The government should provide financial or credit assistance to small- and medium-scale manufacturers of farm equipment to revive local postharvest machinery manufacturing, according to a policy study conducted by the Philippine Center for Postharvest Development and Mechanization (PhilMech).
The study, titled “The Role of the Machinery Manufacturers and Distributors in the Grains Postharvest Mechanization”, also urged local manufacturers of farm equipment to form joint ventures to upgrade their capabilities.
“In general, the local postharvest machinery manufacturing and distribution can be characterized as an ‘aging’ industry that needs to be revived,” the study read.
At present, the study noted that the Philippines is a net importer of farm machines even if there are more than 400 local manufacturers of such equipment.
However, small-scale industries dominate the local farm machinery fabrication industry and most of them employ the “cut and weld” method of fabrication, which shows there is also a need to improve the manufacturing process of the companies.
To ramp up the local farm equipment manufacturing industry, the study recommended the forming of joint ventures among local firms.
“Among local manufacturers, a joint venture agreement should be established for the local manufacture of critical machines and machine parts, and to encourage mutual support and complementation of manufacturing and after-sales service,” the study read.
It also noted that, because of the bias of the Department of Agriculture’s (DA) farm mechanization program in favor of large-scale manufacturers, selected few are able to participate because of the financial constraints of small- and medium-scale manufacturers.
“Hence, to eliminate this entry barrier and to uplift the manufacturing and distribution of postharvest facilities in the country, the government should improve the financial/credit assistance to the small and medium manufacturers,” the study read.
According to the study, the local manufacture of farm machinery is still labor-intensive, but its work force lacks any real training.
“Manufacturing of agricultural machinery is predominantly labor-intensive with a work force that lacks formal educational background on machine fabrication and whose knowledge and skills were gained through experience”, the study read.
“The most common fabrication equipment utilized are the welding machine, bar and sheet cutter, drill press, sheet bender, grinder, shaper, lathe machine, acetylene and compressor,” it added.
According to the study, manufacturing firms should also include distribution in their activities so they can generate higher sales and profit margins.
“Efforts in manufacturing must be combined with distribution activities to gain some complementary effect. On the aggregate, a decreasing return to scale can be noticed that force firms within the industry either to specialize or diversify their product lines, adopt cost-cutting measures or even downsize operations,” the study read.
“Because of the downward trend in terms of performance of the industry, some of the key industry players are pessimistic about the future of the industry,” it added.
PhilMech said it is currently taking steps to improve the state of the local farm machinery industry. These include learning from the experience of other countries and collaboration in research and development of agricultural mechanization (AgMech) technologies with countries that have most similar settings with the Philippines.
The attached agency of the DA said it is also undertaking research and development of machinery suitable for Philippine farming conditions and increasing the technical capability of PhilMech engineers.
Dr. Rodolfo Estigoy, director of PhilMech’s applied communication division, said the development of the local farm machinery manufacturing industry is mandated under Republic Act 10601, or the Act Promoting Agriculture and Fisheries Mechanization and Development in the Country.
The law provides that “production of locally made engines and other machinery for agricultural and fishery purposes shall be promoted and encouraged by the DA in partnership with the private sector, and through joint venture agreements”.
Image credits: PHILMECH