Bernardo M. Villegas
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Land Reform in the Philippines (Part 2)

 

           Thanks to his vast experiences in Mindanao, Dr. Ramon de Vera became familiar with successful farming systems in such high-value crops as bananas, pineapples, and sugar in the large plantations around Davao and Bukidnon, among others.  As he wrote in his thesis, Del Monte, Dole and other corporate plantations’ corporate farming practices suggest that effective farming often requires some economy of scale that will also allow for comparatively smaller investments in community infrastructures, such as housing, schools, clinics, power and water and leisure.  He especially cites the outstanding examples in Malaysia of the Federal Land Development Authority (FELDA) which developed more than 800,000 hectares of community plantation with farmers who attained higher standards of living in record time.  FELDA as a business enterprise was so profitable that it is the third largest IPO listed company in the world, after Alibaba and Facebook.  A similar initiative called the Federal Land Consolidation and Rehabilitation Authority (FELCRA) grouped together  small Malaysian farmers and established community farming centers, focusing on productivity that in turn resulted in higher level of farmers’ income.  In fact, during the peak of the FELDA/FELCRA implementation during the leadership of Prime Minister Mahathir, Malaysia reduced its rural poverty from 62 per cent to 11 percent.  Today, Malaysia’s poverty incidence is at an unbelievable zero per cent, thanks to an optimum combination of industrialization and rural/agricultural development. 

          Learning from the experiences of the two Southeast Asian countries most successful in reducing rural poverty, Malaysia and Thailand, Dr. de Vera came out with the following very practical recommendations, borne out of both his research and professional experience as an agribusiness entrepreneur:

I.  Create incentives for investments and loans into agriculture

          1. Establish a Board of Investment for Agribusiness (BOIA):  investment priorities with incentives to agribusiness projects.

          2.  Float government bonds to support investments in key agribusiness projects in the rural areas.

          3.  Revitalize crop insurance to make it more affordable to the small farmers.

          4.  Remove 20 percent gross receipt tax on loans to defined agribusiness projects.

          5.  Implement the law on tax exemption on importation of agricultural supplies, equipment and machinery.

II. Make larger land areas, whether privately owned or public, available for corporate farming to achieve economies of scale

          1. Allow free transfer or lease of Certificate of Land Ownership (CLOA) without restrictions

          2. Permit and encourage consolidation of small land holdings into farming communities with equipment supplies and technology.

          3.  Assist farmers with CLOAs who are no longer interested in farming to consolidate their holdings.

          4.  Remove ceiling on corporate farms or at least raise it to 20,000 hectares.

          5.  Assist corporate investors to develop contiguous and larger farms.

          6.  Identify regional product categories for suitable farming.

III. Remove or reduce bureaucratic barriers to investments and productivity programs.

           1.  Remove multiple and overlapping requirements for approval from various government agencies and establish a one-stop multi-agency center.

           2.  Stop land acquisition and distribution and instead focus on infrastructures and services to help farmers to work together.

           3.  Allow CLOAs to be presented as security for bank loans (remove the monopoly of the Land Bank of the Philippines).

           4.  Encourage tree planting in idle and unproductive land, inviting long-term investors to choose their own sites.  A study of Finland’s tree planting practices can provide leads to long-term investments in this sector.

IV.  Build infrastructures to improve technology, productivity and market access

           1.  Set up farming support centers that will provide equipment, processing of raw materials, storage, technical support, farmer education to surrounding farm areas.

           2.  Set up farm products exchange centers (called “bagsakan” in the local language) in both rural and urban areas in order to reduce intermediation and unequal distribution of revenue between producers and traders.

           3.  Establish seed banks to provide quality seeds for various varieties in order to improve productivity.

            4.  Provide transport facilities to farming community centers to reduce intermediation in product transfer.  It has to be pointed out that farm-to-market roads benefit only farmers with trucks.

            It is obvious that many of these recommendations will need legislation in the next Administration.  I hope we can vote into the next Congress a good number of legislators who will make rural and agricultural development their highest priority.  As many of them as possible should become familiar with the successful models that we can emulate from Malaysia and Thailand, especially in land consolidation, the development of rural cooperatives and a significant increase in the budget for rural infrastructures.  We do not need the pork barrel system to substantially increase our investments in public works, especially in the rural areas, to 5 percent or more of our Gross Domestic Product.  Only then can we make use of our economic growth to attain inclusive growth.  For comments, my email address is bernardo.villegas@uap.asia