Although the Philippines Government is keen to develop the country’s beef industry, the local herd of 1.7 million head is declining rapidly while the human population continues to increase. (Although there are nearly 3 million indigenous caribao in the Philippines, these are generally regarded as draught animals.) The 60 million people who live in the Philippines consume an average of only 1.3 kg of beef each year. Yet, even with this low level of consumption, beef for manufactured products is imported from the European Community and prime beef is imported from Australia and the United States. As the economy of the country continues to develop, incomes will increase and more beef will be needed.
Close to 88% of cattle used for beef production in the Philippines are part of small operations involving 14 cattle. The remainder are part of large-scale operations, including feedlots. About 90% of the cattle in feed lots are imported, mostly from Australia. Large ranchesonce a dominant feature of the cattle industry in the Philippinesare reducing operations owing to law and order problems and changes in government policies affecting, for example, land ownership. The more successful of the feed-lot operations are owned and operated by large multinational companies, which also control most of the locally produced by-products used in feed lots.
In response to interest by the Government of the Philippines, this project has been developed to:
. describe the economic, institutional and social features of the Philippine beef industry;
. examine current operational procedures and policies, highlighting those that influence imports of live cattle and beef;
. evaluate the economic effects of existing operational procedures and policies that affect imports of live cattle and beef; and
. put forward alternative operational procedures and policies and evaluate their economic effects against existing policy arrangements.
Methodology will involve the development of a computer model of the beef sector using econometric techniques. The model will link farms, feedlots and beef imports so that the effect of policies affecting beef imports, for example, can be traced through to the other parts of the industry. The effects of existing policies and regulations will also be examined, particularly their consequences for consumers and for beef-producing regions.
Staff from the Department of Economics at the University of Queensland, in collaboration with colleagues from the Philippines Department of Agriculture and the University of the Philippines, will conduct the project. The team combines experience in the analysis of the effects of agricultural policies with experience of the Philippines beef industry.
To facilitate the development of the computer model and to use it for policy analysis, the project will have two main phases. Phase 1, of 6 months, will involve the preparation of an overview papernecessary because at present there is no comprehensive documentation on, or discussion of, the policy instruments used in the beef industry. The paper will identify the major economic, social and institutional features of the beef industry, including its structure and regional concentration; the economic linkages between the industry and other parts of the economy, such as the labour market; and the importance of beef consumption for households with different income levels. The research team will also identify and describe the more important policies influencing the industry, particularly those that restrict or regulate imports of live cattle and beef, and assess the broad effects of the various policies. Phase 1 will involve field work in the Philippines by the Australian researchers and Philippine collaborators.
Phase 2 will build on Phase 1 and use the model for policy analysis. Key issues to be examined include the nature and magnitude of the transfers between consumers, producers and taxpayers as a result of present policies; the cost effectiveness of present live cattle purchasing policies; the economic rationale for feeding lighter and younger cattle versus older and heavier cattle in feed lots; the levels of protection provided to the beef industry; and possible alternative sets of policies. This phase will involve close collaboration between the Australian and Philippine members of the research team, both in the Philippines and Australia.
Because of the strong commitment of the Government, the prospect of the project influencing policies in the Philippines is considerable. The potential benefits of a more efficient beef industry are largein one year, at worst, 3 times the cost of the project and, at best, up to 50 times the cost of the project. The results will also benefit other economies of the region, particularly Malaysia and Indonesia. They should also be of use to the Australian beef industry in developing its long-term strategy for supplying live cattle and beef to these markets.