Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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Land Reform in the Philippines (Part 1)

           The title of this column is the same as that of a doctoral dissertation presented by an executive-turned-academician who recently obtained his Ph.D. in Management from one of best private universities in Europe, the University of Navarre in Pamplona, Spain.  Dr. Ramon de Vera, who in his younger days  was an investment banker and then managed banana plantations in Mindanao, obtained the highest grade possible for his thesis on the experiences of the Philippines in helping millions of farmers through the so-called Comprehensive Agrarian Reform Program  (CARP) that expired in 2014.  Today, Dr. de Vera is a colleague of mine in the faculty of the School of Management of the University of Asia and the Pacific.  He has given me permission to present in two parts an executive  summary of his thesis that can serve as a road map for the next and subsequent Administrations on how to “revitalize agricultural productivity and attain inclusive economic growth in the rural areas” of the Philippines.

          His action-oriented study takes off from the famous scholarly paper of National Scientist Dr. Raul Fabella, former Dean of Economics of the University of the Philippines, who arrived at the conclusion that what fifty years of Philippine land reform accomplished was to increase  the number of “landed poor.”  The harsh reality is that 75 per cent of those 25 per cent of Filipinos who are below the poverty line are in the rural areas, many of them farmer beneficiaries of CARP which focused excessively  on land  acquisition and distribution (LAD) instead of  the goal of improving the farmers’ standard of living.  Despite the distribution of 4,542,968 hectares to over 2,653,254 Agrarian Reform Beneficiaries (ARBs), the income differences between the ARBs versus other farmers resulted in a negligible 2 per cent improvement over the half century covered.    Another tell-tale sign of the negative effect of CARP was a severe reduction in investment and credit flowing into agriculture.

          There had been two avenues of intervention under CARP that the Government insistently used, both with little success:  the first was the funding of farmers through subsidized credit that resulted in poor repayment, thus discouraging many banks as potential lenders.  The second was the establishment of cooperatives (or Agrarian Reform Communities) with also little success because of inadequate support by way of farm-to-market roads, irrigation systems, post-harvest facilities and agricultural extension services, with which countries like Taiwan,  Thailand and Malaysia lavished their small farmers.  It is obvious that given this dark diagnosis of the utter failure of land reform in the Philippines, future Administrations should not insist on the emotional battle cry of land reform in the past, “land for the landless” but should consider establishing a new goal, which is to measure the success of agrarian reform with the benchmark of the farmers’ standard of living and the productivity of the agricultural sector.  The ambitious objective should be to allow the agricultural sector to grow at the same rate as the Gross Domestic Product, at least as far as high-value crops are concerned.

          To put the final nail on the coffin of the failed CARP, Dr. de Vera summarized some major statistical indicators of failure:  Resources allocated to agriculture have been in decline.  Registered investment in agriculture had slid to only about 1.4% of total Philippine investments.  Credit to this sector, once at 24%  of all loans granted, has now dropped to less than 5%.  There are more resources allocated to property development than food security.  The so-called “Agri-Agra Fund” has not found its way to agriculture.  In fact, I personally know of large commercial banks that prefer to pay fines of hundreds of millions of pesos to the Government rather than invest in agriculture because of the risks that resulted from the way the Government has neglected agriculture.  The Philippines imports food in all categories of meat and rice and even onions, garlic and lettuce that can be easily grown locally with the right support from the Government. 

          For the year 2011 alone, total approved investments into agriculture, forestry and fishing (AFF) only represented 0.24 percent of the total Philippine investments.  As regards foreign direct investments (FDI), in 2012—the year that saw the highest level of FDIs—the AFF sector represented only 1.41 percent of the total FDIs, equivalent to only P4 billion pesos, far behind manufacturing and the transportation and storage sectors, which accounted for 58 percent and 18 percent,  respectively of total FDIs.  Unless we change drastically the approach to land reform in the coming years, these dismal figures will continue to prevail.  We cannot continue flogging a dead horse.  In management, there is a principle which states that stupidity is defined as addressing the same problem with the same solutions that have been proven failures in the past. (To be continued)