Agri Econ 14: NO to Further Extension of Agrarian Reform

Three weeks ago, there was a report that after President Noynoy Aquino met with several farmer leaders, he was persuaded to have another extension of agrarian reform (AR) in the Philippines, from end-June 2014 (last weekend) to another two years, mid-2016.

This is wrong. Endless extension of forced land redistribution is wrong. Agrarian reform in Japan, S. Korea and Taiwan took only three years or less, zero extension. Here, it is 42 years now, plus two more years? Then extend again when the next administration comes to power?

If one has 10 hectares or more of inherited land from his parents, or he bought an idle and unproductive land for a bargain, and he wishes to jump into agri-business, most likely he will postpone doing it and keep the land idle in the meantime, or use it for pasture, other low value land use, just pay the real property tax at the municipal or city hall. Because if he develops it into high value crops farming, the Department of Agrarian Reform (DAR) will soon knock on his door to say, "As reward for making your idle land become productive, your land will be forcibly taken from you and be redistributed to your workers at low, DAR-valuation price."

When former President Marcos issued his AR program in 1972, it was "land to the tillers". I think it was in the Comprehensive AR Law (CARL) of 1998 that it was expanded to "land to the landless workers" as well.

Endless, no time table AR and forced land redistribution is among the major reasons why agricultural investment and development in the PH is low. There is high uncertainty of government coming in to forcibly take the land away from agri-businessmen and be given to workers who may have little or zero entrepreneurial skill and interest.

The populists and AR campaigners do not realize the damage to rural development of their advocacy. Rural entrepreneurship is not for everyone. If AR did not work well in the PH after 42 years, what makes the advocates think that it can work for the next two years or more?

Even if AR in the PH will be implemented for the next 100 years, it will not work, and some people will always blame the "landed elite", never the AR beneficiaries themselves, never the AR implementers, never the bleeding heart campaigners. 

Assume that you are the landowner of 10 or 20 hectares that you inherited from your parents. Assume further that you voluntarily give away the land to me and a few other workers at a low price, and it so happens that I and my fellow AR beneficiaries' entrepreneurial skill will not even allow us to have a successful sari-sari store. So what do we do with the land that you gave? Most likely, something like 99 percent, we sill sell it to someone else so we can pay back the small price that you charged us, plus it can give me some money to buy a tricycle, expand my house or move elsewhere, plus buy a flat tv, new ref, etc. Then I go back to being a landless person. And AR is defeated.

Repeat: entrepreneurship is not for everyone. If people see or count some successful entrepreneurs, they do not see or count those who tried but folded after a few months or years. 

When I was working at the House of Representatives in the 90s, I talked to one Congresswoman from Northern Mindanao. She said that a large rubber plantation in Basilan was successfully AR'ed, meaning the entire land was successfully and forcibly redistributed to the rubber workers. End of good story? No.

The rubber workers know little about marketing, finance and selling their produce, like who can buy their rubber at a good price and good terms, what new technology to maximize rubber output, and so on. What the AR beneficiaries did, they cut the big, mature rubber trees and planted bananas. And since the land may be conducive for rubber but not for bananas, output was low and so they were back to subsistence farming, but they are small landowners at least. End of somehow good news? No.

Subsistence farming means low income, means poverty. So some of these ex-rubber workers started selling their land. And they are back to landless workers. So AR has been defeated. From poor landless workers to brief small landowners and back to poor landless workers, despite successful land redistribution, despite all the good intentions.

Meanwhile, Dr. Raul Fabella of UPSE wrote a paper, CARPER: A time to let go in BusinessWorld early this year.

CARP Extension with Reform (CARPER or RA 9700) which extended the 1988 Comprehensive Agrarian Reform Law (RA 6657) will itself expire in June 2014. By the end of 2012, 4.49 million hectares shall have been acquired and distributed. That figure represents 84% of the 5.37 million hectares targeted for distribution.

By 2014, the CARP shall have distributed 5.05 million hectares, leaving but 321,000 hectares or an accomplishment rate of 99%. By then 2.6 million farmers shall have gained some form of ownership to an average 1.2 hectares of land (this column owes much to Dr. Fermin Adriano’s “Sustaining the Momentum of Inclusive Growth in the Post-CARP Scenario”). One can argue that CARP and CARPER represent one gargantuan obeisance to the principle of equity: 202,000 hectares acquired and distributed per year for 25 years!

S. Korea did its own AR program in the 50s or early 60s, in just three years or less. Entrepreneurship plus modern technology allow the S. Korean farmers to have  high productivity. See this youtube clip. Rice planting, evenly spaced, is done by a small tractor.

It can be done too here in the PH, if corporate, large-scale and high tech farming is allowed and not demonized. 

On another note, there is a similar debate in S. Korea as in the Philippines -- to retain rice protectionism. Consumers want cheaper rice via rice trade liberalization, rice producers (or perhaps agri NGOs and other protectionist NGOs, accredited rice importers) want expensive rice via trade protectionism. Contained in this news report.

Protectionism is wrong. It penalizes the consumers, the majority of the population. And even rice producers themselves are net consumers on some months, like when they have a bad harvest, or a strong storm or huge pest attack damage their crops.

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See also:
Agri Econ 9: On Agrarian Reform and Agri Credit, April 29, 2013
Agri Econ 11: Protecting Land Properties by the Poor in India, April 22, 2014
Agri Econ 12: Presentation at WASWAC-BSWM Seminar, May 13, 2014
Agri Econ 13: What and Where to Plant, Nature vs. Government Planning, June 24, 2014

Business Bureaucracy 3: Their Rules and Life

I tweeted these "bureaucracy rules". Now I will elaborate or give examples on them. Bureaucracy here means government bureaucracy.

1. Once a bureaucracy is created, its 1st act is to perpetuate itself. It has no allowance for self-destruction someday.

2. When one coalition of governments and bureaucracies don't work to one's advantage or agenda, create a new one.

3. If threatened w/ abolition, bureaucracy's main defense is counting d no. of bureaucrats who'll lose job, social tension.

4. Before the main mandate is accomplished, create new functions, prgrams and "needs" to perpetuate itself forever.

5. Create one admin or regulations order, monitor how ineffective it is, create a revised regulations order, monitor...
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On #1, this is a universal rule of the bureaucracy in possibly all countries and governments. And this largely explains why many bureaucracies, from local to national governments, to multilateral and inter-governmental bodies, keep expanding.

On #2, good examples are the new US government initiatives, the Partnership for Growth (PFG) and the Trans-Pacific Strategic Economic Partnership (TPP). Many if not all countries invited for this new economic coalition are also members of the Asia Pacific Economic Cooperation (APEC). Since the US does not get all its demands and economic agenda from APEC, then it created a new coalition where member-countries and governments will be indebted to it for such new "initiative" and thus, agree to a number of US government demands and political-economic agenda.

On #3, many agencies, departments and bureaus whose mandate has been outdated or irrelevant, cannot be abolished because they have already packed those offices with many employees and directors. Abolishing the office would means several dozens, if not hundreds or thousands, of bureaucrats who will be displaced.

On #4, one option for the bureaucracies whose original mandate has become outdated, is to expand its mandate so that it will remain "relevant and needed." One good example is the Department of Agrarian Reform. The Comprehensive Agrarian Reform (CARP) was enacted in 1988 and was given 10 years to be implemented. DAR is supposed to evaporate once CARP has been fully implemented. Then CARP was not fully implemented for various reasons, so it was extended for another 10 years, to end in 2008. Then it was not fully implemented again, extended again for another 5 years, until 2013. It is safe to assume that there will be another 5 years (or longer) extension as DAR has created more programs like "urban land reform" and there is no limit to those urban land redistribution.

On #5, this is how various Administrative Orders (AOs), Executive Orders (EOs), Republic Acts (RAs) and other laws and regulations keep expanding. The previous regulations allow certain loopholes for the regulated sectors and businesses, so the next administration and officials create new regulations and orders to amend and revised the previous ones. And another change of administration and officials would mean new changes and revisions to recent revisions.
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I wrote this last December 16, 2009:

Unemployment and Statism

The National Statistics Office (NSO) released yesterday its October 2009 Labor Force Survey (LFS), http://census.gov.ph/data/pressrelease/2009/lf0904tx.html.

One ugly result is this: Out of 45.08 million Filipinos in the labor force, 2.72 million were unemployed, and 6.88 million were underemployed (have jobs but need additional work, mainly to augment current small income).

That's a total of 9.6 million Filipinos were either jobless and poor, or have jobs but feel poor enough and look for additional work and additional income. They constituted 21.3 percent of those in the labor force.

Now, there are also people who can be economically productive, but are not looking for a job, mainly because they think they can't find a job anyway. Or they may find a job but not at a salary that they wish to receive. So either they become idle ("tambay"), or pursue new studies to acquire new skills. Say an engineering graduate who cannot be hired as an engineer, so he studied BS Nursing to be hired as a nurse abroad someday, where expected income is a lot higher than local jobs.

For this group of people, they are not part of the labor force at the time of the survey. And this has the tendency of not worsening the already bad unemployment situation.

Who hire workers? The entrepreneurs, the investors, the capitalists. Local or foreign, corporations or single proprietors (or partnerships). They are the main job creators.

"Wait, wait, we are also job creators!" Say government. Oh Yes, thousands of government agencies and bureaucracies, national and local, also hire people. My estimate is that there are almost 4 million Filipinos who are working in government, both national and local government units.

But government hire people not as food producers or transporter of people, food, and other commodities. But mainly as politicians and their staff; as regulators and tax inspectors and collectors. The people who oftentimes give the entrepreneurs and private sector job creators a hard time.

So in a period of high unemployment and high underemployment, the best policy tool is to relax or abolish certain regulations and taxes that discourage the entrepreneurs, the capitalists and job creators. More job creation by private entrepreneurs in exchange for less bureaucracies and less taxes. But this is not happening. Rather, there is more bureaucratism, more regulation, more taxation.

Statism and heavy State intervention in business is a scourge. It drives millions of people to poverty and hopelessness.

I hope more people and voters will realize it in this coming national and local elections on May 2010. Then they will demand for a team of less interventionist candidates who will minimize and reduce the scourge of statism.

* See also:
Business Bureaucracy 1: Avoiding government: Egyptian experience, March 12, 2007
Business Bureaucracy 2: We don't need a new DICT bureaucracy, July 13, 2010
Welfarism 11: Bureaucratizing Entrepreneurs, April 11, 2011

Agri Econ 5: Land Reform Without Timetable is Wrong

A number of people commented on the new Philippine President's inauguration address that he did not mention about land reform, that land reform is mandatory for social and economic development.

I countered that land reform with no timetable is junk. Land reform in the Philippines was first initiated by the government in the 60s. Then a "new" land reform was implemented in the early 70s during the Martial Law period. Then another "new" land reform was implemented in 1988 when the new government took over from the dictatorship that ruled the country for 20 years.

The 1988 land/agrarian reform law, or the Comprehensive Agrarian Reform Law (CARL) has a timetable, that land redistribution should be over by 1998. By 1998, under another administration, the law was extended to end by 2008. By 2008, another extension was made. There is only extension to an extension.


The land socialists do not realize it. Try developing even 10 hectares of idle and grassland into a productive fruit orchard. After several years, when the land has become productive and you begin harvesting the fruits to recoup your effort, time and money, some bureaucrats from the Department of Agrarian Reform (DAR) will come to say, "we will redistribute your land to landless workers." It happened to a number of my friends. That is why land reform without timetable is formula for uncertainty. Land reform should have final-final timetable, zero extension.

Land socialists think it is a crime to own an agricultural land even 5 or 10 hectares out of their hard work and years of savings. That is why they believe that the government should confiscate those lands and give to the landless. They really believe that it is wrong and a crime to own some productive "means of production."

Japan, Korea and Taiwan land reform was successful because it was done in one sweep. Just a few years and it's over. Not 30 or 50 years as in the case of the Philippines, and still no real timetable.

See also:
Agri Econ 1: Food Prices and Government, April 13, 2008

Agri Econ 2: Rice Laissez Faire vs. Subsidies, May 06, 2008

Agri Econ 3: Dr. Samran Sombatpanit and WASWC, July 03, 2008 

Agri Econ 4: Government Agricultural Interventions, October 21, 2008