Startup Hopes to Open Up Agricultural Investments

The Philippines is a rich, fertile country with long winding rivers and multiple lakes. With these topographical characteristics, it would be easy to think that the country's agricultural sector is a major economic driving force. But unfortunately, that is not the case.

The Philippine agricultural sector has lagged behind its neighboring competition. With a whole host of issues like corruption, as exemplified by the Coco Levy Fund, infrastructure problems like irrigation and farm-to-market-road problems and lack of capital, the agricultural sector can be considered one of the most inefficient sectors of our economy. According to a paper by the Philippine Institute for Development Studies (link), 57% of families whose head works in agriculture live in poverty. A good chunk of the workers in the sector don't have access to electricity and potable water which are essential in productivity. Current conditions and a lack of effective leadership has hindered in the development of one of the sector.

With the realities that are plaguing the sector, a startup company by the name of Cropital (link) has sprouted to help farmers gain capital as well as to give potential investors a medium to the sector.

Cropital is a company headed by three young entrepreneurs looking to provide a new market to potential investors. The capital is drawn from people who invest through the website. Each investor is free to choose the specific farm they wish to invest in. Cropital keeps 10% of the farms' profits, investors keep 20%. and the farmers keep 70%. These are desirable numbers for the farmers if you compare it to loan sharks who charge upwards of 40% interest even if the farmers don't turn a profit. It is also a decent alternative to placing their land on collateral. Ultimately, the farmers win because they are given another option to take their business to another level.

Browsing through their website, we will see a focus on high value crops and an absence of rice farms. The long-term crop currently available is napier which is used for renewable energy while short-term crops include beans, bitter melon (ampalaya), tomatoes, cabbages and pechay. As of writing, all farms are fully funded. But liking their Facebook page (link) would keep you up-to-date with more farms in need of funding.

As with other investments, there are risks to be considered. This has prompted the company to find ways to mitigate them. The company has partners with the local governments to help in interviewing and ultimately determining suitable farming partners. Aside from that, the capital to be raised also includes crop insurance from the Philippine Crop Insurance Corporation. Pests are also mitigated as farmers are aided by agriculturists. It seems the main risk investors are to look out for is the market. Because even though the company has their own buyers and even if they cluster up the farms to improve market strength, the market is still a volatile entity. But at the same time, all forms of investment have to deal with market volatility from time to time.

I don't usually publish somewhat promotional posts for my blog. But in this case, I'm not simply promoting a company. I am promoting an approach to farming that should be considered.

Our farms have usually been operated by single proprietors who have to find ways to gain capital to be efficient or, at the very least, operational. With the level of bank-ability of the small farmers that comprise a significant amount of the sector, we have struggled to produce globally competitive goods from the sector. Mar Roxas once alluded to the problem and called for consolidation to improve productivity through economies of scale. But this may ultimately be disastrous to the farmers who are, more likely than not, ill-educated. Hopefully, with a system similar to that of Cropital, farms would have the resources to get with the times and be efficient and self-sustaining. Consolidation or the hacienda system may prove productive with certain crops. But with the help of a profit-driven entity willing to accept the limitations of the farmers/partners' resources, a shift to different methods or even higher value crops prompted by an informed company should lead to productivity as well.

Capital is a major problem for small farmers. And start-ups like Cropital should help with that aspect of the industry.

With the private sector slowly finding effective ways to fund the industry, it's time for the government to put down effective capital outlays to help our farmers. They continue to call for irrigation and farm-to-market roads. Such requirements may only be fulfilled effectively and efficiently by an accountable bureaucracy.

Pharmaceutical Companies Should Not be Allowed to Advertise

I'm sure most of us here watch prime time soaps being offered up by the major networks. I myself have watched Dream Dad, Juan Dela Cruz and whatever ABS-CBN offers up after TV Patrol. What can I say. We have one communal TV and my mom's the boss. So while being forced to watch these shows, I can't help but notice the amount of promotions for medications. Although I don't mind seeing Anne Curtis flying around as she promotes Enervon, it's still not something I encourage having in our country.

Medical costs in the Philippines is pretty significant considering a citizen's purchasing power. Oscar Picazo wrote a detailed article about it for the Daily Inquirer. The significant cost of medication is compounded by the fact that many don't care for insurance. People tend to see insurance as something for the already weak and feeble and only go for it when it's too late.

Due to the high cost of medicine in the Philippines, the government has written laws and constructed policies to solve the issue. The Generics Drug Act and the hotly debated and  apparent watered-down version of the Cheaper Medicines Act come to mind. But even with these policies, a major flaw is being ignored within the economics of our pharmaceutical industry.

I don't claim to be an economist. But as a guy who loves to relax on his couch, I can't understand the use of promotion for drugs. As I mentioned, I don't mind seeing as the art form they are. It's just that they serve no purpose worth serving.

The purpose of advertisements is to inform. There are products out there that need persuasion to be consumed. For example, when choosing the best snack, we have tons of choices. We have Snacku, Mr. Chips, Chippy, Mang Juan and a whole host of other stuff. It's important for these manufacturers to invest in advertising because all of them have the same thing to offer which is the pleasure of eating they're product. The pleasure derived from consuming these products differ though from person to person. So having a famous face eating their product or a catchy theme song is important. These advertisements remind us that these products taste good because of the models' facial expressions in commercials or the lyrics of the theme song. I see no problem with these manufacturers trying to persuade us, regardless of how cheap their attempts are.

Now, as for medicine, pharmaceutical companies are adapting the same concept. The problem here is that unlike the pleasure we get from eating Snacku or Mr. Chips, the efficacy and the suitability of drugs is not up to us. We have doctors who should be the ones saying we need atapulgite or telmisartan.We should be spared from these cheesy commercials of Skelan or Xenical.

Now, aside from the fact we shouldn't be urged to take stuff without doctor's consent, there's still one more bad effect of pharmaceutical commercials I haven't tackled. This is actually the more economically sinful thing.

The biggest difference between medicine and snacks is this: the different brands for snacks differ in flavor which is where we derive it's effectiveness in benefiting us while the brands of medicine we have don't differ in curing illness. What I mean is, loperamide will always be loperamide whether it be labeled Imodium or Diatabs. As long as the dosage is the same, it will have the same effect. So now I ask, what's the point of advertising the products which in turn will drive the price up? What's the point of paying medical representatives P200,000/year to promote the brand to doctors? How does that help the consumer?

In the production of goods, every step needs to benefit both the producer and the consumer. The cost of the plant for snacks production is beneficial to both parties because without it, the producer can't earn and the consumer can't get his hands on some snacks. Advertising snacks is the same way. Advertising increases the demand, or for economic geeks moves the demand curve to the left, thus increasing profit for the producer and it also informs/reminds the consumer of the awesomeness of Snacku and its effectiveness in pleasuring our taste buds or, again for econ geeks, move the supply curve to the right. Sure, it drives the price up, but we don't need to eat Snacku. Unlike medicine which we need to take if the doctor says so.

So yeah, I am calling for the stoppage of the pharmaceutical ads like the Skelan and Enervon ads. But, wouldn't that make less receptive to seek medication? No, because what that will do is lower the price of medicine. Instead of buying Imodium or Diatabs outright, you can go to a pharmacy and they can sell you the cheapest loperamide or activated carbon which you wouldn't have known about because of the brand loyalty instilled by advertising Aside from that, Generika and other approved drugstores selling cheap medicine would only have to compete against other drugstores instead of the drug manufacturers. Drug manufacturers in turn will focus on increasing their productivity to increase profit. What will set them apart from other manufacturers will be the cost of producing the drug instead of the creativity of their commercials.

Medical advertising should no longer be part of the consumers' lives. Having brand loyalty for a medical brand will not benefit the consumer. Advertising of drugs should only be done if the drug is new. And it should be limited to the doctors.

A lot of us have clamored for universal healthcare. Philhealth and normal HMO's do not include medication in their benefits. With the price so needlessly bloated, I can't blame them.

Having to pay P70/tablet of Micardis is insane especially if both your parents are taking them. In the US, it's around $1.50/tablet which is roughly 20% of a minimum wage earner's hourly rate. Medicine is too expensive here. My suggestion may be drastic. But don't we need drastic results?