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Economic Incentives and Comparative Advantage of Vegetable Seed Production in the Philippines
Abstract:
The study sought to determine the effects of the Philippine government's policies on the incentive structure in the vegetable seed industry (specifically for Chinese brassica seeds) and the relative competitiveness of domestically-produced vegetable seeds as compared to imported ones. The measures of production incentives include nominal protection rate, implicit tariff, and effective protection rate. The assessment of the relative competitiveness of domestically-produced vegetable seeds employed the concept of domestic resource cost of foreign exchange.
Results of the study revealed that despite the positive implicit tariffs derived, which indicated the imposition of disincentives to production, the effective protection rates suggest that pechay, radish, and mustard seed production activities received net positive incentives. At present, however, the country does not have a comparative advantage in the domestic production of the three seeds.
The current economic inefficiency of Chinese brassica seed production in the country was attributed to the domestic producers' relative inexperience in the business. In this connection, it was deduced that domestic vegetable seed producers were being protected and the government expected that they would learn how to produce at costs low enough to compete with importers.
Results of the sensitivity analyses revealed that a comparative advantage in Chinese brassica seed production can be attained if the adjusted wholesale C and F prices of pechay, radish, and mustard will increase from ,020/mt, ,090/mt, and ,520/mt to values greater than ,310/mt, ,3 80/mt, and ,690/mt, respectively. However, the country could also attain a relative comparative advantage at average yield levels higher than 714.56 kglha for pechay, 782.41 kg/ha for radish, and 444.72 kglha for mustard.
Based on the findings, the following recommendations for the redirection ofthe Philippine vegetable industry were derived:
1) The private vegetable seed producers should strive to further increase their current yield level, increase their raw seed procurement prices, and decrease the wholesale prices of their seeds.
2) Seed importation should still be subjected to tariff duties for the next five years, after which the trade restriction could be lifted.
3) Local seed production by both current domestic producers and seed importer-dealers should be encouraged by the government at the same time that regulated importation is being implemented.
4) The Philippine vegetable seed program should still revolve around a private seed industry.
5) Seed legislation should consider the relative time needed to attain a comparative advantage in seed production.
