The single-biggest problem in Philippine agriculture is land fragmentation. It’s not the lack of budget or smuggling or agricultural imports. It’s that our farms are just too small. No amount of increased government budget will fix this structural problem.”
That’s how economist Toti Chikiamco saw it for years. Land fragmentation results in low agricultural productivity. This low productivity resulted in the historic rise of food prices over the past year. The record high 8.7 percent inflation rate last January was mostly due to low domestic agricultural output (sugar, onions) and restricted agricultural imports.
Japanese agricultural economist Keijiro Otsuka, the former chairman of the Board of Trustees of the International Rice Research Institute in Los Baños, Laguna, warned: “The decrease in farm size is particularly pronounced in the Philippines partly because of rapid population growth and partly because of the failure of growth of nonfarm sectors, which can absorb rural labor. If this trend in farm size reduction continues and the economy sustains a fairly high growth rate, the agricultural sector’s inefficiency can be a major constraint to further economic growth.”
In a sense, the second Marcos presidency needs a drastic remedial measure that picks up from the flaws in the agrarian reform law implemented during the administration of his father and of Cory Aquino. The good news is, one of the six laws that this Congress managed to pass may just be the right prescription to the problem of our farmers.
The new law condones the unpaid debts of agrarian reform beneficiaries (ARBs) under the Comprehensive Agrarian Reform Program (CARP) or from other agrarian reform programs and laws. This includes all unpaid amortizations, interests, penalties, and surcharges. Under CARP, the government acquired private lands and transferred these to farmer beneficiaries who had 30 years to pay the debt.
Of course, farmers were unable to pay their debts. Our farmers are barely able to keep body and soul together as farming continues to lock them in a vicious cycle of poverty.
The farmers are already deep in debt to traders and usurers who lend them money to pay for farm inputs before the planting season. Problem is, the value of harvests often can’t even cover debt payments. So, a farmer may have a piece of paper saying he owns one to five hectares of land, but not enough money to support the daily needs of his family.
Breaking the chains of poverty among our farmers requires condoning their unpaid debts. This will give farmers a new start so they can focus their efforts on increasing the productivity of agrarian reform lands.
The New Agrarian Emancipation Act is among the priority legislative measures certified by President Marcos to mitigate high inflation. The Land Bank has certified a total amount of P57.6 billion for condonation.
Almost 80 percent of the agrarian reform farmers are unable to pay their debts. Deputy Speaker Ralph Recto said it amounts to about P49,000 per hectare. Every farmer who qualifies will get an average debt relief of P94,000, Recto said.
According to a study by Cristina David in 2003, the restrictions imposed by CARP eroded the collateral value of the land and limited access to credit; constrained the transfer of land from less productive to more productive uses; limited the choice of more efficient contractual arrangements; and lowered the value of the awarded land. In other words, the government is to blame for the farmer beneficiaries’ failure to pay their debt.
A number of economists, including national scientist Raul Fabella, had been arguing for a debt condonation program for agrarian reform beneficiaries. Debt condonation is a way to free the rural land market because if the debts are condoned, agrarian reform beneficiaries would now be able to sell or lease their lands.
How will the new law benefit farmers?
Chikiamco, president of the Foundation for Economic Freedom (FEF), explained it is more about the ability to sell or lease. “That’s the important consequence of the condonation. At its face, it’s a game changing reform,” he added. It will enable farm consolidation through leasing.
Land consolidation is a must. Farm mechanization produces best results when used over large areas of farmlands. Mechanization and big farms are inevitable in Asia where the population is aging and the rural population is fast shrinking.
Those condoned lands are the most productive and fertile under CARP because they used to be private lands subjected to compulsory acquisition. The public lands distributed under CARP are mostly non-irrigated and less productive. These government lands also have a different problem: these are only covered by collective certificates of land ownership award, not individual titles.
And subdivision developers cannot grab those agricultural lands. The National Land Use Act now being debated in Congress includes a stipulation that agrarian reform land cannot be converted into non-agricultural uses.
Farmers can also pool their lands under a cooperative setup, but few cooperatives work well in the Philippines. With the condonation law, one can consolidate via leasing. Big corporations who venture into agricultural ventures don’t want to own the land anyway, they just want to lease.
Toti explained that there’s a need to promote farm consolidation because: a) Rural labor is becoming scarce. Young men prefer to work in construction and other services where the pay is better. b) Most farmers now are just part-time farmers because the income from farming one hectare of land is miniscule. c) The average age of farmers is about 55 and their average educational attainment is Grade 5. d) Bigger farms allow for economies of scale. e) Bigger farms are better at biosecurity controls (e.g. preventing the ASF virus from spreading into their farms).
Agrarian reform farmers who are getting close to their retirement age can opt to lease their land to earn lease income. Secondly, they can become farm laborers in much bigger agribusiness enterprises where they will receive a fixed salary plus SSS and other benefits.
The next problem is the Implementing Rules and Regulations that the Department of Agrarian Reform will write. Hopefully, they don’t suffocate the new law with red tape that will effectively negate the intention of vastly improving our ability to grow our own food.
Boo Chanco’s email address is bchanco@gmail.com. Follow him on Twitter @boochanco