the agricultural competitiveness enhancement fund (acef) a review
TRANSCRIPT
THE AGRICULTURAL COMPETITIVENESS ENHANCEMENT FUND
(ACEF): A REVIEW
Jose M. Yorobe Jr., Ph.D.
February 2005
DISCLAIMER
“The views expressed in this report are strictly those of the authors and do not necessarily reflect those of the United States Agency for International Development (USAID) and the Ateneo de Manila University”.
Abstract Nine years after the creation of the Agricultural Competitiveness Enhancement Fund
and a month before its closure, questions have arisen on what the fund has achieved
and whether its extension is justified. This review assesses the status and performance
of the ACEF and identifies the constraints in its implementation. The discussion
focuses on the fund’s performance in implementation and suggests modifications for
improving effectiveness and efficiency. The review finds that ACEF needs to be more
aggressive in identifying strategic investment areas to benefit the most vulnerable
agricultural sectors. There is also need to monitor and ensure the availability and
timely release of funds for agricultural enhancement. Impact assessment must be
conducted on a regular basis to determine the fund’s contribution to the
competitiveness agenda.
The Agricultural Competitiveness Enhancement Fund
(ACEF): A Review
Jose M. Yorobe, Jr. EPRA Consultant
I. Introduction The accession of the Philippines to the World Trade Organization (WTO)
Uruguay Round Final Act in 1994 has enhanced the country’s liberalized trade regime
through the opening of its agricultural markets to foreign competition. Part of the
agreement in the WTO was the tariffication by member countries of all quantitative
import restrictions (QR’s) in agriculture. The enabling law for this commitment is now
embodied in Republic Act No. 8178 enacted on July 24, 1995 known as the
“Agricultural Tariffication Act”. The Philippine market commitment, among others,
involved a two-tiered tariff quota system for sensitive agricultural commodities: the
in-quota tariff rate for the minimum access volume (MAV) of imports allowed at a
lower tariff rate and the out-quota tariff for volumes beyond the MAV.
To cushion the impact of the liberalized trade regime and also provide for the
adjustment costs in the agricultural sector, the law also created the Agricultural
Competitiveness Enhancement Fund (ACEF) whereby the proceeds from the MAV
accrues to the fund to be earmarked and disposed for projects enhancing the
competitive structure of the agricultural sector. Basically, it seeks to raise farm
productivity and reduce costs by providing for the necessary support services such as,
irrigation, farm to market roads, post-harvest facilities, credit, research and
development, extension services, market infrastructure and information. The fund
essentially supports the Agriculture and Fisheries Modernization Act (AFMA) of 1997
with the objective of modernizing and enhancing productivity and income in the
agriculture and fisheries sectors.
Nine years after its creation, this review intends to assess the status and
performance of the ACEF and identify the related constraints in its implementation.
With the impending closure of the fund this March 2005, questions arise on what the
fund has achieved and whether its extension is justified. While a quantified social and
economic impact measurement can provide a more substantive assessment on the
relative contribution of ACEF in enhancing the competitive structure of the
agricultural sector, this review simply focuses on its performance in implementation
and suggests modifications for improving effectiveness and efficiency.
II. Key Features of the ACEF
The implementation guidelines on the utilization and disposition of the ACEF
are provided for under the Department of Agriculture’s Administrative Order No. 39
of 1999 as amended by Administrative Order No. 10 of 2000. The primary objective
of ACEF is the allocation of the income from the MAV to agricultural projects and
activities that enhance the global competitiveness of agricultural products and other
ACEF-related activities. Some of the salient features of the implementation guidelines
are as follows:
a. The intended beneficiaries are farmers and fisherfolks, agribusiness
enterprises and industry organizations, non-government organizations
(NGOs) and people’s organizations (POs), and the government sector.
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b. Priority is given to projects having sector/industry-wide impact such as
establishment of common service facilities.
c. It supports income and non-income generating projects on a cost-sharing
basis with the proponent.
d. The minimum amount of assistance is P500,000 and not to exceed P60
million extended as a loan, free of collateral and interest and the principal
is payable in six years plus one year grace period.
e. The fund is governed by a project executive committee that reviews and
disposes the funds, and a technical committee and secretariat that
undertakes the review, processing and monitoring of projects.
f. An important component of the project proposal is the project feasibility
study, the cost of which is borne by the proponent.
III. Status and Performance
The Minimum Access Volume (MAV)
The operation and existence of the ACEF depend largely on the income
generated from the utilization of the MAV. The MAV represents the in-quota volume
of agricultural products allowed into the country at a lower in-quota tariff rate. The
MAV comprises one of the country’s commitments to the WTO which is scheduled to
end in 2005. Beginning 1995, the MAV volume was set to equal 3 percent of
consumption at the base period 1986-1988 and rising every year to reach 5 percent of
the base period consumption at the end of ten years (Clarete, R., undated). The rules
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and implementing guidelines governing the MAV is contained in the Department of
Agriculture’s Administrative Order No. 9 series of 1996. As provided for in R.A. No.
8178, Section 8, all the proceeds of the importation under the MAV will be intended
for the ACEF and shall be deposited under Special Account 183 of the General Fund.
The MAV Secretariat of the Department of Agriculture administers and manages the
MAV. The list of agricultural products under the MAV system is presented in Table 1.
Out of the sixteen agricultural products described under the harmonized system
of the Tariff and Customs Code to be under the MAV, only nine have been subscribed
for since 1995. Table 2 shows the yearly MAV allocation in comparison with the
actual utilization. The rate of MAV utilization was observed to be high for coffee,
poultry and corn and the MAV for potatoes were fully subscribed for in the later years.
A sustained usage of the MAV can be observed for corn and coffee but, the volume
was significantly large for corn. The corn MAV imports represented only a small
fraction of the total importations. Beginning 1999, importation of beef under the MAV
was no longer observed and the rate of MAV utilization for other commodities
accentuated beginning this period.
The Philippine commitment to WTO on the MAV ended in 2004 but was
extended on status quo until another agreement can be forged with WTO. Needless to
say, once the MAV commitment cannot be secured, the government is bound to put in
place a single tariff rate for agricultural commodities under the MAV. This move will
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Table 1. List of agricultural products under the MAV, 2005.Heading Product Description
(H.S. Code)
HS 0101 Live horses, assess, mules and hinniesHS 0102 Live bovine animalsHS 0103 Live swineHS 0104 Live sheep and goatsHS 0105 Live poultry (fowls of the species Gallus domesticus,
ducks, geeses. turkeys and guinea fowls)HS 0201 Meat of bovine animals, fresh or chilledHS 0202 Meat of bovine animals, frozenHS 0203 Meat of swine, fresh or chilledHS 0204 Meat of sheep or goats, fresh, chilled or frozenHS 0207 Meat and edible offal of poultryHS 0701 Potatoes, fresh or chilledHS 0901 Coffee, whether or not roasted or decaffeinated; coffee
husks and skins; coffee substitutes containing coffee in any proportion
HS1005 Maize (Corn)HS 1006 RiceHS 1701 Cane and beet sugar and chemically pure sucrose in
formHS 2101 Extracts, essences and concentrates, coffee, tea or
mate preparations with a basis of these products or with a basis of coffee, tea or mate; roasted chicory and other roasted coffee substitutes and extracts, essences and concentrates thereof
Source: ACEF Secretariat, DA.
undoubtedly improve the government revenues from importation assuming that higher
rates are used to protect domestic agricultural producers. However, this will not in any
way improve the country’s competitive position as the higher rates simply add on to
production costs making domestic agricultural products relatively expensive. We also
loose the assured Agricultural Competitiveness Enhancement Fund or the ACEF that
can be directed to the disadvantaged sectors in agriculture for projects that will
strengthen the support services. This is now an option that the government will have
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Table 2. MAV allocation and utilization, 1996-2004
HS Code Description 1995/96 1997 1998 1999 2000 2001 2002 2003 2004 Ave (96-03)
0201 Fresh/chilled beef MAV Alloc.(mt) 6,087 4,261 4,436 4,611 4,785 % Utilization 35.0 0.0 0.3 0.0 0.0 7.1
0202 Frozen beef
MAV Alloc.(mt) 21,131 86,054 71,317 85,581 98,418 108,259 % Utilization 92.4 89.9 9.8 0.0 0.0 0.0 38.4
0203 Pork
MAV Alloc.(mt) 49,985 36,135 38,545 40,955 43,365 45,775 48,185 50,595 53,005 % Utilization 5.6 21.2 15.8 44.1 44.5 18.6 13.3 16.7 18.4 22.0
0207 Poultry
MAV Alloc.(mt) 22,525 16,160 16,701 17,746 18,790 19,834 20,879 21,923 22,968 % Utilization 4.3 9.9 16.2 90.9 62.9 59.6 85.8 94.7 72.4 55.2
0701 Potatoes
MAV Alloc.(mt) 1,430 1,035 1,102 1,171 1,240 1,309 1,378 1,447 1,516 % Utilization 0.0 1.9 7.0 38.7 81.9 95.2 100.0 100.0 100.0 58.3
0901 Coffee beans
MAV Alloc.(mt) 932 993 6,060 1,126 1,192 1,258 1,324 1,391 1,457 % Utilization 0.1 92.5 100.0 97.3 95.7 92.9 87.5 87.9 78.9 81.4
1005 Corn
MAV Alloc.(mt) 200,061 144,623 154,266 163,908 224,550 183,192 192,834 202,477 212,119 % Utilization 98.9 99.1 71.1 99.1 99.4 73.1 41.3 24.4 0.1 67.4
1701 Sugar
MAV Alloc.(mt) 59,069 42,701 45,547 48,393 51,240 54,087 56,933 59,780 62,627 % Utilization 99.9 61.5 59.7 100.0 47.9 0.0 41.0
2101 Coffee extract
MAV Alloc.(mt) 20 20 23 25 26 28 30 32 35 % Utilization 80.6 72.3 86.5 82.0 69.7 99.3 99.3 93.8 76.2 84.4
Ave. utilization 35.2 43.0 45.2 50.2 57.3 55.4 58.6 51.7
Source: ACEF Secretariat, DA and Bureau of Customs.
to make in the coming WTO negotiations. The trade-off is however, clear to the
farmers: protection through higher tariffs in exchange for benefits in terms of support
services. Whatever is the outcome, it is imperative that the government continue the
flow of funds for support services in agriculture to keep those that can still remain
competitive in the market at the very least.
Income from the MAV
Table 3 shows the revenues generated from MAV importation representing the
tariff duties collected from 1999 to 2004 amounting to 5.19 billion pesos. This was
largest in 1999 and 2002 due to the huge corn and sugar importations. The duties
collected from corn and sugar contributed the largest share to the ACEF followed by
poultry and pork.
It should be noted however, that the ACEF was created by law in 1995 but the
implementation was delayed by about 5 years. Although the MAV was utilized since
1995 (as shown in Table 2), there was no record of income generated from the MAV
for the period 1995-1998. An estimate of the revenues for this period showed that
about 2.9 billion pesos of duties must have been collected and should form part of the
income of ACEF for competitive enhancing projects in agriculture (Table 4). This is a
sizable amount that could have initially provided for the necessary support services
badly needed by the agricultural sector at the time when the country joined WTO. If
spent on farm to market roads alone at the cost of 4 million pesos per kilometer, this
amount would translate to about 725 kilometers. The undue delay in the ACEF
implementation has also postponed for 5 years the provision of essential support
services that can cushion the impact of trade liberalization. This delay in the delivery
of the needed support services in agriculture exacerbated the competitiveness of the
country making its position more precarious relative to its Asian neighbors. Evidently,
the lack of our competitive position stems from the failure of government to provide
the necessary support services to increase productivity and the failure of producers to
keep their production costs at the minimum (Clarete, R., undated). Now, the task to
effectively and efficiently use the fund for projects that can provide the most net
benefit in increasing income and reducing production and marketing costs of
agricultural commodities has become more urgent. Unfortunately, funds for this
purpose are also becoming scarce and it is unlikely that the government will refund the
forgone revenues for the ACEF due to increasing government budget deficit.
Table 3. Duties paid (income) on MAV utilization, 1999-2004
HS Code Commodity 1999 2000 2001 2002 2003 2004* Total('000 pesos)
0203 Pork 20,393.3 256,719.2 156,277.1 98,038.10 97,284.6 61,292.0 690,004.30207 Poultry 10,208.4 143,648.0 255,008.1 235,008.60 210,954.6 48,331.2 903,158.90701 Potatoes 434.0 4,981.6 11,191.3 10,786.90 9,862.6 6,508.9 43,765.30901 Coffee beans 265.1 24,597.3 222,151.2 5,652.90 45,490.7 2,880.8 301,038.01005 Corn 34,474.5 342,117.3 145,589.5 336,105.90 90,315.4 387.7 948,990.31701 Sugar 1,294,433.6 165,637.9 212,341.3 406,989.50 213,145.3 0.0 2,292,547.62101 Coffee extract 40.9 3,117.2 2,849.7 8,175.10 5,706.2 43.7 19,932.8
Total 1,360,249.8 940,818.5 1,005,408.2 1,100,757.0 672,759.4 119,444.3 5,199,437.2
* As of 31 October 2004Source of data: ACEF Secretariat, DA for 1999 and 2004 based on MAVIC and
Bureau of Customs for 2000 to 2003 including 1999 for sugar.
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Table 4.Estimated income from MAV utilization, 1995-1998. HS
Code Commodity 1995/96 1997 1998 Total ('000 pesos) 0201 Fresh/chilled beef 36,192.0 0.0 249.8 36,441.80202 Frozen beef 232,183.6 1,064,281.4 113,349.8 1,409,814.80203 Pork 31,899.5 98,140.5 73,891.0 203,931.00207 Poultry 40,740.8 24,215.6 43,326.0 108,282.50701 Potatoes 0.0 47.7 288.9 336.60901 Coffee beans 14.9 16,545.1 151,264.2 167,824.21005 Corn 348,926.0 239,490.9 188,650.8 777,067.61701 Sugar - - 200,024.3 200,024.32101 Coffee extract 1,033.8 382.7 514.6 1,931.1 Total 690,990.7 1,443,103.9 771,559.3 2,905,653.9- Data not available. Source of basic data: BAS and ACEF Secretariat, DA
ACEF Projects
For the period 2000-2004, the ACEF has supported a total of 59 on-going and
approved projects with an aggregate amount of 1.7 billion pesos distributed regionally
except for Regions 5 and 9 (Table 5). Region 4-A received the highest amount of
ACEF loan disposed followed by CAR. The ACEF loan extended to the agricultural
sector was extremely large in 2003 for this included the one billion peso loan released
to Quedancor in support of their financing programs to small farmers and fisherfolks.
A smaller amount was reportedly approved in 2001, only in Region 4-A. As of 2004,
the repayment rate for ACEF loans is 70 percent.
With the ACEF investment of 1.7 billion pesos, an equivalent amount of
private and public investments was also generated in the agricultural sector
representing the equity participation of proponents. Some of these are capital
investments that may already be existing prior to 1999 but, the effect should have been
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Table 5. Project cost of on-going/approved ACEF projects by region, 2000-2005.
Region 2000 2001 2002 2003 2004 2005 Total ACEF Loan Total Project ACEF Loan Total Project ACEF Loan Total Project ACEF Loan Total Project ACEF Loan Total Project ACEF Loan Total Project ACEF Loan Total Project
Cost Cost Cost Cost Cost Cost Cost('000 pesos)
1 12,000.0 24,921.8 12,000.0 24,921.82 19,950.0 55,117.5 8,297.9 31,356.4 17,845.0 45,158.0 46,092.9 131,631.93 57,983.2 118,120.1 16,667.5 33,199.5 83,863.0 170,296.2 33,013.5 58,230.0
CAR 25,000.0 51,788.0 25,191.1 42,001.1 50,191.1 93,789.14-A 18,536.0 36,168.7 27,370.0 40,492.9 38,000.0 70,000.0 14,986.4 33,526.1 12,010.0 18,271.0 110,902.4 198,458.74-B 2,775.0 3,965.0 2,775.0 3,965.06 14,939.6 25,669.7 19,448.5 34,914.5 39,162.7 74,139.7 9,462.6 18,700.4 7 2,776.9 5,446.4 10,825.0 15,464.2 18,168.3 76,538.7 31,770.2 97,449.38 18,428.6 39,064.1 14,670.3 26,495.1
10 12,921.1 34,573.9 9,850.0 18,704.1 28,068.8 45,395.3 36,807.1 55,299.1 11 2,653.2 5,028.6 7,047.4 11,892.7 25,477.3 61,081.5 8,740.0 13,281.8 12 36,000.0 60,000.0 36,000.0 60,000.0
ARMM 2,350.0 3,517.0 12,432.0 17,952.0 14,782.0 21,469.0Nationwide 1,010,954.8 1,015,648.8 17,006.5 30,313.6 1,027,961.3 1,045,962.4
Total 186,963.6 383,154.0 27,370.0 40,492.9 127,156.6 245,543.5 1,248,539.9 1,540,046.2 145,207.2 251,352.1 36,442.0 61,144.8 1,771,679.3 2,521,733.5
Adm. Support 15,033.4
Grand Total 1,786,712.7 2,521,733.5
Source: ACEF Secretariat, DA.
substantial considering the size of the investment. For the 2000-2005 period, the
Department of Budget and Management has already released 1.57 billion pesos for
ACEF. There are still approved projects that remain unfunded as of February 2005
and about 2.3 billion pesos worth of projects are still under review by the executive
and technical committee (Table 6).
The major beneficiaries of the ACEF were agribusiness enterprises and
companies accounting for more than half of the number of on-going/approved
projects for 2000-2005. The total amount of loan released to this group was about 0.5
billion pesos, the largest among the non-governmental entities (Table 7). Farmers and
fisherfolks, mostly represented by cooperatives and large agribusiness enterprises,
accounted for 29 percent of the borrowers amounting to 197 million pesos while only
a few borrowers was observed for non-government organizations (NGO’s) and
peoples’ organizations (PO’s) categories.
The loan released to the government sector was largest (1.09 billion pesos) for
this included the 1.0 billion peso loan extended to Quedancor (a government
financing corporation) and used to fund the financing programs for small farmers and
fisherfolks using the Self-Reliant Team (SRT) model in 2003. The intention was to
use Quedancor in retailing the fund and make it accessible to small farmers and
fisherfolks through the provision of credit since the ACEF management does not have
the administrative capability to cater to a large number of small farmers. Loans
secured from this type were paying interest charges of 12 percent per annum (see
Appendix A). In contrast, those that were directly administered by the ACEF had
access to the non-collateral and interest-free loans. This form of discrimination has
Table 6. Value of proposals still under review, as of February 2005.
Item ACEFLoan Project Cost ('000 pesos)
Executive Committee 424,214.90 813,787.30
Technical Committee 942,926.50 1,561,155.60
Total 1,367,141.40 2,374,942.90
Source of data: ACEF Secretariat,DA.
Table 7. Number and budget of on-going/approved projects by type of beneficiary, 59 projects, 2000-2005.
Type of Benefeciary Number PercentACEF Share Total Project Cost
Farmers/Fisherfolks 17 29 197,742.9 392,100.4
Agribusiness Enterprise 32 54 469,343.0 929,306.0
NGO/PO 2 3 11,336.9 25,276.0
Government Sector* 8 14 1,093,257.1 1,175,052.2
Total 59 100 1,771,679.9 2,521,734.6* Inclusive of the 1 billion peso loan of Quedancor.Source of data: ACEF Secretariat, DA.
Amount
('000 pesos)
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been seriously criticized by the small farmers and fisherfolks and it can be argued that
small farmers and fisherfolks still do not have the competitive access to the ACEF
funds. Under this ACEF-SRT Scheme, the grains, livestock and poultry and high
value crops received the most benefit accounting for more than 70 percent of the 1
billion peso fund (Table 8). These loans secured by the small farmers and fisherfolks
were mainly for the purpose of purchasing inputs and services as specified in the
disbursement guidelines.
Table 8. Total amount of loans extended by the ACEF Financing Program through Quedancor by sector, 2005.
Sector Amount Percent('000 pesos)
Livestock and Poultry 261,995.4 25Rice 221,581.7 21Corn 175,733.6 17High Value Crops 274,864.2 26Fisheries 83,730.8 8Marketing Infrastructure 25,766.4 2Market Information 999.9 0
Total 1,044,672.0 100Source: ACEF Secretariat, DA.
The distribution of current ACEF fund disbursements by purpose is shown in
Table 9. More than half of the ACEF funds have been dispensed to support the
purchase of production inputs and services in agriculture mainly through the credit
scheme from Quedancor. The support may be considered as short-term in nature, only
for one production cycle, and the direct benefits accrue only to the individual farmer.
Other projects could have possibly provided for a better flow of benefits, addresses
the cost-minimization objective, and a sector wide impact. While it is recognized that
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the optimal fund allocation decision may be difficult to achieve given a general
criteria of project eligibilities, there must be some bias towards projects that can
provide the highest level of welfare to society and more sustainable in reducing
adjustment costs. In global competition, the determining factor of comparison is cost.
It is thus, more compelling to favor activities that simply reduces the cost of doing
business in agriculture. This type of activity is generally a characteristic of public
investments like farm to market roads, post harvest facilities, market infrastructure,
irrigation, and the like where the impact is more sustainable and the net social benefit
is positive.
Table 9. Amount of on-going/approved projects by type of purpose, 56 projects, as of September, 2004.
PurposeACEF Share Proponent Share
Irrigation 2,387.4 2,130.0Farm to Market Roads 800.0 75.0Post Harvest Equip't and Facil. 93,674.9 49,259.4Credit 1,700.0 -Research and Development 279.0 3,110.0Marketing Infrastructure 25,766.4 29,087.4Market Information 999.9 635.0Retraining and Extension 719.2 1,843.1 Other Forms of Assistance
Project Preparation/Implementation 17,582.2 238,111.8Production Inputs 1,050,589.2 86,816.6Laboratory Construction 3,061.4 1,305.3Farm Infra/Machineries 510,308.4 299,375.6Technology Acquisition 900.0 200.0
Total 1,708,768.0 711,949.2Source: ACEFSecretariat, DA.
Total Budget
('000 pesos)
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Performance
The mechanism by which the ACEF funds are allocated and administered
provides the minimum criterion to evaluate its performance. As defined by Clarete
(Undated), institutional performance maybe explained by two factors: specificity and
competition. A high degree of specificity and exposure to competition are likely to
induce strong incentives to concerned actors for better performance. The former
refers to the attainment of the objectives and the methods used while the latter is
about the availability of pressures bearing on the actors for better performance.
The delay in the implementation of the ACEF has already placed its
performance in a bad state. This is now manifested by the country’s competitive
position that lags behind its trading partners for basic agricultural commodities like
rice and corn. Due to the delay, there is now a tremendous pressure put before us to
immediately utilize the fund for activities that can provide the greatest benefit at the
shortest time possible. Unfortunately, only 1.7 billion pesos of the ACEF fund have
been disposed or only 32 percent of the 1999-2004 MAV income.
While investments on production inputs and other farm operating services
attain productivity objectives, the support is generally short-lived and not cost
effective. In contrast, the reduction in the ‘cost of doing business’ in agriculture can
be very well addressed by investments in infrastructure like farm to market roads,
marketing facilities, and irrigation where the benefits are more lasting and accrues to
the general public. What is needed therefore, is for ACEF to be more aggressive in
identifying strategic investment areas where the most benefit can be derived by
allocating adequate funds to the most vulnerable and affected sectors of agriculture.
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Through constant consultation with leaders of these affected sectors, investments can
be directed to areas and activities where it is most wanted.
The allocation of ACEF funds to agricultural projects is currently demand
driven i.e. interested parties submit proposals for funding. The project review process
is generally transparent (as projects are approved based on merit as provided for in
the guidelines) and the stakeholders are properly informed of the process.
Considering their access to economic resources and influence, the large agribusiness
entrepreneurs possesses a competitive edge in accessing the fund. They can secure the
loan directly from ACEF, interest- and collateral-free, while small farmers and
fisherfolks have to pass through Quedancor and to be eligible for a maximum
loanable amount of only 50 thousand pesos, subject to a penalty interest rate of 12
percent. This system runs counter to the basic concept of competitive allocation and
enhancement as the payment of interest to ACEF loans already puts a barrier to their
entry and adds on to costs. Due to smallness, these farmers may not also possess the
necessary resources to compete in the allocation. There must be a better mechanism
where the fund can be retailed to the majority of small farmers and fisherfolks given
the administrative capacity of the ACEF Secretariat. The current experience of
channeling the ACEF funds through farmers’ cooperatives and organizations is
already a better proposition as the benefits directly accrues to small farmers and
fisherfolks and the project services a much larger constituency. Unfortunately, only 9
percent of the fund disposed catered to this type of beneficiary.
Critical to the performance and effectiveness of the ACEF is the availability
of funds to meet its requirements, the value of which depends on the collection of
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duties from the MAV. It is in the interest of ACEF that the size of the fund be
constantly monitored and safeguarded to assure its availability for agricultural
competitiveness enhancement measures. It will substantially favor the agricultural
sector if the forgone MAV income in 1995-1998 of 2.9 billion pesos can be allocated
back to the sector. The timely release of the funds however, is dependent on the
system of allocation practised by the Department of Budget and Management since it
forms part of the Department of Agriculture’s budget. In most cases, the timing is
inconsistent with the urgent needs of the agricultural sector owing to the usual
bureaucratic processes in government.
The ACEF fund is presently disposed of as loans to the agricultural sector. It
is but proper that the payment of the principal by the beneficiaries should revert to the
fund (deposited in Special Account 183 of the General Fund) and ploughed back to
the affected sectors of agriculture. This move will not only extend the life of the
ACEF but also provide for a growing fund even after the MAV. As it is, there is only
one time use of the fund as payments to the ACEF loans are deposited directly to the
national treasury. While the law is explicit on the life of the ACEF, support services
in agriculture will always be a necessary condition to attain higher productivity and
competitiveness in agriculture.
One of the most important indicators of performance is efficiency, that is, the
attainment of the highest possible output given the amount of resources used. To
determine the relative contribution of ACEF to the competitiveness agenda, an impact
assessment needs to be conducted on a regular basis. This will indicate the level of
success the program has achieved and the extent of support that is still needed by the
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sector. A major consideration to look into will be the cost of doing business in
agriculture. Domestic resource costs and the comparative advantages of agricultural
products need to be constantly monitored and evaluated. If the ACEF support has
become redundant then, the fund can be diverted to other uses that provide better
opportunities to the affected sectors in agriculture.
V. Suggested Modifications
Cognizant of the difficulties and opportunities in the implementation of the
ACEF, a draft of the proposed revised guidelines has already been prepared by the
Department of Agriculture and submitted to Congress in the interest of the possible
extension of the ACEF (Appendix B). It is substantially an improvement of the
current guidelines as it addresses the contentious issues on the following: project
eligibility, by deleting credit and highlighting infrastructure; financing, by giving
priority to small farmers and fisherfolks, putting a cap on the maximum loanable
amount, and allocating funds for feasibility study assistance; organizational structure,
by creating a regional executive committee with representation from small farmers
and fisherfolks; and, the inclusion of monitoring and evaluation procedures. In
addition, the following are suggested modifications to enhance the effectiveness and
efficiency of the ACEF implementation:
• The ACEF management must provide for a more pro-active mechanism in
identifying strategic project activities eligible for support by prioritizing
activities based on the level of impact on the sector, reduction in adjustment
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costs, and sustainability. This may be achieved through constant consultations
with leaders and key informants of the affected sectors. ACEF can explore
partnerships with the local government units, NGO’s and PO’s with good
track record in fund management. A directional fund allocation may be used
or simply pro-rate the allocation by importance given a set of criteria. If the
sector is wanting in infrastructure and other service facilities where the
incremental benefit is perceived to be highest, then a portion of the fund can
already be dedicated for this purpose as the executive committee may
appropriately determine. These approaches may prove to be more efficient in
view of the limited life of the fund and the difficulties in accessibility.
• The ACEF fund allocation must be transparent and equitable irregardless of
the size and resources of the proponents. It should favor projects that can
reduce the cost of doing business in agriculture and provide a sustained flow
of benefits to a larger constituency. It should discriminate against projects
with transitory effects on adjustment costs and benefits like the acquisition of
production inputs such as fertilizers and chemicals. The purpose of moving
the funds interest- and collateral-free (not to add on adjustment costs) and
with sector-wide impact need to be maintained at all levels of ACEF fund use.
• The ACEF must provide for the constant assessment of the impact of ACEF
on competitiveness in agriculture. One approach is to look at the changes in
the level of comparative advantage/disadvantage before and after ACEF. The
results can provide a good basis for planning and directional funding by the
ACEF.
19
• There must be a deliberate effort to undertake an information dissemination
campaign in the agricultural sector on the existence and purpose of ACEF and
how the fund can be accessed particularly in the affected sectors of
agriculture. The purpose is to advertise and encourage the agricultural sector
constituents to use the fund. This may be accomplished through print media or
consultations with industry leaders and farmers, organizations. The
consultation can accomplish both the dissemination objective and
identification of priority areas for ACEF funding.
• In the interest of expediting the processing of applications, loan approvals
need to be decentralized at the regional level particularly those small in value.
This will prevent the deluge of applications at the National Technical
Committee and the Secretariat whose present capabilities are limited. This
was also proposed in the draft guidelines through the creation of the Regional
Executive Committee but, the committee should include appropriate
representations from the small farmers and fisherfolks groups to attend to the
welfare of their constituency. It is necessary therefore, for the Regional
Technical Committee to possess the expertise in reviewing and processing the
applications. The monitoring and post-project evaluation can also be
accomplished at the regional level.
• The guidelines must provide for the reuse of ACEF loan payments by
depositing such payments to Special Account 183 of the General Fund. This
account is specific for ACEF purposes. The secretariat will have to properly
account for all ACEF loan payments.
20
• There should be a constant monitoring of the income coming from the MAV
and the loan payments to ensure the availability of funds for ACEF projects.
The MAV importation and income need to be regularly accounted for, verified
with the Bureau of Customs and Bureau of Treasury. The knowledge on the
size and availability of the fund will be crucial in developing the national
agricultural competitiveness agenda.
21
VI. References
Clarete, R. Undated. Minimum Access Volumes in Agriculture: Choosing An
Effective and Efficient Allocation Mechanism. School of Economics, University of the Philippines, mimeographed .
________. Undated. Trade-Related Problems and Policy Issues in Philippine
Agriculture, mimeographed . Department of Agriculture. Revised Implementation Guidelines on the Utilization of
the Agricultural Competitiveness Enhancement Fund (ACEF), 28 March 2000.
Department of Agriculture. Rules and Regulations for the Implementation of the
Agricultural Minimum Access Volumes MAV’s), September 1997.
APPENDIX A
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APPENDIX B
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