OBG talks to Rica Davila, Chairman and CEO, Lapanday Foods Corporation

Interview: Rica Davila

What are the most important recent initiatives that have helped modernise the agriculture sector?

RICA DAVILA: The opening of the Philippine market to imported fruit and vegetables from foreign producers has forced local players to improve their operations and adapt to new realities in the market.

Philippine companies that want to survive have been pushed to be more efficient in their production techniques to compete with the likes of China, which can deliver produce at a very low price. From the consumer’s point of view, this has resulted in a huge increase in the number of products that are available, as well as the price ranges for these goods. There have been some improvements in road networks and shipping infrastructure in the country, and these have been able to lower producers’ transport costs, which were quite prohibitive in the past. However, there is clearly much that remains to be done. Backlogs are routine at the country’s ports, and these can be especially troublesome when dealing with perishable goods. If the Philippines wants to remain relevant in export agriculture, in which new technology will eventually enable producers to efficiently export produce to any market in the world, it is going to need a lot more investment in its transport infrastructure.

If the Philippines is able to address the various obstacles to the development of its agriculture sector, it can become an even bigger player internationally. Given the country’s climate and its proximity to the major agriculture markets of China and Japan, the Philippines is naturally suited to be a regional player. As demand is widely expected to continue to rise in these markets, the Philippines market should position itself to capitalise on this increased demand.

Which niche markets present the Philippine agriculture sector with the most potential?

DAVILA: Apart from export-grade bananas and pineapples, I suppose that other export-grade fruits that are grown under fixed annual or seasonal export programmes could potentially do very well in markets that have reasonable quarantine and other such controls. The same view holds true for vegetable exports. Depending on the recovery and cost levels, organically grown produce could work for those with an appetite for higher commercial risk.

How can the Philippines pursue its agrarian reform programme while encouraging investment and efficiency in the agriculture sector?

DAVILA: While agrarian reform is straightforward in theory, in practice it is quite difficult to implement without undermining economies of scale and efficiency, both of which are tenets of a successful agriculture sector. Thus, if the Philippines is to continue with its current agrarian reform initiative, the country must adopt a more comprehensive approach to the matter, to account for the issues related to smaller scales of operation and the resulting obstacles to productivity. Otherwise, the programme will only have a negative impact on the country’s agriculture industry.

In theory, the solution is to organise small-scale farmers into cooperatives and to encourage approaches such as block farming. Such cooperative arrangements can assist farmers by increasing their access to credit and insurance, facilitate a return to the benefits of economies of scale and permit farmers to negotiate with other market players more easily. For example, in most cases the procurement and use of agricultural chemicals is prohibitively expensive for small-scale farmers, and really only becomes economically viable on a much larger operational scale.

As many farmers do not possess managerial training relevant to the running of a large-scale operation, these new cooperatives are going to need guidance. This could take the form of additional education and training for the farmers themselves, but it may demand a more innovative move, such as appointing an independent businessperson to run the cooperative, as this would ensure a focus on efficiency and profit.