Agricultural production, productivity and incomes are as much the result of the nature of the policy, regulatory and institutional environment as that of the physical and natural environment. An inappropriate policy, regulatory and institutional environment that is not responsive to actual needs will fail to achieve desired outcomes. For example, overcentralized planning and management of the agricultural sector could lead government into pursuing one-size-fits all strategies and interventions that fail to recognize peculiar circumstances in various areas and localities. Hence, solutions that may work in some areas may actually be counterproductive in others. Budgetary allocations must also be responsive to actual requirements. In the Philippines, it has been a traditional lament that the agriculture budget has been inordinately focused (60-70 percent) on rice even as it only accounts for less than one-fifth of total agricultural value-added. The segments of agriculture with the highest incidence of poverty (i.e., coconut and fisheries) are also the ones that receive the smallest budgetary allocations. It is likely that the same perverse budgetary allocations are observed in other countries in the region.
In a predominantly smallholder-based agricultural system, especially where prior land reform efforts had deliberately moved the sector in that direction, small producers need to achieve higher efficiencies with economies of scale through the ability to cluster together. The ability to collectively transact with the rest of the value chain is critical to gaining a greater share in the value generated by the sector, thus raising incomes and welfare of farmers and their families. Various models of clustering have been in existence, including traditional cooperativism, nucleus estates, and corporatization of collectives. Sharing of best practices and positive experiences in this area is a valuable tool towards achieving more inclusive growth in the sector, thereby serving the interest of equity.
The efficient operation of land markets is critical to attracting productive investments in the agriculture sector. Weak governance, political conflict and outright rebellion have also gotten in the way of security of land tenure in many parts of the region, posing further impediment to investment and increased productivity. The importance of well-functioning land markets and assured security of tenure thus cannot be overemphasized.
Another crucial challenge of an institutional nature is the research and innovation system that is critical to sustained productivity improvement in food and agriculture systems. Issues range from inadequate budgetary allocations to bureaucratic shortcomings that either stifle (rather than promote) innovation or lead to inefficient and non-responsive outcomes. Innovation systems must be guided by the actual demands of resilience, equity and integration, for the products of research and innovation to become truly instrumental to uplifting lives in rural communities.