Pinoyagribusiness

Technology-Poultry

What if "The Outbreak" finally occurs?

by Miko Jazmine J. Mojica
 July-September 2006
Volume 8 No. 3 

 

Four years since the avian influenza outbreak, 151 human deaths had been recorded out of 10 countries affected. The record was last updated by the World Health Organization (WHO) which it reported as “laboratory-confirmed cases”. Luckily, the Philippines is not among the affected countries but experts say we are constantly at risk.

If the outbreak finally does plague the Philippines, how will this affect the country's economy? This is what the study, “An ex-ante evaluation of the economy-wide effects of an avian influenza outbreak in the Philippines” tried to analyze. The 2006 study was conducted by professors from the College of Economics and Management at the University of the Philippines Los Baños (UPLB), namely, U-Primo E. Rodriguez, Reynaldo L. Tan, and Yolanda T. Garcia.

The study was conducted using the TARFCOM model, which the researchers described as, “a static computable general equilibrium (CGE) model of the Philippines. Patterned after the ORANI-G model of Australia, it is designed for evaluating the macroeconomic and sectoral effects of any economic policy changes or exogenous shocks that may be introduced into the country's economic system.”
According to the researchers, out of the 229 industries that compose the model, 28 belong to the Agriculture, Fishery, and Forestry sector. The model also has four economic agents, namely, households, firms, government, and foreign agents. “Households act as consumers of goods and services. Firms use primary and intermediate inputs in the production of goods and services. Government collects taxes, buys goods and services, and provides public goods. Finally, foreign agents transact with local agents through exports and imports,” they explained.

The researchers also explained that the key relationships in the model are represented by the following: 1) input demand equations, (2) commodity supply equations, (3) household demand equations, (4) government demand equations, (5) market clearing conditions for commodities and primary factors, (6) macroeconomic relationships, and (7) other identities.

The TARFCOM model was mainly used to demonstrate the impacts of the avian flu outbreak on the poultry sector and its related industries or subsectors which the researchers referred to as “production and consumption shocks”. According to the researchers, they found the TARFCOM model suitable for the analysis of the effects of avian flu outbreak on the country's economy because it captures the relationships among the various agents and industries in the economy. Therefore, they added, it facilitates the evaluation of how changes in the poultry sector will affect the economic activity in other industries and their feedbacks.

Based on the results of their study, they pointed out that there are combined effects of these production and consumption shocks that are expected to have negative effects on the economy.
“First, aside from the obvious decline in the production of the poultry sector, outputs of related industries that provide inputs to the sector such as animal feeds and corn are likely to be adversely affected as well. Second, the contraction in the poultry sector and other industries is expected to cause a decline in aggregate output and employment. Third, an outbreak is expected to reduce the supply of meat which threatens food security in the country,” the researchers articulated.

Furthermore, the study also evaluated the steps taken by the government through two policy responses as follows: 1) The import ban on poultry products as a preventive measure against the disease; and 2) The removal of import tariffs on non-poultry meat products to stabilize the supply of meat in the country.

The researchers found that the results for an import quota have the following implications. “First, to the extent that it is effective in controlling the entry of infected poultry products, its costs on the economy are far less than dealing with an outbreak. Second, the imposition of an import quota benefits the producers of poultry products and causes an increase in the supply of fresh meat in the domestic market. Third, the 'major' cost of the import quota is its adverse effects on the other sectors,” they stated.

During the 18th National Research Symposium in October organized by the Bureau of Agricultural Research (BAR) of the Department of Agriculture, the study was presented and won the first prize for the socio-economics paper category of the AFMA Best Paper Award. The study was funded by the SEAMEO Regional Center for Graduate Study and Research in Agriculture (SEARCA) based in UPLB.

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