ground, accept the final policy, and co-operate during its implementation. Studies have
shown that when farmers are consulted in the process of developing a new technology
for the farming system, they are easily persuaded to accept or adopt the resulting
technology than otherwise.

Agricultural Tariffication

Republic Act No. 12078 (December 6, 2024)

An Act Amending RA 8178 or the “Agricultural Tariffication Act”, as amended by
RA 11293
Republic Act No. 8178 : Agricultural Tariffication Act (March 28, 1996) was amended by
RA 11203
Republic Act No. 11203 : An Act liberalizing importation, exportation and trading of rice
and lifting quantitative import restrictions on rice (February 14, 2019)

Definition of Terms
1. Buffer Stock refers to the optimal level of rice inventory for fifteen (15) days that
shall be maintained to sustain the disaster relief programs of the government during
natural or man-made calamities and to address food security emergency situations
on rice. (RA 12078)
2. Minimum Access Volume refers to the volume of a specific agricultural product that
is allowed to be imported with a lower tariff as committed by the Philippines to the
WTO under the Uruguay Round Final Act;
3. Quantitative Import Restrictions refer to non-tariff restrictions used to limit the
amount of imported commodities, including, but not limited to, discretionary import
licensing and import quotas, whether qualified or absolute.
4. Rice Shortage is a situation where the quantity available or the supply of the
commodity in a market falls short of the quantity demanded or required at a given
time.
5. Tariff refers to a tax levied on a commodity imported from another country. It earns
revenues for the government and regarded as instruments to promote local industries
by taxing their competitors. The benefit is accorded to the local producers by the
maintenance of a domestic price at a level equal to the world price plus the tariff.
6. Tariffication refers to the lifting of all existing quantitative restrictions such as import
quotas or prohibitions, imposed on agricultural products, and replacing these
restrictions with tariffs.

 Issuance of Sanitary and Phytosanitary Import Clearance for Rice for the Sole
Purpose of Ensuring Food Safety. - All importers of rice are required to secure a
Sanitary and Phytosanitary Import Clearance (SPSIC) from the Bureau of Plant
Industry (BPI) prior to importation in accordance with existing laws, rules and
regulations: Provided, That the clearance shall not provide for import volume and
timing restrictions. Xxx

 The food safety regulatory function of the National Food Authority (NFA) is hereby
transferred to the Bureau of Plant Industry (BPI).
 Powers of the President.
1. In the event of any imminent or forecasted shortage, or any other situation
requiring government intervention, the President is empowered for a limited
period and/or a specified volume, to authorize the importation at a lower
applied tariff rate to address the situation. Such order shall take effect immediately
and can only be issued when Congress is not in session.
2. When there is an excessive supply of imported or locally produced rice
resulting in an extraordinary decrease in local price prices, the President may
suspend or prohibit further importation for a limited period and/or a
specified volume until both rice supply and prices stabilize.
3. The President may increase, reduce, revise, or adjust existing rates of import duty
up to the bound rate committed by the Philippines under the WTO Agreement on
Agriculture and under the ATIGA, including any necessary change in classification
applicable to the importation of rice: Provided, That the power herein delegated to
the President shall only be exercised when Congress is not in session. (RA 11203)

 Maintenance and Disposal of Rice Buffer Stock. - The NFA shall, in accordance
with rules, regulations, and procedures, maintain an optimal rice buffer stock to be
sourced exclusively from local farmers.
The NFA shall dispose of its rice buffer stock one (1) month before the aging
period starts, following the first in, first out method. The aging process begins three
(3) months from storage for rice and six (6) months from storage form palay. In
both cases, disposal through sale shall be through public auction."
 Rice Competitiveness Enhancement Fund (RCEF). - A Rice Competitiveness
Enhancement Fund, shall be created which shall be sourced from all tariffs
collected from the importation of rice. The RCEF shall consist of an annual
appropriation of Thirty billion pesos (P30,000,000,000.00) until the year 2031,
following the approval of this Act, and shall be automatically credited to a Special
Account in the General Fund of the National Treasury which shall be established
within ninety (90) days from the effectivity of this Act.
The amount allocated shall be released directly to the implementing agencies xxx
 Allocation of RCEF. Subject to the usual accounting and auditing rules and
regulations, the RCEF shall be allocated and disbursed to rice-producing areas, as
follows:
1. Rice Farm Machineries and Equipment - as grant in kind to eligible farmers
associations, registered rice cooperatives, and LGUs, according to their choice, in
the form of rice farm equipment, such as tillers, tractors, seeders, threshers, rice
planters, harvesters, irrigation pumps, small solar irrigation, reapers, dryers,
millers and postharvest and processing facilities such as warehouses, grain
storage facilities, and drying facilities:
2. Rice Seed Development Propagation, and Promotion. - for the development,
propagation, distribution, and promotion of high quality inbred rice seeds to rice
farmers and the organization of rice farmers into seed growers associations
and/or cooperatives engaged in seed production and trade.
3. Other Priority Programs, Activities, and Projects. - to programs, activities, and
projects that will most effectively promote farmers productivity, supply
resiliency, and address food security emergency situations on rice due to
supply shortage or extraordinary increase in prices, in the following order of
priority:
a. Rice training and extension services
b. Financial assistance to rice farmers tilling up to two (2) hectares of rice
land for direct cash distribution to qualified farmers who are listed in the
Registry System for Basic Sectors in Agriculture (RSBSA) shall directly
receive the cash assistance.
c. Expanded Rice Credit Assistance which shall be made available in the form
of credit facility with minimal interest rates and with minimum collateral
requirements to rice farmers and cooperatives,
Beneficiaries of the RCEF. - The beneficiaries of the RCEF shall be those farmers
and farmworkers listed in the RSBSA and rice cooperatives and associations
accredited by the DA.

REPUBLIC ACT NO. 7581, May 27, 1992

The Price Act
 As amended by Republic Act No. 10623 approved September 06, 2013

Definition of Terms
1. "Basic necessities" includes: rice; corn; bread; fresh, dried and canned fish
and other marine products; fresh pork, beef and poultry meat; fresh eggs;
 fresh and processed milk; fresh vegetables; root crops; coffee; sugar; cooking
oil; salt; laundry soap; detergents; firewood; charcoal; candles; potable water
in bottles and containers; and fruits; locally manufactured instant
noodles; household liquefied petroleum gas (LPG) and kerosene and
drugs classified as essential by the Department of Health; (entries in bold
letters are amendment under RA 10623)
2. Panic-buying" is the abnormal phenomenon where consumers buy basic
necessities and prime commodities grossly in excess of their normal
requirement resulting in undue shortages of such goods to the prejudice of
less privileged consumers;
3. "Price ceiling" means the maximum price at which any basic necessity or
prime commodity may be sold to the general public; and
4. "Prime commodities" include fresh fruits; flour; dried, processed and canned
pork; beef and poultry meat; dairy products not falling under basic necessities;
noodles; onions; garlic; vinegar; patis; soy sauce; toilet soap; fertilizer;
pesticides; herbicides; poultry; poultry, livestock and fishery feeds;
veterinary products for poultry, swine and cattle; paper; school supplies; nipa
shingles; sawali; cement; clinker; GI sheets; hollow blocks; plywood; plyboard;
construction nails; batteries; electrical supplies; light bulbs; steel wire; and all
drugs not classified as essential drugs by the Department of Health. (entries in
bold letters are amendments under RA 10623)

Section 6. Automatic Price Control. – Unless otherwise declared by the President,

prices of basic necessities in an area shall automatically be frozen at their prevailing
prices or placed under automatic price control whenever:
1. That area is proclaimed or declared a disaster area or under a state of
calamity;
2. That area is declared under an emergency;
3. The privilege of the writ of habeas corpus is suspended in that area;
4. That area is placed tinder martial law;
5. That area is declared to be in a state of rebellion; or
6. A state of war is declared in that area.
If the prevailing price of any basic necessity is excessive or unreasonable, the
implementing agency may recommend to the President the imposition of a price ceiling
for the sale of the basic necessity at a price other than its prevailing price.
Unless sooner lifted by the President, price control of basic necessities under this
section shall remain effective for the duration of the condition that brought it about, but
not for more than sixty (60) days. Provided , That, in the case of basic necessities
that are wholly imported and deregulated under existing laws such as, but not
limited to, household LPG and kerosene, price control thereon shall remain
effective for a period of not more than fifteen (15) days, taking into consideration
the current inventory or supply levels thereof.” (entries in bold are amendements
under RA 10623)
Section 7. Mandated Price Ceiling. – The President, upon the recommendation of the
implementing agency, or the Price Coordinating Council, may impose a price ceiling on
any basic necessity or prime commodity if any of the following conditions so warrants:
1. The impendency, existence, or effects of a calamity;
2. The threat, existence, or effects of an emergency;
3. The prevalence or widespread acts of illegal price manipulation;
4. The impendency, existence, or effect of any event that causes artificial
and unreasonable increase in the price of the basic necessity or prime
commodity; and
5. Whenever the prevailing price of any basic necessity or prime
commodity has risen to unreasonable levels.

Republic Act No. 8435 December 22, 1997

Agriculture and Fisheries Modernization Act of 1997
Section 2. Declaration of Policy.
 Principles in the development of agriculture and fisheries sectors:
a) Poverty Alleviation and Social Equity. - The State shall ensure that the poorer sectors of
society have equitable access to resources, income opportunities, basic and support services
and infrastructure especially in areas where productivity is low as a means of improving their
quality of life compared with other sectors of society;
b) Food Security. - The State shall assure the availability, adequacy, accessibility of food
supplies to all at all times;
c) Rational Use of Resources. - The State shall adopt a rational approach in the allocation of
public investments in agriculture and fisheries in order to assure efficiency and effectiveness in
the use of scarce resources and thus obtain optimal returns on its investments;
d) Global Competitiveness. - The State shall enhance the competitiveness of the agriculture
and fisheries sectors in both domestic and foreign markets;
e) Sustainable Development. - The State shall promote development that is compatible with
the preservation of the ecosystem in areas where agriculture and fisheries activities are
carried out. The State should exert care and judicious use of the country's natural resources in
order to attain long-term sustainability;
f) People Empowerment. - The State shall promote people empowerment by enabling all
citizens through direct participation or through their duly elected, chosen or designated
representatives the opportunity to participate in policy formulation and decision-making by
establishing the appropriate mechanisms and by giving them access to information; and
g) Protection from Unfair Competition. - The State shall protect small farmers and fisher folk
from unfair competition such as monopolistic and oligopolistic practices by promoting a policy
environment that provides them priority access to credit and strengthened cooperative-based
marketing system.
Section 4. Definition of Terms. -
"Agriculture and Fisheries Modernization" is the process of transforming the agriculture and
fisheries sectors into one that is dynamic, technologically advanced and competitive yet centered on
human development guided by the sound practices of sustainability and the principles of social
justice.
"Food Security" refers to the policy objective, plan and strategy of meeting the food requirements
of the present and future generations of Filipinos in substantial quantity, ensuring the availability and
affordability of food to all, either through local production or importation, of both, based on the
country's existing and potential resource endowment and related production advantages, and
consistent with the over all national development objectives and policies. However, sufficiency in rice
and white corn should be pursued.
"Global Competitiveness" refers to the ability to compete in terms of price, quality and value of
agriculture and fishery products relative to those of other countries.
Chapter 2
Agriculture and Fisheries Modernization Plan
Section 13. Agriculture and Fisheries Modernization Plan (AFMP). - The Department, in
consultation with the farmers and fisher folk, the private sector, NGOs, people's organizations and
the appropriate government agencies and offices, shall formulate and implement a medium- and
long-term comprehensive Agriculture and Fisheries Modernization Plan.
The Agriculture and Fisheries Modernization Plan shall focus on five (5) major concerns:
a. Food security;
b. Poverty alleviation and social equity;
c. Income enhancement and profitability, especially for farmers and fisher folk;
d. Global competitiveness; and
e. Sustainability.
TITLE 5
TRADE AND FISCAL INCENTIVES
Section 108. Taxation policies must not deter the growth of value-adding activities in the rural areas.
"SEC. 109. All enterprises engaged in agriculture and fisheries as duly certified by the
Department in consultation with the Department of Finance and the Board of
Investment, shall, up to the year 2015, be exempted from the payment of tariff and
duties for importation of all types of agriculture and fisheries inputs, equipment and
machinery such as, but not limited to, fertilizer, insecticide, pesticide, tractor, trailers,
trucks, farm implements and machinery, harvesters, threshers, hybrid seeds, genetic
materials, sprayers, packaging machinery and materials, bulk-handling facilities such as
conveyors and mini loaders, weighing scales, harvesting equipment, spare parts of all
agricultural equipment, fishing equipment and parts thereof, refrigeration equipment,
and renewable energy systems such as solar panels: Provided, however, That the
imported agricultural and fishery inputs, equipment and machinery shall be for the
exclusive use of the importing enterprise. The Department, in consultation with the
Department of Finance and the Board of Investment, shall, within ninety (90) days from
the effectivity of this Act, formulate the Implementing Rules and Regulations governing
the importation of agriculture and fishery inputs, equipment and machinery." (amended
by RA 9281)

"SEC. 112. Continuing Appropriation. - The Department of Budget and Management

(DBM) is hereby mandated to include annually up to the year 2015, in the President's
program of expenditures for submission to Congress, and release, an amount not less
than Seventeen billion pesos (P17,000,000,000.00), for the implementation of this Act.
Such amount shall be in addition to the annual budget of the Department of Agriculture
and shall not be subjected to any mandatory reserves that shall be imposed by the
executive department.
With the continuous implementation of the funding support for agriculture and fisheries
modernization, the Department of Agriculture shall formulate, develop and implement
programs and services towards the improvement of the quality of life of the farmers,
fisherfolks and their families and the people who are directly or indirectly dependent on
agriculture for their livelihood.
Additional funds over and above congressional appropriations of the Department shall
be sourced from twenty percent (20%) of the proceeds of the securitization of
government assets, including the Subic, Clark and other special economic zones.
Other sources of funds shall be from the following: xxx
RA 9281 March 30, 2024
AN ACT TO STRENGTHEN AGRICULTURE AND FISHERIES MODERNIZATION IN
THE PHILIPPINES BY EXTENDING THE EFFECTIVITY OF TAX INCENTIVES AND
ITS MANDATED FUNDING SUPPORT, AMENDING FOR THIS PURPOSE
SECTIONS 109 AND 112 OF REPUBLIC ACT NO. 8435