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CLSU 2001-05: Monitoring the Impact of Tariff Reduction on Irrigation Machinery

This paper primarily aimed to evaluate the impact of the Tariff Reform Program (TRP) that affects the irrigated agricultural sector, specifically the irrigation machinery. A survey was conducted among 76 STW farmer - beneficiaries of the DA’s Gintong Ani Program in Bulacan and Nueva Ecija and from active members of AMMDA. Secondary data were also gathered from DA, NSO, BAS, NIA, Philippine Tariff Commission and other concerned agencies. Results show that the STW installed was one of the factors that contributed in increasing production, income, and asset investment among farmers. The area planted to rice increased for both cropping seasons, but a significant increase was noted during the second cropping. In terms of net income per hectare per production cycle, it has improved significantly during the first and second cropping seasons, averaging, Php3,436.73 and Php3,957.21 per hectare. On the other hand, TRP has not been effective in improving the agricultural machinery sector during the period under review. The major buyer of the sector was the government thru DA, NIA, and BSWM. TRP averaged 98% indicating that the agriculture machinery supplies were penalized. This was due to high value added on pump parts in the world market as compared to the value added of STW in the country. This situation was aggravated due to “back-door” smuggling of irrigation machinery, which sells the product at much lower price. Even with relatively low tariff rates imposed on the irrigation machinery, the agricultural machinery should have enjoyed high protection from government control and restriction if the Certificate of Eligibility required from them is suspended, if not totally dropped. Importers enjoyed only 3% duty instead of a 0% as prescribed by law. Adjustment policies toward tariff reforms and import liberalization are not necessary to the agricultural machinery industry. The present tariff structure has been widely accepted by them, however, if the political instability in the country remains the same, strengthening of our peso against the dollar will be affected. The following safety measures are proposed in order that our farmers and the agricultural machinery supplies could maximize their income: (a) allow farmers’ group and associations to undertake importations levels by themselves (b) strengthen anti-smuggling or anti-parallel importation (c) provide subsidies on importation of machineries and (d) increase the budget of agricultural research and development, specially on irrigation machinery.

Central Luzon State University
Authors Keywords
Barroga, Ligaya J.; Barroga, Rocelyn M.; Dela Cruz, Alma M.; Sobremisana, A.P.; tariff reduction; irrigation system;
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