Smallest debt write-off for the greatest number

Perhaps, the biggest social reform legislation under President Ferdinand Marcos Jr. is the condonation of some P58.125 billion in debts of 654,000 agrarian reform beneficiaries (ARBs).

It is one small act of state amnesia for the greatest number of Filipinos in a single blow.

“The P58-billion debts involve 1.18 million hectares of farm lands, 277 times the size of Manila,” notes House Deputy Speaker Ralph Recto.

Albay Second District Rep. Joey Salceda filed the original agrarian condonation measure, House Bill (HB) 3797, the New Agrarian Emancipation Act.

Recalls Joey: “I have been fighting for this measure since my first term in Congress. I fought for it again during my time in the Arroyo Cabinet. I fought for it under the past administration. I feel vindicated.”

Adds Congressman Ralph Recto: “This is emancipation on a massive scale, from the number of beneficiaries, to the amount to be condoned. The impact will also be huge. It financially emancipates the farmers while freeing resources that can be used to achieve food security.”

The P58-billion write-off may seem big. It is not, contends Ralph. “If you break it down per farmer, per hectare, average debt forgiven is P49,000 – a fraction of the current selling price of less than a square meter of a condominium in Metro Manila.”

Recto points out: “Every farmer who qualifies will get an average debt relief of P94,000. Ang halagang ‘yan, sa maraming state universities ngayon, ang syang ginagastos natin para sa isang estudyante sa ilalim ng Free College Law.”

Indeed, if I may add, the state spends P3 million to educate a soldier at the Philippine Military Academy for four years. Plus another P22 million in pension for life, for each, after retirement.

By the way, we have have had 10 coup attempts – one under Ferdinand Marcos (successful), seven under Cory Aquino (all failed but two were the bloodiest in history, in 1987 and 1989), one under Joseph Estrada (successful) and one under Gloria Arroyo (she laughed it off). All ten coup attempts are thanks to state-educated PMA graduates.

Still, we remain unstable.

So what then is P49,000 ($900) per farmer for a lifetime of economic stability for the nation’s 610,000 biggest producers of food?

Recto argues: “If corporations and high-income individuals have gotten tax breaks from recent laws slashing income tax rates, then why should not farmers get the same reprieve involving far smaller amounts?”

Indeed, if the entire personnel of the Armed Forces of the Philippines, the Philippine National Police, as well all our firemen and jailers get moolah from Heaven for life, why not a single act of charity for the poorest of the poor Filipinos – the farmers?

“We have bailed out banks and companies owned by billionaires. We have allowed power sector obligations to migrate as national debts. If we have pursued a debt forgiveness strategy for many troubled companies, why not one for poor farmers?” Recto adds.

“We have forgiven bigger debts by a few in the past. This one, with a lesser amount, is owed by many,” Recto insists.

Gushes Salceda: “When President Marcos signs this measure, he also etches this law into what history books will later write of his administration. The New Agrarian Emancipation Act is the most important legislative accomplishment of the Marcos administration. It has taken nearly three decades and a President with a historic mandate to pass this long overdue measure. Finally, we can begin to correct the most fundamental flaw of the Comprehensive Agrarian Reform Program – placing farmers in debt without adequate services to boost land productivity.”

This measure was first proposed by Salceda in the 1990s, then as a private sector analyst and, later, officially to the Cabinet in 2007 as Arroyo’s Presidential Chief of Staff.

Condonation is long overdue. The P58.125-billion receivables cannot be collected anyway, says Salceda.

CARP without adequate support services and with limited capital or entrepreneurship among farmer-beneficiaries have reduced agricultural productivity in CARP lands by as much as -34.1 percent compared to baseline.

The annual loss in food production productivity because of lack of state support: P418 billion.

With their debts condoned and with better land allocation and higher access to credit and support services, farmers could produce 30 percent more food.

That will create gross value-added gains of as much as P54.02 billion a year for the agriculture sector. It will also unlock some P472 billion in credit for farmers, as well as boost the wealth of agrarian reform families by as much as P590 billion in total, figures Salceda.

“The Estate Tax Amnesty for agrarian lands will enable farmers to finally transfer their lands to their heirs without estate tax penalties,” says Joey.

“We also mandated the DILG to encourage local government units to enact their own tax amnesties for agrarian lands.”

Salceda explains: “The productive capacities that such emancipation will unlock far outweigh the fiscal implications, which have already been incurred anyway. This will allow the transfer of lands to younger farmers or more efficient users, allow existing ARBs to collateralize their land for productive credit and unlock transfer taxes for the national government.”

He says the ARBs’ obligations for CARP land transferred carry 6 percent annual interest, payable in 30 years.  However, only 17 percent of ARBs are good payers. Hence, the 83 percent are loan defaults.

“As such, liens and encumbrances are attached to their lands, making these beneficiaries unable to sell their lands, and making such lands idle in the absence of a financial capable or willing farmer to exploit them,” notes Joey.

Condonation will release farmers from debt and release lands from unproductive possession by condoning agrarian reform debts, lifting liens and encumbrances on agrarian reform land.

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