REPUBLIC OF THE PHILIPPINES SURVEY ON ISSUE ANALYSIS OF FOOD VALUE CHAIN IN THE PHILIPPINES FINAL REPORT AUGUST 2019 JAPAN INTERNATIONAL COOPERATION AGENCY (JICA) PwC PHILIPPINES RD JR 19-024 Survey on Issue Analysis of Food Value Chain in the Philippines Table of contents Executive Summary ................................................................................................................................ 1 Chapter 1. Background and context ........................................................................................................ 3 1.1. Background of the study .................................................................................................................. 3 1.2. Goal and objectives of the study ...................................................................................................... 6 1.3. Methodology .................................................................................................................................... 6 1.4. Overview of the vegetable sub-sector in the Philippines ................................................................. 8 1.4.1. Importance of vegetable production in Luzon...................................................................... 8 1.4.2. Highland vegetable production ............................................................................................ 8 1.4.3. Lowland vegetable production ............................................................................................. 9 1.4.4. Import and export of vegetables ......................................................................................... 11 1.4.5. Factors driving vegetable consumption .............................................................................. 13 Chapter 2. Involvement of the public and private sectors in the food value chain ............................... 16 2.1. Major corporations in each value chain node ................................................................................ 16 2.2. Japanese companies in the Philippine agriculture business ........................................................... 18 2.3. Trends in the Philippine agriculture and food enterprises ............................................................. 19 2.3.1. Production .......................................................................................................................... 19 2.3.2. Marketing, retail, and distribution ...................................................................................... 20 2.3.3. Processing........................................................................................................................... 21 2.3.4. Logistics ............................................................................................................................. 22 2.3.5. Consumer trends ................................................................................................................. 23 2.4. Relevant projects implemented in the Philippine agriculture sector .............................................. 23 2.4.1. Japanese public institutions ................................................................................................ 23 2.4.2. Japan Agricultural Exchange Council (JAEC) programs ................................................... 24 2.4.3. Related donor organizations ............................................................................................... 25 Chapter 3. Description of the vegetable value chain............................................................................. 30 3.1. Overview of the highland and lowland project areas ..................................................................... 30 3.1.1. Benguet highland vegetable production ............................................................................. 30 3.1.2. Quezon lowland vegetable production ............................................................................... 32 3.2. Vegetable value chain mapping ..................................................................................................... 35 3.2.1. Highland vegetable value chain (HVVC) .......................................................................... 35 3.2.2. Lowland vegetable value chain (LVVC) ............................................................................ 41 3.2.3. Common players for both the lowland and highland vegetable value chains .................... 44 3.3. Regulatory framework and economic policies governing the value chain .................................... 48 3.3.1. Regulatory framework ........................................................................................................ 48 3.3.2. Economic policy ................................................................................................................. 49 3.3.3. Taxation system.................................................................................................................. 50 i Survey on Issue Analysis of Food Value Chain in the Philippines 3.3.4. Quality control standards and certification ........................................................................ 53 3.3.5. Agricultural financing and insurance ................................................................................. 55 3.3.6. Recent policy developments and implementation in the agriculture sector ....................... 58 Chapter 4. Dynamics in the vegetable value chain ............................................................................... 60 4.1. Linkages and relationships of value chain players ......................................................................... 60 4.1.1 Price setting and price trends............................................................................................... 60 4.1.2. Margin distribution ............................................................................................................. 66 4.1.3. Marketing or product strategies .......................................................................................... 67 4.1.4. Value chain governance ..................................................................................................... 70 4.1.5. Vegetable flow ................................................................................................................... 70 4.1.6 Transport route of the vegetable value chain ...................................................................... 75 4.2. Vegetable value chain performance ............................................................................................... 80 4.2.1 Profitability.......................................................................................................................... 80 4.2.2. Supply and production growth trends ................................................................................ 84 4.2.3. Equity ................................................................................................................................. 86 Chapter 5. Constraints in the value chain ............................................................................................. 89 5.1. Input node ...................................................................................................................................... 89 5.1.1. High cost of inputs ............................................................................................................. 89 5.1.2. Lack of access to improved production inputs ................................................................... 89 5.1.3. Lack of private sector involvement in improving agricultural inputs ................................ 89 5.2. Production ...................................................................................................................................... 89 5.2.1. Organizational and management failures ........................................................................... 89 5.2.2. Improper traditional farm practices .................................................................................... 90 5.2.3. Lack of hands-on training and provision of needed materials ........................................... 90 5.2.4. Seasonal price fluctuation of produce ................................................................................ 90 5.3. Processing ...................................................................................................................................... 90 5.3.1. Non-integration of vegetable processing in the vegetable value chain .............................. 90 5.3.2. Lack of processing technology and research prioritization ................................................ 90 5.4. Marketing ....................................................................................................................................... 91 5.4.1. Lack of direct market access .............................................................................................. 91 5.4.2. Lack of access to market information ................................................................................ 91 5.5. Logistics ......................................................................................................................................... 91 5.5.1. Constraints in the farm-to-market roads ............................................................................. 91 5.5.2. Constraints in the transport to other markets .....................................................................