AGRICULTURAL /

RURAL
TRANSFORMATION
“One- third of country’s workforce depends on agriculture.”

– Sec. Procejo J. Alcala (Secretary of Department of Agriculture)

Poverty incidence is typically characterized as predominantly agriculture- and rural-based in

most developing countries (IFAD 2018). In the Philippines, the proportion of the poor in rural
areas, including farmers and fisherfolk, reached 25.7 percent, whereas urban poverty incidence
was 11.6 percent only (PSA 2023a). As of 2021, around 2.7 million farmers and fisherfolk, or 30
percent of their population, live below the national poverty threshold (PSA 2023a). Since poverty
is primarily concentrated in rural areas, ramping up agricultural and rural development has been
a continued focus as a key poverty reduction strategy not only in the Philippines but in
developing Asia as a whole. 

Evidence shows that strengthening rural economies by promoting economic activities rooted in
rural areas and enhancing agricultural productivity can significantly reduce poverty and promote
inclusive growth (Wickramasinghe 2018). Rural development has been recognized as one of the
most powerful and reliable strategies for reducing poverty and effecting inclusive growth in
developing countries (IFAD 2016). It primarily involves the intertwined subprocesses of
structural transformation and rural transformation, where the latter is embedded within the
structural transformation process (Timmer and Akkus 2008). 

Motoo Konishi (The World Bank’s Country Director) – “To achieve Inclusive growth to eliminate
poverty – Agriculture is ESSENTIAL. A Large Portion of the poor live in the rural areas was
able to pull themselves out of poverty because of Agriculture.”

Despite being one of the most vibrant economies in Asia, the country’s development
characteristics suggest an incomplete and non-inclusive structural transformation. In other
words, it is a structural change with inadequate rural transformation. The transformation has
mostly happened in the urban landscape, particularly in the services sector rather than in the
more productive manufacturing sector, with the agriculture and rural sectors significantly lagging
in the development process.
Findings from previous research (i.e., Huang 2018; IFAD 2016) have characterized the
Philippines as experiencing a combination of slow structural and rural transformation; and,
subsequently, a slow rate of rural poverty reduction. The World Bank (2020) has likewise
described the country as having slow progress in structural transformation and an
underperforming agriculture sector that fails to fully deliver to the rural and national economy.
Akin to the previous studies, our recent rural transformation study4 has found that only three of
the 16 regions in the Philippines (i.e., CALABARZON5, Central Luzon, and Davao Region,
excluding the National Capital Region) demonstrate a high level of rural transformation. A few
regions such as Northern Mindanao, Ilocos Region, and SOCCSKSARGEN6 are in the

transition stage toward shifting to modern agriculture. However, the country remains to be
dominated by regions at the early stages or low level of transformation.

From traditional to modern agricultural approach to rural development. There is no doubt that
the Philippine government, through the Department of Agriculture (DA) and the Department of
Agrarian Reform (DAR) and their attached agencies, has extensively supported and promoted
agricultural development. However, the long-time bias of the country’s development strategies
toward traditional agriculture, particularly rice, has led to an inadequate impact on the
transformation of the rural sector. The commodity-based approach to DA programs, in which the
budget is often disproportionately allocated to the rice sector, must be reassessed as it may not
be contributing enough to facilitating rural transformation. For the past 20 years, at least 60
percent of DA’s budget has always been allocated for rice (i.e., based on DA’s budget for the
National Rice Program [NRP], National Irrigation Administration [NIA] capital outlay, NIA
support, Philippine Rice Research Institute, and National Food Authority budgetary support plus
obligation) (Ponce and Inocencio 2017). In 2018, NRP received 48 percent of DA’s operations
budget for commodity programs, whereas only 12 percent was specifically allocated for the
National High-Value Crops Program (DBM 2018). In addition, we also find the critical need for
agricultural and rural extension programs to take a big leap in providing farmers and fisherfolk
with more diversified services, such as training, skills development, and other support in
nonfarm production-based activities such as in agritourism, agribusiness and entrepreneurship,
and food processing and storage. This will not only generate better and more diversified
incomes but will also create more off-farm employment and capacitate rural workers to fit
higher-skill jobs in nonfarm employment in both rural and urban areas. We have witnessed how
MIMAROPA substantially accelerated its rural and economic growth through agritourism and
agribusiness development and increased investments in physical infrastructure. It created an
increased and more diversified demand for labor in the region. More of this kind of rural
development are needed in other highly agricultural regions in the country.
WHAT COULD BE THE SOLUTIONS TO ATTAIN RURAL TRANSFORMATION?
From commodity-focused infrastructure to a more wide-reaching investment. We
recognize that investing in irrigation is important as it largely supports rice farming. However,
investing in infrastructure to support a wider range of commodity farmers (not just rice farmers)
in rural areas is equally important. For instance, investment in physical infrastructure such as
rural roads to improve the connectivity of rural farmers to urban markets will likely have a
greater impact on rural transformation. Improved physical connectivity will not only benefit
farmers but will also improve rural residents’ access to opportunities in the rural nonfarm
economy, and more generally, in urban areas.

The past decades of low investment in physical infrastructure have resulted in slow rural
transformation. However, since the National Economic and Development Authority’s (NEDA)
long-term visioning process that started in 2015 revealed the importance of quality transport
facilities to most Filipinos, the national government has prioritized the development of an
efficient transport system, as reflected in the country’s long-term vision, Ambisyon Natin 2040
and the Philippine Development Plan (PDP) 2017–22. Revisiting the National Spatial Strategy,
specifically the Spatial Development Frameworks of Luzon, Visayas, and Mindanao, as well as
the PRDP’s I-BUILD projects would be critical to further strengthen the regional connectivity and
linkages with the growth centers, which in turn could accelerate rural transformation in the
country.
From blanket implementation to a tailor-fitted yet integrated approach. The rural
economies of the regions vary with each other. The differences in the major agricultural
commodities and in the physical and geographical characteristics, such as proximity to regional
growth centers, have all contributed to the varying patterns and stages of rural development in
the Philippines. These diversities imply that multiple pathways could exist toward rural
transformation and, ultimately, rural poverty reduction. A decentralized approach is, therefore,
needed to tailor-fit the rural transformation strategies to the problems of the regions or
provinces. In this approach, an area-based institution with a well-integrated bureaucracy that
delivers to all sectors within a rural economy is crucial in addressing the constraints to rural
transformation regionally.
From Department of Agriculture responsibility to converging government development
efforts. Rural development has always been largely associated with agriculture, where DA,
(along with the other two rural development agencies [RDA], i.e., DAR and the Department of
Environment and Natural Resources) is expected to take the biggest role in it. One example is
the PRDP, which is a major national rural development initiative being implemented under DA
that strongly focuses on improving the agriculture and fisheries sectors only.
According to the Secretary of Department of Agriculture, Sec. Procejo J. Alcala, one-third of
our country's workforce depends on Agriculture, thus they implement the PRDP to create a big
change in lives of huge portion of our population. However, DA’s initiatives toward rural
development may not be sufficient, especially in making a simultaneous impact on the rural
modern agriculture and non-agriculture sectors because they are a more integrated rather than
a sector-specific and piecemeal approach toward rural transformation which is deemed more
effective.
In conclusion, the arrival of the continuously changing structure of the Philippine economy,
agriculture is no longer the only engine of growth in the rural sector and the country. It may help
us towards growth, but it is not the key to growth. Thus, our report represents the rural
transformation pattern that focuses less on innovating the traditional agriculture. This strategy is
by no means advocating the removal of support to traditional farmers, but it is rather hoping to
fill the gaps in and complement the traditional agriculture-biased rural development strategy in
the country.

REFERENCES:

Briones, R., and J. Felipe. 2013. “Agriculture and Structural Transformation in Developing Asia: Review and Outlook.” ADB Economics Working Paper Series No.
363. Mandaluyong City: Asian Development Bank.

IFAD (International Fund for Agricultural Development). 2016. Rural Development Report 2016: Fostering Inclusive Rural Transformation. Rome: IFAD.

2018. Transforming Rural Lives: Building a Prosperous and Sustainable Future for All. Rome: IFAD

2013. Philippine Development Report 2013: Creating More and Better Jobs. Washington, D.C.: World Bank

2017. Doing Business 2017: Equal Opportunity for All (Philippines Mindanao Jobs Report: A Strategy of Mindanao Regional Development). Washington, D.C.:
World Bank

2020. Transforming Philippine Agriculture During Covid-19 and Beyond. Washington, D.C.: World Bank. http://documents1.worldbank.org/curated/
en/614671593417939107/pdf/Transforming-Philippine-Agriculture-During-COVID-19-and-Beyond.pdf