My Thoughts on Analysts Who Say That Onion Importation May Hurt Local Farmers
Sonny Africa, executive director of nonprofit IBON Foundation, expects the import plan to collide with onion harvest season.
“The proposal to import onions will make farmgate prices fall at the expense of local farmers starting to harvest in January and February, collapsing their incomes further, while the impact on retail prices is uncertain and depends on how these will be sold,” he said in a Viber message.
Onion prices have become a trending topic on social media in December, as a kilogram of the produce in now costs as much as P700 in Metro Manila.
This is making me laugh thinking about why in the world should I take Africa seriously? Africa, of IBON Foundation, nonetheless with their obsession with three "solutions" that aren't solutions. These three solutions are, "Raise the salaries. Reduce the prices of goods. Give handouts to everyone." (read here) Such solutions are guaranteed to actually cause massive inflation. We print more money, and the money gets devalued. Higher salaries require higher costs for products and services. If people are required to sell at a lower cost while having higher salaries, it's practically selling at a loss.
Even more, Africa's solution, if any, is this:
“The best solution for farmers and consumers is to go after unscrupulous traders and immediately stop their hoarding and price manipulation. This has to be done while also already giving greater govt production and trading support to local onion farmers,” he added.
I could agree that there are unscrupulous traders who do hoarding and price manipulation. However, that's not the only point. Pricing is determined by factors like supply chain analysis and the law of supply and demand. I really must laugh at IBON Foundation as it's full of highly educated people giving stupid solutions (read here).
We have an economist from the hard-to-enter Ateneo De Manila University (ADMU) which shows the double-edged sword with the imports:
Leonardo Lanzona, an economist at Ateneo de Manila University, said the plan will only benefit consumers—at the expense of farmers’ livelihoods.
“On the whole, the importation of onions will be beneficial to consumers but will be harmful to farmers’ prices of onions are expected to decrease, but this will only be temporary if no action is done to increase its local production,” he said.
Africa lamented that relying on imports would result in onion farmers grappling with lower farmgate prices. This means that they could even be selling their onions at a loss if the import proposal pushes through.
For Lanzona, importing onions has no assurances.
“Furthermore, while farmgate prices will decline in the process, there is no guarantee that the retail prices will fall at the same rate as distribution and other transaction costs can remain high,” Lanzona said. “In effect, importation is not necessarily going to solve this issue.”
This is also where I'm going to call Africa a hypocrite. Africa is in the same types of people who shout out demanding higher salaries, lower cost of goods, and handouts for everyone. What's the use of pointing out that farmers selling at a loss (which could happen). Demanding businesses to raise salaries while decreasing the costs of goods and services is selling at a loss. Why do you think companies sometimes have to sell higher if the facilities and services are being improved? I was reminded of eating in a restaurant and seeing the prices get higher. However, services were also improved so I was pretty fine adding another hundred PHP to the meal because of that!
Meanwhile, Lanzona of ADMU does have some concerns. I can agree that importation can be detrimental while it can help consumers. Lanzona also agrees that there needs to be an increase in local production. Before one can say, "But Singapore has almost no natural resources." Well, we can learn from other countries like Vietnam and India, not just Singapore. It's because both are agricultural countries friendly to foreign investment, Not surprisingly, the costs of locally produced onions from Vietnam and India aren't surprisingly low (read here).
My own outtake on learning from other countries to help solve agricultural issues
FIA Vietnam also shares this piece of information which I believe can help the Philippines in its quest to increase local production of onion:
Over the past few years, local and foreign companies have been actively implementing high-tech agricultural projects in Vietnam, but many of them have yet to receive special incentives from the government. For instance, TH Group plans to invest hundreds of millions of dollars in high-tech agricultural projects nationwide, with a focus on producing fresh milk, organic vegetables, herbs, and fruit.
The group is currently developing its $53 million high-tech dairy farm in the central province of Phu Yen, while also developing two other dairy farming and fresh milk processing facilities in Ha Giang and Thanh Hoa provinces with the total investment capital of $287 million.
In another case, steel maker Hoa Phat Group has entered into egg production by developing two chicken farms in Phu Tho and Dong Nai provinces.
Nafood Group also kicked off the construction of a $9 million facility in the northern mountainous province of Son La to process export-oriented vegetables and fruit, including condensed passion fruit.
Nguyen Dang Quang, chairman of Masan Group, asked the government urgently to create policies to manage and develop near-shore water resources. To unlock the full potential of Vietnam’s long coastline, the Vietnamese government should formulate a clear strategy with an emphasis on sustainable farming.
Over the past years, foreign investors have also come to Vietnam to engage in large-scale agricultural projects. These include Cargill, CJ, CP, and Mavin Austfeed. Foreign direct investment (FDI) in the country’s agricultural sector, which holds only 1 per cent of the country’s total registered FDI capital, is largely focused on producing animal feed and processing farm produce.
The Vietnamese agricultural sector currently has a total of about 49,600 domestic and foreign-invested enterprises.
Pretty much, this is what the Philippines can do. It's not about banning imports. Imports can be done following Singapore's importation laws. There are times we really do need to import during scarcity season. The International Trade Administration (ITA) also says this about Singapore:
As a highly urbanized country with little local agricultural production, Singapore is almost entirely dependent upon imports for its food requirements. Singapore’s food laws are therefore focused on ensuring consistent foreign supply of safe food and agricultural products. While trade contacts report Singapore can be very strict on sanitary and phytosanitary issues, the country maintains a liberal and open trade system. Singapore does not impose quotas and tariffs on imported food and agricultural products (except tobacco and alcoholic beverages). Singapore’s total agricultural product imports in 2021 reached $ 17.2 billion USD, roughly nine percent of which was sourced from the United States (source: Trade Data Monitor). The COVID-19 pandemic has underscored the importance of a robust supply chain, and by extension, food security. Even before the pandemic, as part of the “30 by 30” vision, the Singaporean government (in 2019) set the target of producing 30 percent of the country’s nutritional needs locally by 2030.
Singapore is also a leader in “novel foods,” including alternative proteins that do not have a history of being consumed as food. Examples include “plant-based” and “cultured” (lab-grown) meat. In fact, Singapore gave the world’s first regulatory approval to sell lab-grown meat commercially in 2020. Singapore requires companies to seek pre-market approval for novel foods by submitting safety assessments on the product to cover risks such as toxicity, allergenicity, safety of its production methods, and dietary exposure arising from consumption. A copy of the April 2022 safety assessment document is available in pdf.
The Philippines should just dump that impractical Filipino First Policy by Carlos P. Garcia. What's the use of having Filipinos as the majority of economic shareholders if inflation is high due to low supply and high demand? What's the use of campaigning to buy only local (and it's hypocritically done on media like Facebook which is American) if the local product is bad? What's the use of demanding Filipino First when the world is now a global village? Instead, we can learn from other countries such as Vietnam and India, both agricultural countries.
Through FDI, the Philippines can learn new stuff and bring in new capital. India did it and succeeded. Vietnam did it and succeeded. It can help local farmers when they start to get access to better technology. Can you imagine if all the local businesses in the Philippines only bought local? Jollibee today will still be stuck in the Philippines instead of buzzing around the world. Now, Jollibee is a multinational corporation (MNC) and built its 150th branch in Vietnam.
FDI India can also give these tips on what the Philippines can do to help boost local production:
Role of FDI
Foreign direct investment (FDI) provides the most favorable way to boost a company or a sector. The agricultural industry is among the most crucial segments when it comes to foreign investments since India is predominantly an agrarian economy.
To keep the Indian agricultural system up-to-date with the rest of the world, foreign capital inflow is essential because of the following reasons:
To take advantage of modern scientific and technological advancements – As the world progresses at breakneck speed, our farmers and the farming capacity of the country need to match up to the world. FDI helps in benefiting from the latest scientific research and farming technologies.
To enhance the employment in the segment – As more people are employed in the sector, the agricultural prowess will grow and lead to countries worldwide looking towards the nation for farm products.
To increase exports – The infusion of foreign capital results in the increased productivity of the sector and establishes the country as a leading exporter. India’s total agricultural and related commodities exports are valued at $41.25 billion for FY21.
To provide access to new technologies – With the fast-moving technological age, farmers must be provided with contemporary technologies to help grow production.
India itself acknowledged how FDI is needed. I guess India's high demand for onions in their place (and onion is a staple in regular Indian cuisine except for sattvic foods) has been kept in mind. The Indians saw the opportunity they could increase their local production of onions by accepting FDI. Meanwhile, it's so pathetic at how some Filipinos can cry over the high cost of onions. When asked about FDI, they'll keep ranting about the ill effects based on "trust me bro" stories instead of considering that we can follow Singapore's green policy. The Philippines can follow Singapore's green policy (with modifications) to ensure that environmentally-friendly practices will be upheld by all investors.
References
Websites
https://www.manilatimes.net/2023/01/08/opinion/columns/philippine-onion-most-expensive-in-the-world/1873211
