The Power of Telecommunication

7/25/2019 The Power of Telecommunication

1/16

J Vol. XlV No. 4 July -August 1996 ISSN 0115-9097 I

IIo.876

.

r.am

The Philippine

ell transmitted a complete sentence

through the telephone to his assistant

a short distance away in another room.

That event portended the huge poten-

._dof telecommunications in transmit-

"ring information at instaJntaneous

I

ndustry*

peed to any number of people regard-

less of location.

Today; we find ourselves armed

with a technology that can send

through telephone networks not only of human interacUon to such an extent

by Ruperto

R

Alo

nz

o

,

spoken words but also written infer- that a whole new world is flourishing andWilhertR.SanPedro

marion and computer data. This tech- out there in cyberspace .......................

nology has radical implications for Sadly, however, the Philippine

society. The miracle of telecommuni- telecommunications industry has not

cations has significantly reduced na- kept abreast of developments in the in_ Why Did W

e L

ag

U

onal borders and stimulated the pace ternationa] field

,

irt

'

reie

c

ommunJ

cafio

n$

?

Telecommunications is a vital

*Thiss arevisedversionof Chapter5o facountryeporton "InfrastructurendSustainabilityf infrastructure need in modem society.

th inthePhilippines"ubmittedotheAsianDevelopmentank(ADB)npreparationortheAsian Yet, the Philippines is one of the de-

e

lopment

O

utloo

k

:1996and1997

. veloping countries with inadequate

**Ruperto.Alonzos aprofessorttheSchoolofEconomics,UniversityfthePhilippines.Wilbert

SanPedros agraduatetudentatthesamenstitutionandwasformerlywithPIOS.

It wa_ only three years ago when eel- other's services in terms of wider area cov-

i J " _ lularphonesandpagerswereluxuryitems erage, lowertollratesandfasterrespome

which only the rich people could have to application. The land phone market

tucked into their belts. TOday, they have which used to bedominated bythe Philip-

beco

m

e a necessity in a world where corn

-

pine Long Distan

c

e Telephone Company

2

Food: Is. CrisisLooming? munication has taken centerstage. A (PLDT) has been invaded in recent

multipage advertisement ofa paging corn- months bythe upstart Bayantel (orBayan

pany, for instance, enumerated the oppor- Telecommunications Holdings Corp., a

6 AnInventoryfPhilippine mni_s

thatm_htbelostbetweenpar- venture between the Lopezfamily and

Telecommunications at and child (awareness of each other's New York-basedNynexCorporation). The

activities) and employerand employeeO'ob consumers, of course, have benefited from

Porlicipants _o_o,on; without a pager thi_kind ofcompetition ahhough thefirms

The opening up of the telecommuni- will nevertheless come out as winners in

1] Historicalverview _,a_*-ind_,.yin]093_tothemu,- the_.

rooming of a number of new telecommu-

nicatiom firms which tried to outdo each -_ P_, 16


2/16

: DEVELOPMENT RESEARCH NE-WS July- Augur:: 1996

' ',',.,'i . " '

I

E | furth

e

r

co

nt

e

n

d

s t

h

at

w

o

r

l

d

mar

k

et Nutrifion which

h

ighlight

e

d a continu-

I on

c

erns fo

r

global food secu- pric

e

s of food willbe much higher, and ing large number of chronically under-

rity have often been raised in recent the poor willbe priced out of the world nourished population worldwide. Be-

y

e

a

r

s in th

e c

ont

e

xt of the d

e

bat

e

on ma

r

ket. Brown's alarmist proj

e

ctions cause o

f

the international community's

environment

,

s

ustainabflity

,

and pop

.

u- have gain

e

d some credibility with the apparent complacency toward future

lafion growth as well as the impact of recent fall in world cereal reserves and world food situation, the International

agricultural trade liberalization under c

er

eal prices. Food Policy Research Institute (IFPRI)

the Wo

r

ld Trade Organizafion (WTO). Th

e F

ood and Agriculture has conducted a series of research, con-

The

s

e

c

on

c

erns were succ

e

ssfully Organization's (FAO) director-general ferences and seminars, and published

brou

g

ht out to the general public has also recently warned that: "After a materials trader the theme of "A 20/

20 Vision for Food, Agriculture, and

the Environment" sin

c

e late 1993. The

FOO_ objective is to seek solutions to the

problem of ensuring an adequate fu-

ture food supply while protecting

world natural resources for future gen-

IS a

Crisis Looming?

underwayeratins"reparations are currentl.forhe World Food Sumn_t

at FAO in Rome in late 1996 where

world leaders are expected to renew

their commitment to eradicate hunger

byC

.

ristin

a.

D

a

vid

and malnutrition, and achieve lasting

................... food security for all through appropri-

ate policies, strategies, and plan of ac-

tion.

through Lester Brown's alarmist ar- renewed period of bumper surpluses, Current concerns about the fu-

tides initially published in the Inter- we are now back to a situation where ture food-population balance stem

national Herald Tribune (1994) and the world's grain reserves have fallen from a number of factors:

subsequently referred to in other below the level considered necessary

w

id

e

l

y

circula

t

ed in

te

rnational publi

-

t

o

gua

r

antee global f

o

od se

c

urity...and _:_

Dec

li

ning pe

r

cap

i

t

a l

an

d

cations, world prices have soared and the low- and water resources. The annual

Acc

ording to Brown, China's ce- income, food-deficit countries will

real output will fall by at least 20 per- have to pay out an additional $3 bil- growth rate of new arable land basi

l

decreased progressively from 0.38 pe_ql.

c

ent by 2030 as cultivated area declines lion this year for their imports"

cent in the 1960s to 0.32 percent in the

and yields stagnate. To maintain the (Agence France Press [AFP] 1996).

country's 1990 level of per capita

c

on- 1970s to 0.19 percent in the 1980s. In

sumption, 216 million tons of cereals Constraintsto FutureProduction highly populated countries, the land

frontier has effectively closed. With

will have to imported, an import level In spite of the overall progress in continuing urbanization, the culti-

that is about double the current level

of total world cereal trade. If per capita raising the global food-population bal- vated area is expected to decrease in

cereal consumption is assumed to in- ance over the past three decades, con- absolute terms. Among developing

crease up to Taiwan

'

s present levels, certed efforts have been made recently countries, major expansion of culti-

China's cereal shortfall will reach 378 to draw public attention to future vable land area would be limited to

million tons. world food problems. In 1992 and South America, where much of these

Brown also states that Africa will 1993, the United Nations (UN), World lands are still under forest. Conversion

experience a cereal deficit of 250 mil- Health Organization (WHO), and FAO to agricultural land will thus entail en-

lion tons by 2030, a 10-fold increase sponsored a series of meetings related vironment costs. In Sub-Sahara Africa

from its present net imports. Given to the International Conference on which is also characterized by a rela-

such huge projected increases in world

demand for cereal imports which ex- _PaDerresentedtthelOthAsia-Pacificoundtable.oalaLum_urJune5-8 1996

pc


3/16

tively low man-land ratio, the high cost achieved under experimental condi- early 1980s to not more than $8 billion

/

of market and water infrastructure tions with the rice and wheat green year in the early 1990s (FAO 1996). In

would be a major constraint to open- revolution technologies have levelled the same period

,

agri-culture

'

s share

ing new land for agricultural produc- off (Pingaliet al. 1990). In fact, growth in total official development finance

tion. rate of yield per hectare has slowed also fell from 24 to 16 percent. The de-

With a rapidly-growing demand down and even stagnated in many cline in e

x

ternal funding for agricul-

for water among households and in- years. Although significant yield gaps ture reflected budgetary squeeze in

dustrial users

,

the opportunity or scar- remain between farm and experiment many developed countries as well as

city cost of water for agriculture has station yields, greater concern for both the lower social rate of returns to agfi-

likewise risen rapidly.Moreover

,

as ix- health and environmental costs of cultural investments as world com

-

rigation development has exhausted higher pesticide and fertilizer applica- modity prices collapsed in the 1980s.

locations with nearby sources of sur- tions limit the farmers' ability to close The same factors have also lowered

face water and begun to overextract that gap. In the meantime

,

potentials domestic public expenditure for agri-

groundwater sources

,

the cost per for further technological advance culture inmanydevelopedanddevel-

hectare of ixrigation expansion has in- through biotechnology and other sci- aping countries. Consequently, public

creased significantly (

R

osegrant and expenditures at the international and

_vendsen 1993) .......

,

, national levels for productivity-en-

Table I hancing investments, specifically irri-

+_

;

Deteriorating quality of ProjectedGrowth RatesoFAgricultural gationinfrastructure and agricultural

research are reported to have fallen

land and water resources. There are and Cereal P

r

oduction and Demand

some evidences that land and water re- since the 1980s (Rosegrant and

sources are being (In percent) Svendsen 1993

,

degraded through FAO 1996).

World Developed Developingountries

CountriesTotal Sub-SaharaNearEa

s

t Latin East South

Africa N.Africa AmericaAsia Asia

soft erosion

,

water

logging, saliniza-

tion of irrigated Pros

Oe

r

;

'l_ i

o;

the

lands, and pollu- ]:

a

Ge. _

c

;_;_f

'

_orr

W

tion of surface and 1990-2010 (

F

AO) A number of

groundwater, with

Agriculture

Prod

uc

t

ion

1.

8

0.7

2.6 3

.

0 2

.

7

2.

3

2.

7 2

.6 recent projection

c

o

nsequent nega-

De

m

and

b

8 0.5 2

.

8 3

.

3 2

.

8 2

.

4

2.

8 2

.

8

studies for the year

rive effects on agri- 2000 and beyond

-- _ultural productiv- (Mitchell and

.

.

.Ity.

F

i

s

her

y re-

Cerea

ls

Pr

oduc

t

io

n

2

.

0 1.0 2.1 3

.4

2

.

3

2.

3

2.

0

1.

8

Ingco 1993, Rose-

sources ar

e

overex-

Dem

a

n

d

2

.

0

0

.

5

2.3 3

.4

2.6 2

.4

2.

0

2

.

1

grant

e

t al. 1995,

plaited and forest Alexandratos

covers have 1990.2020 (IFPRI) 1995) provide

dwind

le

d in many

Cere

als, quant

i

tativ

e

as-

areas. Resource Production 1.5 1.0 1.9 3.0 2.4 1,9 ..... 1.8..... sessments of the

de

g

radat

io

n

may Co

n

su

m

p

t

io

n

1.5 0.8 2

.

0 3.1 2

.

2

1

.7

...... 1.9

-

-

---

future food sup-

be due to agricul- ply-demand bal-

rural intensifica- once. These studies

t-ion (increased cropping intensity and entffic breakthroughs

,

and thus for ac- are based on different methodologies

high fertilizer and pesticide applica- celerating productivity growth

,

are and coverage of commodity groups

tions) or to rapid growth of other eco- quite uncertain, and projection periods. It is remark-

nomic activitiesand urbanization un- able

,

however

,

that they have arrived

der policy and institutional frame- _ Failing public

e

xp

e

nditures at generally consistent conclusions at

works that essentially ignore environ- f

o

r agri

c

ultur

e

. Official development the global level (Table 1)

,

although

mental effects, assistanc e (bilateral and multilateral) there may be significant differences for

to agriculture of developing countries some regions.

_

A

pproaching technological in constant 1985 dollars has decreased

frontier. Maximum yield ceilings from around $11 billion

/

year in the -,*

P

_

9

, |1, ,, i i i i m| ..........


4/16

DEVELOPMENT RESEARCH NEWS July - August 1996

Philippine capital market iimi- Scale economies

.

The

t

eleco

m

-

PhilippineTelecommunications... tations.

There i

s

n

o

t enough m

o

ne

y

in mtmi

c

ations ind

u

stry is a

c

apital

-

in

-

P,

_ 1 the capital market to finance capital- tensive industry with slow rates of re-

intensive telecommunications infra- turn on inves

t

ment. Uneven popula-

structure proje

c

ts. An estimate in 1991 tion densities and low incomes of tar-

pegged the capitalization of the Phil- get consu

m

er markets in the regions

telecommunications facilities. From an ippine stock market at only 12170 bil- may result in underutilized facilities

e

c

onomic point of view

,

there are sev- lion. The National Telecommu

n

ica- and late payment of bills by subscrib-

eral factors that tend to influence the tions Commission (NTC) reports that ers, leaving low profit margins and

underprovision of basic telecommuni- as of 1995, investments in telecommu- thereby discouraging investors.

cation services and facilities, nications totalled 12

1

25 billion. There

is real danger that investment in tele-

Marke

t

failure

. Corollary to the

Market structure.

Prior to trade communications may

c

rowd out the above, simply relying on market forces

liberalization in 1993, the telecommu- available investment in other endeav- in rural areas where population and

nications industry was dominated by ors and may have a detrimental effect level of econo

m

ic activity are s

m

all

the Philippine Long Distance and Tele- on overall investment for develop- will not make possible the putting upd

phone Company (PLDT) with more ment. Ahigh foreign exchange require- of telecommunications facilities sincl

than 60 telephone companies operat- ment for the purchase of imported tele- there is no market to speak of.TM

ing on a limited scale within towns and communications equipment is also a Government often fills in to remedy

c

ities in the country. PLDT started op- detriment, these market failure situations.

erating in 1928 under the Philippine

Legislature Act No. 3436 which gave Supp

l

yan

d

De

m

andS

i

tuation

the telephone firm a 50-year franchise , forTelephones

t

o

d

e

v

e

l

o

p telecommuni

c

at

i

ons

s

er-

T

0bleI

Telephone density and availabil-

vices throughout the country. PLDT

has a virtual hold on overseas calls TelephoneistributionbyRegion

i

ty. Just how acute is the shortage of

which

c

an be made only through

(asofDecember995)

teleph

o

ne lines?

Go

vernment esti-

its gateway. It owns and operates mated telephone density at less

the country

'

s only backbone, the than one telephone per 100 per-

egion Working Popul

a

t

i

on Telephone

Lines Density

per IO0Pop.

publi

c

swit

c

h t

e

le

co

mmuni

c

a- sons in

1

989 whi

ch

i

m

proved to

tions network (PSTN). A back- 1.7 telephones per 100 persons in

bone is a main trunk or series of 1994 and 2 telephones per 100

CAR

16

.

3

44 1,3

29

.4

77 1.

2

30

persons in 19

9

5.

T

he g

o

vern_

tow

e

rs using microwave radi

o

I

2

7,

71I

4

,03

1,0

2

3

0.69

0 ment

'

s goal in the ne

x

t fiv

e

y

e

ars,,

that makes long distance calls II 7,685 2,712,823 0.280 is to increase telephone density to

p

o

ssibl

e

. Other tele

co

mmuni

c

a- I

I

I 9

1

,6

2

4 7,

1

6

7

,

0

45

1

,

280

at least

1

0 tel

e

phon

e

s

pe

r

1

00 per

-

tions

c

ompanies a

re o

nly h

o

oked IV 132,1

1

4

9,698,447 1.

360

up to this backbone. PLDT also V 24,256 4,490.359 0.540 sons.

has a strong presence ha the local VI 47,723 6,155,087 0,780 Meanwhile, p

u

blic tele-

e

xchang

e

telephone s

e

rvi

c

e. VII 8

2,

4

9

4

5

,

277

.

62

4

1

.

560

ph

o

n

e

booths s

e

t up th

r

oug

h

th

e

VIII 13,155 3,527

,

149 0.370 government

'

s municipal tele-

Barriers to entry

. The Phil- IX 17,568 2,890,386 0.610 phone program numbered 757 in

ipp

i

ne l

e

gislatur

e

has the p

o

wer x 23,5

5

4 4,111,359

0.

5

7

0 1

9

94.

Th

e numb

e

r of m

u

ni

c

ipali-

to ve

s

t fran

c

hises on t

e

l

ec

ommu- Xl 5

8

,

5

32

5,2

71,986 I.11

0

ties (627 or 4

0

p

e

rcent out of the

nications services and facilities. Xll 14,593 2,387,999 0.610 total of 1

,

604 municipalities) with

E

ntry into the

i

ndustry

,

th

e

ref

o

r

e,

ARMM 5,9

78

2,

0

98,512

0

.28

0

telephone acce

s

s i

n

1992 in-

may r

e

qu

ir

e a certain amount of NCR 846,308 9

,117,

632 9.28

0

cr

e

ased to 1

,

164 (72 per

c

ent) in

political muscle.Due to the diffi- 1994. More local exchanges

cul

t

y in

g

et

t

in

g

a fran

c

hise

,

some were likewise interconnected to

investors opt to b

u

y into shares the public switch telephone net-

work (PSTN) operated by PLDT

of

ex

i

s

ting t

e

lecommunications

companies, leaving only four local ex-


5/16

D

EVE

L

O

PM

EN

T

RESEA

R

CH NE_

W

S Jut1

- A

ugust 1996

c

ha

nges

not

co

nne

c

t

e

d to th

e

P

ST

N .......

c

l

os

e

s

e

c

ond with 112

,

9

4

5 sub

s

cribers

by 1994. T

a

bl

e2

(or 3

5

percent of the market).

Mobileellularhoneubscribers

Trunked repeater subscribers in

-

U

n

rest demand

. In 1992

,

there b

y

Comp

a

n

y

creased by 214 percent between 1994

w

ere

8

0

0,

00

0

un

se

rved appli

c

ati

o

ns

(

as

ofDecemb

e

r995)

and 1995. Th

e

re wer

e

5

,

982 su

b

s

c

rib-

for tel

e

phone lines nationwide, ers in 1994 which sharply increased to

600,000 of which were in Metro Ma- 18,799 subscribers in 1995. Liberty

Ope

r

a

t

or Nu

m

ber of

S

ubscribers

nila alone. The demand was still Broadcasting Network captured 33

un

re

st in 1993 wi

t

h mo

r

e than 700,000

P

il

tel

-

202

,

358

percent of trunked repeater subscrib _

applications remaining. At the end of Smartcom 120,378 ers in 1995, followed by Radiomarine

1995

,

PLDT had less than 2 million _

x

_

e

lc

om

1

00

.1

2

6 with 20 percent

.

telephones in service.

G

H

CR

4

1,000

Isla

c

om

3

0

,

00

0

Opening Up

Regional disparity

. Th

e

distr

i

bu- the

T

e

l

ecomm

un

ic

at

io

n

s

In

d

u

s

t

ry:

tion of phones is likewise highly un- RecentGovernment Policy

even a

c

ros

s

regions_ sixty percent of

The NTC, a govern

m

ent quasi-

he total number of phones are located

So

urc

e

: N

T

C

.

judicia

l

body, exercises regulatory au

-

"in Metro Manila with a telephone den-

sity of 9.28 line

s

per 100 people. The thority over the telecommuni

c

ations

r

e

st of the

c

ountry has a telephone den- jumped to 493

,

862 at end of 1995. The industry. It

s

ets rules and guidelines

sity hovering at one to less than one growth rate of cellular mobile phone on establishing, operating, and main-

per

1

00 popu

l

ation, subs

c

ription w

a

s a phenomenal 1,327 taining telecom

m

unications services

There is a correlation between percent in the period between 1991 and facilities. It also supervises

,

adju-

the level of economic development and 1995. dicates, and controls all forms of tale-

and the number of working telephone Cellular mobile phone systems communications services. Policy de-

lines. Metro Manila (National Capital initially hit the market in 1989. At that velopment for telecommunications, on

Region) which is also the most eco- time, the government granted Pilipino the other hand, is undertaken by the

nomically advanced region in the Telephone Corp. (Piltel)and Extelcom Department of Transportation and

country

,

has the highest concentration franchises to operate

c

ellular mobile Communication (DOTC).

of working telephone lines at 846,308. telephone systems, in 1993, Smartcom, The steady infl

o

w of new play-

Southern Tagalog (Region

W

) is a far Islacom and Globe Telecomjoined the ers in the once-closed telecommunica

-

second with132,114 working lines. The fray. At present, Piltel takes the mar- tions industry (see

Box

) was a direct

egion is ho

m

e to Calabarzon (Cavite, ket lead (Table 2)

.

offshoot of recent government policy

Laguna, Batangas and Quezon), the geared at market reform. Recent

fastest growing provinces next to G

rowth ofpaging and trunk re

- govemmentpolicyontelecommunica_

M

e

tro Manila. Cagayan Valley (Region

peat

e

r service

s. Paging and trunk re- tions may be summed up as follows:

II) and the Autonomous Region for peater services also provided an alter-

Muslim Mindanao (ARMM), two eco- native which f

u

rther narrowed the gap _:_ Policy on universal acces

s

nomically depressed regions

,

have the between the limited supply of fixed through compulsoryinterconnection.

lowest number of working lines at telephone lines and increasing de- Government

'

s response

t

o the gap in

7

,685 and 5

,

9

7

8

,

respectively (Table 1). mand. The National Telecommunica- telecommunications supply and de-

tions Commission (NTC) reported mand was to open up the sector to

Shift to cellular mobile phones

, that the availability of trunk radio sys- more players in 1993. Executive Order

The de

m

and for mobile cellular types terns had minimized the operation of (EO) No. 59 issued in February 1993

has gone up over the years due to the illegal radios, mandated the Compulsory intercon-

shortage of fixed telephone lines

,

There were 201

,

04

7

ra

d

io paging nection of authorized public telecom-

which in turn is a res

u

lt of a growing subs

c

ribers in 1994 which increased to mtmi

c

ations carriers for a universally

population base and an accelerating 324

,

816 (or a hefty 62 percent increase) accessible nationwide telecommunica-

level of economic activity. Although by the end of 1995. Easy Call captured tions network. As of December 1995,

there were only 34

,

600 subscribers in 3

7

percent of the market with 118

,77

5

1991, the number of subscriptions subscribers while Pocketbell was a

-

m

P

_

,

_ 6


6/16

policy is contained in E.O. No. 109 garding the development of a satellite-

Philippine

Telecommunica6onso..

which mand

a

tes

o

perators of the lu- b

a

sed telecommunications industry in

crative cellular mobile telephone and a competitive environment. DC

N

o.

,,,.

P,_ 5

international gateway facilities ser- 94-277 issued in July 1994

,

on the other

vices to cross-subsidize and carry out hand, tackled international satellite

60 interconnections agreements were local exchange carrier development to commtmications policy and defined

forged by local exchanges while six in- underserved areas. The NTC has au- the government's position on new sat-

terconne

c

tion agreements were thorized the following firms to oper- ellite-based technologies which aimed

reached by international gateway fa- ate local exchange services (LECs): Isla, to broaden access to international sat-

cilities. Through this scheme, smaller International Com

m

uni

c

ations Corp. ellite systems.

telephone companies were given ac- (ICC), Piltel, Major (a subsidiary of

cess to remote points via PLDT's back- Philcom), Philippine Telegraph and 0,_Public telecommunications

bone and gateway facilities. E.O.

N

o. Telephone Corp. (or PT&T

,

an affiliate policy act. Republic Act (RA)

N

o. 7925

59 also gave the public the choi

c

e to o

f

Capwire)

,

Digitel

,

Globe Telecom was enact

e

d in March 1995 and en-

use the toll facilities of PLDT

'

s corn- (GMCR) and Smart. Within the next courages the privatization of govern

petitors su

c

h a

s

Eastern

T

ele

c

ommu- three years

,

these operators are

c

om- ment-owned or oF

e

rated telecomrnu.

nications Philippines

,

Inc. (ETPI) or mitred to openup 4,699

,

279 new lines, nications facilities through public bid

Philcom although still using PLDT

'

s ding and in

c

luded provisions on in-

backbone. The policy is also expected _',_ Domestic communications centives toward this goal. RA7925 also

to spur more investment by the private policy. In June 1993

,

DOTC issued De- paved the way for deregulation in the

se

c

tor in telecommunications, partment Circular (DC)

N

o. 93-273 or setting of service rates of various tele-

the domestic communications policy, communications services which are

Pol

ic

y on cross-

su

b

s

idiza- It delineat

e

d government policy re- presently allowed to

c

ompete

f

reely.

fion. Another important government The rules and regulations implement-

Inventoryof PhilippineTelecommunicationsarticipants

i_ I

' are subdivided,nto international anddo-

Tel

e

communications .

Office,

rom a technic

a

l 'perspective, mesticoperations..ASof 1995, fivecom-

t

elecom

m

uncations woul

d,

i

n

cl

ud

e a

ll ' ' o

Pag

i

ngoperation

pan

i

espro

v

id

ei

ntern

a

t

iona

lrecordscar

,

. . .

form

s

of tr

a

nsmission 'of inform

a

tion r

e

r Servce" n

a

mely:. . ' . "'.'Eev

e

n

c

omp

a

ni

e

s

a

r

ec

urc

en

tlyc

o

m

-

through'

vo

ic

e

, r

ec

ord or d

a

t

a

Ov

e

r.long ' ' ' ' ' '.' ' ' p

e

ting for this vi

a

bl

e

service: ,.

distances primarilythrough a telephone Capitol'Wireless, Inc.

system.Wecanclassifythetelecommu- * .E

a

sternTelecommunicati

b

ns.Philip- :. Easy Call COmmunicatians'Philip-

nications i

n

dustry bytype of service pro- pines, Inc. ' ._ . pines

,

.Inc.'.

',,',,

vided. Broadly spe

a

king, telecommuni- .GMCR,..Inc

.

" . ..Pilipino.TelephoneCorp. (Piltel)

cationsserviceswould

in

c

lud

et

h

e

f

o

ll

ow

* '

P

h

i

l

i

p

o

ine,

G

l

o

bal

Co

mmu

n

i

c

at

ion

s,' " Phil

ip

p

i

neW

i

r

e

l

e

s

s

,Inc. (

P

ocketbell

)

i

n

g

:

carrier

'

sca

rr

ie

r

se

rvic

e

,

reco

rd

s

c

a

r- _

l

n

c

_

T

eodoro

R

om

a

s

a

nta, In

c

.

(

D

i

gip

age

)

t

i

er service, pa

g

in

g

op

e

ration, public re

-

PLDT' ..Infoc

o

mCommunication

s

Network; ..

... Inc. (Infopage) .'.

p

e

a

t

e

r sys

te

moperation, public coastal O"n the oth

e

r hand

,

six.entiti

e

s pro-'

R

a

diomarine Network, Inc.

/

E..M.

stationsoperation;radiotelephoneopera- videdomestic records c

a

rrier'services:

tion, cellular mobile t

e

lephone syst

e

m

,

Or

o

zco(Pow

e

rpage)

telephoneoper

a

tion

'

,very small ap

e

rture OceanicWireless Network',.'lnc. . E.rmit

a

Electronics,Inc. (St

a

rpage).

t

e

rminal (V

SA

T)oper

a

tion,

g

atew

a

yf

a

cil- GMCR,Inc

.

. " ' .GMCR,Inc

.

ityoper

a

ti

o

n,

a

n

d

broadcast

a

ndCAW.013-.

,

Philippine Tele

g

r

a

phand T

e

lepho

n

e . Smart Communi

c

a

t

ions,In

c.

er

at

ion

s

. Corp... . " Isla Communication

s,

Inc

.

(Icon)

" RadioCommUnicationsOfthe Philip-. ' Multi-Medi

a

T

e

lephone

,

Inc,

Records

c

arrierservice

,p

i

n

e

s ,in

c

. , ' , o '

PublicrepeaterSystemoperat

i

on

R

ec

or

dcarriers transmit facsimiles 'Un

i

vers

a

lTelecommunic

a

tionsSer- . .

andoffer tel

e

xandt

e

legraphservices

a

nd vices, i'nc

.

.... Public mobile radiocommunications

i i' ' '" ' ' ' "

ii i ii


7/16

ing RA 7925 were issued by the NTC bone or the public switch telecommu- '..............

in Se

ptemb

e

r 1

995

.

nications

ne

twork

(P

STN

).

EO

No

.

5

9

Table

called for compulsory interconnection

Seh

dedelecommunicationsompanies'

Someissuesel

a

tedto of authorized public telecor

c

Lr

a

unica- Finondolerformance994)

ti

ons c

arr

iers

,

th

er

eby

a

llo

w

in

g

de

r

egu

l

at

i

on

n

dl

iber

a

lizati

o

n

smaller phone companies access

The dereg

u

lationandliber

a

liza- to various points here and

tion

o

f the tel

ec

ommunication

s s

e

c

tor abr

o

ad v

i

a P

L

D

T's

b

ac

kb

o

n

e

and

P

L

DT 23, I16,43

9,

000

h

a

s

t

r

ansfor

m

ed it into an

exc

iting i

n-

ga

tew

ay fa

c

i

l

i

t

i

es

. H

owev

er, it Piltel 2,

5

4

6,646

,

000

dustry to watch today due to compe- has been difficult for new indus- Smart Communications,Inc. 146,032,000

titi

a

n

,

m

e

r

ge

rs

, s

trat

eg

ie

s,

and try

p

laye

rs

an

d

s

m

aller

fi

rms to

PT&T 472,598,000

coun

terstrategies of key players, all

n

e

g

o

ti

ate favorable

in

te

r

co

nn

ec-

GMCR

, I

n

c.

4

53,66

7,

000

done in the capitalist tradition (Table tion deals with PLDT since it has JSTelecommunications 258,238,000

3). Ultim

a

t

el

y

,

comp

e

tition in the onc

e

a

s

tronger ba

rg

ainin

g pos

ition as R

CPI

1

72,24.7,000

monopolized sector means better and the incumbent operator. OceanicWirelessNetwork 65,948.000

more innovative service for consum- CapitolWireless 50,974,000

M

rs.

H

owe

v

e

r, n

o

t

every

t

hing is

Problems in universal ac

-

Phil G

loba

l C

o

mmuni

ca

ti

o

ns 1,441,

6

6

0,000

smooth sailing all the way. tess policy. EONo. 109 required EasternTelecom. Phils. 1,200,737,000

P

LDT

'

s

r

es

idual monop

oly is sti

l

l

c

e

llu

l

a

r

m

ob

il

e

t

e

l

e

p

ho

n

e

opera- P

h

il Comm

.

S

a

t

elli

t

e

C

o

r

p

. 7

56

,

613,00

0

in place to potentially block the policy tars and international gateway ExpressTelecom. Co. 643,706,000

of in

t

erco

nn

ection

--

the connection of facility ope

r

ators to p

u

t up tele- E

asyCallC

omm.

Ph

i

l

.

4

5

4

,90

3

,000

lines of different telephone networks phone lines in both urban and DigitalTelecom.Phil. 259,014,000

w

ith

on

e

anoth

e

r. As mentioned ear

- I

nt

e

rn

a

t

io

n

al

C

omm

.C

o

r

p

.

219

,

151,000

lier, PL

DT

op

e

rat

e

s t

he

country

's b

a

c

k

- -

,a P

,

_ 8

S

ou

r

ce:Se

curit

ies an

d

Ex

c

ha

n

geCo

mmi

ssion

.

s

e

rv

i

cesar

e m

ad

ep

oss

i

b

l

eby

p

ub

l

ic

re-

"

GMCR

,

Inc

. _

c

oming

a

n

do

utgoing

in

t

e

r

nat

i

onal

ph

o

n

e

peater net_vorks.The governmenthas calls, data or recordtraffic. By 1995,

_rantedpermitsto the followingcompa- _ Telephoneopellation

th

ere

we

r

e nin

e

entiti

e

sprovidinggat

e

-

I_iesto operatepublc repeatersystems: Sixty-threepriVatecompaniesfunc- wayfacility,namely:

Contel Communications,nc. tion as telephone operatorsthroughout * PLDT

the archipelago.In_,1995, they include Phil.GlobalCommunications,nc.

InternationalCommunicationsCorp, large companies(Digitel,islacom,PLOT

U

b

e

r

iy

Broadcastin

gN

e

t

wo

r

k

,

Inc, EasternT

e

l

e

co

mm

unications

,

nc

.

OmninetPhilippines,nc, andPiltel)andmodestoneswhichset- InternationalCommunicationsCorpo-

=

TeodoroRo

m

a

s

anta

,I

nc. vic

ee

i

t

her

a mu

n

i

ci

p

a

lity

(such a

s t

he rat

io

n

Radio

m

arineN

e

twork

,

Inc. Balagta

s

T

el

ephoneCompanyw

h

ichs

e

t

- *

GMCR

,

I

nc.

Coro

n

aIn

t

erna

t

ional

,

Inc. vice

s

the

m

unicipa i

t

y o

f B

ala

gt

as

,

Capi

t

olWir

e

less,Inc.

Bulacan)or a small island (such as the Smart Communications,Inc.

Infocom Communication Network, CamiguinTelephoneCooperative).

Inc. Isla Communications, Inc.

Un

iv

er

sa

l Tele

c

ommuni

ca

ti

o

n Sy

s

- Th

e

government d

i

r

ectl

y op

e

rates

Digit

a

l Telec

o

mmunic

a

tions Philip-

t

e

rn

s

, I

nc

. four telephone

s

y

s

tem

s

: the DOTCTele- pines, Inc.

Wo

rl

dw

i

d

e

Co

mmu

n

i

cat

io

nInc.

(

Ra- com

mun

i

c

a

ti

on

sO

f

fi

ce

,

Ci

ty

o

f B

a

s

ila

n _

Broadcast andCATVoperations

diop

ho

ne). T

el

ep

h

one,M

i

sa

m

is Orien

t

alProvincial

O Cellulptmobiletelephonesystem TelephoneSystem,andthe Municipality As of .1.995,therewere117 TVsta-

of SanJose TelephoneSystem. tions inthePhilippines,317 AMsations

Ex

p

r

Q

sSTele

c

o

mm

unicatio

o

Co

.

Inc

.

a

n

d2

8

9 FMstations.The ros

t

e

r

alsoin-

" PilipiooTelephoneCorp. Gatewayope.ation cludes 557 CAW stationsoperated by

Smar_Communications,nc, A gatewayisa toll gate that deter- 391 CAW companiescovering441 cit-

I

s

la C

_

om

m

unicationso

m

pany

,

nc.

m

ines

t

he a

mo

untto be char

g

edfo

r

in

- ie

s andmunici

p

a

l

ities

.


8/16

al[ematige: : itica fions:i

L

0cal: C0mpanies continue

p g ,_ L p ....

o ta forei: n:inv:e._[0r_ as :at[herS

:::::::: :::::;::::::::: :i::::: : ......::in upgrad:ing:their::facilitie .i

A

f

telephone: :ci ..... _anies: present:; foreign investors in:thetele,::

....... .... m:mUni:cations: sec

t

0r :inciude: Ko_ :

......

X

:::rea: Telecoms: (parmer::0f :Capwire);

:Ne_ Zealand: Telecom: :::(Digitel)

/

........... Cabie and:Wireless (b6th:6f:Eas_ern);

i:::Mililcom:: (Extel):c0m);: Singapore

ted to:: Shinaw:atra: :of: Thailand : (Islacom)

.......... ....... USA: (Philc0m), and Nippon i:

:::::::(i:::::::::::::::::::::::

:

;:

:Si

: ::D:0_G:Three-Yeaie:p

6

_992-1995

Telegraph :and:i Telephone Corp

,

[

..... ::i:: i : (Smar:tcom):i: : :

: : An0ther: p0ssibi_ ::outc0

m

e::f;

i:C

at

i

on

s

fa

=: :capital _d_,g Constrainis will be: the: :

...... arei_eeded potential merger of weaker firms with

d

lee0_ations: facili- I ::stronger::players::: : :

,IrC:estimated that ::

v

ested::mtelecom- ,.

,

..,,...,.:,_, ................ ............................

: :.... : . ....... Asa :result Ofliberalizati

o

n

,

more

_demand:for:tele-:: 4. .....:: ......

............. :. plaYers---particularly: me: mg on:es_

:i::_e::;:_ ;ilitiesanctserwces: _ .c .... :.._ ............ ..... :

: : .... eamect: entry l13tothe once narcl.-to=ac;

mal:ca:pitalinvest-

v

_ : ,..: .... :

:.......... cess maustry

,

::tlaus _eve_mg me:play-:

: :: :: : ;: : :

2

:1: :: ing: field Five: ceiitil:af::ph0ne comp

;

that: tile .......... ....... : ....._ ..... ....

iS ' ' :: nies:areinoperafi0n:atpreS:nt(from:

the number :6fsubsCriberS:ff0m 34;60011

capl_ :.... :3........... ..........

_:d: traie in 1991: to 495

;

862:in:1995_ Thefe are

mo_ :i: e e ..... ::: ...... ...... .... :.....

........... nine international 0pera tors aUtho:::

....... : : rized :by:the:NTC e0mpared :to three)

the inaclequacy ot ......

;

...... :d 92 E1

:

it.....

..... whicnexiste before:19, "gt :com-

::fi d:_ith:the liberal _: .... .....

: ....._ ....... parties prowae: pag:tng serwces..

....... in.tlUX " ..... ......


9/16

)

EV

ELOPMENT RESE ARCH NE

W

S

, ._,i

;

.J

u

l

y - Au

l

u

st,

1

9

96

cal patterns would be much higher

-

:Is the growthrateinpopulation

Food Crisis Loomingo,o than those of developed cotmtries (at will continue to decline;

P

,_,a least double). However, growth rate of _:_ the proportion of population

demand would be lower than produc- with relatively high levels of income

tion in dev

e

loped count

r

ies, while the and food consumption characterized

Cognizant of the above food sup- opposite would be the case for devel- by low income elasticities for food will

ply constraints

,

all of these studies in- oping countries, increase; and

dicate a continuation of the historical Hence, developing countries will _,_ many poor countries or

slow down in production growth rate. increasingly become net importers of population groups with relatively high

Compared to the 1980-1992 growth food, mainly from land-surplus devel- income elasticities for food are unlikely

rate of 2 percent, agriculture into the oped countries. That would be due not to achieve rapid economic growth.

e

ar

ly 21st century is expected to grow so much to deteriorating food produc-

at about 1.8 percent per year, and ce- tion-population balance but rather to In addition, the projected gap in

reals at a somewhat lower rate of 1.5 changing taste preferences towards food. production and demand in devel-

percent. Growth rates of production wheat, livestock (and feed grains), and oping countries will not substantially

(b

o

th agriculture and cereals alone) other high-valued food commodities

,

widen because the resulting higher

and consumption among developing Pr

o

jected import demand of de- world prices in. the short run will in-

countries as consistent with the histori- veloping countries is relatively mod- duce increases in domestic produ

c

tion.

est. Judging from projected trends in

world food prices

,

there would be no The Case of China and Africa

Table 2 food crisis in the next two or three de- The aforementioned prospective

Proiected Trends in Real World Frice

s

cad.es. Two separate world price pro- assessment oftheworld food situation

of AgricuJtural Commodities jections presemed in Table 2 indicate contradicts Brown's alarmist predic-

(1990 = 100) a continuing decline beyond year 2000. tion of China and Africa's cereal deft-

In fa

c

t, recent estimates of cits by year 2030. Although Brown's

world price effe

c

ts of ag- projection period extends up to 2030,

990 995 2005" 2020'

"

ricultural trade liberaliza- import demand projections into the

World Bank tion expected to occur in early 21st century in other studies are

A

g

ricu

l

t

u

r

e 1

0

0.

0

I 13.5 98.8 the medium- and long- mu

c

h lower. Brown's projections were

term under the overall di- not based on any explicit demand and

ood

100.0 100.0 90.I

Cereals 100.0 103.8 81.2 - rection of the World Trade supply 'modelling effort but on certain

Ri

c

e 1

0

0.0 87.8 Organization show these assumptions about growth in popula-

Wheat 100.0 74.3 - increases to be relatively tion, demand per capita, and produc-

C

o

rn 10

0

.0 78.

0

modest. These are typi- tion. In contrast, the other studies were

c

ally less than 10 percent, based mostly on econometri

c

ally de-

Roseg

ra

ntet al.

and tiros would not be rived demand and supply models

,

and

Ce

r

eals

10

0

.0 B

O.

5

Ri

c

e I00.0 78,4

sufficient to reverse the experts' judgments on the prospects

W

he

at 10

0

.0 84.6 projected declining trends for technological change and other fac-

Corn 1

0

0.0 77.I in real world prices, tors affecting growth of cultivated area.

The declining real and productivity. Except for the

M

e

at

100.0 90.1 world food prices in the Huang et al.

'

s study which was lira-

face of slower growth of ited to China but based on the most

'

Base

dn

ac

tu

a

lpr

ice

s, production suggest that detailed

c

ountry modelling effort, the

Bas

e

d

on projected prices,

future world demand for other studies used a complete world

food

,

particularly cereals, demand-supply framework.

S

o

urc

e

s:

dopted

from: will also increase less rap- The most conservative projection

Worl

dBa

nk.C

o

mm

odityarketsndth

eDe

v

e

lopin

g

Coun

tr

i

es,

A

W

o

rl

dB

e

n

kQuarterly,

1995. idly in the future than in of import demand was by Rosegrant

the past for the following et al. at 22 million tons by 2020, almost

Ro

seg

r

an

t.M.W

.,

M.A

gcaoili

.,_m

bi

l

l

a,

nd

N.D.P

e

rez. reasons: equal to the FAO-Alexandratos and

GlobaloodP

r

ojectionso2020:I

m

plicati

ons

orInvestment

.

Internati

o

naloodP

o

lic

y

Re

s

earchn

s

titute,1995.


10/16

12000and

:i

miiii0n::to:*

:2030i

:indic:a

i

::i::27

: 5 mi.ili0fi: ions: in:2020_

,g :i ::Alexandrat0Sll a_di:de Haen

a ...........Ofpro-i: :(i:995), in i

:ne

t

: jectiOn:: is :nOt: to: b:e taken::eriouslyi:{;

;

g:domeStic prod uc tion :grows i

out:ii i:pe

r

cent ilaf: the sa me: rate of:::pOpula:tion

;

fit a[:

level Of net imports would imply aer.,

piia consumption Ofi2901kilograms; :

if i pefCentl increase between ii

from itsl 990 mid:2030 Sub2Saha fa :,_rica mus

:fali: ........ tly exag-such a conSumpfiOn leVel:by::theni

........... which does not seem t6 bea realistic:

alp6r:t: de_ prospecti.: On thel other:il l_and f: eon_

i::whiCh st_pti0n percapitais:assumedto:re 2:

n:cOnstan

t;

_e implied prod.uction

: _ Would::only be 34 kil0gfams; an unbe

2

:

i the Same: growthl : l ievabi_: lower :ievel:iOf grain produc2

::be:_ee

fi

:::2010:: tion peel Capita e6inpared :to the cur-

i:ab

0

ut 50 i rent level:of:140: kil0gr:amsi :: : .....::

..... i:

ai

/

s mod_ i:: :

net rain ,_;;_ _: _

,

:


11/16

DE

V

ELOPMENTES

E

ARCHNE

_

VS 11 Ju

l

y- Au

g

ust199

6

I . " ,,, , , ,,

His ri o w ,o cal vervie has been'declining since the demand, in turn,, ,depends Primarily on

.....

1

9

7

0

s, Becahse o

f

th

e

low rate 'popula

t

io

n

, incom

e

p

er

ca

p

i

t

a

,

and de-

of irrigation and unfavorable na- gree of urbanization.

, , , , , ,,,

P

r

oduc

t

ion

' ture of.rainfed conditions

,

Sub-Sahara Af

-

'.

rica.was largely bypassed by'the, green . World food' ava'ilability for direct h'u

-

...man. Consumption in daily'.ca or es per

Despite growing la

n

d constraint, glo-' revoiuti

o

n 'technology. Moreover, perva- capita, as a measure, of 'percapita effec-

bal food production has' generally out- Sive government interventions in agricul-

tive demand, has increased over the past

paced population growth, increasing food tural outPUt' and input markets have de

-

.three.decades.

T

his.growth is lower than

production per capita by.18 percent within Pressed incentives, and l

i

mited govern- . the growth of per capita food production,

the past 30 years. Annual growth rate of ment' resources to'

fi

nance productivity- because an increasing proportion of that'

4=codproduction declined over the period, enhancing, investme.nts ,'in this region. . ..'

from 3..0 .percent in'the 1960s to 2.3 production is fed to animals and indirectly

percent inthe 1970s, and down to about ' ' ,...' '. .consumed through livestock, and dairy

2.0 'percent bet

w

een '1980 and early

F,ig,ure

.products. Avail

a

ble food, ho

w

e

v

er,,

i

's d

i

s-.

1990s. But so has population growth rate '

Trends"n T0tol,Food

and Cerecll tributed unequally, as d

a

i 'lyper capita fo

o

d

consumption among developed countries'

which fell from 2.1 tO 1

.

9, and 1.8 per- Availabilityby,Reoion ,,, is ab

o

ut 3300 calories compared to about

cent, respectively. Among,DevelopingCountries, ,

Th',e , apparent ," , ' ,',

,, , , ,

,slowdown of world food' "

production per capita, Totalfood Cereals "

bythe 1980s has been

c

a

l

l

cap

/

day ca

l/

c

a

p

/

day

caused .m

a

inly by the

3

1

oo

--

2

1

oo

--

/

downward trend in de

-

NE_.d

N

o.

h

^1,

,

o_ ..

......,..

veloped 'countr ies'

2

9oo ..... ...... 1

9

oo

East 'Ael=

food product

i

on per _ '.

capita, especially the

2

70

0

.. 17o

o

..:.

.::

/ i

, // / ,..,.. ,.

sh

a

rp drop among

the LAtlI1 Ametlc_ //_-J /'- ... .... . NE lind North A|rlo,

Eastern 'European 2

5

00 /-_---/ t" E

s

st sl

a

1

5o

o ...::___.,.,.,........"'

countries due to tran- ._/f--

.... f

sition problems en-

2

ao

o

. .. .. / ls

oo

" " , South Asia

countered in the.shift ... ,'

/

,

"

from a Socialist to mar

-

21

oo

_

lOO

y

L.t

l

n Am

e

r

i

ca

_---_

k

e

t e

c

onomy, By con

-

___ .f_._--_ ..... "_---

t

rast, the growth per- 19

oo 9

oo

formance of per capita

f

o

od pr

o

du

c

t ion of'de

-

1

7oo

7

o

o

veloping countrieswas

h

i

g

her and con

s

i

st

e

n

tly

on an upw

a

rd trend, _s

oo 5oo

..,.L_

I

..=,....... _.,.L

.

_.

L

J_

961 1966 1970 1976 1980 1986 1992 1961 1966 1970 1978 1980 1966 1992

The remarkably ' ... " '. "

strong growth record of ' .' . ... '

per capita food production was not, how- ConsumPtiO n . .': 2500 among develop ng 'c'ountr es in the

ever, achie

v

ed uniformly across develop- . early 1990s..]

'

hat difference has actu:

ing regions. The highest growth rate oc- ."International trade' allows growth in ally narrowed from nearly 60 'percent to.

curred in Asia due i.n.part to the green . food consumption to be'higher, than do- less.than 40 percent as per capita food

re

v

olution.in rice.and.wheat, and in part .mestic food. production in countries .with availability in developing countries grew

to the policy and i.nstitutional reforms in. 'to w comparative advantage in agriculture, annually at a faster rate (3.0%) than de-

transit ion e

c

onomies Such.as China and ' It also stabilizes food availability and veloped countrie s (i

.

4%) becau

s

e income

Vietnam. While per capita food produc/ prices, and facilitates a wider range of elasticity of food demand decreases at

tion in Latin America showed some small' food choices as comparative advantage, higher income levels, indeed,,per capita

increases and remained just about con- in part icular,. .food commodit ies, depends ' cereal ..consumpt on in develo

p

ed coun-

stant for'northeast

an

d n

o

rth Afric

a

, the much

on

..'factor end

ow

men

t

s"

a

nd . tr

i

es has declined in

a

bs

o

lute t

e

rms

w

hile

poorest performance Wasby Sub-Sahara ... I.ocational factors. The'level 'and compo-

Afri

c

a where per

c

apita, food product

i

on' ,,, s

i

t j'on of food consumpt

i

on or effective ',, ' ,._ Pc._ Z2',


12/16

]HistoricalOverview... percent by

1

990. However

,

hat 20 per- Developed countries have increased

cent still represents a sizeable number-- export shares because of the inherent

p_ f nearly

8

00 million--of undernourished comparative advantage in agriculture of

population. Althou

g

h considerable land-surplus countries in North America

pro

g

ress has been made in bringin

g

down and Austra

l

ia, and also because of sub-

that of developing countries increased as the rate of undernutrition in East and sidized exports of highly protected com-

consumption patterns shif t towards live- South Asia, these re

g

ions continue to modities in the European Union and other

stock, fruits, and other hi

g

h valued prod- account for two-thirds of total undernour- developed countries.

ucts when per capita income rises, ished. In Sub-Sahara Africa, the number

Although developing countries have

Fi

g

ure i shows that wide differences of undernourished are increasing rapidly, become more import dependent on food,

at a rate even hi

g

her than population

in daily per capita food availability exist

among developin

g

countries with Sub- growth in the region as the proportion of

Sahara Africa havin

g

the lowest (only undernourished rose slightly from 35 to .......

2

10

0

ca

l

ories

p

er ca

p

i

t

a

)

a

nd N

o

r

t

heast/

37

percent b

e

tween

1

970 to 1

9

90. Figure 2

North Africa the hi

g

hest level (30

1

0 calo- Growlh o_ AgriculluraJ Trade

des per

c

apita). Growth rate of per capita International Trade

food availability was highest in North With the exception of the mid-1980s, al]r__Output, ] 963-1993

Ea

s

t/North Africa an

d

Ea

s

t

As

ia, r

e

fl

ec

t- agricultural tra

d

e ha

s

g

e

nerally grown

(Percentagehc_n_je

Each Ferio_{}

ing the rapid pace of

e

conomic growth in

these regions. S

i

nce the 1980s, food

availability in South Asia has also grown (%)

r

a

pidly. W

i

th th

e

poor ov

e

rall economic

25

performance of Sub-Sahara Africa, its per II Trade

c

a

pita food availability has sta

g

nated,

declinin

g

sli

g

htly over the past 30 y

e

ars.

20

' ' Out

p

ut

The pro

g

ress in addressing food

availability problems is remarkable in the

light of the near doubling of populat ion. 15

Whereas 80 percent of the populat ion of

developing countries lived inareas where

per capita food supplies were extremely

low--under 2100 calories--this ratio is

10

i_

now down to less than 10 percent. The .,,

nature of the food problem, however, de-

pends not only on the average level of 5 _

kk'

food availability or consumption but on _

the distribution of such suppl ies

w

ithin _,,

each country. FAO's estimate of incidence

of undernutrition considered both average 0

1963-68 1968-73 19

7

3-

7

8 1978

-

83 1983-88 19

8

8-93

and distr ibution of food supplies in deriv-

ing the numbers of persons in develop- Source:GATT,nte

r

nationalrade,1985-86and19

9

4.

ing countries which can be considered as

faster than production, contributing to the the proportion of agricultural imports to

chronically undernourished. The latter is

based on some notion of nutritional growing integration ofthe world economy total merchandise imports have substan-

threshold level (ranging from 1760 calo- (Figure 2). The share of developing coun- tially diminished from 2'5to about 10 per-tries in total food imports has increased cent by 1990. In terms of food imports,

hecapita/day for Asia to 1985 calorie/

to 28 percent, while their share in food this ratio currently represents only about

capita/day for Lat in Ameri

c

a) which is set

equ

a

l to 1.54 times the basal metabolic exports decreased from 30 percent in 5 percent of total imports in South and

1974 to 26 percent in 1994. Conse- Southeast Asia, 10 percent in Latin

rate (Alexandratos 1995).

quently, most developing country regions America, 12 percent in West Asia, and

The proportion of chronically under

-

have become net importers of food, ex- 15 percent in Africa. It should also be

nourished population declined signifi- cept for Latin America which remains a emphasized that increased import de-

cantly, from 36 percent in 1970 to 20 significant exporter, mand has been largely induced bychang-


13/16

reported because official data on land

Foo,lCrisis Looming.+ area have been reportedly understated

ngpr

e

f

e

r

e

nc

es

t

o

wardswheat, livestock

(and, thus, feed

g

rains) and

o

ther hi

g

h _

Pc

__

,

'

o

by asmuch as30percent. This s

u

ggests

va

l

ue

df

oo

d

as i

n

co

m

esi

ncre

ase

.D

eve

l- a considerable scope for in

cr

easing

opingcountrie

s

as

a

whole tend to have gr

a

in yields even at the same level of

muchl

e

ss

c

omp

a

r

a

tiveadvanta

g

ein pro- teclmology because government grain

ducin

g

th

e

se commodities domestically

.

Prod

u

ction Po

t

en

t

ials prices

,

pa

r

ti

c

ularly ri

c

e

,

continue to be

International trade h

a

s thus enabled them Although most analysts have undervalued despite liberalization of

to meet increasing levels

a

nd changing contradicted Brown

'

s alarmist sce- retail prices (Huang and David 1994)

.

patterns of f

o

od demand more cheaply, nario

,

they have nonetheless generally Gale Johnson (1993

,

) indeed lamented

Wo

r

ld P

r

ices taken a conservative estimate of future that China does not have a grain prob-

production growth. Alexandratos lem but a series of policy problems in

T

he historical long

-

term decline in t he (1995), f

o

r

e

xample, p

o

inted

o

u

t

that the pri

c

ing and proc

u

rement of grains.

agricultural terms of trade in word mar- average growth rates of per capita ag

-

Furthermore, t

h

e full benefits

kets reflects the adequacyofglobal food

supplyrelative to effective demand. Per- ri

c

ultural production of developing from aprivate economy have not been

ceptions of a world food crisis in the countries

,

as a whole

,

h

a

ve not been obtained asfarm households donut as

197

0

sasa

re

su

ltof

t

he

s

h

a

rpincre

a

ses

generally lower in the recent years yet have full property rights over land,

in

w

o

r

ld

co

mm

o

d

i

t

y

prices in

19

72 and compared to earlier periods. This is

as is also the case in Japan

,

Taiwan, and

1973 turned out to be a short-run phe- true for countries which have low, as South Korea_ As labor becomes in-

nomenon, as world pri

c

es collapsed in well as high, shares of agriculture in creasingly scarce and larger farm sizes

the

l

ate

19

7

0

s and continued its down

-

their total economy. And with the ex+ are called for to facilitate adoption of

a

rdtrend intothe 1990s. A confluence

of

e

vents causedthat pric

e

pe

a

k includ- ception of China, growth rate of per labor-s

a

ving te

c

hnologies

,

voluntary,

ingtheproductionshortfalls inSouthAsia capita agricultural produ

c

tion in the market-driven ]and transa

c

tions pus-

andmanySouth

ea

stAsi

a

ncountries, the more agri

c

ulture-based countries ac

-

sib

l

e only with full ]and property

short ce

r

e

al

cr

o

p in the US, Europe and cel erated in recent years

,

particularly rights system would be the most effi

-

former USSR, and the failure of the Peru- in South Asia. cient means of adjustment to that farm

vian anchovy catch which is a major

A

lexandratos further argues that production structure. In Japan and

source of protein for livestock

.

Allof these the slow down in agricultural growth Taiwan

,

that adjustment was initially

wereduet

o

adverseweatherconditions

,

since the 1980s primarily reflects pro

-

addressed through part-time farming.

The shorta

g

e was

a

lso exacerb

a

ted by duction a

d

j

u

stments in the main ce-

T

hat route, ho

w

ever

,

has now ex-

he USSR'sdecisionto increase

g

rainim-

ports

,

r

a

ther than to accelerate the real-exporting

c

ountries in response t

o

hausted its limits and therefore large

slaughter

o

f livestock as a response to l

o

w world prices

,

the need t

o

c

o

ntrol inef

fi

ciency costs are incurred with the

:he fa

l

l in domestic grain production

,

the growth of stocks

,

and the transi- continued prohibitions inland market

_uic

k

r

e

c

o

ver

ywas

al

so

h

a

mperedb

yt

he tion problems encountered by Eastem sale and rental.

sharp increases in domestic prices of Europe. That flexibility implies that In other transition economies,

fertilizer,withhe oilfarmcrisismachinerieS'in973. andenergy production can also be easily ex- such as the former USSR, Burma, and

panded when shortfalls in supplies Cuba among developing countries,

The declining trend in a

g

ricultural raise world market prices. The agricul- potentials for accelerating food pro-

terms of trade was caused in part by re- tural trade liberalization underway duction are high since the process of

ducedingheimprtsuccessdemandofhefrgreenCerealSrevolutionf lwould actually increase flexibility in dismantling and reforming socialized

t

e

chnology in m any parts of Asia, gener- domestic production adjustments and agriculture has only begun recently.

al

l

ydepressed w

o

r

l

d economy

, a

nd gro

w

- change world market conditions. State-owned enterprises

c

ontinue to

i

ng

pr

o

t

e

ct

io

ni

s

m

co

up

l

e

dw

ith

s

ubsid

iz

ed There are also reasons to believe act as monopolists and monopsonists

ex

p

orts in

m

a

n

y deve

l

o

pe

d

c

o

un

t

r

i

e

s

, that higher productivity growth in in output and input markets, and the

Ev

e

n

w

i

t

h the re

c

ent increases in

w

orld developing countries can be promoted domestic economy remains insulated

grain pri

c

es as import demand r

o

se and further by policy and institutional re- from international trade develop-

world stocks dropped, the l

o

ng-term de- forms a

n

d by greater public investments. For the former Soviet Union

,

lin

e

ofworldagriculturalandcer

e

alprices

in r

ea

l t

e

rm

s

h

a

v

e

not beensi

g

nificantly ments in land and irrigation develop- the transition to market economy wi

l

l

altered. _ ment and agricultural research. In signifi

c

antly reduce crop waste and

China, for example, average grain

yields are not so high as previously -.,

P

_ 1


14/16

ImplicationsonFoodSecurity

F

o

od security as defined in re-

F

o

od

Crisis Looming...

cent FAO documents means a situation

Wha

t

do

t

hese p

r

ospective food-

where all hou

s

ehold

s

have the ph

ys

i-

c.-

Po9

,

ta

supply-demand balances mean for

cal and economic access to adequate

food security? To many countries

,

food food for all members. That is

,

food

security i

s

often equated with self-suf- should be characterized by availabil-

losses in harvesting

,

marketing

,

tr,

,

Ls- ficiency

,

particularly rice self-suffi- ity

,

accessibility (income and price),

porting

,

and processing agricultural ciency. To others

,

food security can be and stability (supply and prices). This

products

,

and increase productivity of pursued by being self-reliant, that is, should prevail not only at the global

feeds in livestock production (Johnson relying on international trade if that and national levels but most important

1993). The rice economy of Burma

,

the will mean more efficient allocation of

at t

h

e household level. Food insecurity

leading ri

c

e

e

xporter in t

h

e early 1900s, re

s

our

c

es

,

and thus greater national is not so much a question of availabil-

c

an be quickly revived with appropri- income and more stable domestic sup- ity of food supply or adequ

a

te domes-

ate policy and institutional reform, fol- ply and prices as domestic production tic production, but one of effective de-

lowing the experience of Vietnam, is inherently unstable, mand or sufficient level of income,

which became the third largest rice ex- The debate between the two deft-

porter soo

n

after remov

in

g ce

n

t

ra

l

nit

io

n

s is rooted o

n

fears

a

bout riski-

p

articula

rl

y in poor countr

i

es. Food

security, therefore, is a question of the

state monopoly on international trade ness of relying on international trade rate of economic growth and distribu-

in rice and agricultural inputs, because of perceived instability in tion of income within countries, rather

Outside the transition econo- price and supplies in world markets than the level of food production.

mies

,

considerable scope for improv- and possibilities of politically moti- Of course

,

there are still countries

ing allocative efficiency in agriculture

,

where food a

n

d

a

gricul

t

ura

l p

rod

u

c-

t

i

o

n

co

n

t

i

nue to be

th

e

m

a

in

so

ur

ce of

"U/iereare reasoHso bdkvt/lat i9r froduetivity

income for the majority of the popula-

tion. Hence, rapid growth of food pro-

growtttin devdo HgcouJltriesanbepromotedurt er by

duction and food security means the

pOlic arid/ilst/tutioHalre/arms..." s_e thingorthem.nthesecountries

uch as those in Sub-Sahara Africa and

DOTC South Asia, pr0ductivity-enhancing

public investments, and appropriate

policy and institutional frameworks

particularly in grain crops, remains. In rated trade embargos. These instabili- for accelerating agricultural develop-

many developing countries, govern- ties have been reduced by the devel- ment are critically needed to incre

a

se

ment parastatals continue to incur opment of future markets and expan- income and alleviate food insecurity.

high budgetary costs in procurement

,

sion of transport and handling fa

c

ili- For other developing countries

,

the is-

s

torage and marketing of grains which ties for international trade while fur- sue related to food and agriculture is

could have been better spent on pro- ther reductions can be expected with how to alleviate the burden of adjust-

ductivity-enhancing investments. At the agricultural trade liberalization ment of the farm sector as compara-

the same time

,

these market interven- under the WTO. Moreover, food is sup- tive advantage in food and agricul-

tions distort seasonal and geographic posed to be exempted from political tu_ral production declines in the pro-

price variations and domestic price trade e

m

bargoes; trade embargoes can cess of economic development, par-

level away from their social opportu- easily be overcome by third country ticularly in land scarce countries. In

nity cos

t

and prevent the dome

s

tic expo

r

ts; and WTO can nowbe another Japan, Taiwan, South Korea

,

and many

food economy from being more inte- instrument for preventing food trade European countries, that burden has

grated into the world market. Yet, it h as embargoes. Governments espousing been alleviated by increasing agricul-

been well established that even for large rice self-sufficiency in the name of food tural protection. But with the establish-

countries, the lowest cost and most ef- security are now, more often than not

,

ment of the WTO, the use of that policy

fec

t

ive approach to na

ti

onal food secu- motivated by the objective of protect- instrument will not be permitted as de-

rity is through the use of international ing farmers---Japan, South Korea, and veloping countries lose comparative

market

s,

with a modest domestic stor- the Philippines. advantage in agriculture. (_

age program (Johnson 1991).

i ,i i i i . i|.


15/16

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A

l

exandrO

t

o

s

,N

ic

ho

las (

e

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)

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r

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ulture:

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Towards 2010.

F

ood and A

g

ri

c

ul

t

ur

e

_ p,_

,

# operating a network of 300,000 or

Organi

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ation (

R

ome)

an

d John Wiley and ..... 400,000 l ines, for example, may not be

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e, profitable. Of the

1

1 service areas des-Toronto,Singapore),1995.

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--

a

nd H.DeHoen. "Wo

rl

dCo

n

sumptio

n

Easycall has over 100,000 subscribers, parts of the lucrative Metro Manila

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Able to FeedChino?"a

n

d "When Chlna's 112,000. m Pc,q,./6

Scarcitie

s

Become the World's Problem," Telephone density has also ira-

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Cro

s

son,Pierrea

n

dJ.R.And

e

r

s

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d

Partly due to pressures of competition

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F

ood

an

d A

g

ri

cu

l

t

ur

e

Organi

z

a

t

ion

.

Food a

n

d

telephone demand.

Vol. X

lV

N

o.

4

Ju

l

y

-

Au

gu

s

t

1

99

6

I

n

t

e

r

n

a

ti

o

n

alTrade.

Technical paper for the Telecommu

n

ications services are

Wor

l

d

Food

Summit,

Foo

and Agr

i

culture

Organization,Rome, ]996. gaining a foothold in the countryside

du

e

to th

e

servi

c

e are

a co

n

cep

t

.

Under

, "Food,Agri

c

ulture

,

and FoodSe

c

urity

:

TheGlobal Dimension,"Technical

p

aper for this concept, telecommunications car-

the World Food Summit

,

Food and riers w

e

re assigned a mix of profitable Dr. PoncianoS.lnt

a

l,Jr.

AgacultureOrganlTatlon,Rome, 1996. , and unprofitable service areas such President

__. "FoodSecurltyAsse

s

sment,"Technical that I

CC

, for example, was assigned Dr. Mari

a

B. L

a

mber

te

p

a

perfor

t

heWorl

d

FoodSummit,Fooda

nd

Vice

-

Presid

e

nt

AgflcultureOrgdnlzatlon,Rome,1996. to service both the Bicol region and

Huang,Jlkunand C.C.D

a

v

i

d."PolicyReformand

Q

u

ezonCity while GlobeTelecomhad

Hs.Jennifer P.T.Liguton

Ag

r

i

c

ultural I

nce

nt

i

ves In China.* Centr

a

l Mindanao

a

nd Mak

a

ti

C

it

y

. Dire

cto

rf

o

rR

e

searchnf

o

rmatio

n

Unpublishedp

a

per,

1

994. Telecommunications carriers are e

x

- Hr. Maria

C

,

F

eranil

-,

S.Ro

z

ell

e,

ond M.W.Rosegrant

.

"Chlno's pected to cross-subsidize their opera-

Dir

e

c

t

orfor Projec

tS

ervicesandDevelopm

e

nt

Food Economy to the 2]st Century: Supply, tigris through international and do-

Demand, and Trade." Unpublish

e

dpap

e

r, H

s

.Andr

e

a S.A

g

ca

0i

l

i

1995, mestic toils and cellular services. Directorfor Operationsand Finance

John

s

on.D.Ga

l

e. "Doe

s

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