American International Journal of Business Management (AIJBM)

ISSN- 2379-106X, www.aijbm.com Volume 3, Issue 6 (June 2020), PP 90-100

The Current Status of Philippine Mango in the Global

Value Chain
Michael F. Centino1, Mary Caroline N. Castaῆo2, Jenny Beb F. Ebo3
1
The Graduate School, University of Santo Tomas and Associate Professor, College of Accountancy and
Business Administration, San Carlos College Mabini St., San Carlos City, Pangasinan, Philippines 2420
2
Associate Professor, The Graduate School, University of Santo Tomas, Philippines
3
Associate Professor, Cavite State University, Philippines
*Corresponding Author: Michael F. Centino1
ABSTRACT. To maintain the Philippines’ competitive edge in the trading of agricultural products, this study
identifies the current status of the Philippines’ participation in the mango global value chain. The competitive
edge of the Philippines in the global market has been recorded in the trading history. Its contribution to the
economy is notable; however trading is limited to fresh mangoes. Likewise, the continuous decrease of area
planted to mangoes contributed to its bounded participation in global value chain. Meanwhile, some countries in
Asia emerged in the industry and further threatened the entrance of Philippine mango in the foreign market.
This situation will be altered by strengthening the country’s global competitiveness, gross domestic product and
implementing policies on remoteness of the country. The policy recommendations, if implemented, can
guarantee strong integration of Philippine mangoes in the global chain, which will facilitate the flow of factor
payments in the economy, thereby raising the standard of living of Philippine citizens and creating more social
protection for the Philippine people.

Keywords: Philippine Mango, Global Competitiveness, Global Value Chain

I. INTRODUCTION
The term “Global value chain” (GVCs) is often expressed as one of the features that shape the current
swing of globalization however little is known on how to efficiently integrate it in the chain. The current
situation of developing countries like the Philippines motivates these countries to search for efficient and
effective ways to integrate “GVC” in the global economy. With barriers such as limited resources and policy
challenges, developing countries are less competitive and can be left behind by neighbouring developed
countries if they will not improve their respective social and economic outcomes.

Trade statistics shows that mango as an agricultural crop also follows the integration in global value
chain, for the past ten years mango trade shows an increasing trend from US$696 million in 2005 to US$2
billion in 2015 (UN Comtrade, 2016). This is also evident to its position regarded as the top five of the most
cultivated fruits in the world. Yet in some countries, studies shows that trade is limited since majority of the
produce is still locally consumed (FAO, 2016).

In the Philippines, mango contributed to the achievement of the development goal of the country.
Globally, the country had participated in the mango global market chain with an increasing exports of fresh and
dried mangoes which is US$67.9 million or 2.6 percent share of the global market (UN Comtrade, 2018). The
country has exported mangoes to Hong Kong (China), Japan, Singapore, Switzerland, UK and the USA. The
increase in mango exports can also be attributed to the low tariff in exports, which allows Philippine mangoes to
enter duty-free markets, as provided by the World Trade Organization and Japan. Likewise, locally, mangoes
served as a major source of income to an estimate of 2.5 million farmers, ranked third after bananas and
pineapples in terms of quantity and value of production, thus, providing major a source of income to an estimate
of 2.5 million farmers (PCARRD DOST, 2017).

With the Philippines strengths in mango production, the country is regarded as one of the leading
producers and exporters of dried mangoes, with 85 percent of its total processed products was exported.
However, the country’s participation in fresh mango export is often limited which is largely due to limited farm
size. According to the Bureau of Agricultural Statistics Report (2016), the average area of farm planted with
mangoes is 1.34 hectares. There are also other constraints that hinder the Philippines’ potential to improve its
ranking. One of these problems is the inability to meet strict Sanitary and Phytosanitary (SPS) terms in markets.
Similarly, productivity difficulties were experienced by the Philippine mango including erratic annual
production and quality yields because of environmental aspects, pest and diseases and the high costs of inputs
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 The Current Status Of Philippine Mango In The Global Value Chain

by the Philippine mango industry (PCARRD-DOST, 2011). Moreover, the industry also faced lack in
technological development in order to survive environmental hazards, inadequate irrigation equipment, the lack
of fertilization management and equipment and abuse in the use of pesticide (Briones et al., 2013; Buguis, 2014;
Hambloch, 2015). Lastly, other significant challenges including lack of financial resources and infrastructure
are considered as threat.

Meanwhile, other significant mango exporters including Mexico, Peru, Brazil, India and Thailand
emerged in the industry. These countries threatened the status of the country in the global trade. Mexico and
Peru have placed considerable focus on developing and upgrading farming techniques and many of their farms
are certified by and followed the standards set by GAPs. Concurrently, other countries like India have allocated
additional budget for Research and Development to solved problems of low productivity and seasonality (R&D)
like India.

Literature Review
There are four points that will be discussed in Literature Review.

Definition of Global Value Chain

According to the WTO (2011), the term “value chain” illustrates all of the activities that firms and
workers do to produce goods or provide service from its conception to its end use and so on. This includes
activities such as the design, production, marketing, distribution and support to the final consumer. All these
activities was then organized with the so-called global value chains (GVCs), wherein the different stages in
production process are located across different countries (OECD, 2019). Melle et.al (2007) describes “value
chain” that includes all activities needed to produce a product from “conception”, thorough “production”,
“transformations”, and “delivery” to final consumers and also needs to incorporate the proper final disposal
after usage. It includes process and also players from suppliers of inputs to producers and processors to
exporters and buyers engaged in the activities required to produce a product for its end use.

Various researchers used the concept in different fields. One of the well-known business books
authored by Michael Porter (1985) introduced the concept in constructing corporate strategy. According to him,
for the firm to be globally competitive, it is necessary to focus on the entire system of activities like that of the
chain in which activities must be organized collectively. While Kimura and Ando (2005) suggested that the
value within the system which is the product of the firm’s effort was also the factor of the value distribution
system that influenced the firm’s selection. The vertical participation of “GVC” relies on the hierarchical
pattern that has an absolute and unidirectional control of the main company over its subsidiaries. Figure 1 shows
the modes of organizing value chains and that the subsidiaries performance is carefully supervised and
examined in line with their main company management strategies. Outsourcing options on the other hand, show
that the relationship among clients (buyers) and subcontractors (service suppliers) have the same level of
exercised powers.

Figure 1: Modes of Organizing Value Chains, Kimura and Ando 2005

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 The Current Status Of Philippine Mango In The Global Value Chain

Measurement of Global Value Chain

While there are various studies conducted on analysing the global value chain, complexity of the
measurements used has created difficulties on apprehending trade and creating policies. Traditional
measurements used gross value of the exchange between partner countries and do not include producer’s
contribution in understanding global value chains of commodities. Other literature used value-added of trade
data. Chen et.al (2014) introduced the idea of integrating gross exports into the value added context. With the
limitation of the conventional approach, some studies used “input-output” tables. Hummels et al. (2011) for
instance introduced the concept of vertical specialization and used input-output tables to measure the
intermediate inputs used to produce an exported good. Another study conducted by Daudin et al. (2006)
constructed a multi-country input-output table from 70 countries to compute for the domestic value-added of
exports. This also includes indices of vertical specialization and regionalization. Moreover, Bems and Johnson
(2012) proposed the concept of “value-added” real effective exchange rate. These indicators were used to clear
the external imbalances and use to evaluate the magnitude of prices. Moreover, Koopman et al. (2016)
introduced the decomposition method of gross exports into various sources of value added. The method breaks
down the gross export into local value added absorbed abroad, local value added first exported then returned
back home, foreign value-added and pure double-counted terms.

In terms of its categorization, Gereffi et al. (2015) discussed a GVC categorization that shows the
relationship between contracting parties respective of their powers. Figure 2 shows the five variations of “GVC”
governance. The boundary was represented by the rectangles and their size represents the “bargaining power”
with respect to the other party. Moreover, the arrows illustrate the path and the degree of business integration in
the partner’s activities. The right of the diagram shows that clients possess greater bargaining power than its
left, and they are also interpreted as having the capability to exert a major influence over the distribution of
value added. In this diagram they also considered the movement of the GVC configuration with parameters of
“complexity of transactions”, “ability to codify transactions”, and “capabilities “in the supply base or the 3 C’s
model.

Figure 2:The classification of Global Value Chains, Gereffi, Humphrey & Sturgeon, 2015

Determinants of Global Value Chain

Various studies pointed out different factors that contributed to the increasing integration to the global
chain, these depends heavily on the economic and geographical status of each countries. In Asia for instance,
food distribution systems relied on changes in urbanization, consumer preference and eating habits,
infrastructure development and competition. This integration in the supply chains and networks provided
chance for making added value. Moreover, branding lead to high consumer confidence and satisfaction in the

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 The Current Status Of Philippine Mango In The Global Value Chain

buying of good and services. Likewise, chains helped in facing challenges by creating partnership, input
provider, marketers and customer within the networks of chain (Chen and da Silva, 2005).
Geography was also found out to be one of the determining factor of Global Value Chain. The center
of production hubs in terms of trade includes the United States, Asia which includes China, Japan and Republic
of Korea and one in Europe, Germany. According to Diakantoni (2017) on his study based on the UN Comtrade
database, China is on the boundary and tends to trade with the “hub” that is nearest in geographic distance.
Since African countries are far from the existing hubs, trade becomes difficult in these countries. Many
developing countries are also far from the existing hubs that affects their integration in the chain. Figure 3
shows the interconnection and the center of production “hubs” in terms of trade.

Figure 3: The three interrelated production hubs, Diakantoni et al., 2017

Moreover, flexibility and speed were factors that also contributed to the degree of integration. Shorter
lead time, fast response to market change, and the demand-driven orientation greatly contributed to the
manufacturing supply chain strategy. However, the degree of integration within the chain needs improvement
because the functional level of the supply chains is not the desired level. There is a lack of values and
integration on the vertical and horizontal members of the manufacturing industries, which hinder the best value
chain. Working in “Silos culture” leads to lack of customer focus and top management commitments (Lemenge
& Tripathi, 2011).

Analysis of Global Value Chain

There were also various approach used in the analysis of the global value chain integration. Some
studies used qualitative approach like case analysis. In the study conducted by Sarah Mutonyi and Karin
Beukel (2015) they explained in the study that “price fairness”, “price reliability”, and “relative price” are scope
of price contentment that influence producers’ trust in the buyer. The study found out that trust is an important
mediator factor which affects producer loyalty and price satisfaction. Kusnandar (2012) utilized case study
method and the application of the triple helix model and causal loop diagram. The results of the study revealed
that institutional innovation provides support to the farmers thereby reducing risk. It further opens the chance
for the farmers to be included in the supply chain of the “export market”. Developing a scheme of information
to determine the operation of the multi stakeholder participation in the supply chain and the improvement of
policy simulator as a matter of upgrading the triple helix policy of Indonesia.

However very limited studies used quantitative approach, the study of Muntonyi et al. (2016) which
utilized the SEM model revealed that trust is important factor that influence producer’s loyalty. Relative price,
reliability and price fairness are the identified scope that establish producer’s loyalty and trust in the supply
chain. These findings are in relation to latest studies about trust and its role. Since the player’s perception
involved in the chain changes overtime, it is recommended to rely on a design which is longitudinal. However,

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 The Current Status Of Philippine Mango In The Global Value Chain

the model has established a low disparity in producer loyalty and trust with only 45 percent, therefore other
factors needs to be addressed in this study. In China, Wang et al. (2017), utilized the Structural Equations
Modelling in analysing the sustainable food supply chain management practices. Results suggest that “supply
chain management practices” positively affects the environmental and social performance that leads to
improvement of financial performance. Food safety insurance is in turn affected by sustainable performance.
However, the model did not consider effect of other variables such as “moderator” and “control”. They
recommended that new variables into the mechanism of Sustainable Supply Chain Management (SSCM)
practices. Enterprises of different sizes are significantly different in SSCM and that its impact to sustainable
performance may differ. SSCM included the internal and external management and its relationship was not
included in the study.

With the limitations of SEM specifically as applied in first-hand information, gravity model might be a
necessary tool that will bridge the gaps in information. The “Gravity model” that predicts the bilateral trade
flows based on the economic sizes and distance between two units. Since global value chain deals with trade
this model is applicable to use. Trade volumes depend on an entire network structure of trade connections
(Baldwin and Taglioni, 2011). The intermediate goods trade between two countries “ increases in the size and
productivity of a third country and declines in each of the two countries trade costs to it ”. They call
this relation “gravity” of a third country which finally contradicts the common theoretical literature of
the final goods trade where third country “gravity”, or in traditional terms, lower multilateral resistance,
decreases bilateral trade (Anderson and van Wincoop, 2003).

The gravity model, in its standard form, is derived from a consumer expenditure system in
which the price term is eliminated using the general equilibrium structure of the theoretical model. In
Anderson and van Wincoop (2003), the demand for the products of i by entity j , derived by
maximizing the CES utility function of the consumer j , is as follows: where Pi, is the supply price of i , tij
the iceberg trade costs and Pj the consumer price index in j . The aggregate exports of i to all partners j are
equal to the total output of i:

The above market clearance condition is then used to eliminate the relative price term ( Pi ) in expenditure
equation (1). The equilibrium prices are then:

Hence, trade from i to j in equilibrium is:

The above model relies on the assumption that the products exported from i to j are produced solely in
i . In empirical gravity literature Xij , is measured as the gross exports of i to j , while Yi is measured on a
value-added basis by the GDP of entity i . However, under vertical specialization, the origin of the
value-added and the exporter of the goods are no longer the same and the volume of aggregate gross
exports is much higher than the amount of domestic value-added due to the import content of exports or,
in other words, intermediate goods imported and re-exported after being processed.

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 The Current Status Of Philippine Mango In The Global Value Chain

II. METHOD
The study used descriptive research design. It described the situation or status of the Philippines
in the mango global value chain integration. Pangasinan in Luzon, Western and Central Visayas, Davao and
Cotabato are the leading exporters of mango in the Philippines. These provinces come from four regions of the
country namely, Region 1, 6, 7 and 11 and was chosen as the regions that are assumed to be involved in the
mango global value chain. The data were gathered from the agencies Philippine Statistics Authority and UN
Comtrade.

Likewise, the leading importers of fresh and dried mangoes according to UN Comtrade (2016) are
USA, Netherlands, China, Germany, Canada, Vietnam, Hong Kong, United Arab Emirate, Korea, Thailand,
Singapore and Japan. Trade data of these countries were also used as basis of the analysis in this study.

III. RESULTS AND DISCUSSION

Status of the Philippines in the Global Trade of Mango
According to the Department of Agriculture (2018), mango placed third as the most important fruit
crop in the Philippines next to banana and pineapple. The mango fruit’s importance is due to the fact that it is
the Philippine national fruit and one of the country’s top agricultural exports. The three well known variety of
mango are all present in the Philippines, and these are Carabao, Pico and Katchamita (also known as Indian
Mango). However, Carabao is the most dominant variety that is widely grown and is the sole exported variety.

By 2017, the Philippines ranked ninth in exports of fresh and dried mangoes which is US$ 67.9 million or 2.6
percent share of the global market (UN Comtrade, 2018). Mexico is the country having the highest exports. This
was followed by Netherlands, Thailand, Brazil, Peru, India, Spain and China. These countries compete with the
Philippines in global market for mangoes. Figure 4 shows the leading exporters of fresh and dried mango by
value in the world.

COTE D IVOIRE 52.6

PHILIPPINES 67.9

CHNA 70.1

SPAIN 85.3

INDIA 145.6

PERU 191.7 Exports in US$ (millions)

BRAZIL 205.5

THAILAND 275.1

NETHERLANDS 374.6

MEXICO 459.9

0 100 200 300 400 500

Figure 4: Leading exporters of fresh and dried mango by value in the world, 2018
Source: UN Com Trade

The Philippine mango industry consists of few large farms with over 20 hectares, a few hundreds of
medium sized farms of 2 to 5 hectares, and 1.9M of very small farms with an average of 10 to 12 trees for a total
equivalent area of 146,841 hectares planted with Carabao mango. With this condition of the mango farms, the
operation of orchards was limited to corporate farms. While most of the small growers were involved in service
contractors, contract-sprayers to spray and manage the fruiting of their trees which are unprofitable in most
places. (PSA, 2018).
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 The Current Status Of Philippine Mango In The Global Value Chain

Likewise, according to Philippine Statistics Authority, Philippines is lagging behind in the world market for
mango. This is evident in its yield with having 4.1 mt/ha which is below the world average of 7.65 mt/ha and
is far from Thailand’s with yield of 8.20 mt/ha. With this situation, mango yield must be improved in order to
be competitive in the global market (PSA, 2018). Table 1 shows the mango production, area and yield of top 10
producing countries from 2010 to 2011.

Table 1: Mango production, area and yield of top 10 producing countries, 2010-2011
Production (MT) Area harvested (ha) Yield (MT/ha)
Country
2010 2011 2010 2011 2010 2011
WORLD 37,149,496 38,953,166 4,956,754 5,088,800 7.49 7.65
India 15,026,700 15,188,000 2,312,300 2,297,000 6.50 6.61
China,
mainland 4,000,000 4,350,000 450,000 450,000 8.89 9.67
Thailand 2,550,595 2,600,000 311,048 317,000 8.20 8.20
Indonesia 1,287,287 2,131,139 131,674 208,280 9.78 10.23

Pakistan 1,845,528 1,888,449 173,731 172,008 10.62 10.98

Mexico 1,632,649 1,827,314 174,970 196,930 9.33 9.28
Brazil 1,189,651 1,249,521 75,179 76,383 15.82 16.36

Bangladesh 1,047,849 889,176 129,000 111,100 8.12 8.00

Nigeria 850,000 850,000 130,000 130,000 6.54 6.54

Philippines 843,508 800,551 197,816 195,401 4.26 4.10
Source: FAO Statistics

Mango trees were cut down for being unproductive because of poor farming practices. Some farmers
had adopted wrong planting distances, use chemicals which damaged the good microorganism and biodiversity
of the soil. These suggests of increasing market demand of natural and organically grown mangoes which are
free from toxic chemical residues which makes the farmers rethink of their farming system to meet market
demands. Table 2 shows the top mango producing provinces such as Pangasinan, Zamboanga del Norte and
Davao del Sur and Cebu were climate are well- suited for cultivation of mango.

Table 2: Top Carabao mango producing provinces, Philippines, 2018

Rank Province Production (MT)
1 Pangasinan 121,142
2 Zamboanga Del Norte 47,489.02
3 Cebu 39,850
4 Davao Del Sur 38,974
5 Misamis Occidental 23,210
6 Iloilo 23,125
7 Ilocos Norte 20,993
8 Batangas 18,636
9 Nueva Viscaya 18,572
10 Isabela 17,381
Source: Philippine Statistics Authority, 2018

Philippine Mango in the Global Value Chain

Since 1980, the Philippines notably participated in the mango global market with increasing exports in
the 1990s. By 2017, the Philippines ranked fourth in exports of fresh and dried mangoes which is US$67.9
million or 10.08 percent share of the Asia’s export of mango (UN Comtrade, 2018). The country has exported
mangoes to Hong Kong (China), Japan, Singapore, Switzerland, UK and the USA. The increase in mango
* Corresponding Author: Michael F. Centino1 www.aijbm.com 96| Page
 The Current Status Of Philippine Mango In The Global Value Chain

exports can also be attributed to the low tariff in exports, which allows Philippine mangoes to enter duty-free
markets, as provided by the World Trade Organization and Japan. Figure 5 below shows the leading exporters
of fresh and dried mango by value in Asia, 2018.

Asia’s Export is US$

673.5 million

Figure 5: Leading Exporters of Fresh and Dried Mango by Value in Asia, 2018

However, the current situation of mango in the farming industry posts problem in terms of the area
planted and volume of production. As shown in Figure 6, the land area planted with mangoes decreases at an
average of 0.20% within the period of five years with an average farm size of 1.34 hectares. Correspondingly,
volume of production decreases at an average of 1.78% in five years (Figure 7).

Decreases at an average of 0.20% in the last six years with an

average farm size of 1.34 hectares

Figure 6: Land Area Planted with Mango (in Hectares), Philippines, 2013-2018

Decreases at an average of 1.78% in the last six years with an

average farm size of 1.34 hectares

Figure 7: Volume of Production (in Metric tons), Philippines, 2013 – 2018

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 The Current Status Of Philippine Mango In The Global Value Chain

With the decrease of its volume of production, the share of mango to total exports declined, exhibiting a drastic
fall (Figure 8). This explains the decreasing competitiveness of the Philippine mangoes in the world.

Figure 8: Percentage Share of Mango to Total Philippine Export, in FOB value Million pesos
(at constant) prices, 2013-2018

The country’s participation in the global value chain was limited in the production and processing
stage of the chain. Thereby limiting its integration (Figure 9). This situation limits its participation in the trade
of fresh and processed mangoes.

Figure 9: Philippine Participation in the Mango Global Value Chain

Majority of processed mango in dried, airtight and juice goes to US and puree goes to Hong Kong (Figure 10).

Figure 10: Processed Mango Exports Value in US$ Millions, FOB, 2013-2017, By Type,
By Export Destination Philippines

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 The Current Status Of Philippine Mango In The Global Value Chain

IV. CONCLUSIONS AND POLICY RECOMMENDATIONS

Based on the results of this study, the government’s concerned agencies need to take a look on the
present situation of the Philippine mango specifically on its decreasing volume of production. There is a need to
review policies to boost the agricultural production of mango in the country. Likewise, a need to strengthen
research and development is also necessary to help increase the integration of mango in the global value chain.
The present situation of mango in the international market shows its competitive edge in the market of fresh
mango; however it has limited integration in the global chain. Therefore, the country must find ways how to
increase its integration.

The Philippines’ participation in mango global value chain is also limited to its exports of fresh and
processed mango and was threatened by the decreasing pattern of its land area planted with mangoes. The
Philippines for such was majority present and specialized in the primary goods that is the supply of fresh
mangoes in the world that explains the similarity and small differences in the result of the two export values
used in the analysis of global integration. This does not mean that the Philippines is not concerned in Global
Value Chain Integration, but processing activities involved in the chain are mainly oriented to the supply of
fresh mangoes to the foreign markets because of its low competitive nature. Since the Philippines is only
present in the production stage and was limited to the final stage which is processed products, its global
integration is threatened by its competitor countries.

The concerned authorities must also take necessary action to help the mango farmers. As the results
reveals, the Philippines participation is limited only in the production and processing stage of the chain. To
integrate deeply, the country may invest to improve the quality and freshness of the Philippine mangoes. Invest
also in buying machineries and equipment to be able to compete globally. They may also tap the available
manpower and skills to integrate in distribution, marketing and sales. Investment in education and trainings
might be the key factors necessary for the upgrade of the country’s status in global trading. The policy
recommendations, if implemented, can guarantee strong integration of Philippine mangoes in the global chain,
which will facilitate the flow of factor payments in the economy, thereby raising the standard of living of
Philippine citizens and creating more social protection for the Philippine people.

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*Corresponding Author: Michael F. Centino1

1
The Graduate School, University of Santo Tomas and Associate Professor, College of
Accountancy and Business Administration, San Carlos College Mabini St., San Carlos City,
Pangasinan, Philippines 2420

* Corresponding Author: Michael F. Centino1 www.aijbm.com 100| Page