In Partial FulfillmentOf the Requirements for the CourseECONTWO K31Term 2, Academic Year 2017 – 2018A Study on Innovation in Agriculture and its Effects to the Economy of a Third-World CountrySubmitted by:Alon, Alicia Marie M.Ramin, Pia Ilyana A.Sy, JannManikis, GeorgeSubmitted on:January 29, 2018Introduction The Philippines is highly rich in fauna and flora and, as a result, is considered as one of the world’s mega biodiversity countries. The country is abundant with natural resources as 41% of the country’s landmass is used for agriculture, with arable land at 18.2%, permanent crops at 17.
8% and permanent pasture at 5% (Central Intelligence Agency, 2018). Moreover, it has 4 sub-sectors, which include: farming, fisheries, livestock and forestry, with the first 2 being the largest. Its main agricultural products include rice, corn, sugarcane, bananas, pineapple, coffee, mangoes, tobacco and abaca. While, its secondary products are as follows: peanut, cassava, camote, garlic, onion, cabbage, eggplant, calamansi, rubber and cotton (Nations Encyclopedia, 2010). In the last quarter of 2017, the country’s GDP growth of 6.6% was contributed by a 2.4% growth in the agricultural sector.
This is a big improvement from the same quarter of 2016 due to the 1.3% decline of the same industry. Furthermore, 25.
2% of the country’s labor force work under this sector (Philippine Statistics Authority, 2018). With majority of the labor force focusing its efforts on the service sector and with the unpredictable changes in weather, it has become more relevant that the government, along with other private sectors, increase innovation in the agricultural sector so as to prevent the further decrease or lagging of the said sector and to maximize the country’s abundance of natural resources. The research will be discussing the country’s agricultural sector as a whole and its relation to other factors, such as employment and pricing of its products.
With that, the research hopes to improve agricultural innovation for the benefit of the sector by improving inter-sector relationships, to increase the country’s GDP/GNP and to maximize the sector’s labor force & the country’s natural resources. BodyCurrent situation of the Philippine agricultural sector With regards to GDP and GNP, the agricultural sector has slowly been decreasing in terms of productivity, yield output and income generation over the past years. This can be seen in the Gross Value Added (GVA) of the said sector.
It shows the performance in terms of its year-on-year growth which is measured by the difference between gross output of agricultural production from the intermediate consumption during the production process. Despite the slow increase in the country’s GDP and GNP, the contribution of the agricultural sector to this has been decreasing as more efforts are being focused on the services and industry sector. Based on Figure 1.
1, it can be seen that the agricultural sector has not been as productive compared to the other 2 sectors. Comparing 2015-2017’s percent distribution for GDP and GNI among industries, it has been constant that agricultural sector has contributed the least to economic growth. Also, it’s contribution has been decreasing from 7.9% in 2015 to 7.1% in 2017 (Philippine Statistics Authority, 2017).
Figure 1.1: Gross National Income and Gross Domestic Product by Industrial Origin, 1Q 2015 to 4Q 2017 at Constant Prices (in %)Global Innovation IndexIntroductionIn 2007, Cornell University, INSEAD, and World Intellectual Property Organization (WIPO) published the first Global Innovation Index or GII which is a report that shows the rankings of the countries and economies in terms of their capacity and success in innovation. It is a tool that will serve as guide in the creation of policies that will promote to overall economic growth.
The GII follows a framework that relies on two sub-indices: (1) the Innovation Input Sub-Index and (2) the Innovation Output Sub-Index that are based on seven key pillars (globalinnovationindex.org, n.d.). (1) Institutions, (2) Human capital and research, (3) Infrastructure, (4) Market sophistication, and (5) Business sophistication are classified as the key input pillars that determines the elements and factors of the national economy that gives way to innovation while (6) Knowledge and technology outputs and (7) Creative outputs are the key output pillars that provides the actual evidence of the output of innovation in an economy (globalinnovationindex.org, n.d.).
These key pillars are broken down to sub-pillars that consist of individual indicator. Scores of each sub-pillar are measured by computing the weighted average of the individual indicators while the scores of the key pillars can be measured through the weighted average of the sub-pillars. After that, four measures are then calculated which are: Innovation Input Sub-Index: is the simple average of the first five pillar scoresInnovation Output Sub-Index: is the simple average of the last two pillar scoresThe overall GII score is the simple average of the Input and Output Sub-IndicesThe Innovation Efficiency Ratio is the ratio of the Output Sub-Index over the Input Sub-IndexFigure 2.1: Global Innovation Index framework (Source:https://www.globalinnovationindex.org/about-gii#framework) After computing all measures, the GII is evaluated and a summary of key findings are produced. The GII report is published annually and can be freely accessed by the public. The most recent GII, for the year 2017, has already been published and the top ten countries with the highest innovation index can be seen in the figure below.
Figure 2.2. Top 10 GII Rankings for 2017The figure shows that countries with high-income such as Switzerland, Sweden, Netherlands, USA, and the UK are the ones with the highest capacity for innovation. Moreover, these countries are mostly part of Europe except for USA which is part of North America and Singapore that is part of Asia. On the other hand, as shown in Figure 1.3, Philippines is at rank 73 with the score of 32.48 and an efficiency ratio of 0.65.
Figure 2.3. GII ranking of the Philippines for 2017.For 2017, the theme of the Global Innovation Index is “Innovation Feeding The World” which discusses how innovation affects all aspects of the global economy, even food and agriculture. It also focuses on the opportunities that can come from innovation in creating sustainable solutions for some of the pressing challenges such as the continuous increase in global demand and competition for limited natural resources. Innovation index of philippines in previous yearsIn terms of the innovation here in the Philippines, record shows that it has been improving continuously, statistics show that it has been continuously improving. In Figure 2.
4, it is shown that in 2013, Philippines ranked 90 in 2013 then ranked 83 in 2015 then ranked 74 the year after in the Overall Global Innovation Index. Consequently, in terms of the Innovation Efficiency Ratio, the ranking of the country decreases constantly from rank 24 in 2013 to 49 in 2016. Figure 2.4. Overall Global Innovation Index and Innovation Efficiency Ratio: ASEAN RankingThere is also a constant improvement in the Innovation Input Sub-Index of the Philippines as shown in Figure 2.5.
From ranking 108 in 2013 to rank 86 in 2016.Figure 2.5. Innovation Input and Output Sub-Indices: ASEAN RankingHuman Capital and ResearchFigure 2.6. Graduates in Science and Engineering Figure 2.7. Researchers, headcounts (per million population)Figure 2.
8. Gross Expenditure on R&D (GERD)Business SophisticationFigure 2.9. Employment in Knowledge Intensive ServicesFigure 2.
10. GERD Performed by Business EnterpriseFigure 2.11. GERD Financed by Business EnterpriseKnowledge and Technology Outputs Figure 2.12. National Office Resident Patent ApplicationsFigure 2.13. Patent Cooperation Treaty Resident ApplicationsFigure 2.
14. Scientific and Technical PublicationsFigure 2.15. Total Computer Software SpendingFigure 2.16. High-Tech and Medium High-Tech OutputTypes of innovationGreen Super Rice When super typhoon Haiyan hit Leyte in 2013, it resulted to the livelihoods of a large number of coconut farmers being destroyed.
Several years after the destruction the p Relation of increase in innovation to current situation of agricultural sectorEmployment Introduction to Philippine Employment Aside from increasing the country’s innovation for the improvement of the agricultural sector, another factor that may contribute to this is employment. Understanding the current situation of the country in terms of statistics will allow the government and other concerned stakeholders in addressing the needs of this specific sector. The Bureau of Agricultural Statistics under the Department of Agriculture has created yearly publications to inform the public regarding national population and labor force as it’s seen as one of the development indicators of the sector. These statistics will be used for the purposes of this research. Agricultural Employment in the Philippines Labor force is described as the manpower supply of the country.
It is inclusive of all persons 15 years old and above, either employed or unemployed. In recent years, the labor force has been increasing and so has the employment rate. Even if this seems as an improvement for the country, it is important to note that the workers in the agricultural sector have been decreasing (Philippine Statistics Authority, 2017 – BAS, DOA).In 2016, around 43.36 million people were part of the labor force and 94.6% of them were considered employed (Figure 3.1 and 3.3).
Of the employed Filipinos, 27% or 11.06 million individuals were working in the agricultural industry (Figure 3.2). Figure 3.
1: Labor force by region, Philippines, 2012-2016 (in ‘000 persons)Figure 3.2 Proportion of employed persons in agriculture by region, Philippines, 2012-2016 (in percent) Figure 3.3: Employment rate by region, Philippines, 2012-2016 (in percent)This shows how Filipinos working in the agricultural sector aren’t maximized to their full potential. Many of them find it harder to produce and sell their output due to the decreasing priority that the government gives them.
Even if the employment rate continues to rise, the percentage of workers in the agricultural sector are decreasing by the year. Therefore, it can be said that former agricultural workers end up discontinuing their jobs. The decreasing participation of the labor force in this sector may be attributed to the increased weather changes over the years and lowered government investments. Trends over the years in terms of the agricultural sector have decreased generally due to the increased demand for construction, community services, trade, hotels, etc. Because of the shift in focus towards higher value sectors (service and industry), lowered maximization of the country’s natural resources and labor force hindered the overall economic improvement of the Philippines (International Labor Organization, 2015). Vulnerable employment which is defined as the employed individuals who are less likely to have adequate working conditions and formal work arrangements, according to the United Nations.
These individuals are either own-account workers or contributing family workers (n.d.). As seen in Figure 3.4, vulnerable employment rates are unfortunately higher for the agricultural sector. This is due to the aforementioned reasons in the previous paragraph.
Figure 3.4: Vulnerable employment rate by sex and sector, 2008 and 2013 (in percent) Suggestions for the improvement of agricultural employment In order to improve the overall productivity of the agricultural sector, it is important that the government create programs and policies that will address the problems in terms of labor and employment. By being able to allocate more funds in this sector, more job opportunities will be created and more private sectors will be willing to invest. If the government will be able to allocate more funds into this sector, the stakeholders involved should use this to their advantage by increasing innovation. Once this has been accomplished, more long-lasting job opportunities will be created for many Filipinos.
With the increased participation rate in the sector, more output will be produced, thus, increasing the sector’s productivity for overall national economic growth. Market pricesOutput production “How to make the country rice self sufficient is a key goal in the current administration.” (Cathy Yang, 2016). The agriculture sector takes up a third of our labor force but still only contributes a tenth of our GDP. The output production is affected by more than just the 4 factors of production discussed in economy. It is also affected by weather, pests and mechanization. If the farms could prepare for storms better, have access to safe insecticides and have more funds for mechanization then the agricultural sector would surely grow.This chart shows how much the agriculture sector produces every year starting from 2015-2017.
INDUSTRY/INDUSTRY GROUP2015201620171. AGRICULTURE, HUNTING AND FORESTRY1,173,0881,212,8181,327,710 a. AGRICULTURE1,170,2561,210,4001,325,3952. FISHING193,778184,796196,474GROSS VALUE ADDED IN AGRICULTURE, HUNTING, FORESTRY AND FISHING1,366,8661,397,6151,524,184Source: Philippine Statistics Authority The agriculture sector has constantly displayed growth throughout 2017. The agricultural sector has been facing several declining quarters but has finally recovered showing a 5.
28% growth rate in the first quarter of 2017. In its 2nd 3rd and 4th quarters of 2017 the philippines has grown by 6.18%, 2.32% and 2,2% respectively.Exports and importsSource: Philippine Statistics SocietyThe Philippines is a big importer of agricultural products despite it having more land for agriculture compared to Vietnam. Agriculture is an important part of any growing nation not just for self-sustenance but also for raising the overall GDP of the country.
Every year, the number of people who consume food grow almost exponentially and having enough food for this growing workforce is important if the Philippines wants to sustain its growing GDP. If our agriculture sector cant keep up with the birth rate of our country then obviously we would have to import rice to be able to feed the people. Our goal shouldn’t just be self sufficiency but to export more than what we import agriculturally.
Pricing of sector’s goods in relation to output production The costs of the production output is one factor for the pricing of the product. It is the goal of the sector maintaining minimum cost while making big amount of high quality products. Based on Samiksha, there are seven important factors and they are cost of production, demand of the product, price of competing firms, purchasing power of customers, government regulation, objective, and marketing method used.
Among the following factors, cost of production, demand of the product and government regulation are the biggest influences for the price of the products. Cost of production is the main support of the product’s price because it is never favorable for the business selling their products less than the product’s production cost. Second is the demand of the product, it is an opportunity for the business to increase the price due to the consumers’ demand for the product. For agriculture it is their true advantage because it is always in a person’s daily need like food and ingredients for making food. However, the government regulations are preventing that idea.
The intervention of the government makes sure that there will be no violations happening while selling the products especially with agricultural goods because it is needed by people everyday.ConclusionReferencesAPA formathttp://psa.gov.ph/sites/default/files/Q4%202017%20NAP.pdf https://www.cia.gov/library/publications/the-world-factbook/geos/rp.htmlhttp://www.dost.gov.ph/phocadownload/Downloads/Statistics/Global_Innovation_Index_2013-2016.compressed.pdfhttps://www.globalinnovationindex.org/about-gii#frameworkhttps://psa.gov.ph/content/performance-philippine-agriculture-october-december-2017-1http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Philippines-AGRICULTURE.htmlhttps://psa.gov.ph/sites/default/files/ais_Population%20and%20Labor%20Force_2017.pdfhttps://psa.gov.ph/tags/performance-philippine-agriculture http://library.pcw.gov.ph/sites/default/files/pet%202015%20ilo.pdfhttp://psa.gov.ph/nap-press-release/data-charts https://psa.gov.ph/content/foreign-trade-statistics-agricultural-commodities-philippines-fourth-quarter-2016n https://psa.gov.ph/sites/default/files/Selected%20Statistics%20on%20Agriculture%202016.pdf ABS CBA news philippines needs to unlock huge agricultural potential: analyst https://www.youtube.com/watch?v=ClZVsofBD http://www.yourarticlelibrary.com/production/7-important-factors-that-determine-the-fixation-of-price/1093