Philippines - Agricultural development and prospects

LkE COPY C-54 _ :: & ~~~~~~~~~~~~~~~~c-54 INTERNATIONAL BANK FOR RBCONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION AGRICULTURAL DEVELOPMENT AND PROSPECTS OF THE PHILIPPINES August 12, 1970 East Asia and Pacific Department Prepared By: Mirko Lamer   TABLE OF CONTENTS Page No. * I. RECENT TRENDS IN AGRICUITURE 1 II. MAJOR ISSUES 4 A. Objectives Under the FY 1971-74 Development Plan 4 B. Fertilizer Use 5 C. Irrigation 7 D. Land Reform Prospects 9 E. Agricultural Credit 10 F. Coordination Among Various Government Agencies 12 III. SUMMARY AND RECOMMENDATIONS 13 APPENDICES I. AGRICULTURAL COMMODITIES 1 A. Rice and Corn 1 B. Sorghum and Soybeans 4 C. Livestock 5 D. Coconut Products 5 E. Sugar 8 F. Tobacco 10 G. Abaca 11 H. Bananas and Pineapples 12 I. Forestry and Forest Products 12 J. Fisheries 13 II. TABLE 1 - Actual Production for 1968 & 1969 and Physical Targets of the Agricultural Program FY 1971-74 16 TABLE 2 - Average Growth Rates of Major Agricultural Proiucts 17  a  AGRICULTURAL DEVELOPMENT AND PROSPECTS I. RECENT TRENDS IN AGRICULTURE Production 1. In 1969 and 1970, agriculture continued roughly along the same trend as in past years, and production of most commodities increased. However, the 1969 rate of growth of food crops was only 0.6 percent as against 6.2 percent in 1968 and 3 percent in 1967. The main reason for the slowdown was a severe drought affecting in particular paddy production, which declined by 2.5 percent in 1969, after a record 11.4 pereent increase in 1968. Rice production would have declined even more severely had it not been for the expansion of the area planted with high-yielding -rarieties. In 1968/69, the area under high-yielding varieties increased by 35.6 percent in comparison to 1967/68, and the new varieties covered about 18 percent of total acreage of paddy. Without high-yielding varieties, the ?hilippines would have been obliged to import substantial quantities of ri.e in 1969. The situation for 1970 appears much more favorable and exports of rice are considered. 2. The effects of the drought were less pronounced for corn and other food crops which were more resistant, as the following table sl2ows: Production of Major Food Crops (Thousand metric tons) Growth Rate (% change) Crops 1968 1969 1966/67 1957/68 1968/69 Food 9,294.4 9,353.2 3.0 6.2 0.6 Paddy (palay) 4,560.7 4,444.6 0.5 11.4 -2.5 Corn 1,619.1 1,732.8 8.0 8.7 7.0 Fruits and nuts 1,371.6 1,375.8 9.3 1.4 0.3 Rootcrops 1,305.2 1,338.2 -7.1 -4.6 2.5 Vegetables 201.1 218.5 4.3 0.7 8.7 Coffee 43.9 43.8 3.5 -0.9 -0.2 3. Achievements in major agricultural export crops were better than in foodcrops, as illustrated by the following table:  - 1) - Productioni of Major 1gricultural Export Crops (Thousand metric tons) Growth Rate (% change) Crop 1968 1969 1966/67 19677/6 1965/69 Export crops 3,948.o 4,146.0 7.7 1.9 5.0 Sugar (centr. & Muscovado)1,658.4 1,665.0 11.1 2.3 0.4 Molasses 502.9 505,1 10.2 24.0 0.4 Copra 1,541.8 1,736.7 6.2 -2.2 12.4 Desiccated coconut 56.3 49.7 14.2 -3.7 -11.7 Abaca 103.4 104.9 -13.1 -12.1 1.5 Tobacco (Virginia) 17.4 19.9 0.7 18.4 14.4 Tobacco (Native) 47.5 36.9 -15.9 30.5 -22.3 The 1969 production of sugar hardly exceeded the 1968 lev.1 due to typhoons, drought, and lower yields of traditional varieties. In 1970, however, improved yields may lead to an increase in production of about 10 percent. This might permit for the first time since 1965 some shipments under the additional quota to the United 1States. In 1969, the production of molasses declined severely because of a sharp drop of export prices from $100 to $60 per ton. In 1970, molasses wil'L be diverted more to the domestic market for livestock feeding. 4. In 1969, copra production showed an upward movement owing to favor- able weather conditions, but typhoons may reduce copra production in 1970 by 10 percent. After several year3 of declining output, abaca showed a slight increase in production, as prices improved in the international market. Native tobacco showed unfavorab'le production results, while production of Virginia tobacco increased; this was due to the weather conditions affecting both crops grown in different parts of the island of Luzon. 5. The production of logs shows sha-p and erratic annual fluctuations. In 1969, log production was 11.6' million m- or an increase of o,nly 4.2 percent as compared with a rate of 4L.9 percent in the previous year. 1 This was partly the result of the government's policy to reduce the cut of timber for export of logs and to promote domestic processing of wood produc-ts. The following data show trends in forestry products in recent years. Forestry Products Production L968 Growth 1Rate (1961-68) annual Logs (cubic meters) 11,086,0o0 7.7 Lumber (000 board feet) 432,921 -0.3 Plywood (000 square feet) 695,034 15.1 Veneer (000 square feet) 1,205,9:L0 26.1 1/ Rate of veneer and plywood production Inot available for 1969.  - 3 - 6. As for livestock and dairy production, pork and poultry meat production continued to increase. The recent introduction of a feedggain. program (yellow corn, sorghum and soybeans) should present an additional impetus for a further increase in livestock production. In 19'0, the manufacture of "toned milk" started. The catch of fish increased from 937,700 metric tons in 1968 to 1,035,000 metric tons in 1969, or by 10.5 per- cent, which was a considerably slower expansion than the previous year's 25.7 percent. Inputs 7. Consumption of fertilizers reached 402,600 metric tons (product weight) in comparison with 384,000 metric tons in 1968, an increase of 4.8 percent. 8. In 1969, the irrigated area did not increase greatly as new large scale gravity projects need considerable time for completion, but a number of existing irrigation schemes were rehabilitated and expanded, and irrigation pumps were more extensively used for sugarcane and rice. 9. For the period 1968/69, the total area planted with high-yielding varieties of rice was 606,495 ha as against 390,294 ha in 1967/68, an increase of 35.7 percent. In 1968/69, new high-yielding varieties were introduced in corn (54,000 ha) and sugarcane (133,000 ha). At the end of 1969 planting of high-yielding varieties of sorghum and soybeans started on areas of 200 ha and 1,480 ha, respectively. 10. Loans granted to agriculture continuously increased, from Fl4. billion in 1965 to P2.2 billion in 1968. Data for 1969 are incomplete for commercial banks, but loans of rural banks to small farmers and of the Philippine National Bank for large projects have increased, while loans by the Development Bank of the Philippines declined. 11. Management of development programs has been strengthened by the creation of the National Food and Agriculture Council (NFAC) in May 1969. This Council coordinates all agencies involved in the food program (rice and corn), and is now also covering feedgrains for livestock (sorghum, soybeans, yellow corn), fruits, vegetables and fish. 12. The introduction of the floating rate of the peso in February 1970 and the export tax in May 1970 brought confusion particularly during the period before the export tax was introduced. Agricultural exporters, thanks to the factual devaluation, have an easier access to foreign markets, but increased prices of necessary inputs such as fertilizers, trac ors, irrigation pumps and other farm equipment, will probably slow down their use and lead to an increase of farm prices. Appendix I to this Annex contains a more detailed discussion on individual commodities and inputs.  -4- II. MAJOR ISSUES A. Objectives under the FY 1971-74 Development Plan 13. The Four-Year Plan contains an agricultural strategy by which the Government plans to actively pro:mote agricu'Lture as the leading sector of the economy. T'he Plan aims at national sufficiency in food crops and promotion of agricultural. export crops as a source of foreign exchange. The overall target is to increase agricultural output by 6.2 percent annually; the sectoral share of agriculture in the net dlomestic product should increase from 34.1 per- cent in 1969 tc, 35.1 percent in 1974. The specific objectives of the agricultural program can be summarized as follows: (a) intensification of food production (rice and corn) beyond self-sufficiency 'Levels not only for stockpiling, but also for exports; (b) expansion and improvement of the output of agricultural export crops through crash programs for coconuts, sugar, tobacco and ramie, kapok, ancd oil palm; (c) expansion of the nlumber of animals and production of animal products to attain self-sufficiency in meat and milk as soon as possible; (d) livestock development (particularly hogs and poultry) based on an increased production of feedgrains such as yellow corn, sorghum and soybeans; (e) expansion of fish production, setting fish hatches, production and dispersal of f'ingerlings, promotion of deep-sea fishing, increased productivity of fish ponds, establishment of i'resh-water fish farms, increase of modern equipment f'or commercial fishing vessels, and improvement of fish marketing conditions; and (f) orotection of forests from urwarranted exploitation, reforestation of denuded areas, protection of park and -ildlife, stabilization of lcg exports by gradual increase of domestic processing of logs and gradual .limitation of exports of logs to 40 percent of the allowable cuit. 1)4. Both the private and public sectors will assist in the execution of the program. The public sector vrill mainly concentrate on construction of irrigation, inf:rastructural, storage, processing, marketing and credit facilities. The Four-Year Plan projections of output and exports of agri- cultura.l product:s have been based. on past trends in the last decade and on the intended shifts in emphasis as among products. Appendix II, Table 1  shows the output projections in detail, while Appendix II, Table 2 compares the growth rates of the Four-Year Plan with actual output of previous years and with some other projections. B. Fertilizer Use 15. Soil deficiency of plant nutrients is very high in the Philippines and fertilizers are needed to increase production of agricultural crops. Of the cultivated soil in Luzon, about 85 percent is deficient in phosphorus, 59 percent in potash and 55 percent in nitrogen. 1/ The coastal plains have fertile soils, while mountainous regions have a low soil quality which rein- forces persistence of shifting agriculture. Government paid increased attention to the use of fertilizers when domestic fertilizer plants started to operate in 1953, but imports covered still about 25 percent of total fertilizer consumption in 1969. Government stimulated application of fertilizers for rice and corn by subsidized prices through the Agricultural Credit Admiristration from 1956/57 to 1962/63. But rice and corn farmers often sold subsidized fertilizers on the black market to sugar growers, the main users of fertilizers in the country. Since this system was discontinued, the domestic fertilizer companies use their own field experts (about 600 in 1970) to teach farmers the application of fertilizers. 16. Sugar was the first crop for which fertilizers were used; its share was 95 percent of total use before World War II. The application is spreading to other crops as the following table shows: Consumption of Fertilizers by Crops in 1967 a/ (in nutrient equivalent) Nitrogen N Phos hate P205 Potash K20 Crops Metric tons Metric tons r Metric tcns Sugar 37,829 47.8 17,033 57.5 12,570 59.2 Rice 23,528 29.6 6,722 22.7 4,179 19.7 Corn 3,396 4.1 515 1.7 252 1.2 Tobacco 1,724 2.2 410 1.4 361 1.7 Coconut 1,380 1.7 803 2.7 492 2.3 Vegetables 2,301 2.9 1,140 3.8 858 4.0 Citrus 1,742 2.2 1,092 3.7 686 3.2 Pineapples 3, 038 3.8 131 0.4 737 3.5 Other crops 4,543 .7 1,811 6.1 i,106 5.2 79,481 100.0 29,657 100.0 21,241 100.0 a/ Study of the Philippine Fertilizer Market. ESSO Standard Fertilizer and Agri- cultural Company, prepared by SyCip, Gorres, Velayo & Co., Manila, Aug. 1968,p.1S. 1/ Mirko Lamer, The World Fertilizer Economy, Stanford, 1957, p. 445.  6- In 1969, consumption of fertilizers reached 402,60C metric tons (product weight), 100,000 metric tons of which were imported; as against a consumption of 384,000 metric tons in 1968, this meant a 4.8% increase. Fertilizer consumption in sugarcane increased from 168,000 metric tons in 1967 to 188,000 metric tons in -968, while in rice, corn and other crops - where a higher growth rate was expected - it declined slightly from 196,000 metric tons to 193,000 metric tons. Adverse weather conditions, unfavorable prices of farm produce and reduction of credits were considered as responsible factors. T'he projections of the Marketing Study on Fertilizers based on 1967, assume that demand for plant nutrients until 1980 will shift from sugar to rice and corn. The average annual rate of growth was projected at 8.9 percent for paddy,, 15.2 percent for corn, 2.8 percent for sugar and 8.1 percent for other crops. The following table shows the share of fertilizer nutrient-demand by crops in 1967 and the expectations for 1980: a/ Projected Demand of Fertilizer Nutrients by Crops :Ln percentages) Rice Corn Sugar Other Crops vNitrogen N 1967 30 4 48 18 1980 39 22 25 14 Phosphate P 0 1967 23 2 57 18 2 5 1980 39 21 25 15 Potash K20 1967 20 1 59 20 1980 15 1 67 17 -! Study of the Philippine Fertilizer Market, op. cit., p.2. 77. The effective fertilizer demand in 1969 of 402,600 metric tons .-s only 6.6 percent of the potential demand of 6 million tons, based on the "ideal rate" of application to a hectare of crop land. 1/ The effective use of fertilizer may not be more than 612,000 metric tons Tproduct weight) in -975, according to ESSO estimates. Among the factors preventing higher fertilizer use the low income level of farmers, lack of credits, and lack of -nowledge should be mentioned. 18. Farmers who use fertilizer respond quickly to price changes. Recently this was noticeable as a resu:Lt of the factual devaluation. When pices of imported nitrogen increased by 40-50 percent (and potash by -/ Economic and Engineering Feasibility Study on Storage, Handling and Marketing in the Philippines. RCA with assistance of U'S AID, prepared by Weitz- Hettelsatter Engineers, Kansas City, Missouri, June 1968, p. 55.  -7- 100 percent; due to reduced production in Canada) and domestic fertilizer prices settled on the same level as those of imported fertilizers which are sold at a low price in the Philippines due to sharp competition on the international market, the immediate response of rice farmers was a reduction of about 50 percent in the purchase of fertilizers; the reaction by sugar farmers was less pronounced as sugar is an export crop. 19. The old idea of the Sugar Producers Cooperative to establish a urea plant on the main sugar island, Negros with a daily capacity of 300 tons and cost of about $50 million was revived as a consequence of increased fertilizer prices. There is also a proposal by the Farmers Fertilizer Company to establish a nitrogen plant. The domestic fertilizer producers oppose establishment of new plants as their plants operate at a low utilization rate of capacity. The Senate Committee on Economic Affairs recently proposed the creation of a Conmmission to study the problems of fertilizer industry. C. Irrigation 20. Considerable progress has been made in the expansicn of irrigated land. In 1963, 290,000 ha were under irrigation, in 1966, 545,COO and at the beginning of 1970 about 840,000. So far, irrigation projects concentrated on paddy land of which 750,000 ha are irrigated or 30 percent of total rice area; on the contrary, only 5 percent of sugar plantation area cr about 15,000 ha are irrigated. A good background for future development can be found in the reconnaissance reports prepared by the United States Bureau of Reclamation for the Government of the Philippines and the US AID. The objective of the Four-Year Plan is to expand the area covered by improved irrigation and new projects by about 287,000 ha from 1970 to 1974 as follows: National Irrigation Administration Fectares Rehabilitation 11,000 Completion of projects 12,800 New projects (national) 70,600 Communal irrigation projects 22,000 Special projects: 1. Upper Pampanga - 31,000 (old) 46,000 (new) 77,000 2. NIA/UNDP groundwater development 3,000 3. NIA/Asian Development Bank Cotabato Project 7,430 Irrigation Service Unit Pumps 83,260 287,090  -8- 21. At present more than 95 percent of irrigation schemes use surface water, while the irrigated area is situated over abundant groundwater resources, 2 to 5 rieters below ground level. Ground water has been neglected as an alternative while the traditional gravity irrigation lacks sufficient supply of water as it is closely related to the rainfall; thus, irrigation water is plentiful during the rainy period and scarce during the dry season. "The scattered natuire of the irrigatle area and the abundance of shallow acquifers calls fo:- the wide development of irrigation by pumping without neglecting surface and water conservation methods", and "large scale pumping is an incentive fo:r mechanization, rower consunption and rural development in general" the FAO report on Philippine water resources points out. 1/ The country's gap in groundwater technology has been due to the fact that the Government paid little attention to this type of irrigation. More initiative in groundwater was taken by private interests, particularly sugar plantations and some rice farms. Recently, however, the Government has paid increased attention to groundwater irrigation in the projects of Central LuzonI. 22. The Upper Pampanga River Project, assisted by a IBRD loan of $34 million, includes provisions to construct at a later StELge a power plant, the energy of which would be used mainly by deep-lwell pumps for groundwater irrigation. The financing of the power plant would have to be covered by an additional loan. After completion of the present phase of the Upper Pampanga Project in 1974, an adjoining project in the province of Nueva Ecija will get priority; and this project will provide groundwater through deep and shallow wells to an area of 40,000 ha. The total costs are estimated at $25 million, of which $12.5 million in foreign exchange a-t the old exchange rate. The feasibility report is expected to be completed in 2 years, and will be based on a UNDP/FAO assistance project intended to test and demonLstrate possibilities of agricultural production based cn supplementary irrigation from groundwater sources, cover- ing two irrigatior.. pilot iareas in Nueva Ecija province. Another feasibility study is made by National Irrigation Administration under a US AID feasibility loan concerning the Magat multipurpose project in Isabela province based on surface water for an area of 74,000 ha (34,000 ha of new irrigation). Originally rice production was planned but other crops may be considered as a further expansion of rice area does not seem to be called for. As with the former project, power generation in addition to irrigation is planned. Total costs are estimated at $60 million, of which $32.5 million in foreign exchange. The Asian Development Bank has approved a loan of $265 million to cover foreign currency requirements of the Cotabato project to irrigate 7,430 ha of agri- cultural land. This project will be connected with a hydro-power plant, and pilot demonstration farms will be established in this area. While the Upper Pampanga and Cotabato projects should be completed during the Four-Year Plan, the groundwater project in Nueva Ecija and surface project in Magat will start in a subsequent period. 1/ UNDP/FAO/OTC, Water Resources Development Task Force to the Philippines Fina Report), Rome, July 196', p. 12.  -9- D. Land Reform Prospects 23. In 1963, the Agricultural Land Reform Code was passed in order to abolish tenancy and to establish owner-cultivatorship of the economic family sized farms, conducive to greater productivity and rice of farm incomes. In pursuing this policy, the leasehold system should re?lace the sharecropping system in the first stage of development, and the a3quisition of land and transformation of leaseholders into owners should follow, but both stages of land reform could be performed at the same time. rhe Land Reform Code meant to achieve that the lease should be lower than the transfer under the sharecropping system by stipulating that rent of rice aad other crop lands should not be over 25 percent of the average normal harvest during the three agricultural years immediately preceding the date of the leasehold after deducting the amount needed for seeds, the cost of harvesting, threshing, loading, hauling and processing. The leasehold contracts were to be registered with the municipalities upon agreement between agricultural lessor and lessee. Other provisions of the Code include that the agricultural lessor carries the cost of permanent irrigation and is entitled to an increase of rent commensurate to the resultant increase in production; he has the right to propose a change in the cropping pattern. 24. In the present phase of agricultural reform the main purpose seems to be to convert sharecroppers to leaseholders. In 1963, the land reform task became the conversion of 130,900 rice and corn sharecroppers into leaseholders. The holdings of sharecroppers average about 2.6 ha. which means that the area involved totalled about 330,000 ha; 24,200 sharecroppers were immediately pro- claimed leaseholders, 28,000 between 1964 and 1968, and 10,700 in 1969. 25. The second stage of the land reform, conversion of leaseholders into landowners, is an extremely slow and time-consuming procedure. The determination of "just compensation" of land to be expropriated is a long process. The Land Authority, established by the Code, proceeds to acquisition of private agri- cultural land, when landowners agree to sell their property under the terms of the Code. A joint motion by the Land Authority and the landowner, including the valuation of the property, is submitted to the courts of agrarian relations; beneficiaries of the land can raise objections on the valuation if it is regarded as excessive and the court then finally determines the "just compensation'. 26. The owner of the expropriated land is paid by the Land Bank of the Philippines, established by the Code as the financial arm of the reform. The Land Bank pays 10 percent in cash and 90 percent in Land Bank bonds with a 25 year term and 6 percent interest, or 60 percent in Land Bank bonds and 30 percent in Land Bank preferred shares with 6 percent guaranteed dividend. This interest rate is regarded as very low in comparison with other government bond issues and private dividends. Land Bank bonds have a limited negotia- bility and they do not carry Central Bank support. The Land Bank could not develop large scale activities as it has had very limited funds at its disposal. Under the Agricultural Land Reform Code, Sec. 81, the authorized capital stock of the Land Bank shall be Pl.5 billion; P900 million of which shall be  - 10 - subscribed byr the Government and F600 million shall be issued as preferred shares. 1/ Of the subscribed capital L400 million has been allocated by Congress, but only P13.6 million or 3.4 percent of total allocations were released until now. 2/ 27. In the whole period from 1964 until April 1970, the Land Bank ,'inanced the acquisition of 1,012 hectares of land out of 330,000 ha under land reform "to establish owner-cultivatorship" and "dignified existence of small farmers". Until now the Land Bank has acquired I1 agricultural estates valued at F3,434,600. The average purchase price per hectare was about P3,400 whLich means that the value of 330,000 ha should total about PK billion; but prices are expected to be about F5,000 per ha. in the future. Thus, the Land Bank. provided small farmers with the ownership of about 3.4 percent of the land under the reform. The Land Bank is implementing administrative procedures concerning negotiationQs about various landholdings, but it cannot undertake any large scale action due to insufficient funds. 28. Recently, it was proposed that the leaseholder provisions should be declared immediately operative for the whole coantry. This would mean abolishing sharecropping for about 432,000 paddy farmers and 174,402 corn tenants working on an area of 942,485 ha. and 274,512 ha. respectively. However, other tenants, such as coconut and tobacco growers, have not yet been included in agricultural reform projects. 29. The econoiiic situation of leaseholders did not improve in relation to sharecropping as they actually remained sharecroppers although their share to the landlord is now called "rent." The Land Reform Code (Sec-33) provides that the lease of the land shall be paid in an amount in money or produce, or both. Since the leaseholders do not have cash, they pay "the rert" to land- lords in rice (7-20 cavans per ha.) or in corn. In addition, the sharecroppers used to get credits from the landlord which were beneficial for farm investment, while now they may obtain short-ter. crop loans from Rural Banks. It appears that many former landlords became stockholders of rural banks. E. Agricultural Credit 30. The land r-eform and increased credit requirements as a result of expansion of irrigation, new seeds and fertilizers, have led to the creation of various new credit institutions and to the strengthening of existing ones. The section on money, credit and prices 3/ shows the distribution of loans supplied to agricu:Lture in the past years. Total loans increased from PI.4 billion in 1965 to P2.2 billion in 1968, (data for commercial banks are not available for 1969). Short-term loans of rural banks to smallholders increased from P363 million in 1968 to F406 million in 1969, and medium- and long-term loans of the Philippine National Bark (PNB) from P852 million to P903 million. 1/ Agricultural Land Reform Code (Rep.Act.No.3844) Manila 1968, p.55, Sec. 81. 2/ "Towards Full Land-Ownership" - An Annual Report of the Land Bank of the Philippines, FY 1968-69, and the Statement of the Land Bank, Feb. 1970. 3/ See RAP-16a, Current Fonnomic Position and Prospects of the Philippines, August, 1970.  - 11 - PNB aims at providing loanable funds to meet the financial requirements of farmers in their efforts to accelerate agricultural productivity as well as to give financial assistance to rice growers in support of the Government's objectives of expanding production; it granted loans without collateral to lessees, set up higher loan ceilings for coconut industry, gave assistance to the fishing industry, and financed the sugar and livestock development. 31. The charter of the Development Bank of the Philippines (DBP) provides that about 35 percent of loanable funds should be available to agriculture. DBP financed processing, storage and trading aspects of rice and corn, gave loans for conversion of non-irrigated rice land into irrigated, and earmarked loans for beef cattle, piggeries and poultry farms, fish and meat products, vegetable production and financed development of bananas and coconuts. 32. The system of Rural Banks is nearest to the small farmers, small merchants and small rural industries. In 1952, the Rural Bank AcJ was promul- gated in order to provide credit facilities to the rural economy. Rural Banks are spreading in various regions of the country, they had 462 offices in April 1970; each month 3 new rural banks are established. The sy,stem of rural banks operating under a charter granted by the Central Bank of the Philippines is supervised by the Department of Rural Banks of the Central Bankc. They are organized in such a way that private capital in rural communities or small towns participates actively in these banks. They are mostly managed by the members of the rural community who have capital resources; country lawyers, physicians, engineers, teachers etc. are active in the rural banks. Some of the rural banks are well managed under the guidance of progressiva entrepren- eurs with good knowledge of the agricultural situation in their areas. About 55 percent of capital of rural banks is owned by private stockholiers and 45 percent by the Government. 33. About 80 percent of the loans of rural banks concerns small farmers in the form of short-term crop loans not exceeding one year, at 12 percent annual interest. The loans of rural banks intend to cover farm expenses connected with production, harvesting and marketing of crops and purchase of animals, seeds and fertilizers. In recent years, rural banks started to finance medium and long-term farm equipment loans with the assistance of IBRD. The first Bank loan of US$ 5 million was extended in 1965, and the second loan of US$ 12.5 million was agreed upon in 1969. The second rural project slowed down after the devaluation in 1970; as prices of all imported equipment increased, e.g. small tractors by 30 percent, large tractors 50 percent, irrigation pumps 20-25 percent, and feed prices 35 percent, the farmers became reluctant to take higher credits for farm equipment. The Department of Rural Banks of the Central Bank is elaborating a system for revision of the present loan amortization scheme to ease the program of payments in the first few years when prices cf farm produc-ts have not risen to the same extent as costs of farm equipment. 34. The Agricultural Credit Administration (ACA) was createcd by the Larid Reform Code to supply the newly created group of leaseholders and small land- owners with production and crop loans. But, as the land reform has not made  - 12 - any substantial progress, this financial institution has had a very limited scope of action also because it does not have any substantial funds on disposal. According to the Land Reform Code, the sum of 150 million was appropriated to the ACA from the National Treasury, but the release of funds was very small. The highest amount of loans granted to farmers by ACA was F31 million in 1967; it was F23.6 mil:Lion in 1969. ACA's share in total loans granted to agriculture is less than 10 percent. 35. The most important issue of Loans to small farmers, who are changing -rom traditional and self-sufficient t,o market-oriented agriculture concerns increased expenditures for various input factors and technical innovations, which are often not of a short 'but a medium-term nature. The loans of ACA aver- aged about P350 per ha. while those of rural banks averaged P600-P700 per farmer or P200-F300 per ha. The production costs on rice farms (one crop) averaged about F400-FP500 per ha. and t,he loans covered about one-half of the production costs for fertilizers, seeds, harvesting, etc. 36. Interest rates on credits ex-ended by Rural Banks, ACA and Co- operatives amount to 1 percent per month while private money lenders charge as much as 25-30 percent and sometimes 300 percent per year. F. Coordination Among Various Government Agencies 37. The previous IBRD report on the Philippines 1/ pointed out that "the Philippines has a plethora of government agencies concerned with planning and executing agricultural policy and in offeringr advice to farmers", adding "rthere is considerable room for'streamlining and reducing the number of agencies." 2/ An important step forward has been made by the creation of the National Food and Agriculture Council (NFAC) by the President of the Philippines on May 6, 1969. The Secretary of Agriculture and Natural Resources is the Chairman of the Council, which -s composed of 21 members representing various agencies. 3/ The function of the Council originally 1/ IBRD, "Current Economic Position and Prospects of the Philippines," Volume IT, Annex ITT, p. 17 (June 24, 1969). 2/ Same source, p. 37. 3/ Rice and Corn Administration, Rice and Corn Board, Bureau of Plant Industry, Agricultural Productivity Commission, Bureau of Soils, Bureau of Animal Industry, Fisheries Commission, Na-tional Irrigationr Administra- tion, Irrigation Service Unit, Bureau of Agr-icultural Economics, Office of Statistical Coordination, Philippine National Bank, Central Bank of the Philippines, Agricultural Credit Adminis-tration, National Land Reform Council, Budget Commission, Presidential Arm on Community Develop:2ent, College of Agriculture, Universit;y of the Ph-Llippines.  - 13 - was to achieve a national program in self-sufficiency in rice and corn, but this was expanded to feedgrain, vegetables, fruits and fishery. Agencies dealing with sugar, tobacco, coconuts and forestry are not represen,ed in the Council. However, the Council became the focal point of six various agencies dealing with irrigation (National Irrigation Administrationi, Irrigation Service Unit, Presidential Arm on Community Development, Agricultural Produc- tivity Commission, and Bureau of Soils). The Council became a clearing-house among various agencies and conducted negotiations with non-government organiza- tions e.g. with mixed-feed manufacturers to determine targets of the feed grain program for development of livestock. 38. In 1969, the Water Resources Development Authority was created with the purpose of coordinating all activities pertaining to water resources development; this covers technical coordination while NFAC integrates irrigation within economic planning. Proposals to integrate all agencies dealing with water into one single body, be it a separate corporation, the Department of Agriculture or Department of Public Works, are still under discussion. 39. In forestry, a similar situation as in irrigation exists; responsi- bility is divided among three separate agencies: Bureau of Forestry, the Reforestation Administration, and Park and Wildlife Office. The Secretary of Agriculture has submitted a recommendation to the President and Congress to consolidate the different government forestry agencies into a Commission. 1/ III. SUMMARY AND RECOMMENDATIONS 4O. The concept of agricultural productivity penetrated the &gricultural strategy of the Philippines after gains of the high-yielding varieties of rice became obvious. The highest yields of paddy were obtained in the areas where all interrelated input factors (high-yielding varieties + fertilizers + irrigation) were applied at the same time. The results achieved by "miracle rice" have encouraged farmers to give up traditional methods and to accept innovations. This has also decisively influenced the government's economic policy. It is not a pure historical coincidence that the Administration of President Marcos in his first term, at the time when first practical results of new varieties of rice were noticeable, shifted economic policy emphasis from industrialization to the promotion of agriculture. This is now much more vigorously launched in the second term of the Marcos Administ-^ation and particularly in the present Four-Year Plan from 1971 to 1974. The seed and fertilizer revolution in rice created as a by-effect an increased interest in irrigation which was necessary to provide better yields and dimini3h sharp fluctuations of production during droughts. The rice irrigation projects started to be developed on a larger scale including ground water development. Thus, rice cultivation reached the stage of self-sufficiency and the couatry is no longer obliged to import rice for its fast increasing population. Today, 1/ Annual Report of the Secretary of Agriculture and Natural Resources to the President of the Republic, December 1969, p. 30.  - 14 - possibilities for rice exports are even considered. 41. Planting of high-yielding varieties started to spread to other crops such as corn and sugar, and recently to sbrghum and soybeans. The production of agricultural export crops did not show an increase in output and could not match the requirements of export markets. One of the main reasons for their low productivity is the fact that not all interrelated input factors have been applied. Fertilizers are used in considerable amounts on sugarcane, but new high-yielding varieties were introduced only recently and irrigation of sugarcane is very deficient since only 5 percent of the area is irrigated. The low coconut yields are due to lack of fertilizer application, high-yielding dwarf varieties with short gestation and new planting. Output of both coconut and sugar increased less than domestic consumption and exports declined. Favorable results have been obtained in those crops where all input factors were applied, such as bananas and pineapples for exports, and vegetables in the areas around cities. 42. By the expansion of irrigat-Lon, new seeds and fertilizers, a multiple cropping system became feasible in the Philippines replacing the single crop of the traditional strains. The double cropping introduced in various parts of Central Luzon resulted in farmers' incomes about twice as high as derived from the traditional vrarieties. The increased income of farmers was, absorbed however, by increased requirements of input factors and farm improvements. 4L3. The trend of fostering agricultural productivity in developing countries is connected with increased mechanization (tractors, harvesting machines, irrigation pumps etc.) whichl often fol-Lows expansion of irrigation and use of high-yielding varieties for various crops. In the Philippines, howeverp, the mechanization is progressing slowly. This is not only due to the small size of farms, but also to the institutional barriers of tenancy, which prevent initiatives for long-term investments. 44. Sharecroppers or leaseholders have very restricted credit facilities for short-term (6-month) crop loans in the rice area; the coconuat sharecroppers facing a long gestation period (5-7 years) are complete-Ly outside of credit zones. The rural banks supported by the IBRD started to develop medium-term credits for mech- anization for small farmers in the rice area. The short-term credits to rice farmers do not even cover current expenditures for seeds, fertilizers, insecticides, harvest- -ng etc. and definitely do not permit any larger expenditures for farm equipment. Lack of credit is one of the main bottlenecks for increased investments on new technological means of production. The available loans of rural banks, ACA and cooperatives cover about one-half of the most necessary production costs. Therefore, farmers often borrow from private money lenders at exhorbi- tant interest rates. One possibility to induce higher credits to farmers by commercial banks would be a government guarantee scheme. )X6. The limited market for farm equipment is one of the reasons that -Local manufacturing of such implements has not developed; only some assembly plants exist, and the major part of farm equipment is imported. Maintenance  - 15 - of farm equipment often presents problems as spare parts need tc be imported from various sources. Selection of a few importing manufacturirg firms or local manufacturing wherever possible would be preferable to the existing situation. 47. In agriculture-based industry, government is speeding up the process- ing industries so as to substitute processed products for exports of raw materials, e.g. wood products instead of logs and coconut oil irstead of copra. The by-products of processing plants were mostly wasted until recently when the private sector showed increased interest in converting by-products into useable products for domestic or foreign markets (e.g. rice bran and molasses for livestock feeding, bagasse for production of board and pulp. wood wastes for chips). An extensive study by the Government would lend valuable assistance to promotion of productive by-product use. The factual devaluation of the peso through which imports became more expensive, could induce the establishment of plants producing canned meat and fish, fish meal and soybean meal. An import levy would create the same effects. 48. Regional specialization of agriculture according to climatic and soil conditions is progressing slowly. Some changes have been noticeable, as in recent years new large coconut farms started to develop in Southern parts of the Philippines (particularly Mindanao) which are outside the typhoon zone. New banana, sorghum, soybeans, yellow corn and livestock development has been mainly concentrated in the southern parts. But a resettlement policy intended to move the population from the over-crowded areas in Luzon has not found a great response. This is partly due to traditional attachment to area or community but also to the difference in languages between vario-as islands. 49. The cooperatives, among which the Farmers Cooperative Marketing Association (FaCoMas) played the most important role, received a spurt of development in the last two years. FaCoMas improved relations -aith rural banks and ACA for farmers' credits; they became active distributors of fertilizers to farmers by agreements with fertilizer companies. 50. The Four-Year Plan strategy contains a number of ways to improve agricultural development; however, it may be useful to emphasize the follow- ing recommendations: (a) The Land Reform should not remain in its present stagnation. This is not only a barrier to economic and social development but also involves the stability of the country. It would be beneficial to proclaim all sharecroppers leaseholders, but this is not sufficient;medium-term credit facilities by rural banks or ACA or any other financial institution have to be added. Under the present slow procedures, Land Reform not being compulsory but resolved from case to case, leaseholders will not become landowners in the foreseeable future. This  _16_ creates a great social discontent among them. New legal and financial measures should be deve:Loped to substitute the present provisions of the Land Reform Code. An acceleration of the agricultural reform could 'be introduced by acquisition and subdivision of large land-estates to farmers on long-term mortgages as a guarantee basis. (b) Smal:L-sized farms however, will remain an obstacle for increased use of modern input factors. Moreover, these small farms will be fragmentized still further due to division by inheritance. Among some sugar farms in Negros a certain consolidation of small farms into a single large unit was started. This procedure might well be introduced in rice-growing areas where one common irrigation system unif'ies farmers. The concept of small farm consolidation deserves serious Government consideration. (c) The agricultural strategy for crop development should be based on a simultaneous operation of all the factors in the basic input-triangle (seeds + fertilizers + irrigation) in order to reach a rapid yield takeoff. When one of the factors is missing, the results are only partially satisfactory. At the same time, promoting input factors should be closely connected with deve'lopment of marketing, processing, credits and infrastructural facilities. (d) Often programming of irrigation projects is concerned only with irrigation per se; but programming of the crop pattern, other input factors, marketing, processing, and credit facilities to efficienitly use the irrigated land should be undertaken at the same time. In some new irrigation projects it was taken for granted that crops which were gronm before the introduction of ir?rigation, should be maintained, without taking into account the possibility of diversified crops. (e) Wherever possible, the introduction of small-scale irrigation by farmers through tubewells and pumps should be encouraged. This type of irrigation can often be introduced in a few weeks, while large irrigation projects require several years. Besides, the farmers appreciate getting rapid results by their own investments; however, they need credits for small-scale irrigation. (f) The expansion of irrigation has been concentrated mainly on paddly, but it is necessary to pay more attention to the irrigation of sugarcane. The lack of irrigation has been responsible for low yields, and short harvesting and crushing seaEsons for most sugar mills which led to establishing more sugar mills than necessary. Future irrigation projects for sugarcane should at the same time develop the full package of input factors, including credit facilities, to obtain optimal yields by sugar planters.  17 _ (g) One of the priority subjects for pre-investment study should be a comprehensive program of water resources (gravity and ground water) for year-round irrigation, combined with a land classification system of crops. A comprehensi-re water development project has to consider water requirements for agriculture, industry and domestic use in order to establish pre-requisites for investments in long-term irrigation. The water may become a more limiting factor for crop production than land. A number of reconnaissance studies on thae Phili- ppines and various parts of the country by UNDP/FAO and US/AID have already been prepared. The irrigation projects should be closely connected with land classification to determine the comparative advantages of different areas and soils for particular crops and livestock development. (h) The present breakthrough in rice output aiming at self-supply should be watched carefully so that output does not overshoot the targets. To accelerate the output drive is no problem as long as there is a domestic food shortage; but, the situation becomes different when the Philippines have to search for export markets. Many other countries are on their way to develop self-sufficiency in rice, while Japan who used to be the important importer of rice introduced a protectionist policy establishing a subsidized price at three times the world market prices. In case Philippine rice cannct find sufficient export outlets, prices on the domestic market will decline substantially; farmers may then suffer from the results of technological changes. Therefore, it may appear necessary to shift some of the rice acreage to other crops. (i) A program of fertilizer application on coconuts is urgently needed in order to increase yields. This involves providing coconut growers with credit facilities for a period of about 5 years, since without credit coconuts will not be fertilized on small groves. Corn and native tobacco belong to other crops needing increased application of fertilizers. (j) In milk production, the relationship between low-fat and cheap "toned-milk" with still cheaper "filled milk" (produced from domestic vegetable oils and skim milk powder ) and should be studied more carefully to secure development of "toned" milk industry; this would create a valuable supply of animal proteins to low-income groups. (k) An extensive study of production and marketing possibilities for using various by-products of processing industries in original or converted forms, would be valuable, as those are presently wasted.  18 - (1) One of the most important prerequisites for export of wood products appears to be reshaping the present inter- island shipping system by concentration of loading places. Other'ise, the wood inc.ustries cannot compete with other suppliers on the export, market. This would involve a careful study as the shift from logging to wood-processing depends also on the freight rates. (m) There are prospects for a project in deep-sea tuna fishing for exports; a preliminary feasibility study has been prepared and needs further attention. (n) An investigation of the possibilities of the local manu- facturing of agricultural equipment for small farmers would be valuable. Inadequate maintenance of spare parts is often a crucial problem for f'arm equipment. A selection of a few importing farm equipmernt firms would be beneficial as well as local manufacturing. (o) Among other products, the price support system for tobacco needs to be rationalized in order to promote higher graded quality and to improve yields. At present, the conipetitive position of tobacco on the international market is weak. It should be stressed that abaca should gradually shift from exports to supply in the domestic market, using the products for various purposes, e.g. pulp and sacks. (p) The Rice and Corn Administration system needs specific attention as the production of both croos concerned has reached levels different from those in earlier years when RCA was established. (q) The coordination system of the National Food and Agriculture Council has considerab:Ly promoted integrated action among government agencies an(d other orgamizations in the planning policy. It would be valuable if the coordination could be expanded to other agricultural sectors such as sugar, coconuts, tobacco and forestry. The National Food and Agric-ulture Council played an important role in the Four-Year ?lan preparation but a number of government agencies independently prepared their planning policy. All real efforts should be coordinated so that different targets set by various agencies on the same programs are eliminated.  APPENDIT I AGRICULTURAL COMMODITIES 1. This survey discusses in some detail the recent trends ia the pro- duction of the major commodities and the factors influencing their develop- ment. A. Rice and Corn 2. The impact of new high-yielding varieties of rice became very noticeable in 1968/69 during the most severe drought which hit the Phili- ppines in the last 50 years. The short growing season of the new varieties, during the period of water shortage saved the crop, which would otherwise have declined much more than by 2.5 percent compared with the previous year. In 1968/69, the total area planted with high-yielding varieties was 606,495 ha, an increase by 35.6 percent in comparison to 1967/68; low-yielding varieties covered 2,258,000 ha. The yield performance of high-yielding varieties averaged about 3,300 kg per ha, while yields of traditional paddy ranged from 1,300 to 1,500 kg per ha. In 1966, new varieties covered only 3 percent of the total rice area, while in 1968/69 they reached 18 percent, and 21 per- cent in 1970. Thus, the rice farmers reacted favorably to this innovation. Since November 1969, the famous IR-8 (miracle rice) started to be gradually replaced by IR-20 and IR-22. These new varieties require less fertilizer (particularly nitrogen), the grains are more translucent and break less than IR-8 and are more resistant to diseases. They also are dry when cooked and it is assumed that these new varieties will be more acceptable to Asian consumers than IR-8 and IR-5. 3. The high-yielding varieties of paddy (sturdy, short-strawed) need considerable amounts of fertilizers. In 1964, the application of fertilizers on rice was only 9.4 kg per ha, but this figure must have increased con- siderably after the introduction of high-yielding varieties. Nevertheless, only 30 percent of all rice farmers use fertilizers, and only at about one- half of the recommended rates. On these farms, expenditures on fertilizer account for about one-quarter of total production costs (?l4oo - FP50 on single-cropped ricefields). The cost of fertilizers (mostly urea and compounds) increased from about P120 per ha to F180 per ha after the factual devaluation in February 1970 and consequently, rice farmers considerably reduced their purchases of fertilizers. This might affect the favorable development in crop yields.  Appendix I Page 2 4. Increased irrigation of rice land is another factor which has improved rice cultivation. In 1968/69, 109,929 ha of rice land have been put under irrigation, of which 72,130 ha by pump system. Today about 750,000 ha or 30 per- cent of the total rice area are under irrigation, of which about one-third can bear two crops yearly, while 500,000 ha receivre only sufficient water for one crop. The aim is to reach 1 million ha of irrigated rice land at the end of the Four-Year Plan. Rice production would grow by 6.5 percent per year and the Philippines would gradually develo:D an exportable surplus. WVith the increased use of high-yielding varieties, the planned growth rate seems attainable. Assuming a yearly shift of 5 percent of the area from traditional to new varieties with average yield 2.5 times higher than the former, output would increase, by about 6 percent with one quarter of the area under new varieties, gradually levelling off to 4.5 percent by the time theses varieties cover one-half of the acreage. The planned expansion in irrigated area, allowing for double cropping would push these rates considerably up. With the second crop being harvested during the monsoon, the advisable extent of expansion in irrigation is to a certain degree determined by the availability of drying facilities. As already mentioned, plant breeding in search of the most suitable varieties is progress- ing further at the International Rice Research Institute in Los Banos 1/ and at the Government's Bureau of Plant Industry. 5. In the past, the Government has paid less attention to corn than to rice, although the price of both commodities is supported. Corn is the staple food for 7 million Filipinos and -ts nutritional content equals that of rice. But the yields of corn are less than one-half of the average rice yields per hectare and the price of corn is substantially lower than of rice. Recent increases of corn consumption in Central Luzon have been the consequence of increased price of rice relative -:o corn and not to a basic change in the con- sumption habits. In the Philippines, about 60 percent of corn (white flint) is used for human consumption, 30 percent (yellow) for animal feeding, and the rest for industrial uses, and see(is. 6. The corn farms are smaller, with an average of 1.2 ha, than those of rice (2.5 ha) ard often spread over marginal and deforestated land with low productivity. Ihe corn area of 2.3 million ha absorbed only 4.1 percent of total fertilizers used in the PhiLippines, wiile rice with 3.3 million ha accounted for 25.6 percent of total fertilizer application in 1967. The ideally required expenditure on fertilizers for corn rose from i144 to P200 per ha after the factual devaluation. The introduction of high-yielding varieties is slow; in 1968 an area of only 5h,000 ha was involved. 1/ The expenditures of the Rockefeller and Ford Foundations for ITUrT amounted to $15 million in 1962-1968, but the value of rice harvested in Asia might have been close to $1 billion higher in :1968/69 thanks to the new varieties than it would have been in their absence. See Lester R. Brown, Seeds of Change, (The Green Revolution and Development in the 1970's), New York, 1970, p. 49.  Appendix I Page 3 7. Recently, the authorities have embarked on a Feeding Program for livestock. This program calls for increased efforts to grow feedgrains, in particular yellow corn. Consequently, the goal of the corn program is to plant 150,000 ha with high-yielding varieties in 1971 and to reach a level of 500,000 ha in 1980. Projections for corn in the Four-Year Plar assume an average production growth rate of 8 percent. This is not much higher than recent performance. Price increases of inputs may, however, adversely affect the planned growth, although to a lesser extent than for rice. 8. Assuming an increased output of corn, Mindanao and Visayas might develop into surplus corn producers. In such a case, corn might be shipped to other islands for livestock feeding there, or the livestock industry could be expanded in the areas of corn production, depending i.a. on transport costs. 9. In 1966, the Rice and Corn Administration (RCA) was established with the purpose to maintain a low consumer retail price for both rice and corn and to support a "fair" level of farm prices. RCA purchased paddy and corn from farmers against receipts of delivery orders (called "quedan") to designated warehouses, usually private mills and FACOMAS cooperatives. Rice and corn bought by RCA is usually of low quality and is sold to low-income groups during shortage periods to prevent increases in consumer prices. Since RCA sells products to the public below cost, it carries large losses. Average annual losses amount to about P100 million (including excessive acdministrative costs of P20 million). 10. In 1966, the support price of paddy was increased from ?12 to P16 per cavan 1/, and in 1970 to P17.50 per cavan for rice and P13650 per cavan of corn. 27 This price support level was regarded as too low by the leading agricultural cooperatives. 3/ In May 1970, they requested a support price of P27 per cavan, on the basis of the recent rise in input prices following the factual devaluation. In the years of RCA intervention, this organization purchased about 5-10 percent out of the total crop. The floor prices provided a certain security to farmers at the time of introduction of high-yielding varieties, although in years of abundant supply e.g. in 1968 difficulties arose. In that year, the abundant supply of rice made the market prices decline below the support prices. RCA accumulated stocks of 462,000 mt (10.5 million cavan) in storage, which would have further depressed prices if sold on the market. RCA exhausted its fund 4/ for purchase of rice. The government suspended the operation of RCA through most of 1968. The organization was able to export only 42,000 mt and released stocks during the following drought. 1/ 1 cavan of rough rice (paddy or palay) = 46 kg (gross). 2/ 1 cavan of corn = 56 kg (gross). 3/ Agricultural Cooperative League of the Philippines, which claims a membership of 300,000 rice farmers organized in 285 cooperatives. 4/ RCA borrows the "revolving fund" for stabilization from the Philippine National Bank (7 percent interest).  Appendix I Page h Ilo Although RCA intervened favorably in the market in the early period of the introduction of new varieties, it now lacks e nds for greater intervention ind has insufficient effect on the market as a stabilizing factor. RCA is the only organization which can import rice in times of shortage, but exports can be handled by private firms. The present agricultural policy intends to export rice of high-quality, long-grain varieties and to import an equal quantity of lower- graded rice for the ]ow income groups. Most other rice importing countries also attempt to reach self-sufficiency, while Japan, as the most important importer, has developed a highly protective policy. The quality of Filipino rice is not yet known on export markets and the experience with IR-8 has not been satisfactory. I4ore favorable results are expected from IR-20 and IR-22, but this will have to be proven by the actual experience. B. Sorghuna and So;ybeans 12. The introduc:tion of sorghum is a complete novelty in the Philippines, while soybeans are already grown, but on a small area. The natural conditions are very favorable for both crops on these islands. The crash feed-program provides possibilities for development in 19 pilot provinces particularly on tne island of Luzon nearby large commercial mills. These crops will be planted as succession crops to rain-fed low-land rice and irrigated rice with inadequate water supply for a second rice crop. The sorghum program started last year; 200 ha were planted up to March 1970 cf which production of 440 mt is expected. The current demand by commercial feed mills for soybean is 60,000 mt. (which would involve 20,000 ha of sorghum). The soybeans area (Western Visayas) comprises 1,480 ha with an expected production of' 1,250 mt. Imports of soybean flour amounted to 65,000 tons last year at a value of P45 million. 13. Under the auspices of the Nlational Food and Agriculture Council, agreements have been reached be-tween i'eedgrain producers and two soybean meal olants near Manila for processing of soybeans. I'hese two plants with an annual capacity of 100,000 tons have not been operating since 1967, when a tariff of P250 was introduced on soybean imports. The tariff on soybeans and soybean meal should be realistically adjusted to avoid that progress in the livestock and poultry production would be slowed down. The Feed Program provides for the following expansion in area: Years Yellow Corn Sorghinrm Soybeans Credits (1,000 h7ectares) (Million Pesos) 1970-71 56 12 2 9.84L 1971-72 67 28 6 13.774 1972-73 8C 44 12 18.51 1973-74 96, 60 24 24.75 Total 299 144 44 66.84  Appendix Page C. Livestock 14. The feedgrain program is geared primarily to hog and poultry raising, with small quantities going into cattle and carabao raising. Feeding costs represent about 60-70 percent of total production cost of pork and poultry. The most important feeding ingredients in the program are yellow corn, sorghum, soybeans and further rice bran, copra meal, fish meal and molasses. The Develop- ment Bank of the Philippines intends to finance 15 large-scale piggery projects a year for the next ten years at a cost of about P18-20 million. These 150 projects could raise the herd from 8,000 to 177,000 hogs and produce 73,000 tons of purk meat within ten years. The FY 1971-74 Development Plan fcresees a yearly increase in poultry, pork meat and egg production of about 50,000 mt, which would correspond to increased feed requirements of some 300,000 mt per year. The successful implementation of the Feed Program would result in an additional feed supply of about 180,000 mt. Domestic shortages of feed are therefore to be expected. 15. Many cattle farms are managed by traditional methods as during the Spanish period, on large haciendas. Some of the large ranches started to intensify cattle production, and coconut plantations in Mindanao became interested in livestock production. The Development Bank of the Philippines intends to finance a minimum of 20,000 ha of ranch land a year for a period of 13 years, at a yearly cost of about F3.6-4u million. These 260,000 ha of ranch land would provide for 430,000 heads of cattle and 41,000 mt of beef. Furthermore, the Government, with the assistance of a UNDP mission, will formulate a proposal for a pilot cattle improvement project, which would involve intensification of cattle production on existing large ranches and on coconut plantations in Mindanao and Negros. 16. The production of "toned" milk belongs to the innovations of the dairy industry as carabao milk has a high content of butter fat (8-12 percent), even higher than buffalo milk in India where manufacture of toned milk developed during the last 20 years. The dairy plant at the Agricultural College in Los Banos has started the manufacture of toned milk in May 1970. The program of the Bureau of Animal Industry has developed large-size projects for increased output of milk from 9,400 tons in 1968 to 311,000 tons in 1973 (mainly tonel milk). This target does not seem feasible as the milk resources are not available, and the project of toned milk may be scaled down, in spite of the fact that demand for milk and dairy products is growing rapidly. In 1965 imports of dairy products amounted to US$26 million and in 1969 to US$37 million. D. Coconut Products 17. About 84 percent of total coconut products are exported, but the production is not increasing sufficiently to satisfy both exports and domestic consumption. The Philippines have a predominant role in the world market of coconut products; the country produced 42 percent of the world's copra and shared for 63 percent in international trade in 1967. In the same year it accounted for about 50 percent of coconut oil and desiccated coconuts, and ~,0 percent of cpra cake and meal in international trade. Coconut growing forms one of the least  Appendix T Page 6 developed sectors cf Philippine agriculture and is managed along traditional lines. Some reasons for low productivity are: (1) Annual yields of coconut are 30 ]luts per tree. This could be raised to 120 nuts by proper application of fertilizers as the plantations renove considesrable quantities of plant nutrients from the soil. 1/ Out of a total area of 1.8 million ha under coconut in 1968, fertilizers were applied only on 4,000 ha, totalling about 2,000 tons. According to the estimates of ESSO, coconuts would need an application of 600,000 tons to obtain adequate yields. Since 1960, average yields of coconuts declined by about 2 percent annually. This; was due to antiquated techniques and a complete lack of technical inputs, rejuvenatiozn of plantations and cadang- cadang infestations. (2) Lack of credits makes it impossi'ble for the growers to purchase fertilizers. About 42.14 percent of the total coconut area belong to farmer/tenLants with less than 5 ha per farm and an income of less than P400 per year. The agricultural reform has not yet entered into the problem of leaseholding or ownership of coconut growers. Given the long gestation period of coconuts, credits should be of a long-term nature of about 5 years and this type is not available at all. (3) The introduction of quickly producing dwarf varieties has not been started nor examined sufficiently. (4) Weather conditions have a strong effect on the output of coconuts, particularly typhoons, and the effects remain noticeable during a period of 18 to 24 months. 18. The precarious situation was finally realized and the "Presidential Coconut Action Group" (PCAG) was established with the task to arrange various measures for promotion of production. Among these are setting up of 100 demon- strations farms (Cwth a size of only 1 ha) by Philcoa, of which only 8 are operating now;'' furthermore, the promotion of plowing which can increase yields by 40 percent, the propagation of seeds, rejuvenation and rehabilitation of plantations; many trees of over 60 years old are still regarded as economically productive and are not replaced on small farms. Increased attention is paid to inter-cropping (rice, corn, pineapples, vegetables, papaya, coffee, etc.), control of diseases, marketing of ccconut by-products (coir, husks, charcoal, etc.) An increase in prodluction is also expected from the newly established large coconut plantations (some with a size of 7,000 ha) in Mindanao by several corpo- rations which absorb smallholders into wage-earners on large farms. 1/ A plantation o: 173 trees per ha harvesting 40 nuts/tree/year removes from the soil: 91 kg N, 41 kg P205 and 135 kg K20.  Appendix I Page 7 19. The copra projections in the Four-Year Plan appear to be conservative with an annual production increase of 3.5 percent from 1971-74, since the actual growth rate was 5.3 percent from 1961 to 1968. The growth rate of desiccated coconut of 3.9 percent appears to be high, as the production in the past years declined (-0.7 percent from 1961 to 1968). The export market in the United States, the main market for this product shows favorable aspects, but not a significant upward trend. 20. The Four-Year Plan assumes a further shift from exports of copra to coconut oil. Exports of copra were 1,060,000 tons in 1960 and declined to 659,000 tons in 1969, 1/ while coconut oil exports increased from 60,00 tons to 240,000. In the same period, the number of oil mills in the Philippines increased from 4 to 32 (working at about 30-80 percent of plant capacity, according to seasons) and the number of copra exporters declined from 30 firms to 3 or 4 large exporters. According to the export projection of the: Four- Year Plan, 484,000 metric tons of coconut oil and 699,000 tons of copra should be exported in 1974. The shift from copra to coconut oil is also favored by high prices of coconut oil in the world market, which product belongs to the highest-priced major oils in the last decade. International prices of both products were as follows: Years Copra a/ Coconut Oil b/ (-US dollars per metric ton) 1965 226.5 359.9 1966 184.9 311.1 1967 207.5 326.4 1968 232.5 399.2 1969 202.0 361.2 1970 March 242.0 405.0 a/ Philippines, bulk, c.i.f. Europe. b/ Ceylon, 1 percent bulk, c.i.f. Europe. Prices of copra and coconut oil rise steeply when supplies are short, and decline sharply at abundant supplies. Coconut oil has certain qualities for which a specific demand exists. It has a steady demand in bakeries, confectionery, ice-cream industry and for other edible products in the United States. In Western Europe, it is traditionally used for margarine 1/ It should be emphasized, however, that export statistics may not accurately reflect the actual exports. Prior to the 1970 factual devaluation, a substantial part of copra exports is believed to have remained unrecorded. A similar phenomenon took place prior to the devaluation in the early 'sixties.  Appendix I Page 8 and shortening, with soybean oil, palm and gro-undnut oil, etc. as competing products. Other lower priced synthetics started to compete vigorously with coconut oil on the market. Hence, a substantial expansion of coconut oil supply on the world market will be followed most probab-ly by, a drop ( coconut prices. Cn the other hand, coconut oil- might then recapture some former markets which were lost due -to high prices. The Four-Year Plan considers that the United States is "unlikely to absorb the total Philippine coconut oil availabilities" but might take aboub 350,000 mt, while for the remainder markets have to be found in Europe. However, expansion of the coconut oil industry is not regarded favorably by the processing industries of copra importing countries. The Dutch Association of Margarine Industry requested EE to introduce import levies on coconut oil. E. Sugar 21. Sugar plantations and sugar industry belong to the advanced agro- industries in the Philippines. However, the sugar production has failed to meet its commitments to the United States since i965. The area of sugar production increased from 270,000 ha in 1964 to 340,000 ha in 1969, but with lower yields and deteriorated cane quality; th:is was partly due to the planting of cane on marginal lands with low productivity. Droughts and typhoons are also partly responsible. The United States has the legal possibilities to reduce the quota if it is not filled, but it waived this privilege. 1/ However, the failure of the Philippines to fill additio:nal sugar quotas became a national economic emergencyr problem and the President created a "Sugar Production Council" in June 1968 with the task to introduce a crash program to invigorate sugar production. 22. In 1968/'69, 133,000 ha of high-yielding varieties of sugar were planted; average yields on these fields reached 6,180 kg (103 piculs) 2/ per hectare while the average is 5,000 kg or 8, piculs. The high-yielding varieties should be expanded to 25(,000 ha by 1972. 23. The app:Lication of fertilizers increased, particularly of potash and phosphoric acid; --he use of nitrogen declined, however. In 1967 sugar accounted for 52 percent of all fertilizers used in the Philippines. If the recommended 1/ Section 202 (d) of U.S. Public Law 89-331 (Sugar Act Amendrment of i965) stipulates that whenever in any calendar y-ear a foreign country fails to fill at least 90 percent of its qu.ta as established under the Act, the quota for such country for the subsequent calendar year shall be reduced by the amount of the quota it failed to fill. Crop disaster or some other grave causes, however, may be sufficient reasons for the penalties invoked by the law to be waived. Such waivers have been granted to the Philippines. 2/ 1 picul = 60 kg.  Appendix I Page 9 rates are applied, sugar yields can increase by 600 kg (10 piculs) per hectare. Sugar plantations on the island of Negros, which produce over 70 percent of sugarcane in the country, applied 1 to 1.5 mt. of fertilizers with expenditures of about P300 per hectare or 40-50 percent of their total production costs. After the factual devaluation, the costs of fertilizers on typical sugar farms increased from P315 to P4175 per hectare, which might become a serious obstacle to higher yields in the future harvest. 24. Lack of irrigation in sugar area is one of the most important limiting factors of increased production as only 5 percent of total sugar area is irrigated. To grow sugarcane on irrigated land would increase yields by about one metric ton (18 piculs) per hectare. Irrigation would also help to extend the milling season; the season is now very short (on the average 135- 160 grinding days, according to Philsugin). The size of farms terds to become smaller because of inheritance. About 70 percent of total acreage still belongs to farms with a size of over 50 ha and farmers are owners of the lanc_. The smaller farms have difficulties in making investments. In Negros, some districts started a consolidation of small farms into large units to reach a higher efficiency. It should be added that the sugar planters are the best organized farmers in the country and the Sugar Producers Cooperative includes 27,000 of the 30,000 sugar planters as members. 25. The development of sugar industry depends solely on the United States as a pulling force on production, as U.S. is the only buyer of sugar with a favorable quota system and considerably higher prices than on the world market. In 1969 the price of sugar in the U.S. was about 3.36 cents per pound higher than on the world market (3.37 cents per pound). Production costs in the Philippines are 2-4.5 cents per pound. Consequently, the Philippines is not using its quota of 60,000 tons in the International Sugar Agreement, such as exports would be unprofitable. The United States Department of Agriculture assigned the basic quota for 1970 (including a set portion of the increase in U. S. consunption requirements) at 1,126,020 short tons; the additional quota compensating for other countries' deficits is about 384,843 short tons and the total 1.5 Tmllion short tons (raw value) or 1,370,000 mt. At present, Philsugin expects to fulfill completely the basic quota and to ship 60,000 to 100,000 additional quota. Future arrangements with the United States depend mainly on the increased level of production, which will provide a more favorable negotiating position for the Philippines than at present with the non-fulfil- ment of commitments. The expiration of the Laurel-Langley Agreement in 1974 is another issue creating uncertainties. 26. The projections of sugar production in the Four-Year Plan are rather conservative and considerably lower than those of the Philsugin. 1/ The annual growth rate of 3.8 percent can be reached by realizing the various input factors 1/ The Four-Year Program's production projection for 1972 amounts to 1,929,000 mt., while those of the Philsugin is much higher wi-;h 2,360,000 mt. See the Sugar Production Program 1968-1972 prepared by Sugar Products Task Force, Manila 1968.  Appendix I Page 10 in the crash program, although the actual growth rate was 3 percent in the period 1968. The export projections of raw sugar barely cover the basic quota to the United States, and not the additional quotas. The projections of production include molasses with a relatively high growth rate of 3 percent. This by-product used to have high export prices in 1964 and 1965, which declined since, from $100 to $60 per ton. Use of molasses for livestock feeding started recently in the Phi:lippines. Bagasse has been used only marginally as fuel, but some attempts and projects have bleen made for the manufacture of board from bagasse, which is cheaper than manufacture from wood. Such a complementary industry would be beneficial for workers during the seasons that mills are inoperative which in Negros is the case during 5 months out of 12. F. Tobacco 27. A great difference exists between native cigar-filler tobacco produc- tion which follows traditional methods, and Virginia tobacco production which was introduced in 1.953, to substitute for heavy imports of cigarettes. In 1955, the area of Virginia tobacco was only 3,260 ha; it reached 49,000 ha in 1968, while native tobacco covers about 55,000 ha. Native tobacco is grown on alluvial soils and Virginia tobacco on sandy soils, mostly in Nor`hern Luzon. The cigar-tobacco farms are very small in size (0.5 to 1.0 ha), while those producing Virginia tobacco are larger (2 ha); many rice farmers became Virginia tobacco growers. Fertilizers are not used on cigar tobacco at all, while fertilizers make up? 50 percent of total expenditures for Virginia tobacco. The farmers of Virginia tobacco are organized in cooperatives (FACOMAS) but none exist among native tobacco farmers, whose income is less than P800 per year. 28. The average yield of native tobacco was 700-800 kg per ha while 1,200 kg could be reached by fertil-zer application. The yields of Virginia tobacco are not higher (730 kg/ha). Low yields and high production costs are restricting the competition on the :Lnternational market. Both crops are supported by the Government. The subsidy of cigar tobacco is PlO million for five years, while the Virginia Tobacco Administration used to be financed by the Central Bank, to which it is in heavy debt (about P230 million). In spite of all efforts to promote Virginia tobacco, this product scores low on leaf classification, and recently foreign technicians were called in to advise on proper grading and gradual elimination of low grades from the market. Farmers are negligent in the classification when they deliver tobacco to the cooperatives (FACOMAS). Gradual introduction of higher grades may need about 5 years. 29. Virginia tobacco has great difficulty in finding customers on the international market; 7,000 tons were exported in 1969. Large exports occurred only in 1968 due to crop failure in Indonesia, but at very low prices. Stocks of 1,200 tons of Virginia tobacco accumulated in the beginning of 1970 out of a production of 20,000 tons in 1969). These latrge stocks of low-graded aromatic tobacco were bought by the Virginia Tobacco Administration at the high support prices prescribed by the governmnent.  Appendix I Page 11 30. The production of native tobacco was 37,000 tons in 1969, 40 percent of which was exported. There are no stocks. The Philippine cigar-leaf tobacco is of excellent quality but a very expensive product. Under the Laurel-Langley Agreement, Philippine cigars enjoy a fixed tariff-free quota for imports to the United States, but this was never filled. In 1968, the quota was 80 million cigars, but actual eXports were only 10.3 million. In that year, the total export value of cigars was only $535,000, while the exports of unmanufacbured cigar tobacco amounted to $13.5 million. 31. The Four-Year Plan prefers expansion of native tobacco (annual growth rate 3.6 percent) over that of Virginia tobacco (1.4 percent), which might be due to various reasons mentioned above. But there is an urgent need to re- organize the whole price support system, which has not promoted the production of higher quality tobacco for domestic and foreign markets. The production needs also a vigorous introduction of modern methods as the production costs are extremely high and productivity low. G. Abaca 32. About 80-90 percent of the production of abaca is exported but in recent years exports experienced stiff competition from other hard fibres and synthetics, particu:Larly in the rope industry. Therefore, the prices of abaca declined, which was followed by a severe reduction in production. In Mindanao, the main abaca area ,many farmers shifted from this product to coconuts and bananas. The production of abaca declined so severely that it cculd not meet the normal demand in foreign markets and increased demand of the pulp and paper industry. Consequently, the prices of abaca increased again in 1968, which gave an impetus to production. 33. The value of total abaca exports was US$10.5 million in 1968 and $12.5 million in 1969, only a fraction of the $67 million reacher- in 1952. The United States take about 40 percent of abaca exports which enter duty free under the Laurel-Langley Agreement. Since the export possibilities of abaca do not show favorable long term prospects in the international market, nore attention should be devoted to the expansion in use of abaca products in the domestic market. Two pulp factories started to use long-fibre abaca in the Philippines, and one project to produce 1 million sacks from abaca substituting imports of jute sacks is under consideration. 34. The responsible government agency, the Abaca Corporation of the Philippines, has not played a significant role in stabilizing the market by purchasing products at the "protected" price level; its purchases amounted to less than 7 percent of total production. The agency has not been operative for the last two years. It started to operate again in 1970. 35. The problems of finding a solution for abaca on the domestic market are becoming urgent, as about 5 million people obtain their living from this product. If farmers cannot shift to other occupations in agriculture and  Appendix I Page 12 industry, they will soon represent a social problem of high unemployment. The Four-Year Plan shows an annual production growth rate of 1.4 percent, which is rather hILgh in comparison with the 1961-1968 performance of -1.6 percent. H. Bananas and Pineapples 36. In 1968, a most important innovation started when the commercial cultivation of bananas (Grant Caverndish variety) was introduced by an American company (StanfilcTo .Two other American companies followed. The companies signed contracts with individual farmers; production takes place under the guidance of experts, to reach acceptable produLcts for the export market. One company signed 200 contracts with farmers eachi of whom works a plantation of about 12 ha. The banana growers obtain pre-production loans on 10 months' terms for fertilizers, seeds, etc. The Development Bank of the Philippines granted loans to planters who have marketing and management contracts with the Stanfilco (about P2,800 per ha.). The intention of the Philippine banana agro- industry is to penetrate gradually into the Japanese market in competition with the present exporters in Taiwan, Ecuador and Honduras. In 1969, the first Philippine exports of bananas arrived in Japan with a share of 3 percent of total shipments. It is expected that Phil.ippine exports of bananas to Japan will reach a share of 52 percent in 1973, i.e. about 1,000 million pounds. This production can be reached by planting 13,000 ha of bananas in the Philippines. The value of exports would amount to US$33 million (excluding ocean transportation costs). The export tax on bananas is not applicable in 1970, but it is expected to become 6 percent in July 1971. 37. Pineapples are growm in large commercial plantations, managed by foreign companies, according to the most scientific methods. The area of commercial pineapples covers about 27,000 ha, mainly in Mindanao. The value of exports in 1969 was US$15.6 million (f.o.b. Philippines) and their destination was as follows: US $ million Unite6. States Continental Europe 4.6 UnitecL Kingdom 2.0 Japan 0.8 Other.s C.4 I. Forestry and Forest Products 38. The forests in the Philippines cover half of the country's area, but forests are abominably devastated by shifting agriculture and unauthorized logging. It is estimated by FAO forest experts that the clearance of forests by shifting agriculture (kaingin) and legal and illegal encroachment on the forests represent about 100,000 ha yearly. 1/ In Northern Luzon, over 1/ The Philippine Forestry Economics, FAO, Rome 1970, p. 42.  Appendix I Page 13 1 million ha of cleared forest cannot be expected to be regenerated in high forest. The official Forestry Statistics register only a small part of actual clearing as the forestry officers do not report it. Punitive measures against kaingineros have been passed under Republic Act, but political pressure and slow court procedures seldom bring any results. 39. According to the Four-Year Plan, 5 million ha of open land, including some 1.5 million ha of critical watersheds are in need of reforestation. So far, about 153,000 ha. have been planted. The current annual planting rate is only 30,000 ha. At this rate two centuries would be needed to reforest the open mountain areas. It is estimated, however, that by a moderate amount of silvicultural work: in over-cut forests, the yield would safely boe increased to a level of 14 million m3 and even high yields of 18-20 million m3 are within the capacity of the forests in the next 20 years. 1/ The Division of Forest Economics in the Bureau of Forestry estimates the potential cut at 15 million m3. 40. The intention of the Four-Year Plan is to shift exports from logs as raw material to manufactured products (lumber, veneer, plywood). This should be reached by reducing log exports to 40 percent of allowable cut, from 68 percent in the period 1962-1968. The shift from logging to manufacturing of wood products will be extremely difficult to achieve since log exports are a profitable operation while other wood products sustain losses or make only small profits, as the following table shows: 2/ Annual average profit or loss from 1963-1966 on the basis of financial Type of Operation statements; before deduction of tax Logging + 25.8% Sawmill - 33.3 Plywood and veneer + 1.7% Higher capital returns in logging are due to a low capital/output ratio (labor intensive industry) as well as to favorable demand for logs in Japan, Korea and Taiwan. The wood-processing industries operate with a high cost of production, low capacity plant utilization, restricted market outlets outside the United States and heavy freight costs. 41. In 1966, out of 623 sawmills only 321 were operating, at 37-42 percent of their capacity. Plywood and veneer plants numbered 12 in 1957 and 32 in 1970; they used 80 percent of their capacity. The greatest problem for exports of wood products resides in the high freight rates, in comparison with competing countries. One of the main causes of heavy freight rates is the dispersion of wood-processing plants over various islands which requires many loading places and considerable time for final shipments. Plywood shipments from the Philippines to the UJnited States need 20 days for loading, while in Japan this 1/ The Philippine Forestry Economics, op. cit. 2/ Status of the wood and wood-processing industries (Part 1) prepared by the Economic Development Foundation, Manila 1968, p.5.  Appendix I Page 14 operation is completed in 5 days. The freight rates from South Korea and Taiwan to the United States are 42.5 percent and 27.5 percent lower than those from the Philippines. The lunber shipping rates from Japan to the United States were 17.6 percent lower in contract rates and 28.3 percent in non-contract rates than shipments from the Philippines. The reduction of inter-island shipping and shipping rates by concentration of p-Lants in selected loading places is a precondition for increased exports of wood products. The problem of local conversion of logs into manufactured products is further hampered by the fact that quality logs are exported and only the inferior ones are processed, which are often below world standards. 42. In 1969, a mission of wood-processing industries visited Europe to find new markets there. European im?orters showqed interest in those parts of wood products that can be used for furniture and not for housing as in the United States. This would mean reconzverting certain plants to obtain suitable products. Actual efforts have not yet been made in this respect. J. Fisheries 4,3. Fish is orLe of the main food items in the diet of the Philippine islands. The consumption of fish increased from 20.6 kg per capita in 1964 to 28 kg in 1968. The available resources would permit a much higher catch, export possibilities and substitution of large imports of canned fish. The Philippine sea fisheries have 1.6 million kmo at their disposal. Of this, only the coastal waters and shallow seas have been exploited, but not yet the offshore and deep sea. The fresh water covers 9,000 jm2 but heavy fishing has depleted some areas. The 5,000 km2 of brackish swampland are only partly utilized. About 80 percent of the total fish catch is sold to the consumers as unprocessed fish, about 19 percent reach the stalls of retail dealers as dried fish, and onLy- 1 percent is being delivered as canned, smoked or processed fish. 44. Fisheries started to be developed after World War II and the product- ion tripled between 1951 and 1968. The fish industry has to face many problems among which: (1) lack of research information on the potentials of the fishery resources; (2) inadequate and antiquated equipment of fishing boats; (3) lack of trained personnel to operate the fish industry; (4) inadequacy of fish marketing facilities such as refrigera- tion units; (5) inad3quate safeguards to prevent water pollution; (6) illegal methods of fishing; and (7) limited credit assistance to the fishery industries.  Appendix I Page- 15 The Philippine Fishery Commission is executing a stocking progran in inland waters and a massive fish fingerling production project with assistance of FAO experts. The Commission has expanded extension services by manpower training in fish pcond operation, and established fish refrigeration units for markets, etc. T'he potentials are large in fresh water fishing where at present 500 kg per ha are obtained but where yields could be increased 6 times. Recently, particular attention has been paid to the large tuna sbocks in the waters around Sulu Archipelago. A project is prepared for frozen tuna, which could be exported to available markets in the United States, Japan and Italy. It is proposed to convert sardine boats into tuna boats for catching about 10,000 tons of tuna. There is also a proposal to develop shrimp fishing for exports. 45. Philippines exported a few hundred dollars worth of fish; but imported large quantities of canned fish as the following data show: LMports of fish and fish preparations a/ (F.o.b. value in thousand US dollars) 1965 13,884 1966 15,670 1967 19,526 1968 22,112 a/ Chilled or frozen fish is imported from the United States and Hongkong, shrimp from Hongkong, mackerel from Japan, salmon from Canada, sardines from Portugal, tuna from Japan, etc. Imports of canned fish represented 9 percent of total food imports in 1965, and nearly 20 percent in 1968. In addition, fish meal was imported, for an amount of F7.3 million in 1967 and p8.9 million in 1968. Imports of canned fish have become more expensive following the factual devaluation, and this may give a new impetus to the canning industry. 46. The Four.-Year Plan projects a rather conservative growth rate for fishery production at 8 percent from 1971 to 1974, while the actual rate was 10.9 percent between 1961 and 1968. The Philippine Fisheries Commission uses much higher projections than the Four-Year Plan; it is the intention of the Commission to reach in 1972 the targets planned earlier for 1995. According to the Philippine Fishery Commission, the target of fish output is 1,936,000 tons for 1974, which is 449,000 tons more than in the Four-Year Plan.  I I  Appendix II - Table 1 Actual Production for 1968 and 1969 and Phyaical Targets of the Agricultur Proram PT 1971-1974 1968 a 1969 Commodity Actual!! ActuQla" 1971 972 1973 1974 Food Crops 9,294 9,353 10,950 21,620 12,342 13,127 Palay 4,561 4,445 5,510 5,868 6,249 6,655 Corn 1,619 1,733 2,039 2,202 2,378 2,568 Fruits and Nuts 1,372 1,376 1,531 1,618 1,715 1,818 Rootcrops 1,305 1,338 1,392 1,413 1,434 1,456 Vegetables 251 272 328 348 369 391 Coffee 44 44 52 55 59 63 Sorghum - 4 9 15 30 Soybean - - 2 5 16 34 Others 143 145 97 102 107 112 Commercial Crops 3,948 4,146 4,406 4,583 4,718 4,910 Copra 1,542 1,737 1,678 1,737 1,798 1,861 Desiccated Coconut 56 50 100 104 108 112 Sugar (Centrifugal and Moacovado) 1,658 1,665 1,836 1,929 1,976 2,079 Molasses 503 505 550 566 583 600 Abaca 103 105 141 143 145 147 Tobacco - Virginia 17 20 24 24 25 25 Tobacco - Native 48 37 54 56 58 60 Rubber 14 22 17 18 19 20 Others 5 6 6 6 6 6 Total Crops 13,242 13,498 15,356 16,203 17,060 18,037 Forestry (logs)! 4,711 5,003 4,847 4,944 5,043 5,144 Fishery 938 1,036 1,180 1,275 1,378 1,487 Commrcial 407 512 553 598 645 Fishponds 87 109 118 127 137 Municipal and Sustenance 444 559 604 653 705 Livestock Population (no. in 000) Cattle 1,644 1,823 1,887 1,953 2,021 Carabao 4,173 4,626 4,788 4,956 5,129 Poultry 71,395 92,458 100,779 109,849 119,735 Hogs 6,090 7,779 8,440 9,157 9,935 Others 906 933 942 951 960 Slaughtered (no. in COO) Cattle 212 235 243 251 260 Carabao 30 33 34 35 36 Poultry 32,566 42,174 45,970 50,107 54,617 Hogs 6,715 8,577 9,306 10,097 10,955 Others 84 87 88 89 90 Dressed Weight (in MN) 361,687 457,255 494,604 535,091 578,987 Cattle 23,299 25,833 26,737 27,672 28,641 Carabao 4,197 4,654 4,817 4,985 5,160 Poultry 35,823 46,391 50,567 55,118 60,078 Hogs 295,440 377,362 409,438 444,240 482,001 Others 2,926 3,015 3,045 3,076 3,107 Fresh Mi1k 9.40b" 25.9 26.2 29.3 33.2 Poultry Eggs 95.83- 130.0 138.5 157.0 167.2 a/ Bureau of Agricultural Economics, Bureau of Forestry, Philippine Fisheries Commission; pr)liminary estimates. Program of Production cf Animal Protein, prepared by the Bureau of Animal Industry, April, 1970. In million board feet.  I I I  Appendix II - Table 2 Average Growth Rates of kJor Agricultural Products (percentage ) Four-Year Bureau of Projections Development Actual Growth Rates of 1969 Plan Animal Husbandry e/ l96l-68~~" b/ C/ dl191-1 1961-68_- 1965-68 - 196_9 169-72/ 1971-7- Food Crops 3.3 3.9 o.6 7.6 6.2 Palay (paddy) 0 17 -- 1= Corn 4.2 7.2 7.0 8.8 8.0 Fruits and Nuts 10.0 4.2 0.3 5.8 6.o Rootcrops -1.5 -5.3 2.5 1.2 1.5 Vegetables 4.5 2.8 8.7 6.1 6.o Coffee 4.5 -0.1 7.3 6.4 6.6 Sorghum - - - - 72.2 Soybeans - - - - 127.5 Export Crops 3.9 1.6 5.o 5.1 3.7 Copra ITT 7l7 7. Desiccated Coconut -0.7 -3.6 -11.7 4.2 3.9 Sugar (centifugal and Mhscovado) 3.0 0.8 0.-4 7.6 3.8 Molasses 5.1 6.7 0.4 2.7 3.0 Abaca -1.6 -8.3 1.5 1.6 1.4 Tobacco - Virginia -6.7 0.4 14.4 0.8 1.4 Tobacco - Native 6.o 18.5 -22.3 4.3 3.6 Fishery (Total) 10.9 12.0 10.5 7.6 8.0 Fore stryf Logs 7.7 22.0 14.2 f5. / 2.0 Lumber -0.3 -6.6 SK n.a. n.a. Plywood 15.1 5.2 -f n.a. n.a. Veneer 26.0 17.1 -g/ n.a. n.a. Live stock_Population Cattle 3.8 3.5 3.6 Carabao 3.9 3.5 3.6 Poultry 11.0 9.0 6.3 Hogs 10.5 8.5 10.3 Others 1.0 1.0 a/ Bureau of Agricultural 3conomics. bET/ Background paper for the World Bank mission. Jointly prepared by Department of Economic Research, Central Bank of the Philippines and Operational Planning and Statistics Office Presidential Rconomic Staff, May 1970. c/ The Revised Agricultural Development Program BY 1969-73, Presidential Economic Staff, Agricultural Program Office, January 1969, p.32. d/ Four-Year Davelopment Plan for the period FT 1971-74. Prepared to Interagency Committee, March 1970 - Table IV-1-]. e/ Program of Production of Animal Protein Foods and Policy on Animal Production, prepared by the Bureau of Animal Industry, April 1970. fl Timber cut will decelerate by 5.0 percent yearly from a high attained in 1968 and domestic processing of logs will accelerate from 40 percent in 1969 to 80 percent in 1973. EL/ Forestry Statistics show an increase of lumber production from 432,921,000 bd. ft. in 1967/68 to 620,975,000 bd. ft. in 1968/69, decline of plywood from 695,034 to 523,866 sq. ft. and decline of veneer from 1,205,910 sq. ft. to 627,271 sq. ft. in the same period. n. a. = not available