What COA Found

Local milk production remains at 1.3 percent of the country’s dairy requirement, which means that Philippine Dairy Industry has stayed dominated by dairy importers occupying 98.7 percent of the dairy market. Per Philippine Statistics Authority (PSA) data, the number of dairy animals increased by an average of three percent annually from 39,069 in CY 2012 to 47,600 in CY 2018. This enabled local producers to contribute 23.69 million liters of milk, which covered 1.3 percent of the national dairy requirement of 1.77 billion liters. However, these accomplishments are still below the desired projections under the DRM; the number of dairy animals is 76 percent short of the 198,977 target while milk production is 54 percent short of its 2.8 percent sufficiency level target. Furthermore, historical data show that local milk production remained at the same level of 1.2 percent for CYs 2013-2016 and slightly increased to 1.3 percent for CYs 2017-2018.

 

 

We found that the following contributed to the non-attainment of the DRM targets:

First, lack of coordination and cooperation among key agencies led the same to deviate from the DRM targets. For example, the PCC did not adopt the DRM 2010-2016; instead, it crafted its own Strategic Plan 2011-2025, which we note, was not also implemented. What PCC did was set substantially lower targets than the DRM and its Strategic Plan. PCC explained that the adjustments were based on the budget available to them. Similarly, the NDA did not adopt the DRM targets. The NDA adopted a different set of targets, which were based on the available budget and on the Performance Agreement with the Governance Commission for the GOCCs (GCG).

Second, the DRMs which are the overall guide for the development of the Philippine Dairy Industry, do not contain well-defined roles and responsibilities for its key stakeholders. The vagueness of the DRM made it difficult to hold other implementing agencies, such as the Bureau of Animal Industry (BAI) and Dairy Training and Research Institute (DTRI), accountable for their supposed roles in the program. The contribution of the private sector was also not elaborated in the DRM.

Third, both the NDA and PCC encountered difficulty in importing dairy animals due to lack of funding. Importation is the main strategy of both agencies to rapidly expand herds. However, due to issues with funding, both agencies were not able to meet their importation targets. For example, out of the 11,880 target for CYs 2013-2018 under the DRM, the NDA was only able to import 3,060 dairy animals. Similarly, the PCC was not able to import dairy buffaloes as planned due to lack of funding support from the DA.

Fourth, due to operational issues, the NDA and PCC were unable to fully implement and monitor other herd build-up strategies. As a result, targets under these strategies were also not met. For example, the NDA’s Artificial Insemination (AI) and breeding services strategy only achieved a calf drop rate of 42 percent of the total animals bred and inseminated, instead of 60 percent. Also, the harvest rate under the NDA’s animal buy-back strategy was only at 11 percent, which is below the target of 20 percent. The palit-baka scheme achieved an animal repayment rate of only 37 percent of the total animals due. The PCC, on the other hand, was unable to conduct 31 percent of its target AI services. Also, its AI success rate was only at 22 percent, instead of 35 percent which is the target rate.

Lastly, apart from not meeting the herd build-up targets, both agencies registered significant cattle and buffalo mortality rates. For CYs 2013-2018, the NDA registered 2,614 cattle mortalities or 10 percent of the total dairy cattle population; which costed the government a total of ₱346.35 million. Meanwhile, the PCC registered 3,284 buffalo mortalities, which costs ₱471.42 million. Based on our interviews with program officials and dairy farmers, these mortalities were caused by problems with herd management, inadequate provision of proper animal healthcare services, and non-provision of housing facilities for the animals.

It is expected that the demand for locally produced milk with the implementation of RA 11037 or the National Feeding Program will provide impetus to the government as well as the private sector for more investments aimed at increasing the number of dairy animals and volume of milk production.

 

Why COA did this study

In CY 2012, importers dominated the Philippine Dairy Industry supplying 99 percent of the country’s annual dairy requirement. In line with the state policy to strive for national self-sufficiency in milk and dairy, the Department of Agriculture (DA) issued the Dairy Road Map (DRM), which aims to increase the milk market share of the local producers from 1 percent to 10 percent by CY 2022. Through this, the government will be able to provide proper nutrition and generate employment opportunities for the people.

To achieve this, the government needed to increase the number of dairy animals and volume of milk production through the Herd Build-Up Program (HBP) under the National Dairy Authority (NDA) and the Carabao Development Program (CDP) under the Philippine Carabao Center (PCC). For CYs 2013-2018, the government allocated an amount of at least ₱2.85 billion on these programs to increase the number of dairy animals from 39,069 to 198,977. Through this, the government expects to increase local milk sufficiency level from 1 percent to 2.8 percent by the end of CY 2018.

This audit aims to assess: (1) the extent to which the HBP and CDP attained the target increase in the local dairy stocks and volume of milk production taking into consideration the objectives of the DRM; and (2) the extent the NDA and PCC ensured proper administration of the programs.

In conducting the audit, COA reviewed the program documents and accomplishment reports, conducted survey of farmer beneficiaries from selected regional offices and centers, interviewed key officials and personnel, assessed the extent of coordination among stakeholders in program implementation and conducted site visits to different PCC’s National Impact Zone/Regional Impact Zones and NDA’s Regional Departments. The scope of the audit is program implementation from CYs 2013-2018.

 

What COA Recommends

COA recommends the following:

1) the DA needs to strengthen coordination and cooperation among key stakeholders to unify efforts and ensure funding support aimed at attaining the desired local milk sufficiency level;

2) the roles and commitments of cooperating agencies and the private sector should be clearly defined in the DRM to ensure their respective contributions in the attainment of its targets;

3) in the absence of fund requirement for importation, the NDA and PCC should focus on massive upgrading through AI and bull breeding, buy-back program, intensified monitoring and efficient collection of animal repayments to increase the inventory of dairy animals; and

4) the NDA and PCC should strengthen their controls in program administration in line with the principles of efficiency, economy and effectiveness.