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The Hernandez recommendations

(Article published in the July 11, 2007 issue of Manila Standard Today)  
 
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           Aside from the assessment that, after 34 years, land reform in the Philippines is nowhere near the fulfillment of its promises, the study commissioned in 2004 by the Department of Agrarian Reform (DAR), in cooperation with the German Technical Cooperation (GTC), to assess the Comprehensive Agrarian Reform Program (CARP) and the paper distributed by Atty. Eduardo F. Hernandez and co-signed by four other members of the Presidential Agrarian Reform Council (PARC), which is headed by President Gloria Macapagal Arroyo (PGMA), agree that a key ingredient that is yet to be provided by the government in abundance is support services for the farmer beneficiaries.  This is the one of the major reasons for the Hernandez thesis that the land reform program “has not yet succeeded” and the DAR-GTC study observation that “the reform is not yet completed.”

 The common diagnosis is based on what the Hernandez paper calls “realities in the field.” Farmer beneficiaries could not borrow from banks on their land on account of the restrictive provisions of the CARP law. This resulted in farmer beneficiaries being constrained to borrow money from the 5/6 type of lenders.  The Land Bank is said to be unwilling to give crop loans to farmer beneficiaries apparently because 17.8% of the farmer beneficiaries could not even pay for the amortizations of the purchase price of their land. As a result, Director A. Guevarra, in his PARC Technical Workshop Presentation on CARP beyond 2008 reports that about 66% of the 3.1 million farmer beneficiaries have not yet been given support services.

 Obviously, land distribution by itself is not the panacea.  The famous quote, “Give a man a fish; you have fed him for today.  Teach a man to fish; and you have fed him for a lifetime”, is apparently not all that wise. With due apologies to the Chinese to whom the adage is commonly attributed, their adage fails to say that it is essential, in addition, to give him a market to sell his fish, to allow him to borrow money to repair his fishing net and maintain his banca to teach him methods to preserve his catch, not to mention clean waters to fish in.
 










 The recommendations of the DAR-GCT study on to provide him support services for the farmer beneficiaries are typical of that genre, unabashedly academic, intentionally comprehensive, and unmistakably definitive. The DAR-GCT study speaks of (a) gearing government interventions toward agrarian development “in the areas of promoting farming as an enterprise”; of (b) “providing off-farm or non-farm economic opportunities for the residents in rural communities”; of (c) ensuring that “private banks and, to the extent feasible GFI (government financial institutions), [should] provide credit facilities and financial support,”; of (d) allocating public funds “to productivity enhancing interventions that have direct impact on income rather than for the construction of infrastructure facilities for which community support should be mobilized”: and of (e) asking the DAR and the local government units to “promote ARB/PO (agrarian reform beneficiaries/people’s organizations) partnership with private agribusiness firms to enhance farm productivity and link producers to markets.”

 I am certain those recommendations are packed with insight and backed by data.  Certainly, I am sure they are understandable to economists, like President Gloria Macapagal Arroyo, who, having graduated with a Doctorate in economics from the University of the Philippines, is being touted as an expert.  But, to Marc Anthony and me, “a plain, blunt, man,” and those like us, such recommendations are as comprehensible as Jobberwocky, prior to the annotations of Humpty Dumpty.  I understand better the recommendations of Eddie Hernandez and his four colleagues at the PARC.

 Their first recommendation is addressed to PGMA.  They ask her to insist that developed countries desist from continuing to grant subsidies to their modern mechanized farms.  Citing a New York Times article entitled “The Rigged Trade,” they are scandalized by the fact that “developed world’s $320 billion in farm subsidies…dwarfed its $50 million in development assistance” to poor countries.  Not surprisingly, Filipino consumers pay double to triple what consumers in Thailand and Vietnam pay to buy rice and Filipino farmers spend double to triple what farmers in Thailand and Vietnam spend to produce rice.”

 The rest of their recommendations concern the DAR, which is the lead agency implementing land reform.  At the top of the list is the need for “convergence,” which is Eddie’s polite word for “coordination,” among the implementing agencies for the delivery of support services with the delivery of land. In effect, it is a call for a paradigm shift, from main focus on land distribution to provision of support services in tandem with land distribution.  Again, giving a man a fishing rod or net and showing him how to use either of them is not enough.  A lot more is required.

 One of such requirements is without any doubt, credit to farmer beneficiaries.  Hernandez and colleagues submit that micro-finance lending is essential to delivering credit to the farmer-beneficiary and that the Grameen Bank-Muhammad Yunus approach (described in this column in its May 17, 2006 issue and available at www.thetrustguru.com) is an apt model. Thus they recommend that banks be required to engage in micro-finance.  “Requiring”, at this time, is probably not the best policy for the BSP, but certainly, “encouraging” ought to be the order of the day.

 In addition to credit, they suggest developing the farmer-beneficiary’s ability to compete in the outside world.  Storage facilities, canning factories, locally-made dryers, organic fertilizer plants, refrigeration facilities, etc., together with other rural infrastructure suited to the peculiar needs of each of the localities need be installed.  The farmer-beneficiaries should be able to exploit the country’s competitive advantage, e.g. because of our being a country free of bird-flu and foot-and-mouth decease, we should be able to export our chicken and meat.  Needed too are technological support as well as export tax incentives to export oriented agricultural enterprises.

 Additional stakeholders, specifically foreign investors in agri-business, also need to be encouraged to put money in support of farmer-beneficiaries.  Contract farming, such as those practiced by San Miguel for poultry or Monterrey Farms for pigs, ought to be encouraged for the planting and harvesting of raw materials for bio-fuel and ethanol plants.  Contract farming, apparently, is not something new.  In fact, Hernandez recalls that before the Second World War, Japanese companies (e.g. the Ohta Plantation and the Furukawa Plantation) were contracting the planting and buying of abaca, pomelo and pineapple.

 The Hernandez paper calls for some specific measures. Among them: the adoption of the quedan and crop loan system, which were responsible for doubling the size of the sugar industry; the education and training in farming for beneficiaries who were not tillers; the small irrigation systems managed by the farmers themselves; the securitization of Land Bank’s collectibles, etc.

 But the Hernandez paper is not all giving.  Reflecting the work ethic he grew up with, Hernandez also suggests that farmer-beneficiaries be made to suffer the consequences of their vices.  The unproductive, the lazy, the drunkards, drug addicts, and gambling farmers, according to Eddie, “cannot be allowed to be protected from their own destructive habits. 

 In its conclusion, the Hernandez paper in an ominous note says: “We need therefore to face the facts.  The world has changed and we must change. We need to be efficient and competitive...We must change strategies…Land distribution without the proper support services will simply bring us to perdition.”

 

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