Over the past years, the average growth of the agriculture sector has been below the government’s medium-term plan targets. The weak performance of the sector is indicative of its declining overall productivity and competitiveness. To reverse the trend, it is important for government to make more efficient and prudent use of its limited resources to raise productivity thereby resulting to more competitive sector. One of the policy instruments to help achieve this goal is the Agricultural Competitiveness Enhancement Fund (ACEF). The ACEF as a special purpose fund, intends to increase rural productivity and to reduce the “costs of doing business” in the sector through the provision of grants and loans to income-generating and competitiveness-enhancing projects, particularly small and medium enterprises.
ACEF implementation, however, had been plagued by irregularities and other implementation problems. This has led to the suspension of implementation of the program in January 2011 and call for its immediate review. Despite the introduction of a number of regulatory and fiscal reforms, there were still unresolved utilization problems, which include among others, very low collection efficiency, unaccounted funds at QUEDANCOR, phasing out of direct credit by the government and limited involvement of conduit bank or government financial institution.
In view of the above, the paper presented a number of recommendations which include, merging ACEF’s loan component with credit programs being supervised by the Agricultural Credit Policy Council, transferring the credit management of the ACEF loan component from the Department of Agriculture to government financial institutions, closely monitoring collections and/or grant assistance to various DA attached agencies, implementing COA recommendations on ACEF utilization; and developing performance information on ACEF-assisted projects.>>read complete document