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How will Vertical Farming increase the Agricultural Production and its
contribution to the total GDP of the Philippines

Thesis · April 2013

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HOW WILL VERTICAL FARMING INCREASE THE AGRICULTURAL
PRODUCTION AND ITS CONTRIBUTION TO THE TOTAL GDP OF
THE PHILIPPINES?

A Research Paper
Presented to
De La Salle University – Manila
School of Economics,
Economics Department

In partial fulfillment of
Of the course requirements in
Macroeconomics 1

Submitted to:
Dr. Rica Sauler

Submitted by:
Aaron C. Francisco
Daniel Joseph C. Tan

April 2, 2013
I. Research Question
The Philippine posted a 6.5% growth in GDP in the 4th quarter of 2012 according to National
Statistical Coordination Board (NCSB). The Philippine agricultural sector accounts for 9.3 percent of the
total GDP. However, this contributes to only 0.6 percent of GDP growth. The agricultural sector has the
second largest group in the labor force with an estimated 32.3 percent of the 37.7 million employed
persons based on the labor survey done by the National Statistics Office in October 2012. Despite the
mass of labor it employs, the sector has grown only at a rate of 0.1 percent based on the 4th quarter of
2012. Based on these figures, the Philippines despite being rich in natural resources and agricultural land
does not maximize the use of assets it possesses. The researchers would like to know how the concept of
"Vertical Farming", if put into application, may prove to increase the value-added of the agricultural
sector of the Philippines to the annual GDP and further maximize the utilization of labor.

II. Background & Significance of the Study

Although the Philippines is rich in natural resources, these are poorly utilized considering the
available technologies and techniques available for better yields in our day and age. But being non-
industrialized, our country cannot afford the modern machineries, infrastructures and inputs. Vertical
farming can help utilize the country's relatively limited land area and significantly increase the country's
agricultural production and to further expand its contribution to GDP and its growth.

Apart from increasing the country's agricultural production, Vertical farming may also provide
more opportunities to use our indigenous plants for research and other non-agricultural purposes. This
would include the production of biofuels and medicinal plants, thereby increasing the value-added from
the production of the other sectors of the economy to the GDP.

Besides the obvious benefits measurable against economic indicators that the country can realize,
there are also environmental synergisms in terms of control of pollution and improved air quality. All
told, vertical farming will increase production efficiencies, result in more jobs and create an increase in
the sector’s contribution to GDP and its growth.
III. Review of Related Literature
"The potential for increasing the supply of food through expanding the land frontier has long been
exhausted, particularly in densely settled countries in Asia where 60% of the world's population live
(Hossain, 2007). With the increase in the pressure of the population on the limited natural resources, land
prices have continued to increase relative to prices of other factors of production. The land-saving
technical change that increases the crop yield (productivity per unit of land per season) has been the
dominant source for maintaining the food-population balance. However the potential for increased land
productivity created by the dramatic technological breakthroughs on the late 1960's for the irrigation and
favorable rainfed environments have almost been exhausted."

Vertical farming provides a more effective utilization of the surface area it occupies because of its
ability to be able to systematically produce the intended plants and crops on different levels or floors
whilst still occupying the same area of land. Because of this, vertical farming has a fairly significant
potential of being able to provide more surface area for the production of agricultural produce well as the
potential of providing a corresponding increase job opportunities entailed therein.

Vertical farming may also be able to address the steadily increasing demand of agricultural
products due to population growth. Hossain (2007) confirms that the population continues to increase at a
high rate and its population growth is a prevailing factor in regards to the demand for staple food.

Apart from having the potential to increase the country's Agricultural production, vertical farming
may also lessen the risk of their intended agricultural produce being jeopardized by natural disasters and
calamities. According to Haen & Hemrich (2007), countries should put a big weight indevelopment
strategies and food security policies when it comes to in assessing the vulnerability of agriculture and
lessening the disaster risk inflicted on it i.e., protecting agricultural lands and water. It further states that
the most important asset needed to address the high vulnerability and disaster risk is investment.

Since the Philippines is located near the equator, it is frequently visited by typhoons and heavy
rainfall. As such, the country's agricultural produce have a corresponding risk of suffering losses due to
the fortuitous events that could occur thereof. Devereux (2007) further explains that unpredictable
rainfalls in rain fed agricultural systems can have devastating impacts on livelihoods and local economies.

Despite the stellar economic growth achieved in 2012, Mr. Benjamin Diokno, School of
Economics professor in the University of the Philippines was not impressed with the agricultural sector.
He mentioned that the contribution of the agricultural sector to the GDP continued to shrink posting the
lowest growth among the three major sectors in spite of the large labor force. Moreover, the 2.7 percent
growth in the agricultural sector in 2012 did not contribute so much to GDP growth but with little
improvement from the 2.34 percent growth in 2011.

According to the Bureau of Labor and Employment Statistics, the employment in agricultural
sector was stagnant and no significant changes in the 4 quarters of 2012. It ranged during this interval
from 11.6 million to 12.4 million employed people. It has the second largest group of employed people
behind the service sector and more than the industry sector. In the end of 2012, the industry sector having
5.5million to 5.9 million employed people managed to grow at a faster rate at 6.5 percent more than twice
the 2.3 percent growth in 2011.

IV. Analysis and Discussion

Aside from the basic concepts and ideas it entails, the effects of vertical farming in the country's
agricultural production would be dependent on how it is introduced and integrated to the society as a
whole. The concept of vertical farming is very flexible such that the size, structure and materials used for
construction in the vertical farms themselves will be dependent on the scale on which it is to cultivate any
number of agricultural produce it plans to house. There may also be some legal and ethical concerns
regarding the matter. Cultivating plants in an artificial environment may prove to appear unnatural or
hazardous to consumers and concerned environmentalists and might cause the concept to be rejected
before the first blueprints arrive.

There have been bills passed in the Congress and the Senate that would implement and practice
the use of vertical farming in the future. As stated in both bills that “the Department of Agriculture and
Department of Science and Technology are hereby mandated to promote the use of urban agriculture and
vertical farming in the metropolitan areas as an instrument to address food security concerns and
regenerate ecosystems in the Philippines. Idle/abandoned government lots and buildings owned nationally
or locally or available land resources of state universities and colleges shall be considered for growing
crops, raising livestock and producing food with the methods mentioned above. Furthermore, the said
methods would be included in the academic curriculum in secondary and tertiary levels in both private
and public schools.”
 V. Bibliography
de Haen, H., & Hemrich, G. (2007). The Economics of Natural Disasters: Implications and
Challenges for Food Security. In I. A. Economists, Contributions of Agricultural
Econoics to Critical Policy Issues: Proceedings of the Twenty-Sixth Conference of
the International Association of Agricultural Economists (p. 31). Malden, MA:
International Asociation of Agricultural Economists.

Devereux, S. (2007). The Economics of Natural Disasters: Implications and Challenges for
Food Security. In I. A. Economists, Contributions of Agricultural Econoics to Critical
Policy Issues: Proceedings of the Twenty-Sixth Conference of the International
Association of Agricultural Economists (p. 47). Malden, MA: International Asociation
of Agricultural Economists.

Hossain, M. (2007). The Economics of Natural Disasters: Implications and Challenges for
Food Security. In I. A. Economists, Contributions of Agricultural Econoics to Critical
Policy Issues: Proceedings of the Twenty-Sixth Conference of the International
Association of Agricultural Economists (p. 161). Malden, MA: International Asociation
of Agricultural Economists.

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