21/07/2022
YES, THE PHILIPPINES IS AN AGRICULTURAL COUNTRY
by Michael Batu, PhD
JULY 18, 2022 - One of the numerous ways economists, including myself, analyze a country's Gross Domestic Product (or GDP) is to decompose it into several sectors like Agricuture, Industry, and Services. If we were to take the average share of these sectors to the Philippines' total GDP from 2000 to present, we can find that the agriculture sector represents a measly 12%, while industry and services represent 30% and 58%, respectively [1]. With these numbers, can we conclude that we are not an agricultural but instead a services-driven economy? If we were to follow textbook economists, then the answer is a resounding yes. However, we need to look beyond the share of these sectors to GDP to properly understand why the country can be considered agricultural.
First, let's look at land. Any economist or anybody who took an economics subject should know that land is one the factors of production along with labor and capital. While the Philippines is an archipelago, the country is endowed with land very much suitable for farming and raising livestock. The latest estimates form the World Bank reveal that 42% of land area of the country is agricultural [2]. That land area includes those used by our farmers to grow staple crops and raise livestock. Not many countries are endowed with such amount of land for agricultural purposes. For instance, South Korea with all of its economic might, only has a measly 16% of its land that can be considered agricultural. Our ASEAN neighbors like Indonesia, Malaysia and Laos has 33.2%, 26.1%, and 10.4%, respectively [3].
Second, the Philippines has the fifth longest coastline in the world [4]. These coastlines provide our fishermen with bounties from the sea. According to a World Bank report, The Philippines' fisheries production has steadily increased from 0.230 million tons in 1950 to 5.158 million tons in 2013, an equivalent average growth of 22.4-fold. As a result, the country has become one of the world's top fishery producers. The percentage contribution of the Philippines' fisheries to world production ranged from 1.2 percent in 1950 to 3.1 percent in 2010. The country's world ranking also improved with its percentage contribution, from 17 in 1950–1965 to 5 in 2010. The country is ranked eighth in the world in terms of fisheries production [5].
Third, agriculture represents a significant amount of the Philippines' labor force. In 2020 for example, the proportion of employed persons in agriculture to total employment is 25%. That means about 1 out of 4 Filipinos are "directly" involved in the production of agricultural products [6]. Note my usage of the word "directly". It is known that agriculture support local nonagricultural economy in rural areas. Agriculture creates jobs in other sectors particularly in the countryside. Given the limitation on how economists study sectoral employment, the total amount of employment generated by agriculture into these other sectors is not known exactly. This is unfortunate and another reason why us economists need to rethink on how employment numbers are determined.
One final note. As the Philippines grow richer, both the share of agriculture in GDP and the share of agricultural employment in total employment decreases. While becoming rich is a good thing, we should not dismiss the important contributions of agriculture to our economy, culture, and society. This is natural, given its primary purpose of producing food, which is essential to human life.
References:
[1] https://psa.gov.ph/national-accounts/base-2018/data-series
[2] https://data.worldbank.org/indicator/AG.LND.AGRI.ZS?locations=PH
[3] https://data.worldbank.org/indicator/AG.LND.AGRI.ZS
[4] https://www.cia.gov/the-world-factbook/field/coastline/
[5] https://repository.seafdec.org.ph/handle/10862/3349
[6] https://psa.gov.ph/content/agricultural-indicators-system-employment-and-wages-agriculture-sector
