1. ASSESSMENT OF PROSPECTIVE IMPACT OF FRUITS AND VEGETABLES RESEARCH AT THE INDUSTRY LEVEL IN THE PHILIPPINES: THE CASE OF THE ACIAR – PCAARRD HORTICULTURE PROJECT Dr. Roehlano M. Briones and Ivory Myka R. Galang Philippine Institute for Development Studies

2. Outline Objectives Research and Development (R&D) Assessment method Results of the assessment Analysis of the results

3. Objectives Analyze the contribution of the fruits and vegetables subsector in agricultural development. Evaluate the potential impact of R&D on selected horticulture crops. Draw implications for investment allocation and institutional framework for the agricultural R&D system.

4. Research and Development Budgetary allocation trend – Table 1. By Major Final Output (OPIF; World Bank ; in P millions) 2001200220032007200820092010 MFO 1 Support services20,19921,75818,70214,74820,80336,00633,858 MFO 2 Regulations5122,2572,2446891,1861,1971,353 MFO 3 Plans and policies2,0761,3821,1033,0591,7672,4692,617 TOTAL22,78725,39722,04918,49623,75639,67237,828

5. Research and Development Budgetary allocation trend – Table 2. Breakdown of MFO 1 (OPIF; World Bank; in P millions) 2001200220032011 Production Support Services2,5232,4684,6084,975 Market Development Services267143115242 Credit Facilitation Services31212418423 Irrigation Development Services9,98113,1249,04412,552 Other Infra and/or Post harvest Dev't Services 2,8002,0121,667716 Extension Support, Education and Training Services 2,6302,5142,1261,853 Research and Development 1,6861,3739581,185

6. Research and Development Investment in agricultural R&D – one of the major drivers of agricultural productivity. Most of the agricultural research and development efforts (funding) come from the government agencies. – Agricultural research as a public good – Stakeholders (workers and farmers) are poor

7. Research and Development General trends – Table 3. Global public agricultural research-intensity ratios, 1981-2000 Expenditures as a % of AgGDP Region/country 198119912000 Developing countries 0.520.500.53 Sub-Saharan Africa 0.840.790.72 China 0.410.350.40 Asia and Pacific 0.360.380.41 Latin America and Caribbean 0.880.961.16 Middle East and North Africa 0.610.540.66 Developed countries 1.412.382.36 Total 0.790.860.8

8. Research and development Public-sector agri research intensity ratio, 2002 PHILIPPINES: 0.46 % – Higher than Vietnam [0.17 %], Indonesia [0.22 %], Laos [24%] – Lower than Malaysia [1.92 %] – Higher than the overall average for Asia (2000) : 0.41 % – Lower than the average for developing countries (2000) : 0.53 %

9. Research and Development Research Intensity Ratio 1994-1996 Rice 0.25 Corn 0.05 Sugar 0.5 Coconut 0.3 Fiber Crops 2.5-3.0 Cotton 2.5 Abaca 1 Other fiber crops Vegetables nil Tobacco 1.1 Livestock 0.15 Carabao 3.6 Other livestock 0.02 Fruits Banana nil Other fruits nil Fisheries excl. SEAFDEC 0.12 incl. SEAFDEC 0.35 Forestry 3.5 Source: David (1998) 2012 GVA Shares Banana6.93 Livestock12.79 Poultry7.47

10. Assessment Method Economic Surplus Approach – Change in economic surplus arises from farm productivity improvement due to innovation (k- shift), which propagates by a diffusion process – Together with research cost, permits calculation of measures of project worth Net present value (NPV) Benefit-cost ratio (BCR) Internal rate of return (IRR)

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12. Assessment method K-shift  NPV, BCR, & IRR Unable to get good estimates of k-shift Reverse NPV, BCR, and IRR  threshold k-shift – minimum value to justify the amount invested in the research – NPV=0, BCR=1, IRR= discount rate A model named ‘welfare impact simulator for evaluating research’or WISER has been developed to automatically calculate the prospective impact of a new technology generated from fruit and vegetable R&D.

13. Philippines Horticulture Program Fruits – C1: Analysis of Papaya supply chain constraints – C2: Durian/Jackfruit Phytophthora Integrated Management – C3: Papaya Integrated Crop Management – C4: Improved and Sustainable Mango Value Chain Vegetables – C1: Integrated soil and crop nutrient management – C2: Development of a cost-effective protected cropping system – C3: Management of bacterial wilt and other wilting diseases in Solanaceous crops – C4: Analysis of selected vegetable value chains Fruits and vegetables – C5: Economic impacts of new technologies and policy constraints Research cost: financing by the Australian Centre for International Agricultural Research (ACIAR) and in-kind contribution by the Philippines.

14. Assessment method Assumptions to calibrate the diffusion process: High adoption scenario – admax (maximum adoption): 20 % – adop20 (adoption after 20 years) : 15 % Low adoption scenario – admax : 5 % – adop20 : 4 %

15. Assessment method Table 4. Research cost (over 4 years) Total investment in the Philippines, in AUD$ Philippines in- kind, in AUSD$ TOTAL Durian201,345 18,200219,545 Jackfruit""" Mango430,09156,504486,595

16. Preliminary results Table 5. Threshold k-shift estimates in percent NPV=0; BCR=1 IRR 0.05IRR 0.15 LOW adoption HIGH adoption LOW adoption HIGH adoption Durian2.40.811.44.9 Jackfruit8.52.830.715.6 Mango0.80.34.21.7 k-shift (%) Pearl millet 18 to 59 Sorghum 12 to 26 Groundnut 15 (Evenson, 2003)

17. Analysis of the Results Modest levels of k-shift are needed to justify research investment It is expected that the actual k-shifts of the research project would be higher than the k- shift estimates in this study. The computed k-shifts can help the research stakeholders to potential benefit of research to society via farm-level productivity improvement