Bernardo M. Villegas
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Can the Philippines Eradicate Poverty? (Part 2)

          In his 2007 study entitled “Agrarian Reform and Poverty Reduction in the Philippines,” Dr. Balicasan drew some lessons from other developing countries that also implemented agrarian reform programs.   The first observation is that the speed and political credibility of program implementation are essential to the success of a national land reform.  From the publications of Dr. Rolando Dy, Executive Director of the Center for Food and Agribusiness of the University of Asia and the Pacific, I have learned that the three most successful East Asian countries that implemented agrarian reform programs were Taiwan, Thailand and Malaysia, today some of the most productive producers of high-value crops and with low poverty incidences (in fact, Malaysia has the reputation of having near zero if not zero poverty incidence).  These countries carried out the land reform program with speed and political credibility immediately following up the redistribution of land with very effective infrastructure building programs as well as financial and marketing services to the small farmers whose incomes increased to the level of the urban wage earners.  A much-vaunted success was the ingenious nucleus estate system of the Malaysians through which the small farmers were allowed to lease out their small holdings to a nucleus farm owned by the State or by a private corporation that attained economies of scale in  the farming and processing of  palm oil, involving the small farmers as employees of the nucleus estate.  In Taiwan and Thailand, the consolidation of small farms was achieved through cooperatives.  The most current model is Vietnam where the State has been very effective in providing small farmers with the necessary infrastructures and other services to make them highly productive, especially in the cultivation of rice and high-value crops like coffee.

         In fact, one of the conclusions of the study of Dr. Balicasan was that land reform programs constraining the scope of tenure choice tend to defeat the objective of promoting efficient resource allocation in rural areas.  Because they tend to constrain upward social mobility, they also hurt the poorest of the rural poor—the landless farm workers—whose poverty frequently serves as justification for land reform legislation.  There should be more flexibility in allowing for different land tenure systems which can help achieve economies of scale, especially in the growing of high-value crops.  There should be no fixation on redistribution and fragmentation for their own sake, without considering the technical capacity and institutional discipline of government bureaucracies tasked to implement land reform programs.  In the Taiwanese example (and more currently in the Vietnamese case), there was a relatively well-disciplined bureaucracy, together with the availability of an accurate set of data on landownership and tenure relations.  Because of patently limited government resources, both financial and competent manpower, the respective roles in agrarian reform programs of the private and public sectors have to be clearly defined.  There should be more dependence on private organizations (“corporatives,” cooperatives and social enterprises) as well as nongovernment organizations which can be effective conduits for the delivery of essential services to the program beneficiaries of agrarian reform.

         From the survey of Dr.  Balicasan of successful agrarian reform programs in other countries, he found out that these programs tend to have simple, transparent, and uniformly enforceable rules of participation.  In contrast, the CARP design of the Philippines failed this test.  Deliberately  interventionist and discretionary measures are inferior to those providing mechanisms for inducing institutional  and organizational change.  Centralized decision-making and mistrust of market forces to achieve land redistribution objectives slow down land acquisition and distribution.  In a land reform regime that admits compensation of land owners at “fair market value” (as in the Philippine CARP), it is necessary to dismantle agricultural pricing subsidies and investment policy distortions that drive land prices above the capitalized value of farm profits, before any land redistribution program is introduced.  It must be made clear that land reform is not a panacea for poverty reduction.  In countries with highly unequal land distribution and widespread poverty, agrarian reform should be seen as only one element of a comprehensive strategy for economic and social development.  As has been painfully experienced by the Philippines, an aggressive rural infrastructure building program is needed to complement land redistribution. Without these infrastructures (farm-to-market roads, irrigation systems, post-harvest facilities), land redistribution is doomed to fail in attaining poverty reduction.

         Since the national economy is an organic whole, certain policies implemented in other sectors of the economy can have harmful effects on the agricultural sector.  Many studies have shown that the import-substitution strategy for industrialization in the 1960s and 1970s actually depressed the relative price of agricultural products and encouraged the capital-intensive manner of production in manufacturing.  This greatly limited the absorptive capital of the economy for labor so that the Philippines—unlike its neighbors—was not able to capitalize on the demographic dividend that the baby boom after the Second World War created. Unemployment and underemployment contributed much to increasing poverty.   To make matters worse, the agricultural sector performed poorly in the decades of the 1980s and 1990s as a result of a decline in the world prices of commodities, stagnation in public investments (particularly in rural roads, irrigation and research), the absence of high-value crops and the uncertainty that emerged from the ineffective and slow implementation of the agrarian reform program.  (To be continued).