The way to progress passes through the farms

READING the World Bank’s latest report on East-Asia and the Pacific entitled “Will Resilience Overcome Risk?”, one can’t help but think that the future indeed belongs to the region.

The report says growth in emerging East Asia is expected to grow 8 percent in 2007 and about 8.2 percent in 2008, to be underpinned by continuing rapid industrial development and urbanization. China and Vietnam will lead the way with growth rates within 8 percent to more than 11 percent. The Philippines is hitching on to that bandwagon through exports to China, Japan, Malaysia, Singapore and Korea and is poised to grow more than 6 percent this year.

But wait a minute, says the World Bank (WB). If we want to spread the benefits of growth, we need to get back to the basics, to the farms. In the same report, the bank noted that “as growth outside of agriculture has taken off, the gap between rural and urban incomes has widened, leaving behind many people in the rural areas generating social and political tensions.”

“Today more than 90 percent of the $1-a-day poor in EAP [East-Asia and the Pacific] live in rural areas,” said the WB.

Solution? The WB says it’s not enough to leave poverty reduction to economic growth and urbanization; governments in the region should develop specific programs to improve the rural areas. Such a strategy, the bank says, should have two major components. First is facilitating absorption of rural labor in the urban economy through investments in urban infrastructure, human capital and labor-market policies such as vocational training, transport services and job matching.

Second is promoting faster rural-income growth through several measures, including the promotion of high-value agriculture demanded by local and global markets as well as rural nonfarm employment. These measures could be complemented by policies like the liberalization of domestic trade. In the case of the Philippines, the full liberalization of shipping and port operations to effectively link the rural island-economies of the Visayas and Mindanao to Manila as well as to global markets would be extremely necessary to enhance market access among rural producers.

One of the major strengths of the Philippines when compared with its neighbors in the region is that it has sizeable areas for expansion for agribusiness, especially for high-value crops like ornamentals, flowers, fruits and vegetables. After an initial surge in investments in high-value crops like pineapple, bananas, rubber trees and oil palm until the 80s, especially in Mindanao, not much money has flowed into this sector since the country embarked on a “comprehensive agrarian reform program” (CARP) under the Aquino administration following the Edsa Revolution.

The reason is simple: agrarian reform has introduced uncertainty into the policy environment for the rural sector. Landowners were not willing to upgrade their farms (e.g., planting better and productive crops, buying better farm machines and equipment, and establishing orchards) knowing DAR officials will someday come and distribute the lands to agrarian-reform beneficiaries. The DAR, in fact, was able to distribute close to 7 million hectares, a significant portion of which were public lands, to more than 4 million farmer-beneficiaries. However, the failure of the government to provide support services for the “new landowners” suggests that productivity has not improved significantly in the countryside.

The Philippines has been implementing agrarian reform for 34 years now since Marcos promulgated Presidential Decree 27. If we want to inject vigor into the countryside, we should remove the uncertainty by completing or winding up such a program as soon as possible. We should put a timetable for its completion; otherwise, we will be implementing such a program till kingdom come with no additional benefit to the country.

Currently, DAR is asking for another 10-year extension for the distribution of additional 1.2 million hectares at a cost of another P100 billion. We say, enough! In fact, the best option is allowing the program to die a natural death by 2008. And if the government really has the commitment to improve the countryside, it would be wiser to spend that P100-billion funds for rural infrastructure and support services to existing CARP beneficiaries.

We have already extended agrarian reform once. It wouldn’t do us good if we extend it once more. This program has gone too far and too long to the point that the DAR bureaucracy seems to have evolved in some parts into a rent-seeking organization whose interest lies in not completing its mandate so that it could prolong its existence. DAR right now has 15,000 officials and employees, and 60 percent of its money is spent on salaries and wages. In other words, DAR has become one huge public-employment agency with less and less marginal utility for every minute of its existence.

DAR has been justifying its inefficiency by citing “landowner resistance” to land distribution. But its own statistics says that voluntary offers of sale and voluntary land transfers accounted for 120 percent and 180 percent, respectively, of its targets. These figures suggest more of DAR resistance to land distribution.

Let’s put an end to this charade and move on to give the rural sector a fresh slate. (Drafted as editorial for BusinessMirror, Nov 27 2007)