Rural banks fear losing agri clients due to AFTA

Rural banks stand to lose as the agriculture sector — their primary client for loans — faces stiffer competition from global rivals as tariffs fall under a regional trade pact. Rural Bankers Association of the Philippines (RBAP) President Joseph Omar O. Andaya said they expect fewer loan applications as local agriculture players get sidelined by lower duties under the ASEAN Free Trade Area (AFTA). Andaya said the agriculture sector, which lacks support from the government, would suffer against competition from Thailand, Vietnam, Indonesia and Malaysia. "Don’t implement [this agreement] for now. Give the agriculture sector support first because we would die if this sector dies," he said in a telephone interview on Tuesday. The RBAP chief said half of the rural banking sector’s loan portfolio is lent to the agriculture sector. The rest, he added, is lent out mostly to micro and small enterprises in the countryside, which are largely or dependent on agriculture. Andaya noted that around 90 percent of rural bank head offices and branches are in the countryside. In January, tariffs on goods such as petroleum, chemicals, iron and steel, cars and parts, rubber, leather goods, textiles and garments, and glass were scrapped under the Association of Southeast Asian Nations free trade deal Duties on certain farm goods — corn, cassava, poultry and pork — were reduced to 0-5 percent. The Philippines’ proposal to keep rice tariffs at 40 percent before lowering it to 35 percent in 2015 is being negotiated. The RBAP chief said the government should shift the focus of the agrarian reform program to improving the education of and support for beneficiaries from just land redistribution. He said most of the beneficiaries have been left to fend for themselves. Agriculture officials were not immediately available for comment. Andaya said the 650-strong RBAP, which has over six million depositors and a million borrowers, has commissioned a study on the impact of the AFTA on the rural banking industry. The results will be released in two months. Overseeing the study is Rolando T. Dy, executive director of the Center for Food and Agribusiness and dean of the University of Asia and the Pacific's School of Management. In a text message, Dy said the sectors immediately affected by the free trade deal are corn farmers and chicken and hog producers. Tariffs on imported chicken and livestock were reduced last month to zero and 5 percent, respectively, from 40 percent and 35 percent. — Don Gil K. Carreon, BusinessWorld