Politics

Closer economic ties with Taiwan – 1

5 Mins read

(First of two parts)

As the administration of President Ferdinand Marcos, Jr. tries to expertly balance our politico-economic relations with China, avoiding the extremes of the last administration, it should also try to achieve as many benefits as possible from closer economic trade and investment relations with Taiwan.

It was refreshing to hear the President say in his State of the Nation Address (SONA) that he will not budge an inch in claiming our rights in the West Philippine Seas. As Secretary of Agriculture, the President will find many opportunities to improve the productivity of our farm sector through closer cooperation with both the Taiwanese Government and Taiwanese agribusiness enterprises.

Although Taiwan is a highly industrialized country such that is already considered First World (its per capita income is about $25,00000, far above the $12,000 threshold for a high-income economy), its interest for us in our greatest challenge of attaining food security comes from the historical fact that its industrialization was preceded by a significant improvement in the productivity of its agricultural sector. We can say that it is the first economy in East Asia to attain First World status on the basis of balanced agro-industrial development. That should be the ambition of our leaders today, especially since our sitting President today also occupies the position of Secretary of Agriculture. There is still time for us in the next 10 to 20 years to become an agro-industrial power in the Indo-Pacific region. The promises made by the President to our farmers in his SONA (in excellent Tagalog) can parallel very closely what the Taiwanese Government did for their farmers to make them among the richer citizens of Taiwan.

This is not to say that Taiwan will not play an important role in helping the Philippines deepen its manufacturing sector. In fact, over the years Taiwanese firms have poured in P32.3 billion in total investments in export-oriented enterprises in economic zones registered with the Philippine Economic Zone Authority (PEZA), mainly in electric equipment and apparatus, metal products manufacturing, as well as in the real estate sector. Among the most significant investors are Kinpo Electronics (Philippines), Inc., Acbel Polytec, Inc., and Tong Hsing Electronics, Inc. Even at the height of the pandemic in 2020, Taiwanese companies such as Adapter Technology Co., Ltd. and Sunon Properties Philippines still chose to invest in the Philippines. These Taiwanese investments have created some 40,000 jobs.

It is notable that Taiwanese investments of P32.3 billion in the Philippines surpass those of mainland China, a much bigger economy, whose cumulative investments in our country reached only P24.7 billion.

The greatest lesson we can learn from Taiwan, however, is their most successful agrarian reform program during the Government of Chiang Kai-shek which came in three phases: 1.) forced reduction of land rent to 37.5% of the crop yield (instead of the previous 50%); 2.) selling of small land shares seized from the Japanese (who occupied Taiwan for some 40 years); and, 3.) finally, proper agrarian reform in 1951 (Land-to-the-Tiller Program) with a 2.9 hectare limit on the property surface area, expropriation of big landowners, and the redistribution of surplus farmland to small farmers. Most important of all, after making the small farmers the owners of their own land, the Taiwanese Government endowed them abundantly with farm-to-market roads, post-harvest facilities, irrigation systems, and all the agricultural extension and credit services needed by the small farmers to make their holdings productive enough for them to earn a comfortable living. Indeed, the Taiwanese economic success was premised on making the small farmers rich.

Thailand and Vietnam followed very faithfully the Taiwanese model of agrarian reform. The Philippines did not by grossly neglecting the infrastructure and other assistance to the small farmer that was needed to help them improve their productivity. It is heartening to note that President Marcos Jr. intends to make up for lost time in announcing all the services and benefits his government will endow to Filipino farmers. He, however, will need the full support of the business sector and civil society.

The agrarian reform program of Taiwan was so successful that between 1946 and 1976, agricultural production quintupled and continued to diversify: animal products, fruits and vegetables, which were not very prominent early on. The greatest lessons we can learn from the agricultural experience of Taiwan are in the high-value crops in which we can be self-sufficient. As agricultural productivity increased, enriching the small farmers, the farm sector was able to supply the rest of the economy with a capital sum representing 22% of the agricultural value added at the early stages, and 15% at the end, whether through taxes or, as happened at the later stages, the diversified placement of farmers’ savings. For this reason, it is safe to say that agricultural surplus played a crucial role in the constitution of industrial capital in the development of Taiwan.

Fortunately, today there is a Filipino corporation which, through a joint venture with a leading Taiwanese agribusiness firm called Known You Seed, is actively transferring modern but appropriate agribusiness technology from Taiwan to the Philippines. Put up by Filipino-Chinese entrepreneur Arsenio Barcelona, Harbest Agribusiness Corp. has been, for more than 20 years, transferring Taiwanese technology developed during the golden age of Taiwanese agriculture during the last century to Filipino farmers and agribusiness enterprises in the Philippines.

Here, let me report on a proposal called Formosa Filipina by Mr. Barcelona which intends to achieve a Taiwanese-Filipino farmers partnership in producing quality fruits in agro-industrial orchards in the Philippines.

Through several decades of research and development by the Taiwanese Agricultural Research Institute’s Tropical Fruits Research Center in Fengshan, Taiwan, as well as the enthusiastic acceptance of these improved varieties and agronomic technology by the fruit farmers themselves, the Taiwanese consumers have been blessed with year-round supply of fresh quality fruits. A visit to fruit stalls in Taiwan would immediately reveal that 95% of the fruits being sold are grown locally. This is in stark contrast with what we see in Philippine supermarkets in which more than 50% of fruits are imported. This is unfortunate since there is no reason why the Philippines cannot be self-sufficient in fruits. We, like Taiwan, can produce abundant supplies of mangoes, atemoya (atis or sugar-apple), jojoba, carambola (star fruit), guava, persimmon, pineapple, melon, watermelon, honeydew, papaya, loquats, lychee, bananas, oranges, pomelo, durian, longan, caimito (star apple), avocado, santol (cotton fruit) and many more. In fact, like Taiwan, we can export many of these tropical fruits to China, South Korea, and Japan. The Chinese domestic market has an almost unlimited demand for tropical fruits.

The only success stories of the Philippines as regards tropical fruits are in cavendish bananas and pineapples grown in large plantations in Mindanao. In contrast, mangoes, durian, avocado, guyabano (soursop), guava, atis, nangka (jackfruit), calamansi (local citrus), the saba and lakatan banana varieties, mangosteen, pomelo, papaya, watermelon, melon, and honeydew are grown in inefficient small farms or backyard gardens. Quality is not stable and fruits sold in supermarkets are usually of poor quality if compared with those sold in Taiwan. This technology and farm practices gap between the two economies presents an opportunity for close ties between the Philippines and Taiwan.

As pointed out by Harbest’s Mr. Barcelona, the more than 100 million strong Philippine population can become a huge market for affordable and quality fruits. He proposes a “Formosa Filipina” collaboration that will match Taiwanese agronomic and marketing skills in fruit farming with the young workforce in the Philippines, many of whom can be attracted to the entire agribusiness chain linked to fruit farming. Taiwan has clearly demonstrated that agribusiness goes much beyond farming and encompasses the whole value chain, from farming to post-harvest, to warehousing, cold storage, and the entire logistics sector, all the way to processing and retailing.

(To be continued.)

Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission.

bernardo.villegas@uap.asia