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End of Term Report of

Secretary Virgilio de los Reyes


For the term from July 2010 June 2016

Department of Agrarian Reform (DAR)

June 29, 2016

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Contents
Preface ........................................................................................................................................... 4
Current Status of the Agrarian Reform Program ............................................................ 5
I. Overview ................................................................................................................................................................................. 5
II. Land Tenure Services ........................................................................................................................................................ 9
A. Cumulative Land Distribution Accomplishment (1972 2015) ........................................................... 9
B. Land Acquisition and Distribution (LAD) Balance from 2016 Onwards ........................................ 10
C. Collective CLOAs ...................................................................................................................................................... 12
D. Update on Other Land Tenure Services (LTS) ............................................................................................ 16
E. Landowner Compensation and ARB Amortization .................................................................................. 17
F. Land Tenure Services under the Aquino Administration ...................................................................... 20
III. Agrarian Legal Service ................................................................................................................................................... 30
A. Particular Cases that Reached the Office of the Secretary .................................................................... 30
B. Proceeding with the CARP ................................................................................................................................... 35
C. Government Lands Covered by EO 407/448 .............................................................................................. 36
D. Major Policies ............................................................................................................................................................ 36
E. Administrative and Operational Systems Implemented ........................................................................ 42
F. Urgent Pending Cases in the Supreme Court/Court of Appeals Affecting DAR and CARP ..... 44
G. Legal Defense Fund ................................................................................................................................................. 44
IV. SPECIAL POLICY AND RESEARCH STUDIES ........................................................................................................ 44
A. Comprehensive Agrarian Reform Program: An Assessment after Twenty-Five Years and
Beyond CARP Issues .......................................................................................................................................................... 45
B. Survey of Agrarian Reform Beneficiaries ..................................................................................................... 45
C. Comprehensive Study on Agricultural Credit for Smallholders ......................................................... 46
D. Multi-Sectoral Study on Agribusiness Venture Arrangement (AVA) Policy and
Implementation Under CARP ........................................................................................................................................ 46
E. Tenure vs. Agrarian Reform: Lessons from the Philippine Comprehensive Agrarian Reform
Program from Commonwealth to Contemporary Periods ............................................................................... 47
V. Support to Operations ................................................................................................................................................... 48
A. In 2010 ......................................................................................................................................................................... 48
B. Remedial Measures Undertaken ....................................................................................................................... 49
C. Understanding Underspending ......................................................................................................................... 50
D. Things To Do .............................................................................................................................................................. 52

CARP and the Philippines Economic and Agriculture Policies ............................... 53


I. Introduction ....................................................................................................................................................................... 53
II. State of Agriculture, Smallholder Farmers and Farm Labor ......................................................................... 54
A. Agricultures Contribution to the Countrys Gross Domestic Product ............................................. 54

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B. Predominance of Smallholder Farms ............................................................................................................. 54
C. Agricultural Labor and Wages ........................................................................................................................... 55
D. Low income of smallholder farmers ............................................................................................................... 56
III. Agrarian Reform and Agricultural Policy .............................................................................................................. 57
A. Policy Focus on Improving Productivity and Not on Farm Income .................................................. 57
B. Disjointed Policies Based on Centrally-Planned Economy ................................................................... 58
C. Policies contributing to low income and high food prices .................................................................... 61
D. Review of related policy studies ....................................................................................................................... 65
E. The Aquino Administrations Policy: Divergence and Adjustment Programs.............................. 66
IV. Policy Levers for Agrarian Reform and Agriculture ......................................................................................... 67
A. Addressing Rural Poverty .................................................................................................................................... 67
B. On Rice Sufficiency and High Food Costs ...................................................................................................... 68
C. CARP Completion and Agriculture Policies .................................................................................................. 70

Analysis of the Support Services Program and Its Implementation ...................... 71


I. Unconsidered and Unforeseen Factors, Events, and Relations ................................................................... 71
A. Unconsidered Factors ............................................................................................................................................ 71
B. Unforeseen Events .................................................................................................................................................. 72
II. Support Services Delivery Mechanism ................................................................................................................... 73
A. Support Services Delivery Mechanism before the PNoy Administration ....................................... 73
B. Support Services Delivery Mechanism during the PNoy Administration ...................................... 75
C. Foreign-Assisted Projects (FAPs) ..................................................................................................................... 81
D. Agribusiness Venture Arrangements (AVAS): The Need To Get Farmers Consent and
Improve their Bargaining Power ................................................................................................................................. 92
E. Agricultural Financing ......................................................................................................................................... 101
F. Evidence-Based Support Services .................................................................................................................. 109

General Analysis of the Land Distribution Program ................................................ 115


I. CARP, Property Rights and Land Records........................................................................................................... 115
A. Colonial Institutions and Land Inequality .................................................................................................. 115
B. The Current Property Rights Regime Governing Land ......................................................................... 115
C. Effect of Gaps in Land Administration on the Agrarian Reform Program .................................... 116
D. Design Flaws in CARP .......................................................................................................................................... 118
E. CARP Lacked Focus on Large Private Lands.............................................................................................. 122
F. Inappropriate Collective CLOAs And Questionable VLTs Negated Agrarian Reform Goals . 124
G. Distributed Lands Whose Original Landowners Are Unpaid ............................................................. 125

Recommended Policy Initiatives and Institutional Arrangements ..................... 126


I. On the Role of the State in Agricultural Policy .................................................................................................. 126
II. Support Services: Public Goods Vs Private Goods ........................................................................................... 127

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A. Public Goods ............................................................................................................................................................ 127
B. Private Goods .......................................................................................................................................................... 131
C. Which Government Agencies Should Provide the Public Goods and Starter Assets? ............. 133
D. Addressing the Food Self-Sufficiency Policy Debate .............................................................................. 134
E. Clear Land Policies and More efficient and Moderized Land Administration ............................ 136
F. CARP Residual Issues ........................................................................................................................................... 137
G. Institutional Arrangements ............................................................................................................................... 140

Conclusion ............................................................................................................................... 142


Tables .......................................................................................................................................... 143

ANNEX A: Implementing the Supreme Court Decision on Hacienda Luisita, Inc. .................... 157
ANNEX B: Implementing the 1999 Supreme Court Decision on the Roxas Properties in Nasugbu,
Batangas ...................................................................................................................................... 169
ANNEX C: Stabilizing ARBs Property Rights in the CARP-Awarded NDC Lands in Tupi and
Polomolok, South Cotabato ........................................................................................................ 177
ANNEX D: Other Special Projects Aimed at Stabilizing ARBs Property Rights in their CARP-
Awarded Lands ........................................................................................................................... 180

References ................................................................................................................................... 183

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Preface
Implementing the Philippines agrarian reform program requires one to navigate a complex
mix of laws, regulations and jurisprudence, steer through the bureaucracies and processes of
multiple government agencies and address diverse issues and challenges ranging from land
laws, property rights, surveys, agriculture policy, rural development, production relations,
government procurement, human resource management, stakeholder relations, enterprise
organizing, credit and agri-financing, agri-extension, and, even climate change.
The Comprehensive Agrarian Reform Law (CARL) or Republic Act 6657 mandated the
Department of Agrarian Reform (DAR) as the government lead agency in the implementation
of the Comprehensive Agrarian Reform Program (CARP) to broaden the land ownership base
and provide the required resources and necessary support services to improve the socio-
economic status of the agrarian reform beneficiaries. This makes CARP both a social justice
and a poverty alleviation program.
This End of Term Report is the authors description and analysis of the agrarian reform
program and the economic and agricultural policies related to the CARP, including the
programs and projects that were implemented prior to 2010. The Report gives due
emphasis on the agrarian reform program and its implementation during the period 2010-
2015 based on the established goals in addressing the key challenges and policy program
thrusts of the current administration. The Report elaborates on the critical analysis of
agrarian reform and agriculture policies as these relates to the manner that DAR and CARP
agencies are implementing land tenure improvement, the provision of support services and
legal services toward the end goal of improving land productivity and farm income of the
smallholder farmers. The Report also presents the policy levers and possible measures to
pursue the unfinished business in the agrarian reform program that the next DAR
management may consider in light of the economic policy thrusts of the incoming
administration.
In writing this End of Term report, the author was enriched by discussions and consultation
meetings with agrarian reform beneficiaries and the leaders of their organizations, DAR
officials and employees as well as advocates and experts. A number of published works
related to agrarian reform, land administration and agriculture policy was also consulted.
But the opinions expressed as well as the analysis and conclusions drawn here are the
authors alone.

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Current Status of the Agrarian
Reform Program
I. Overview
The Philippines has been implementing land reform in one form or the other for decades.
The first land reform measures sought to regulate tenancy in rice lands starting with
Commonwealth Act 4054 (Rice Share Tenancy Act of 1933) which was subsequently
amended in 1946 by Republic Act 34 and then by the Agricultural Tenancy Act of 1954
(Republic Act 1199). While Public Land Act of 1936 defined the administration and
disposition of alienable or disposable public lands, the scheme for distributing agricultural
public land was mandated by CA 691 and, later by Republic Act 1160 otherwise known as the
NARRA1 Law of 1954.
RA 1400 or the Land Reform Act of 1955 commenced the Landed Estates Program and was
the first land reform program involving the acquisition of private agricultural lands for resale
to tenant-farmers. Tenant-farmers were assisted so they could purchase the land, be issued
Certificate of Land Transfer and Deed of Sale, and then issued Transfer Certificate of Title
(TCT) [MAR Reorganization, 1986]. Retention limits for ownership of private agricultural
land was first imposed by this law but was set at a very high level: 300 contiguous hectares
for private lands planted to rice, 600 hectares for corporate farms, and 1,024 hectares for
private farms other than rice. This retention limit was reduced to 75 hectares (though last in
the order of priority) by the Code of Agrarian Reform of 1963 (Republic Act 3844). This law
also abolished share tenancy.
President Magsaysay created the Land Tenure Administration (LTA) to implement the
acquisition of the big landed estates for resale to the tillers under RA 1400. RA 3844
renamed the LTA as the Land Authority which had the mandated to expropriate private
landed estates after payment of landowners compensation. Republic Act 6389, passed in
1971, created the Department of Agrarian Reform and absorbed the functions of the Land
Authority.
Presidential Decree (PD) 27 mandated the compulsory distribution of tenanted private rice
and corn lands to landless agricultural tenants and lessees. RA 6657 or the Comprehensive
Agrarian Reform Law sought to transfer land ownership of all public and private agricultural
lands, regardless of crops planted, to landless farmers and farmworkers. The latest, RA 9700,
changed some implementation mechanisms, extended the budget authorization and
implementation of R.A. 6657 until June 20142. At present, the program continues to cover
the remaining target landholdings. Beginning 1972, when rice and corn lands were covered
until the present, the Philippines has been implementing one of the longest-running agrarian
reform programs in the world.

1 This law created the National Resettlement and Rehabilitation Administration or NARRA.
2 The evolution of the agrarian reform program can be found online in the DAR Legal Information System (DAR
LIS) under History and Evolution of Major Agrarian Reform Laws/Issuances/Programs under the Different
Philippine Leadership. http://www.lis.dar.gov.ph/documents/9300.

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Land distribution is undertaken by two departments: the Department of Agrarian Reform
(DAR) and the Department of Environment and Natural Resources (DENR).
The DENR distributes public alienable and disposable (A & D) lands suitable for agriculture
through the processing and issuance of Free Patents and Homestead Patents. Thus, under the
DENRs land disposition function, the government recognizes and confirms the rights of
farmer-beneficiaries who are actual occupants/tillers over the public agricultural lands. In
addition, there is a non-land transfer component to DENR-CARP. The DENR allocates select
forest lands/areas suitable for agro-forestry by means of stewardship through the issuance
and award of Certificates of Stewardship Contract (CSC) for individual occupants, and
Community-Based Forest Management Agreements (CBFMAs) for communities/groups.
[DENR, 2003]
The Department of Agrarian Reform distributes both private agricultural lands (PAL) and
non-private agricultural lands.
DAR distributes three types of non-private lands:
Government-Owned Lands (GOL/KKK). These are (a) land of the public domain
placed by law and other executive issuances under the jurisdiction of DAR and; (b)
land previously proclaimed for various government departments, agencies and
instrumentalities and subsequently turned over to the DAR for distribution under the
CARP pursuant to EO 407, series of 1990, as amended by EO 448 [DAR-DENR Joint
MC 9 series of 1995]. A large portion of these lands are the so-called KKK land.3
Settlements. DAR administers and distributes public agricultural lands in settlement
areas which is the function of the predecessor agency of the DAR.
Landed Estates. Landed Estates are former haciendas or landholdings of private
individuals or corporations which have been acquired by the Government under
different laws (particularly RA 1400 and RA 3844) for redistribution and resale to
deserving tenants and landless farmers [DAR AO 3, series of 1990].4
DAR redistributes private agricultural lands through five modes of acquisition:
Operation Land Transfer (OLT). This is the mode of acquisition governed by PD 27
which mandates the compulsory distribution of tenanted rice and corn lands.
Tenanted rice and corn land that were tenanted on or before October 21, 1972 or
with Order of Placement issued by the Regional Director on or before August 1987
are distributed according to the rules of PD 27/EO 228. Otherwise, these are covered
under RA 6657.

3 Marcos issued Proclamation No. 2282 on March 29, 1983, which reclassified certain portions of the public
domain as agricultural lands and declared these as alienable and disposable lands for agricultural and
resettlement purposes of the KKK Land Resource Management Program of the defunct Ministry of Human
Settlements. These had a total land area of 1.5 million hectares located in various provinces nationwide. On
June 17, 1986, President Corazon Aquino issued Presidential Memorandum Order No. 17 revoking PP 2282 and
ordering that these KKK lands to be turned over to DAR for distribution to beneficiaries in accordance with EO
407 as amended by EO 448 and EO 556. DAR Memorandum Circular No. 17, Series of 1993 defined the
guidelines on the distribution and titling of such lands.
4 The Landed Estates Program was the first land reform program involving the acquisition of private agricultural
lands for resale to tenant-farmers. The Landed Estate program was piloted in the provinces of Pangasinan,
Bulacan, Nueva Ecija, Pampanga, Tarlac, Occidental Mindoro, Camarines Sur, and Misamis Oriental. A total of
18,247 hectares out of a total scope of 18,377 hectares was acquired and distributed to 7,466 farmer
beneficiaries [BARIE, 2003]. As of 1986, DAR administered a total of 150 landed estates.

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Compulsory Acquisition (CA). This is a mandatory mode of acquisition governed by
R.A. 6657 and applies to private agricultural lands regardless of crop or tenurial
arrangement.
Voluntary Offer to Sell (VOS). This is a voluntary mode of acquisition governed by
RA 6657 wherein the landowner voluntarily offers to sell the land to the government
at government-determined price.
Lands Foreclosed by Government Financial Institutions (GFI). Under EO 407/448,
lands foreclosed by government financial institutions were turned over to DAR for
distribution.
Voluntary Land Transfer/Direct Payment Scheme (VLT/DPS). This is a voluntary
mode of acquisition governed by RA 6657 wherein landowner and farmer-
beneficiaries agree on the terms and conditions for the transfer/sale of the land to
the farmer-beneficiaries. The role of government role is to recognize the sale as an
agrarian reform-related land transfer.
Private agricultural lands acquired through OLT, CA, VOS and EO 407/448 (GFIs) are
referred to as LBP-compensable lands, that is, the landowners are paid just compensation
through the Land Bank of the Philippines and agrarian reform beneficiaries pay amortization
for the land at subsidized rates. Non-private lands and private lands under the VLT/DPS
scheme are referred to as Non-LBP Compensable lands. Government does not pay for the
acquired land though DAR shoulders the costs for documentation, survey and titling of the
awarded lands.
Lands distributed through P.D. No. 27 are awarded to beneficiaries through Emancipation
Patents (EPs) while those distributed through R.A. No. 6657 are awarded through
Certificates of Land Ownership Award (CLOAs). These EPs and CLOAs are registered with
the Registries of Deeds. CLOAs may be individual CLOAs or collective CLOAs.
In general, non-private lands are easier to distribute than private lands (except for those
under the VLT scheme); compensable lands take longer to process for distribution than non-
compensable lands; and voluntary modes of acquisition are less contentious than
compulsory modes. Private lands are covered by titles and are subject to the vagaries of an
outmoded, opaque, and complex land administration system. Compensable lands have to
undergo a valuation process and, under current rules, initial payment to landowner must be
made. Voluntary modes of acquisition are less contentious. In compulsory modes of
acquisition, landowners can employ a host of legal and illegal tactics to prevent or, at least
delay, the completion of land distribution. Tenanted lands are less subject to beneficiary-to-
beneficiary conflict than plantations with regular, temporary and seasonal farmworkers
because the tillage of tenants are pre-defined while those of farmworkers are not. Thus, the
easiest and least contentious to distribute are GOL/KKK, settlements and VLT lands while the
hardest, most time-consuming and most contentious are private lands subject to compulsory
acquisition, especially compulsory acquisition of lands that have farmworkers instead of
tenants. (See Figure 1)

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COMPULSORY ACQUISITION

Documents such as copy of Landowners have the rights to: Conduct ofJoint DAR & LBP Issuance of Notice of Land Valuation and
title & tax declaration obtained File Protest vs Coverage or petition for exemption/ Field Investigation (FI) Acquisition (NLVA) to the Landowner
Ocular inspection of exclusion w/in 30 days from receipt of NOC Preparation by LBP of Land DAR issues Order to Pay
landholding & projection into Nominate preferred beneficiaries Valuation Worksheet and LBP deposits initial payment to landowner
the land classification map Exercise right of retention w/in 30 days from receipt issuance of Memorandum of & issues Certificate of Deposit (COD)
Issuance & service of Notice of NOC; choose retention area w/in 15 days after. Valuation (MOV) DAR transmits COD to Register of Deeds
of Coverage; posting of NOC The Beneficiary Identification process involves: Conduct of lot allocation and (RoD)who cancels landowners title and
Conduct of information campaign segregation/subdivision survey; issues RP Title
Submission by potential beneficiaries of application Preparation of survey plan DAR generates CLOA and submits it to
& necessary documents Submission of survey plan to the RoD for registration
FB screening & posting of preliminary list of FBs Land Management Service of
Period for inclusion/exclusion, arbitration the DENR for inspection,
Approval & posting of Final Masterlist verification and approval of
survey plan (IVAS)
APFU & oath before judge

VOLUNTARY OFFER TO SELL

ACQUISITION AND DISTRIBUTION OF GOVERNMENT-OWNED LANDS

*Beneficiary identification in GOL only involves determining actual tillers; beneficiaries need not execute an APFU nor take an oath

VOLUNTARY LAND TRANSFER

Figure 1: Comparative LAD Processes for Different Land Types and Modes of Acquisition

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II. Land Tenure Services
A. CUMULATIVE LAND DISTRIBUTION ACCOMPLISHMENT (1972 2015)
1. MAGNITUDE
Four decades of implementing the agrarian reform program has resulted in the
redistribution of a large tracts of private and public lands. From 1972 to December 31,
2015, the DAR reported a cumulative land distribution accomplishment of 4,718,845
hectares distributed to an estimated 2.7 million beneficiaries5. (See Table 1)
In addition, the DENR distributed 2,538,219 hectares of alienable and disposable land
under the Comprehensive Agrarian Reform Program (CARP) from July 1987 to December
2015.
In all, 7,257,064 hectares have been distributed under the Comprehensive Agrarian
Reform Program. This is more than half (51.1%) of all alienable and disposable lands in
the Philippines which totals 14,194,675 hectares. [FMB-DENR, 2014].
2. NATURE AND CHARACTERISTICS OF DAR-DISTRIBUTED LAND
More than half are private lands.
Of the DAR-distributed lands, 2,608,770 hectares (55.3% of total) are private agricultural
lands while 2,110,075 hectares (44.7% of total) are non-private agricultural land (non-
PAL). (See Table 2)
But just a little more than one-third are LBP-compensable.
However, only 1,773,209 hectares (37.6% of total) are LBP-compensable lands while
2,945,636 hectares (62.4% of total) are non-LBP compensable. It should be noted that
LBP-compensable lands require a longer period of time to document and acquire since it
has to undergo a valuation process and, in the case Compulsory Acquisition and
Operation Land Transfer, are more contentious since landowners tend to contest or
resist the coverage of their lands. (See Table 2)
Only one-fourth were private lands distributed through compulsory modes of
acquisition (OLT and CA).
Of the total DAR-distributed land from 1972-December 2016, only 7% was acquired
through compulsory acquisition; OLT made up another 12%. Thus compulsory modes of
acquisition make up only 19% of cumulative LAD accomplishment. The three largest
contributors to DARs cumulative land distribution accomplishment are government-
owned lands or GOL/KKK (25.8%), private lands under the voluntary land transfers
scheme (17.7%) and settlements (17.2%). Private lands under VOS make up 13.8% of
total distributed lands. (See Table 1)

5 This is an estimate from the EP/CLOA IS, the database of all EPs and CLOAs reported to have been issued and
registered by the DAR Provincial Offices. The EP/CLOA IS has limitations. One, it is the database of EPs and
CLOAs, not beneficiaries. Note that a beneficiary may be issued more than one CLOA if, for example, his/her
farmlot is traversed by a road. On the other hand, there are collective CLOAs where only one name appears
appended with et. al., meaning, there are several beneficiaries. To correct this, the current database (the web-
based OpTool made operational in 2014) requires the list of the names of beneficiaries which can then be put
into a searchable library of names. Second, some field offices fail to diligently send updates to the EP/CLOA IS.
The MISS is currently determining the unique count of beneficiaries which is a tedious process due to, among
others, misspellings.

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Figure 2: DAR-Distributed Land by Mode of Acquisition/Land Type, 1972-Dec. 2015

B. LAND ACQUISITION AND DISTRIBUTION (LAD) BALANCE FROM 2016


ONWARDS
The DAR still has to distribute 621,085 hectares of land; this constitutes what is termed as
the Land Acquisition and Distribution Balance or LAD Balance.
Of the LAD Balance, 66.1% (410,270 hectares) are private lands which will be distributed
through compulsory acquisition. Another 16.5% (102,442.68 hectares) are private lands
under Voluntary Offer Sell (VOS). Very little non-private lands are left to distribute. Around
92.6% (575,272 hectares) are private agricultural land; 88.3% (548,467 hectares) are LBP-
compensable. (See Table 2)
Of the LAD Balance, 4,747 landholdings with total area of 32,107 hectares are deductible
(being validated to find out if the land is indeed coverable); 18,507 landholdings with total
area of 149,612 hectares have been tagged as problematic and only 43,540 landholdings
with total area of 439,367 hectares are workable. More significantly, of the 410,332 hectares
for compulsory acquisition, around 27% (111,836 hectares) have been tagged as
problematic. (See Table 3)
A substantial number of large private agricultural landholdings remain undistributed. Of the
LAD balance of private agricultural lands, an estimated 24% of landholding covering 41% of
the gross area are of land sizes above 24 hectares. Of this, there are 10,622 landholdings
covering an area of 175,982 hectares whose sizes are more than 50 hectares. (See Table 4)

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Figure 3: LAD Balance by Mode of Acquisition/Land Type as of January 2016 (area in hectares)

Thus, like the outgoing administration, the new administration will be faced with the
challenge of distributing a LAD balance that will take longer to acquire and distribute, are
more tedious to document, and are more contentious and faced with technical and other
problems.

Figure 4: LAD Balance by Land Size (Private Agricultural Land only) as of January 2016 (area in hectares)

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A Note on the Determination of the LAD Balance.
The LAD Balance for the current year is not merely the difference between the LAD Balance
at the beginning of the previous year and the previous years gross accomplishment.
In the course of processing landholdings for acquisition, land surveys are conducted. It may
turn out, after the survey was conducted, that the area in the title of a landholding is different
from the area as surveyed. This will, of course, entail adjusting the area of the landholding in
the database. Moreover, in the course of the year, some landholdings might be found to be
not coverable upon ocular inspection, or found to be non-A&D or cannot be located on the
ground. It may also happen that DAR or the courts grant a petition for exclusion or
exemption. In these cases, the landholding will be deducted from the LAD database upon
completion of the necessary documents and undergoing the required process. While a
landholding is still being processed for deduction, it is tagged a deductible in the database.
On the other hand, landholding may be added to the database in the course of the year
(inclusions) because of the turn-over of public lands by DENR or other agencies or the
coverage of a previously non-covered landholding as a result of reports by field offices or
CSOs in the area, the revocation of an exemption order or a conversion order, the grant of a
petition for coverage, and others.
Thus, the LAD Balance at the beginning of the year is determined by getting the LAD Balance
at the beginning of the previous year then adding/subtracting adjustments in the area,
adding inclusions, subtracting deductions and then subtracting the accomplishment for that
year. This is a process called the LAD Balance accounting and is usually completed well into
the first quarter of the year after validating accomplishments, deductions and inclusion. It
may happen that media, or CSOs or Congress or the Executive will ask DAR for data on the
LAD balance before the completion of the validation. In these cases, the DAR releases a
preliminary LAD balance report as of a certain date which may differ from the final
reckoning of the LAD Balance after the completion of the validation process. This accounts
for what is pejoratively referred to as DARs dancing balance. Moreover, amendments in
the LAD Balance would change the DARs CARP Scope since the CARP Scope is computed by
adding the cumulative accomplishment and the LAD Balance. (See Table 5 for the annual LAD
Balance Accounting from July 2010 to December 2015.)

C. COLLECTIVE CLOAS
Stabilizing property rights in agricultural lands is necessary for the development and
modernization of Philippine agriculture. One of the main source of property rights instability
are the numerous collective CLOAs issued over lands meant for individual, not collective,
cultivation. The subdivision of these collective CLOAs is a major unfinished business of the
DAR in order to secure the property rights of the agrarian reform beneficiaries on their
awarded lands.
Most of the collective CLOAs were issued in the 1990s and the main reason for issuing
collective CLOAs was to facilitate the distribution of land to beneficiaries and not really to
achieve economies of scale. By issuing collective titles, the conduct of subdivision surveys
and their subsequent inspection, verification, and approval by the DENR which could take
two to three months, could be postponed. Unlike in the case of individual CLOAs which
require identification of lots allocated per beneficiary, which can only be done by conducting
subdivision survey, collective CLOAs did not require such. The intent of the DAR
management then was to subdivide the collective CLOAs shortly thereafter. However, field
offices then were concentrated on the distribution of new lands and the subdivision of

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collective CLOAs were left for some future time since, anyway, these had already been
distributed to the beneficiaries.

250,000

225,000

200,000

175,000

150,000

125,000

100,000

75,000

50,000

25,000

2004

2015
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

2016
TOTAL COLLECTIVE CLOA CA VOS
GFI (EO 407/448) VLT/DPS Settlement
KKK/GOL

Figure 5: Collective CLOAs Issued by Year and Land Type/Mode of Acquisition, in hectares

The issuance of Collective CLOAs was supposed to be an intermediate or temporary stage


until subdivision surveys are conducted and approved. But the subdivision of these collective
CLOAs was neglected after the accomplishment had been reported. Instead, the number of
collective CLOAs piled up such that in 2010, only 878,494 hectares of collective CLOAs meant
for subdivision were actually subdivided.
1. MAGNITUDE OF COLLECTIVE CLOAS ISSUED
Available data in 2010 showed the total area covered by collective CLOAs was 2,346,502
hectares. This figure turned out to be not entirely accurate. It must be noted that the
cleansing of the database on collective CLOAs started in earnest only after the cleansing
of the LAD database. After cleansing of the collective CLOA database, a reasonably
accurate database was established in 2015 though some of the data still needs further
verification.
The cleansed database showed that as of April 30, 2016, collective CLOAs were issued to
2,168,116 hectares of land distributed to agrarian reform beneficiaries. Collective CLOAs
constituted 46% of more than 4.7 million hectares of lands distributed from 1972 to
December 2015.
A very large proportion of the collective CLOAs (around 76%) were awarded on a co-
ownership basis to individual beneficiaries who were not organized and were not
actually engaged in collective farming. These are the collective CLOAs that are meant for
subdivision.

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2. NATURE AND SOURCE OF COLLECTIVE CLOAS
Around 73% of land distributed through EO 407/448 (GFI) were issued collective CLOAs
as with 62% of those distributed through VOS, 58% of distributed GOL/KKK land; 42% of
settlement lands; and 40% of those distributed via compulsory acquisition. More
troubling is the fact that more than half (52%) of land distributed through the Voluntary
Land Transfer scheme were issued collective CLOAs. In terms of magnitude, 70,081
landholdings distributed through VLT with total area of 432,360 hectares were issued
with Collective CLOAs. One wonders why beneficiaries who paid directly for the land
would consent to being issued collective CLOAs instead of individual CLOAs.
The two regions with the highest area of collective CLOAs issued are Region 12 (296,914
hectares) and Region 8 (237,398 hectares). Three provinces lead in terms of total area of
collective CLOAs issued: Negros Occidental (138,195 hectares), North Cotabato (136,930
hectares), and Bukidnon (82,608 hectares).

Figure 6: Collective CLOAs Issued vs. Total Land Distributed, 1972-2016 (in hectares)

GOL/KKK lands constitute the single biggest land type issued collective CLOAs: 53,339
landholdings covering 708,565 hectares which is 32.68% % of total area of collective
CLOA issued. The next largest contributors of collective CLOAs are those issued to VLT
lands and those distributed through VOS (19.96% and 18.72%, respectively, of total area
of collective CLOAs issued). (See Table 6)
3. SUBDIVISION OF COLLECTIVE CLOAS
As of January 1, 2016, less than half (1,064,746 hectares) of the collective CLOAs have
been subdivided. A total area of 115,816 hectares have been found to be timberlands,
forests, roads, watersheds, etc. Another 16.5% (139,134 hectares) are collective CLOAs in
which the co-owners opted not to subdivide the collective CLOAs. Thus, there remains
848,420 hectares under collective CLOAs for subdivision. Of this, 579,566 hectares are
priorities for subdivision while the other 268,854 hectares are not priority for
subdivision (See Table 7). Collective CLOAs from LBP compensable lands (227,026
hectares) as well as those from KKK/GOL, Settlements and Landed Estates (346,118

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hectares) are priority for subdivision. Those awarded to farmers
associations/cooperatives (65,701 hectares) and those emanating from voluntary land
transfers (203,153 hectares) are non-priority for subdivision. (See Table 7)
The subdivision of collective CLOAs was delayed or slowed down by issues and problems
emanating from the fact that these collective CLOAs were issued one to two decades ago.
There are operational problems in the identification of ARBs and validation on the
location of the landholdings covered by Collective CLOAs especially those issued in the
1990s. Some ARBs listed in the CLOAs are now deceased and there is a need to go
through the process of inclusion and exclusion of ARBs which is a requirement for the
subdivision survey. Some ARBs are no longer tilling the land and have transferred
his/her rights to another. Some tillers in place are not in the original list of ARBs. Some
collective CLOAs are in the name of the farmers organization but the names of individual
beneficiaries are not annotated in the collective CLOA. A significant number of collective
CLOAs include non-CARPable portions and non-A&D lands.

Figure 7: Inventory of Collective CLOAs as of Beginning of 2016

There is an ongoing project with the Land Registration Authority (LRA) that seeks to
project large collective CLOAs into the land classification map to determine which
portions of those collective CLOAs are in within A&D, timberland and unclassified forest
land. As well collective CLOAs emanating from GOL/KKK and Settlement lands will be
projected in order to identify if these are indeed within areas under PP 2282 and the
various settlement proclamations.

End of Term Report by Secretary Virgilio de los Reyes Page | 15


D. UPDATE ON OTHER LAND TENURE SERVICES (LTS)
1. DISTRIBUTED LAND WITH UNPAID LANDOWNER COMPENSATION6
One of the residual tasks of Department is fast-tracking the completion of the
documentation and payment of landowners compensation for already distributed
OLT lands and GFI lands under EO 407/448.
This situation arose because of lapses in documentation brought about by the
need to accelerate agrarian reform accomplishments.
In the case of OLT lands, non-payment of LO compensation arose when
Emancipation Patents (EPs) were distributed even before the completion of land
valuation and even if the documentation for landowner compensation had not yet
been completed and, therefore, the claim folder had not yet been submitted to
Land Bank. This started in the waning years of the Marcos regime and continued
during the early years of the Corazon Aquino Administration and RA 6657 when
there was a rush in the issuance of EPs. Once EPs were distributed, the task of
completing the documentation for landowners compensation took the back seat
to the tasks related to the attainment of land distribution targets. It was several
years before the DAR undertook to resolve the problem by including the
completion of the documentation for distributed but unpaid OLT lands in its
performance targets. By that time, some documents have been lost making it
more difficult to complete the documentation.
In the case of GFI properties, EO 407/448 directed that all lands foreclosed by
government financial institutions be turned over to DAR for distribution. GFIs
executed Deeds of Transfers (DOT) to the DAR and on the basis of these DOTs, the
DAR distributed the GFI lands even before the GFIs were compensated for these
lands.
As of January 2016, there are still 10,056 landholdings totaling 55,456 hectares
which are already distributed to tenants but whose landowners have not yet been
paid. In addition, there are 7,927 landholdings totaling 71,272 hectares
foreclosed by GFIs and awarded to ARB for which the GFIs have not yet been paid.
2. LEASEHOLD OPERATIONS
Sec. 12 of R.A. No. 6657 mandates the Department of Agrarian Reform (DAR) to
determine and fix the lease rentals within retained areas and areas not yet acquired for
agrarian reform in accordance with Section 34 of R.A. No. 3844. DAR A.O. 02-06 adds that
it is DARs mandate to protect the rights and improve the tenurial and economic status
of farmers in tenanted lands andto provide for an effective mechanism that shall
implement leasehold and improve the method for determining and fixing lease rentals.

6 In DAR parlance there are DNYP land (Distributed but Not Yet Paid) and DNYD land (Distributed but Not Yet
Documented). The nomenclature is not entirely accurate. It is not the case that DNYD lands have no
documentation at all. There are claim folders for these lands but these have not yet been submitted to the Land
Bank because either the documents needed are not yet complete or adjustments have to be made in some of the
documents in the claim folder. Technically, these are the lands which have already been distributed but the
landowner has not yet been paid. In the case of DNYP lands, initial cash payment and even AR bond payments
had actually been paid to the account of the landowner but these remain unclaimed or unwithdrawn.

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DARs leasehold operations involves the preparation, registration, and implementation of
leasehold contracts
The 2012 Census of Agriculture and Fisheries show that there are 814,296 tenanted
farms covering 1.071 million hectares. It is unclear from DAR data which of these are
covered by leasehold contracts since, unlike landholdings for coverage, there is no
database of tenants and tenanted lands.
What DAR records show is the yearly accomplishment. There is no accurate consolidated
and current data on leasehold within the DAR though reported cumulative
accomplishment on leasehold states that from 1964 to December 2015, the cumulative
area covered by registered leasehold contracts is 1,790,021 hectares involving 1,233,245
ARBs. However, what the Planning Service does is to add reported annual
accomplishment every year. It does not deduct landholdings which over the years have
been distributed and issued EPs and those where there is a revision in the leasehold
contract (e.g. change in leaseholder because of the death of the original leaseholder).
The RA 3844 mandate for the government to regulate and monitor leasehold
arrangements is not implemented uniformly across the country. The DAR central office
needs to create a database on leasehold similar to the LAD database with details on
location, landowner, area, title number, and leaseholder, etc. in order to (a) validate the
magnitude of farms under tenancy/leasehold; (b) determine how many farms under
tenancy are actually covered by formal leasehold contracts, (c) prevailing contractual
arrangements between landowner and leaseholder, etc. This will inform the government,
among others, in deciding if current laws and regulations need updating and in
determining the type of support services that can be given to leaseholder.
3. UNTITLED PRIVATE AGRICULTURAL LANDS (UPAL)
There are private lands being covered by CARP that are untitled. As of the beginning of
2016, there are 9,801 landholdings covering 78,569 hectares in the LAD balance which
are classified as untitled private agricultural lands (UPALs). This is 15% of the LAD
Balance in terms of the number of landholdings and 13% of the LAD Balance in terms of
gross area. Only half of these UPALs (4,277 landholdings covering 39,189 hectares) are
workable. Another 4,954 landholdings covering 34,231 hectares are problematic. The
rest are tagged as deductibles.
DOJ Opinion 100 series of 2012 stated that for untitled properties in excess of 12
hectares, the DAR is responsible for the distribution of the 12-hectare portion while the
DENR will be responsible for the distribution of the portion in excess of 12 hectares.
Processing UPALs for distribution takes a longer time because of the joint DAR-DENR
ground validation and entails additional cost shouldered by DAR (around P500
additional per hectare).

E. LANDOWNER COMPENSATION AND ARB AMORTIZATION


1. LANDOWNER COMPENSATION
Landbank data shows that from 1972-March 31, 2016, the government through the Land
Bank of the Philippines approved and paid PhP 69.443 billion (in cash and in Agrarian
Reform bonds) to 84,143 landowners for 1,548,056 hectares of LBP-compensable private

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agricultural lands7. Of the P69.443 billion, 4.70% or P3.264 billion were compensation
for acquisitions under PD27/EO228 while 78.60% or P54.586 billion were for lands
acquired under RA 6657 and the remaining 16.70% or P11.594 billion were for
acquisitions under RA 9700. (See Table 8)
Moving forward, LBP-compensable lands in the LAD balance total 548,467 hectares. Of
this, 22,231 hectares are deductible. This leaves 526,236 hectares constituting the
realistic LAD balance of compensable lands from 2016 onwards. Using the realistic LAD
Balance of 526,236 hectares, the Land Bank estimates that government will still have to
spend PhP131.56 billion in landowner compensation in order to complete land
distribution under the agrarian reform program.
2. ARB AMORTIZATION
The total amount paid for Landowners Compensation is not the same amount that
agrarian reform beneficiaries will have to pay government for their awarded lands.
a. Amount of ARB Amortization
Of the total PhP69.443 billion paid to landowners, only 84.41% or PhP58.617 billion
will be amortized by 906,997 agrarian reform beneficiaries (ARBs). The difference of
PhP10.826 billion are regular subsidies and adjustments in valuation as a result of
just compensation cases decided by the Courts. These Court-awarded increases are
charged to the account of the national government; these are not charged to ARBs.
(See Table 9)
Of the PhP58.617 billion that will be amortized by ARBs, only 27% (PhP15.658
billion) is at present booked as agrarian reform receivables (ARR). The other 73%
(PhP42.959 billion) is not booked as ARR and remain as Lands Purchased and
Expropriated (LPEx) in AR books due to the absence of Land Distribution
Information Sheets (LDIS) and/or Land Amortization Schedule (LAS). Those booked
as ARR cover 715,783 hectares of land awarded to 464,842 ARBs. There are still
832,272 hectares of land awarded to 442,155 ARBs that are not yet booked as ARR.
(See Table 10)
The absence of LDIS/LAS for a large number of ARBs is a result of a backlog in DARs
completion and submission of the LDIS for these ARBs. The backlog accumulated
because, first, the guidelines for FB amortization were not issued at the same time as
the guidelines on land acquisition and distribution, and second, procedures were not
clearly defined until 1997.
It took the Department four(4) years from the enactment of RA 6657 before coming
up with the implementing rules on FB amortization (AO 3, series of 1992) but the
principle of affordability was not fully implemented: it applied only during the first
five (5) years of repayment and set a condition for its application in the remaining 25
years.
A year after, AO 6, series of 1993 was issued which adhered more closely to the
principle of affordability. But, in both AOs, the procedures were not defined. Instead,
both AOs mentioned that guidelines will be issued to put these into operation.

7 The discrepancy between DAR-reported accomplishment and LBP-reported acquired area is because there are
lands already distributed by DAR but whose landowners had not yet been paid because DAR has yet to submit
to the Landbank the Claim Folder for these.

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LADIS was prescribed only in 1997 (DAR-LBP JMC 30, series of 1997) which
introduced CARP Form No. 22 and enumerated the documents to be gathered by DAR
and those under the responsibility of LBP. By that time, the CFs requiring LADIS had
already accumulated because it was already on the 9th year of implementation.
In order to accelerate the payment of agrarian reform remittance (ARR), a new MC
was issued (DAR-LBP JMC No. 13, series of 2004 was issued). It would be noted
however, that the procedures referred only to newly registered lands (V. Procedures
- DARMO accomplishes 4 copies of LADIS [CARP Form No. 22]) within 20 days after
receipt of the registered CLOAs. This did not address the backlog.
b. Payment/Collection Rate
Of the PhP15.658 billion booked as ARR, less than half (7.682 billion) are due and
demandable; the other 7.977 billion are classified as Not Yet Due. Out or the 7.682
billion which are due and collectible from ARBs, PhP3.128 billion have been collected
by the Landbank. In addition, even if their amortization is not yet due, some ARBs are
already paying amortization; these payments are booked as Farmers Advance
Remittance.; NYD collected by the Landbank total PhP1.812 billion. (See Table 11)
Overall, the average collection rate from ARBs is 52%.
Of the PhP7.682 billion due and collectible from the ARBs, 51% or PhP3.929 billion
have been fully paid while PhP3,752.71 are classified as Currently Due and Past Due.
Out of the PhP3.753 billion Currently Due and Past Due Accounts, PhP7.3996 billion
have already been paid by FBs or a current collection rate of 19%. (See Table 11)
In terms of the number of ARBs, 112,234 ARBs are with payment while 120,213
ARBs are without payment. Another 232,395 ARBs are fully paid (See Table 12). The
rest are ARBs whose awarded lands still do not have LDIS/LAS.
3. FISCAL IMPLICATION OF FORGOING ARB AMORTIZATION
If the new Administration chooses to forgo further collection of ARB amortization, the
national government will have to expend the total amount of PhP190.308 billion. This is
the cost of writing off the PhP58.748 billion of currently uncollected ARB amortization
plus the PhP131.56 billion of landowner compensation for the remaining LBP-
compensable lands in the LAD balance.
Currently, the total amount to be amortized by ARBs is at PhP58.617 billion of which
PhP4.669 billion have already been collected leaving a balance of PhP 53.948 billion. If
the adjustment of PD27/EO228 claims pursuant to DAR AO 6 series of 2015 of P4.80
billion is considered, the adjusted balance to be amortized by FBs shall be P58.748 billion.
As stated above, the Land Bank estimates that government will still have to spend PhP
131.56 billion in landowner compensation in order to complete land distribution of the
remaining 526,236 hectares of LBP-compensable lands under the agrarian reform
program. Thus, total amount of P190.308 billion shall be expended by the new
administration to cover the cost of writing off booked amount to be amortized by FBs of
P58.748 plus the value of the remaining lands for distribution of P131.56 billion.
If we assume an annual average cost of distribution for the remaining 526,236 hectares,
this amounts to PhP 21.93 billion a year for six years. The amount of P80.678 billion shall

End of Term Report by Secretary Virgilio de los Reyes Page | 19


be booked as expense by the national government during the first year, and P21.93
billion each year from the second to the sixth yea8r.
The estimated first year cost of PhP80.678 billion is 3.82% of 2015 total government
revenues of PhP2,109 billion and 0.60% of 2015 GDP of P13,522 billion.

F. LAND TENURE SERVICES UNDER THE AQUINO ADMINISTRATION


1. LAND ACQUISITION AND DISTRIBUTION (LAD) ACCOMPLISHMENT FROM JULY 1, 2010 TO
DECEMBER 30, 2015
a. Cumulative LAD accomplishment and LAD Balance at the Beginning of the Term
At the beginning of the Aquino Administration, DARs cumulative accomplishment in
land distribution stood at 4,184,663 hectares. More than half of these were private
agricultural lands (57%). The rest (43%) were non-private agricultural lands. But
only 39% of the distributed lands were LBP-compensable. Moreover, only 6.87%
were compulsory acquisitions.
The LAD Balance in July 2010 was radically different from the cumulative
accomplishment up to the beginning of July 2010. About 95% of these were private
agricultural lands and only 5% were non-private agricultural lands. Private
agricultural lands that were compensable by Land Bank consisted of 86%. In terms
of area, close to two-thirds (63%) were to be acquired under compulsory acquisition,
an involuntary way of putting lands under CARP coverage. Moreover, Around 70% of
the balance in private agricultural lands was composed of the medium and big
landholdings. The medium (above 10 to 24 hectares) comprised 36% and the big
landholdings (above 24 and above 50 hectares) consisted of 33%. The rest of the
30% were 10 hectares and below. Around 82.5% of the LAD balance were planted to
four major crops, namely, coconut, rice, sugarcane, and corn. The big proportion of
lands planted to sugarcane is consistent with the fact that Negros Occidental, a
primary producer of sugarcane has the biggest LAD balance among all provinces
nationwide.
Available data showed that most of the landholdings at the beginning of the term
were in early stages of the Land Acquisition and Distribution process. Around 64% of
the LAD Balance (698,996 hectares) were in the first stage of acquisition: research
and gathering of basic documents.
b. Land Distribution Accomplishment under the Aquino Administration (July 1,
2010 to December 31, 2015)
Thus, at the beginning of the Aquino Administration, the DAR was faced with the
challenge of distributing lands that take longer and are more tedious to acquire and
are more contentious.
i. Net accomplishment of 534,182 hectares; Gross accomplishment of 601,267
hectares
Over a five-and-a-half year period, DAR has completed the documentation and
processing of 47,727 landholdings consisting of 601,267 hectares which resulted
in the distribution of 534,182 hectares to 335,591 agrarian reform beneficiaries;

8 This assumes that the LAD balance of compensable lands are all acquired during the six year term of the
incoming Administration and these are acquired in equal volume during these six years.

End of Term Report by Secretary Virgilio de los Reyes Page | 20


the balance of 67,085 hectares processed/ documented but could not be
awarded to ARBs because these are non-CARPable for various reasons
(undeveloped portions with above 18% slope, eroded, silted, portions within
timberland, etc.). On the average, non-CARPable lands accounted for 11.2% of
the total area documented and processed. Prior to 2010, DAR reported only the
area actually awarded to beneficiaries. This, however, did not capture the total
work done by DAR, as well as the funds spent. (See Table 13)
ii. Non-PAL and non-LBP compensable lands still majority of accomplishment
Around 46% of the total accomplishment for the period consisted of private
agricultural lands, while 54% consisted of non-PAL. LBP-compensable lands
accounted for 29% of the total, and non-compensable lands contributed 71%.
(See Table 13)
iii. But there was reversal of trend in the latter part of the term; CA dominated land
distribution accomplishment in 2015
Although non-PAL and non-LBP-compensable lands accounted for the biggest
share in the total accomplishment, the reversal in the trend of CA, VOS, and
GOL/KKK is very noticeable.
Overall, the average share of Compulsory Acquisition with respect to total
accomplishment within the period rose to 13% of net accomplishment in
contrast to the 7% share of CA in the cumulative accomplishment from 1972-
2015. CA accounted for 16.8% of landholdings acquired and distributed and
15.2% of gross accomplishment. (See Table 13)
The share of CA in terms of number of landholdings rose from 10.1% in 2011 to
52% in 2015; in terms of CARP area, CA increased from 9% in 2011 to 57% in
2015; and from 10% to 59% in terms of Gross Area. VOS, likewise had an
upward trend although not as pronounced as that of CA. Both of these modes of
acquisition are LBP-compensable lands, which means, processing time takes
much longer.
In contrast, both GOL/KKK and VLT had a drastic decline in 2015 as a result of
strict implementation of the policy not to include them in the target unless these
were already in process at the beginning of the year. Before 2015, it had been
the practice of some field offices to process government owned lands for
inclusion in the LAD balance, and eventually to distribute these whenever they
are unable to distribute targeted private lands. This is glaringly illustrated by the
fact that although the GOL constituted only less than 60,000 hectares of the LAD
balance at the beginning of 2011, more than 200,000 hectares of government-
owned lands were distributed from 2012-2014.
GOLs share fell from 39% in 2011 down to only 7% in 2015 in terms of gross
area. In terms of CARP area, its share declined from 41% to 8%, and from 35%
down to 4% in terms of number of landholdings. VLT had a similar sudden drop
in share of accomplishment to total. (From 22% to 4% in terms of gross area,
36% to 4% in terms of carp area, and from 33% down to 4% in terms of number
of landholdings.
Aside from the directive not to include VLT and GOL/KKK in the target, there
really was a change in the composition of the LAD balance. With the easier lands

End of Term Report by Secretary Virgilio de los Reyes Page | 21


already delivered, what were left were the more difficult ones, particularly CA
landholdings.
c. On the 2015 LAD Accomplishment
For 2015, DAR was only able to complete the processing and documentation of 3,792
landholdings covering 35,015 hectares of which 27,670 hectares were distributed to
agrarian reform beneficiaries. This is one of the lowest LAD accomplishment to date.
But DAR completed more than what this data reflects.
In truth, DAR essentially finished the processing and documentation of 137,418
hectares.
It must be remembered that the bulk of DARs tasks are in the early and middle
stages of the land acquisition and distribution process: identification of the
landholding to be covered, research and compilation of basic documents such as
titles and tax declarations, identification of beneficiaries, issuance of Notices of
Coverage (for compulsory acquisition), survey activities and submission of survey
plans to the Land Management Service of the DENR (DENR-LMS), and participation in
the Joint DAR-Land Bank Field Investigation preparatory to the valuation of the
landholding for the purpose of landowner compensation.
After these, the Land Bank values the covered landholding, the LRA-ROD cancels the
titles of the owner of the covered private land and issues RP titles and then registers
EPs and CLOAs after these have been generated by the DAR. DARs processing of
target landholdings do not proceed at the same pace. Some reach the DENR-LMS or
the Land Bank at a later time than others and therefore do not result in the
registration of EPs or CLOAs before the end of the year.
By the end of 2015, a total of 19,021 hectares were still with the DENR-LMS; a total of
13,096 hectares were still with the Land Bank for valuation; and 27,323 hectares
were still pending at the LRA/ROD either for issuance of RP title or registration of
EP/CLOA. Thus, in all, DAR substantially completed its work in 59,540 hectares that
were already submitted to the other CARP agencies.
In addition, some 42,963 hectares that were part of the target and were being
documented and processed turned out to be not coverable for various reasons such
as being found to be already subdivided among the heirs of deceased landowners,
found to be non-alienable and disposable after plotting and projection in land
classification maps, found to be no longer suitable to agriculture or already devoted
to non-agricultural use during the conduct of field investigation, or final and
executory orders are issued declaring the land exempted, excluded, retained by
landowner or petitions for conversion granted.
Add all this with the 35,015 hectares for which the distributable portions were issued
EP/CLOAs, the DAR was able to complete its work for 137,418 hectares of the
targeted 198,631 hectares.
There are also factors that contributed to the low accomplishment:
i. Change in the composition of the LAD balance and targeted landholdings
Though the Field Operations Office (FOO) had issued directives that priority
should be given to the acquisition and distribution of private lands, up until
2014, DAR field personnel continued to process non-private lands and voluntary

End of Term Report by Secretary Virgilio de los Reyes Page | 22


land transfers in order to meet targets in terms of hectarage. For 2015, DAR
management decided to bite the bullet and through budgeting and monitoring,
strictly implemented the policy of acquiring only private lands with very few
exceptions for public lands that were already being processed at the start of the
year knowing that accomplishment will drop drastically in the process.
This change presented a big challenge to the provinces that were used to
delivering mainly non-compensable agricultural lands because they happened to
have the concentration of these type of lands. Their personnel had to cover
compensable private agricultural lands, which for many of them, is an unfamiliar
process. Through the rationalization plan, we have increased the number of
personnel in provinces with high LAD balances; however, those placed or
appointed have yet to gain the proficiency to process the more complicated
compensable private agricultural lands.
Thus, there was a qualitative change in the 2015 accomplishment compared to
previous years: 86% of accomplishment is private lands. Further, 57% of
accomplishment is compulsory acquisition. This is in contrast to past
accomplishment in which only a little more than half were private lands and a
measly 7% were private lands subject to compulsory acquisition. In terms of
magnitude, the 15,745 net accomplishment in compulsory acquisition
accomplishment is the highest within the 10 year period from 2006-2015.
ii. Acquisition of most OLT lands held in abeyance in 2015 pending harmonization of
rules to conform with Supreme Court decisions
The acquisition and distribution of most tenanted rice and corn lands (OLT lands
or PD 27 lands in DAR parlance) was delayed in 2015 because the Land Bank of
the Philippines temporarily ceased processing OLT lands pending the issuance of
new rules governing the valuation of these lands.
It must be noted that one of the basis for the valuation of OLT lands was the
government support price for rice or corn as of October 21, 1972. But there are a
myriad of Supreme Court decisions pertaining to valuing the just compensation
of landowners of OLT lands and it was thought prudent by both the DAR and the
Land Bank to review the policy on valuation of OLT lands.
The review, conducted by a joint team of DAR and Land Bank of the Philippines,
became complicated by what seemed to be conflicting decisions of the High
Court and therefore a winding line of jurisprudence. This review culminated in
2015 when the undersigned issued clear guidance, based on the law and
jurisprudence, in processing OLT claims. The rules and guidelines issued
through DAR Administrative Order No. 6, Series of 2015 were completely
different from any of those on the matter issued in the past. In order to ensure
smooth implementation, this Agency decided to test it first in particular
provinces last year before having it implemented all over the country at the
same time.
iii. Delays in the completion of CARP transactions at the LRA/ROD level
It takes a considerable amount of time for CARP transactions to be completed at
the RoD/LRA level even with the 2012 computerization of land records and even
if the DAR provided more than fifty encoders and verifiers to LRA to ensure that
there is a dedicated manpower to process CARP transactions.

End of Term Report by Secretary Virgilio de los Reyes Page | 23


There are several cases of unauthorized transfers of titles even when Notices of
Coverage had been issued, and cases of lost or missing RoD copies of titles and
such cases are discovered only at the tail end of the LAD process when DAR
requests for the cancellation of the landowners titles and the issuance of RP
Title. It is not only the delay in the issuance of RP title or the registration of
EP/CLOA that affects DARs output. The delay in the issuance of requested
certified copies of titles also delays the submission of claim folders to Land Bank
or the submission of survey plans to DENR for approval because such copies of
titles are required by these agencies. Thus, the entire LAD process is affected.

2. PROBLEMS ENCOUNTERED/REASONS FOR THE LEVEL OF ACCOMPLISHMENT FROM JULY 2010


2015
a. LAD Balance in July 1, 2010 Consisted of Harder-to-Distribute Lands
An analysis of the composition of the accomplished lands from 1972 to 2010 would
show that only 20% were private agricultural lands acquired under involuntary
scheme (PD 27 under Marcos 13%, and compulsory acquisition 7%). The
majority were either private agricultural lands voluntarily offered or government-
owned lands already turned over to the DAR for distribution.
With the easier lands already delivered, the LAD balance in 2010 was composed of
5% non-private agricultural lands and 95% were private agricultural lands (PAL), of
which 84% of the PALs are to be compensated by Land Bank. In practically all cases
involving compensable landholdings, completion from the start of the documentation
to the registration of EP or CLOA exceeds one year.
This change has also presented a big challenge to the provinces that were used to
delivering mainly non-compensable agricultural lands because they happened to
have the concentration of these type of lands. Now, their personnel had to cover
compensable private agricultural lands, which for many of them, was their first time
to handle such land type.
Through the rationalization plan, we have increased the number of personnel in
provinces with high LAD balances; however, those placed or appointed have yet to
gain the proficiency to process the more complicated compensable private
agricultural lands.
Bottom line, the complexity of the LAD process for compensable private agricultural
lands compounded by the complicated legal and technical issues bedeviling each
landholding cannot be resolved simply through the provision of more financial and
human resources.
b. LAD Process Is Not Solely the Work of DAR But Involves the Participation of
Three Other Major Government Agencies That Are Not under DARs Jurisdiction.
Accomplishment in Land Acquisition and Distribution is not solely, the work of the
Department of Agrarian Reform. There are other government agencies involved,
namely, the Land Bank of the Philippines, the Department of the Environment and
Natural Resources Land Management Services, and the Land Registration Authority
which perform activities critical to the delivery of the final output. Thus, it is not only
the capacity of the DAR but also of these agencies that should be looked into. Delay in
the performance of the activities by these agencies, affect the delivery of the

End of Term Report by Secretary Virgilio de los Reyes Page | 24


intermediate outputs leading to the registration of the EPs and CLOAs. These are
beyond the control of the DAR.
The LAD-related functions of the three agencies are presented in the matrix below.

AGENCY LAD-RELATED FUNCTIONS


LAND BANK OF THE (i) Pre-Processing Review of Claim Folders, together with DAR,
PHILIPPINES before the conduct of the Joint Field Investigation of the
landholding
(ii) Conduct of Joint DAR-LBP Field Investigation of
Landholdings; Preparation of Field Investigation Report
(iii) Processing of Claim Folders (Land Valuation)
(iv) Issuance of Memorandum of Valuation
(v) Release of Certificate of Deposit, which is a proof that the
cash portion of Landowners Compensation has already
been deposited to the LOs account
DEPARTMENT OF (i) Conduct of Joint DAR-DENR Verification of Untitled
ENVIRONMENT AND Privately-Claimed Agricultural Lands
NATURAL RESOURCES LAND (ii) Issuance of Certification as to Land Classification of
MANAGEMENT SERVICE landholdings being covered (whether Alienable and
Disposable or within Forest Zone or Timberland)
(iii) Inspection, Verification, and Approval of Survey Returns
LAND REGISTRATION (i) Annotation of Notice of Coverage at the back of the ROD
AUTHORITY/ REGISTER OF copy of the landowners title
DEEDS (ii) Issuance of Certified Copies of Titles (needed for CF
documentation, and by the LBP and DENR as part of the
documents required for the submission of claim folder or
survey returns
(iii) Issuance of LRA Certification for untitled lands, whether
there is a Decree issued
(iv) Cancellation of Landowners title and issuance of Title in the
name of the Republic of the Philippines
(v) Cancellation of the RP title and registration of EP or CLOA in
the name of the agrarian reform beneficiaries
(vi) Release of Owners Duplicate copy of EP or CLOA to LBP for
compensable lands, and to DAR for non-PAL

3. ACCOMPLISHMENT IN OTHER LAND TENURE SERVICES UNDER THE AQUINO ADMINISTRATION


a. Accomplishment in Collective CLOA Subdivision and Redocumentation from
2010-2015
From July 1, 2010 to December 2015, 186,717 hectares of collective CLOAs were
subdivided to individual ARBs. Accomplishment in the redocumentation of collective
CLOA was 248,726 hectares for the period.
An additional 6,422 hectares of collective CLOAs were subdivided from January
April 2016; thus, for the period from July 2010-April 2016, 193,139 hectares of
collective CLOA were subdivided.
Last May 2016, the DAR issued AO 3 series of 2016 which seeks to streamline the
process of the subdivision of collective CLOAs and facilitate the resolution of the

End of Term Report by Secretary Virgilio de los Reyes Page | 25


issues related to collective CLOA parcelization, and thus, stabilize ownership and
tenureship of beneficiaries in collective CLOAs,
b. Completion of Documentation for Landowner Compensation of Distributed but
Unpaid OLT and GFI Lands
From 2010-2015, the DAR completed the documentation for payment of LO
compensation of 26,941 hectares of unpaid OLT and GFI lands.
c. Leasehold Operations
From 2010 2015, leasehold contracts were registered for 91,680 hectares. Region 5
(13,243 hectares), Region 8 (16,695 hectares), and Region 12 (14,351 hectares)
recorded the highest coverage of registered leasehold contract for the period.
The land acquisition and distribution process cannot be completed without the
participation of the LRA as shown in the matrix above. The DAR, however,
experiences problems in securing certified copies of titles of the landowners, which
are necessary in the documentation of the property; requesting annotation of the
Notice of Coverage at the back of the RODs copy of the landowners title in order to
prevent unauthorized transactions; requesting for the cancellation of the title and
generation of title in the name of the Republic of the Philippines; registering EPs and
CLOAs; and in securing the release of registered EPs and CLOAs. These delays
happen despite the fact that the LRA has computerized its land titling system.

4. ISSUES WITH OTHER AGENCIES


a. Land Registration Authority
The LRA entered into a Build, Own-Operate (BOO) contract for its Land Titling
Computerization Project (LTCP) with the Land Registration Systems (LARES), which
is a joint venture with IL & FS Technologies, Ltd., an Indian conglomerate. The
contract involves the comprehensive modernization of the operations of the LRA and
the computerization of its major business processes. The System Integrated IT
solution to be developed would interconnect LRA's Registries of Deeds (RDs)
nationwide, enable on-line transaction processing, and integrate its critical business
processes. The build portion with partial operations was targeted for completion in
three years, and full operations would be for 10 years, renewable every ten years
until a maximum of 50 years. (www.laresinc.com).
Project objectives were defined to ensure:
Secure Land Titles and Documents
Detect Fake Titles & Prevent Issuance of Duplicate, Fraudulent Titles
Standardize and Streamline Registration Process
Provide Anytime, Anywhere Query on Land Records
On July 2, 2009, the LRA published the Implementing Guidelines on the Electronic
Registration of Titles and Deeds. The implementing guidelines intended to inform the
public of changes from the manual system and provide the framework for the
processing of transactions and rendering of services by the Central Office and the
Registries of Deeds using Philaris in accordance with laws.

End of Term Report by Secretary Virgilio de los Reyes Page | 26


On July 18 2011, LRA issued Memorandum to all its RDs to immediately stop manual
processing once an ROD is brought into live Philaris Operation. Then in September of
that year, LRA again issued a Memorandum clarifying that all CARP transactions shall
continue to be processed manually and should not be charged IT fees, except when
the privately owned land that is brought under CARP coverage, has already been
converted under Philaris system, the transfer of the title from the landowner to the
Republic of the Philippines and then to CLOA can no longer be processed manually.
The transaction will already be under Philaris and corresponding IT fees shall be
charged to the transactor, whether government entities or private individuals or
institutions.
On November 13, 2013, the LRA issued Memorandum Circular 65-2013 to all officers
and personnel of the Central Office and the computerized RODs on the cessation of
Central Office verification process. According to LRA, among the objectives of
computerization is to prevent the issuance of titles with technical defects such as
open parcels, wrong area, wrong location, overlapping parcels, etc. As such it
instituted a computer system based Central Office Plotting and Verification, which
relies heavily on documents issued and/or approved by other government agencies
(titles and survey plans), the acquisition of which takes time thus affecting LRAs
turn-around time. Considering that the titles and plans were issued and approved by
other government agencies, concerned, then there is presumption of regularity in the
preparation and approval of said documents. Hence, the LRA Administrator directed
the cessation of Central Office Processing and Verification. However, this does not
apply to those titles that were issued and survey plans approved by LRA. In which
case, processing and verification are still required. The Memorandum also set a
minimum quota for all systems users of a minimum of 50 transactions to be sent back
to the RDs daily.
On 20 February 2014, the LRA administrator issued a Memorandum to all registry
personnel to issue pro-forma certification for lost or missing titles or are Not In
Volume or cannot be located in the files of the Registry even after diligent search.
Such certification should be issued upon the lapse of 15 days from the receipt of the
request for certified copies of titles. This was issued due to the complaints from DAR
that requests for certified copies of titles that will be used as reference in issuing the
Notice of Coverage were not being acted upon promptly because the titles
In response to the complaints of LRA that they lacked dedicated manpower to do
CARP activities, DAR Field Operations Office provided them with around 50
additional personnel in the Central Office to speed up encoding, plotting and
verification, and an undetermined number of additional staff provided by the
PARPOs to the provincial Registries of Deeds. DAR also provided two high speed
scanners to the Central Office, and again, the field offices also provided the RDs with
some of the equipment requested.
Despite these assistance, the problem persists. There is a delay in the transactions,
which was expected to be speeded up with the agencies computerization of the land
titling process.
Aside from the delays, there are still unauthorized transfers of agricultural lands
even without the requisite DAR clearance. In many instances, these become known
to DAR only when the LAD process has reached the advanced stage when DAR
requests for the cancellation of the landowners title and to issue RP Title, which then

End of Term Report by Secretary Virgilio de los Reyes Page | 27


becomes the basis for DAR to generate EP or CLOA in the name of the qualified
agrarian reform beneficiaries. As a result, DAR has to re-do the process.
Lost or missing ROD copies of titles. Several ROD offices were razed to the ground by
fires or damaged by typhoons. As a result many of the titles were damaged or totally
destroyed. Others are missing from the ROD files. This also puts a stop to the LAD
process, because DAR has to file petition for reconstitution of title. There is a further
problem when the court does not want to recognize the personality of the DAR to file
and dismisses the petition because it believes, only the landowner can file for the
reconstitution of title. If DAR succeeds in filing the petition, then it has to wait until
the title is reconstituted before the registration of the EP or CLOA can be done.
5. NOC ISSUANCE
After the results of the nationwide claim folder review were processed, DAR accelerated
the issuance of Notices of Coverage for landholdings subject to compulsory acquisition.
Despite the challenges, the DAR, in 2012, was able to issue 25,841 Notices of Coverage
(covering 239,337 hectares) for landholdings of landowners with aggregate landholdings
above ten (10) hectares. For 2013, another 18,460 NOCs were issued covering 210,655
hectares for these lands whose sizes are 10 hectares and above. In April 2013, the DAR
started issuing NOCs to small landholdings below 10 hectares. Some 12,098 NOCs
covering 70,538 hectares for these small landholdings were issued in 2013. Thus, for
2013, some 30,558 NOCs were issued covering 281,192 hectares. From January to June
30, 2014, the DAR was able to issue and serve NOCs for around 28,091 landholdings with
a total area of about 233,148 hectares9.
The DAR has also already published in its website all landholdings for which it has
already issued Notices of Coverage.
There are still 6,626 landholdings with area of 67,827 hectares for which NOCs have
not been issued. This would necessitate a law to extend the power of the DAR to issue
NOCs.
6. REMEDIAL MEASURES UNDERTAKEN TO FACILITATE LAND ACQUISITION AND DISTRIBUTION
When the present DAR leadership took over on July 2010, it took stock of the tasks it has
to complete. Systems and operating procedures were evaluated. The evaluation revealed
that the systems, operating procedures and, sometimes, the compentencies of personnel
were more suited to acquiring and distributing government-owned lands and voluntary
land transfers rather than the compulsory acquisition of private lands.
It should be noted that additional provisions in the RA 9700 or CARPER stretched the
acquisition process. The process of farmer beneficiary (FB) identification alone takes at
least five (5) to six (6) months to complete as it requires posting, attestation of
landowner, revalidation of list of FB materlist, among others.

9 NOC accomplishment from 2012 to June 30, 2014 should not be added up. During that period, some NOCs were
re-issued due to defects in previously issued NOCs or transfers of ownership of subject landholding.

End of Term Report by Secretary Virgilio de los Reyes Page | 28


a. New Rules to Speed up the LAD Process and Address Problematic Landholdings
i. Revised Rules and Procedures Governing the Acquisition and Distribution of
Private Agricultural Lands (AO 7 Series of 2011)
To speed up the process, new rules for land acquisition and distribution was
drafted and issued on October 2011. AO 7 Series of 2011 simplified the LAD
process. AO 7 also strengthened the due process requirements in land
acquisition and distribution. In the past, the steps in the LAD process were
followed sequentially (i.e., finish one step before proceeding with the next). The
process was revised in order that some processes can be done simultaneously.
ii. AO 8 Series of 2011
This administrative order provides remedial measures for CARP-covered lands
subjected to unauthorized transfers or conveyances, commonly referred to as
chop-chop titles.
iii. AO 9 Series of 2011
Issued last October 2011, this provides rules for the survey and field
investigation of landholdings where DAR and LBP personnel were denied entry.
b. Inventory and Review of All Claim folders
Part of the problem encountered by the present Management is that, although the
database was cleansed, the DAR Management only knew the whereabouts of the
claim folders but not the actual status of the land acquisition
From February to June 2012, the field offices of DAR reviewed and evaluated ALL
claim folders in order to determine exactly the nature of the lands still to be acquired,
their status, and problems encountered so that holistic solutions may be put in place.
In all, 47,858 claim folders covering 471,415 hectares of CARP-covered lands were
reviewed and evaluated. This had never been done before in such a scale.
The mass inventory and review of claim folders was done to determine actual
magnitude and status of the LAD balance, identify the issues and problems that need
to be resolved in order that timely interventions can be provided.
c. Targeting Based on Specific Landholdings
Previously, target setting was based principally on magnitude of remaining
landholdings for coverage. Numerical targets were arbitrarily assigned to provincial
agrarian reform officers and it is up to them to look for landholdings that can be
documented and processed. The massive claim folder review revealed that many
landholdings had improperly served notices of coverage, land titles which were
already cancelled and needed trace back titles, lands under VOS pending for more
than ten years, missing documents, and other problems that need to be addressed.
The massive claim folder review resulted in specific targeting of landholdings for
coverage.
With landholding-based targeting, the progress of acquisition can be monitored more
accurately against a pre-determined time standard and cost parameter. Problems can
be identified immediately and remedial measures can be put in place faster.
Landholding-based targeting also rationalizes budgeting and fund utilization.

End of Term Report by Secretary Virgilio de los Reyes Page | 29


d. Other Measures
i. In the two provinces with the highest land acquisition and distribution balances,
Negros Occidental and Camarines Sur, the provincial office was split into two
operational units.
ii. A Joint Memorandum Circular of the DAR and LRA signed December 2011
required the annotation of the Notice of Coverage on titles of CARP-covered lands
to prevent illegal transfers meant to circumvent CARP coverage.
iii. Some steps in the distribution process were centralized. Before, each individual
Municipal Agrarian Reform Officer (MARO) procures the certified true copies of
titles with the respective Registers of Deeds, serves the Notice of Coverage (NOC)
to landowners (even if the landowner lives in another province or in Metro
Manila), and requests survey services. Now, the DAR Central Office makes bulk
requests for certified true copies of titles with the central office of the Land
Registration Authority. The DAR Provincial Office now determines survey
schedules and coordinates field investigations with the Land Bank.
iv. The Land Bank and the DAR have agreed on certain measures that reduce total
time for land acquisition and distribution. The number of reviewers/signatories
to valuation was lessened. Augmentation/ redeployment of regional/provincial
Land Bank staff are done as needed by the volume of CARP transactions.
v. The time period within which to file protests or petitions have been prescribed
under the new guidelines. Beyond this period, protests and petitions will no
longer be entertained.

III. Agrarian Legal Service


Agrarian Legal Service (ALS)10 involves the provision of agrarian legal assistance to ARBs,
resolution of agrarian law implementation (ALI) cases and adjudication agrarian disputes.

A. PARTICULAR CASES THAT REACHED THE OFFICE OF THE SECRETARY


1. DOJ 44
DOJ 44 is one of the most used grounds for excluding an agricultural landholding from
CARP coverage. It is not an express provision found in R.A. No. 6657 but rather founded
on a spate of Supreme Court decisions that used a 1990 Department of Justice Opinion, as
the name suggests, as basis.
Section 4 of R.A. No. 6657 states that the law covers all public and private agricultural
land, and the term agricultural land was defined by Section 3 (c) of the same law as a
land devoted to agricultural activity as defined in this Act and not classified as mineral,
forest, residential, commercial or industrial land.
On 16 March 1990, the DOJ issued an Opinion addressed to the DAR stating that the
authority of DAR to approve conversions of land use started only on 15 June 1988. The
issue was whether or not the DAR had the authority to unilaterally convert land use prior
to the said date, which the DOJ answered in the negative.

10 Until recently, ALS was known as Agrarian Justice Delivery (ALS).

End of Term Report by Secretary Virgilio de los Reyes Page | 30


Three years later, the Supreme Court en banc ruled in the doctrinal case of Natalia Realty,
Inc. vs. DAR11 that lands converted to non-agricultural use prior to the effectivity of the
CARP law (15 June 1988) are outside the ambit of that law. In deciding the said case, the
Court not only used the definition of agricultural lands as found in Section 3 (c) of R.A. No.
6657, but also the deliberations of the 1986 Constitutional Commission which confirmed
that Agricultural lands are only those lands which are arable and suitable agricultural
lands and do not include commercial, industrial and residential lands.
In 2004, in the case of Justina Advincula-Velasquez vs. Court of Appeals12, the Supreme
Court affirmed that lands already converted prior to 15 June 1988 need not go through
the land use conversion process of DAR.
By virtue of the Natalia Realty doctrine, the DAR has excluded from CARP coverage those
landholdings proven to have been converted/reclassified prior to 15 June 1988.
During the term of this Administration, as per data of 2 June 2016, the Office of the
Secretary decided 80 petitions for exclusion (involving 3,602 hectares of land) on the
basis of DOJ 44. Of these, 59 petitions (73.75%) covering 1,781 (49.47%) hectares were
approved; 18 petitions (22.5%) covering 963 (26.74%) hectares were denied, while 3
petitions (3.75%) covering 857 (23.79%) were partly granted (501.0676 hectares) and
partly denied (355.8783 hectares).
During the same period, the Office of the Secretary was also able to decide 4 cases
(involving 418 hectares of land) seeking for the revocation of approved DOJ 44 Orders.
Of these, 3 approved orders (298 hectares) were revoked, while 1 (28.81 hectares) were
denied.
2. LAND USE CONVERSION
Lands that were reclassified after 15 June 1988, however, is a different story. The
Supreme Court ruled that agricultural lands reclassified after 15 June 1988 may not be
used for non-agricultural use unless a final land use conversion clearance has been
obtained. As late as 18 June 2010, the Supreme Court ruled, in the case of Chamber of
Real Estate and Builders Association, Inc. vs. The Secretary of Agrarian Reform that
[r]eclassification alone will not suffice to use the agricultural lands for other purposes.
Conversion is needed to change the current use of reclassified agricultural lands. x x x It
is of no moment whether the reclassification of agricultural lands to residential,
commercial, industrial or other non-agricultural uses was done by the LGUs or by way of
Presidential Proclamations because either way they must still undergo conversion
process.
a. Main Elements in Approving Land Use Conversion
Section 65 of R.A. No. 6657 governs land use conversion. The main elements
provided by the law in approving land use conversion are the following:
The land either:
ceased to be economically feasible and sound for agricultural purposes, or
the locality has become urbanized and the land will have a greater economic
value for residential, commercial or industrial purposes

11 G.R. No. 103302, 12 August 1993


12 G.R. No. 111387, 8 June 2004

End of Term Report by Secretary Virgilio de los Reyes Page | 31


Irrigated and irrigable lands shall not be subject to land use conversion
Disturbance compensation are to be paid to tenants (and others working on the
land)13 who will be displaced due to the land use conversion
These elements were embodied in a Department Administrative Order, the current
one of which was issued in 2002.
Whether a landholding is irrigated/irrigable is confirmed by certifications from the
NIA and through ocular inspections conducted by the Land Use Cases Division of the
Bureau of Agrarian Legal Assistance (formerly the CLUPPI Secretariat of the Office of
the Secretary). In 2015, the NIA issued its Memorandum Circular No. 23, Series of
2015 clarifying what an irrigable land is.
Standards, however, in deciding whether or not the first abovementioned element
exists are not found in any rule or law. While certifications from the Department of
Agriculture (DA) as to the suitability of the land for agricultural use has been a major
factor in deciding this element, Secretaries have pretty much relied on their own
wisdom in deciding this matter.
Under the current Administration, in order to standardize the process and not be
accused of arbitrariness, the DAR has relied heavily on the certification of the DA and
the decision of the local government units through land use / reclassification
ordinances in determining whether or not the first element exists.
b. Land Use Conversion Cases from July 2010 to May 25, 2016
During the term of this Administration, per data as of 25 May 2016, the Office of the
Secretary was able to decide 142 applications for land use conversion involving
3,892 hectares. Of these, 41 (1,396.73685 hectares) were denied by the Office of the
Secretary, while the remaining 101 (2,496 hectares) were approved. Out of the 101
approved applications, 9 (191 hectares) are for socialized housing, 7 (117 hectares)
are for PNP/AFP housing, while 11 (589 hectares) are for power plants during the
power crisis.
Once a land use conversion clearance becomes final, the developer has five years to
develop the land. That is a statutory rule. Under the law, the only exception to is if
the developer has proven that the delay is not due to the fault of the landowner.
On the other hand, of the 57 requests for applications (involving 3,632.5427
hectares), 22 (1,859.4179 hectares) were denied while 35 (1,773.1248) were
approved.
c. Priority Projects for Land Use Conversion
Urgent projects of the government were given priority by the DAR in the process of
land use conversion.
When the President announced that housing for PNP and AFP personnel is an urgent
concern of the government, the Department issued a Department Administrative
Order in 2011 to fast-track the process. When Yolanda hit the country, another rule
was issued expanding the jurisdiction of the Regional Offices and providing strict
timelines in processing applications for purposes of housing projects for those hit or

13 Added by the 2002 rules of the DAR

End of Term Report by Secretary Virgilio de los Reyes Page | 32


to be relocated due to the super typhoon. In both cases, the trigger of the DAR is a
certification from the National Housing Authority this means that only those
certified as PNP/AFP housing or necessary for Yolanda housing projects will be
granted access to these special rules.
Furthermore, when the Department of Energy (DOE) announced an energy crisis in
late 2014 to early 2015, the DAR granted the request of the DOE for prioritization of
DOE-certified priority energy (power plant) projects. Similarly, the trigger to allow
prioritization is the certification from the DOE.
Finally, the DAR also issued this year a Department Order exempting from applicable
fees and certain bonds those projects certified in writing as urgent by national
agencies.
It is vital to note, however, that in all of the above cases, the DAR made it clear in its
issuances that the decision on whether or not to approve the application for land use
conversion must still be based on the provisions of the law. Priority projects,
therefore, are not assured that it will be granted land use conversion clearance. In
fact, at least one urgent energy project has been denied by the Office of the Secretary
when the documents submitted by the applicants showed that the classification of
that portion of the land is agricultural.
Per data as of 25 May 2016, out of the 101 approved applications, 9 (191 hectares)
are for socialized housing, 7 (117 hectares) are for PNP/AFP housing, while 11 (589
hectares) are for power plants during the power crisis.
3. CANCELLATION CASES
R.A. No. 9700 concentrated the jurisdiction to cancel Titles issued pursuant to agrarian
reform programs (referred henceforth as cancellation cases) to the Secretary. Whereas
before, the resolution of these cases was diffused to adjudicators in the provincial level,
all cancellation cases since 1 July 2009 had to fall in line, figuratively speaking, before the
Office of the Secretary. The impact of the CARPER amendment is highlighted by the
figures. Since 2010, a total of 12,366 cancellation cases were filed all of which the law
requires one person to decide.
a. Streamlining Procedures for Processing and Deciding Cancellation Cases
This Administration came in a year after R.A. No. 9700 became effective (30 June
2010). A little more than a year later (further enhanced in 2014), the rules on
cancellation cases were revised with two objectives in mind:
i. Efficiency:
While CARPER restricted the jurisdiction in resolving cancellation cases to the
Secretary alone, the same law did not prohibit the other units of DAR in aiding
the Office of the Secretary by conducting the necessary staff work. The venue in
the filing of cancellation cases, the issuance of Notices to Comment (akin to
summons), the reception of answers, responses, pleadings, and evidence, and the
investigation of issues raised were delegated to the field offices.
The old two-step rule was also dismantled. In the past, the rules of the DAR
allotted the jurisdiction to cancel Titles, on the one hand, to the provincial
adjudicators, while that to resolve agrarian law implementation (ALI) cases
(such as issues on retention rights, exemption/exclusion of landholding from

End of Term Report by Secretary Virgilio de los Reyes Page | 33


CARP coverage, or the qualification of beneficiaries), on the other hand, to the
Regional Directors and the Secretary. Since the grounds for cancelling Titles for
most, if not all, cases are ALI issues, the pre-RA-9700 cancellation procedure
requires a final and executory ALI decision first before a provincial adjudicator
can take cognizance of a cancellation case. Hence the two-step rule resolve the
ALI case first, then resolve the cancellation case.
When R.A. 9700 removed jurisdiction from the adjudicators and concentrated it
to the Secretary, the first cancellation rules of procedure issued by the previous
administration (2009) retained the two-step rule by requiring a final and
executory ALI decision first before the Secretary will take cognizance of the case
this despite the fact that the Secretary has jurisdiction over ALI cases.
In 2011, the rules were changed so that cancellation cases may be filed even
without a previous final and executory ALI case decision.
ii. Strengthen due process:
The Administration took pains in ensuring that under the new rules the Title
holders are notified that there is a case pending against him/her. The service of
Notices to Comment (akin to Summons) were aligned with the Rules of Court.
Where previously, the rules allow the issuance of Notices to Comment through
registered mail, this mode was removed and what was set were personal
delivery, substituted service, and publication.
b. Cancellation Cases from July 2010 to April 30, 2016
From 1 July 2010 until 30 April 2016, the Secretary decided 405 cancellation cases
(on top of other cases under his jurisdiction, such as appealed ALI cases,
exemption/exclusion from CARP coverage cases, and land use conversion cases)
involving 1,532 Titles.
Looking at the data on a per case basis, only 116 of these cases (28.64%) were
decided in favor of cancellation, the remaining 289 (71.36%) of which were either
denied or withdrawn. Out of the 116 cases decided in favor of cancellation, only 12
(10.34%) were cancelled in favor of returning the land to the landowners, while 97
(83.62%) were cancelled in favor of another beneficiaries14 belying the bigay-
bawi claim of some activists, at least with respect to this Administration.
It is also well to note that out of the 116 cases decided in favor of cancellation of the
Title, only 21 (18.10%) were decided based on an original petition, while the
remaining 95 (81.90%) were issued pursuant to a previous final and executory order.
It should be said that if we look at the data on a per Title basis, out of the 1,532 Titles
that were decided, 1,025 (66.91%) were ordered cancelled while only 507 (33.09%)
were maintained. Out of these 1,025, 827 (80.68%) Titles were cancelled in favor of
the former landowners, while only 111 (10.83%) were cancelled in favor of another
ARB15. However, this should be viewed in light of the fact that one case Asturias
Industries, Inc. vs. Heirs of Aninao, et al. which was based on, and merely an
execution of, a final and executory Supreme Court decision, was decided in favor of

14 1 (0.86%) reverted back to the State, 6 (5.17%) were cancelled in favor of the same beneficiaries (changes only
in the technical description).
15 80 (7.80%) reverted back to the State, 7 (0.68%) were cancelled in favor of the same beneficiaries.

End of Term Report by Secretary Virgilio de los Reyes Page | 34


cancelling 814 Titles in favor of the former landowner. If we take this away, only 211
Titles out of 718 (29.39%) were cancelled, and out of these 211, only 13 (6.16%)
were decided in favor of returning the land to the former landowners.
c. Transfers in the Guise of Cancellation Cases
There are cancellation cases filed that are based on waivers of an EP/CLOA holder in
favor of another person. In some cases, these waivers have been recognized in final
and executory orders of Regional Directors. The Office of the Secretary, during this
Administration, denied these petitions for cancellation on the ground that these
waivers are akin to voluntary transfers which are not covered by a cancellation case.
Transfers from one beneficiary to another person is covered by A.O. No. 8, Series of
199516 and is subject to requirements by other government agencies (such as
transfer taxes).
It should be noted, however, that the Office of the Secretary recognized waivers made
by beneficiaries to the government which in turn identified new qualified
beneficiaries to take over the land. As of 30 April 2016, a total of 56 cases directing
the cancellation of 64 EPs/CLOAs are based on this.
The Office of the Secretary, during this Administration, settlements of estates of
deceased beneficiaries in the guise of cancellation cases. The law has delegated the
jurisdiction to settle estates and recognize heirs to regular courts, not the DAR.

B. PROCEEDING WITH THE CARP


The DAR in 2012 conducted a review of all claim folders (a claim folder contains all the
documents required or obtained in processing the land acquisition and distribution process
on a particular landholding) pending nationwide. After seeing the results, the DAR declared
early on that not all the lands will be fully acquired and distributed by 30 June 2014.
It was at that point too that the DAR announced its legal position that the only thing that will
expire on 30 June 2014 is the authority of the Department to initiate the land acquisition and
distribution process on landholdings not yet covered by a case or a Notice of Coverage or
voluntarily offered to sell. To bolster this view, the DAR requested DOJs legal opinion on the
matter in 2013. DOJ Opinions Nos. 59 and 60, S. 2013 affirmed the DARs position. This was
further confirmed by Congress when it provided as a special provision in the FY2014 General
Appropriations Act that lands covered by a case or Notice of Coverage by 30 June 2014 may
still be acquired and distributed thereafter.
The CARP Completion Bill was filed by members of the House Committee on Agrarian
Reform, on the part of the House of Representatives, and Senator Honasan, on the part of the
Senate, in order to extend the authority of the DAR to issue all remaining Notices of Coverage.
While the Senate already passed its version, the House Bill is currently stalled due to
objections posed by other members of the lower chamber.
In the meantime, backed by the DOJ Opinion and the GAA, the DAR continued with the
processing of those landholdings covered by Notices of Coverage issued, voluntarily offered
on or prior to, or covered by a case as of, 30 June 2014.

16 A new AO issued in May 2016 repealed this Rule.

End of Term Report by Secretary Virgilio de los Reyes Page | 35


C. GOVERNMENT LANDS COVERED BY EO 407/448
While R.A. No. 6657 states that all agricultural lands, whether private or public, is covered by
CARP, the law did not provide for the process of covering publicly-owned lands. Section 16
of the law laid down the procedures of acquiring and distributing private lands.
There are generally two types of public lands: those that are owned by the State through the
Regalian Doctrine and those that are owned by particular government agencies.
The first type is distributed by the DAR pursuant to Presidential Proclamations. One major
type of this land is the so-called KKK (Kilusang Kabuhayan Kaunlaran).
With respect to the second type, in 1990, the President C. Aquino issued Executive Order No.
407 which was expanded in 1991 by Executive Order No. 448. Under the said Executive
Orders the President ordered all government agencies to jointly determine with the DAR
whether agricultural lands they own are not actually, directly, and exclusively used or
necessary for the purpose to which they are reserved.
On 26 June 2013, the DOJ issued an Opinion essentially saying that while the pertinent
government agencies and the DAR must jointly determine the above issue, at the end of the
day, the DAR has the ultimate authority to judge such question.
This Opinion is problematic. While the DAR may be competent and capable to make a
determination on whether or not a particular land is actually, directly, and exclusively used
for the purpose to which it is reserved for, the DAR may not be competent to say whether the
land is necessary for the purpose. In fact, only the government agency itself, or the President
himself, who has ultimate authority and control over the government agencies, can make
such a determination. The DAR cannot replace the wisdom of the President and the
government agencies in determining what is necessary for the good of their mandate.
It is therefore recommended that an inventory of all agricultural lands owned by government
agencies be made, and the President, together with all affected agencies, once and for all
make a determination which of these are still necessary for governments mandate and
which are those that can already be distributed to agrarian reform beneficiaries.

D. MAJOR POLICIES
1. ON THE PROCEDURES FOR ACQUIRING AND DISTRIBUTING PRIVATE AGRICULTURAL LANDS
a. General Rules
As previously mentioned, this Administration entered at a time when the
bureaucracy was more used to distributing government-owned lands and processing
voluntary land transfers of agricultural lands.
Although rules on the acquisition and distribution of private agricultural lands were
issued not even a year prior to the start of the administration (Administrative Order
No. 2, Series of 2009), this Administration saw it fit to enhance it further.
On 30 September 2011, Administrative Order No. 11, Series of 2011 was issued with
the following enhancements:
i. Efficiency:
It was made clear in the new procedures the steps and processes involved in the
land acquisition and distribution process need not be sequential; some
processes can be conducted simultaneously with others. Therefore, unless a
particular step is a necessary prerequisite to conduct another step, then each

End of Term Report by Secretary Virgilio de los Reyes Page | 36


need not wait for the other to be completed. For example, the conduct of the
segregation survey need not wait for the completion of the identification of
farmer beneficiaries and vice-versa. The valuation of the just compensation can
be started without waiting for the completion of the identification of qualified
beneficiaries.
ii. Strengthening Due Process:
Due process for the landowner is also strengthened on two fronts:
Service of Notice of Coverage: The issuance and service of the Notice of
Coverage (NOC) initiates the compulsory acquisition proceeding. The NOC is
a document informing the landowner that his/her/its land is determined by
the DAR to be covered by CARP and giving him/her/it the opportunity to
question the said coverage and to exercise the rights due to the landowner
(retention rights and the nomination of preferred beneficiaries).
The previous rules allow the issuance of the NOC through registered mails.
Unclear registry return cards and Notices that were returned to sender
raises doubt as to whether some landowners were actually informed that
their lands were considered to be compulsorily acquired before it actually
was. Cases as to the coverability of the land were raised belatedly under the
allegation that the landowner was not informed of the coverage. This
resulted to unstable Titles (CLOAs) of the beneficiaries, diminishing the
chances of investments to pour in.
The rules were changed making personal service the primary mode of
service of Notice of Coverage, with substituted service and publication as
alternate modes. Service via registered mail was removed.
Non-cancellation of Title of the landowner pending resolution of cases
dubbed as The Killer Provision: The Notice of Land Valuation and
Distribution (NLVA) is a document informing the landowner of the amount
of his/her/its just compensation and the fact that the landholding is now
being acquired by the State. The NLVA serves as the impetus for the
payment of the just compensation and the cancellation of the landowners
Title.
Administrative Order No. 7, Series of 2011 directed that no NLVA may be
issued until questions pertaining to the coverage of the landholding has been
decided with finality, or upon the resolution on the issue by the Office of the
President, whichever comes first. This means that the Title of the landowner
will remain pending the resolution of the issue. The DAR has drawn flak due
to this rule dubbed by CARPER advocates as killer provision.
This so-called killer provision however only embodied the ruling of the
Supreme Court in the case of DAR vs Estate of Pureza Herrera17 which
stated that the acquisition and distribution process should be suspended
until pending petitions are resolved.

17 G.R. No. 149837, 8 July 2005

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Previous to the institution of this provision, there were some cases in which
CLOAs were issued and registered even if cases were still pending. As a
result, not only were the landowners right to due process violated (his
ownership of the land was stripped away even if his objection thereto have
yet to be resolved) but (a) it placed serious doubts as to the validity of the
Title issued to the beneficiaries and (b) public funds have been released in
the name of a person who may not even be eligible to receive just
compensation.
The impact of the doubts as to the validity of the Title (CLOAs) of the
beneficiaries is highlighted by the several Orders issued by the Office of the
Secretary cancelling CLOAs on the ground of final and executory orders by
the Supreme Court and other tribunals asserting that the land is not covered
by the CARP.
As mentioned above, under the rules crafted, it is only after the question has
been decided with finality, or upon the resolution on the issue by the Office
of the President, whichever comes first, will the DAR issue the NLVA, cancel
the Title of the landowner, and order the deposit of the just compensation.
b. Organization of the Rules:
The organization and over-all design of the Administrative Order were made easy to
understand. The rules were embodied in clear sections, with logical numbering, and
organized chapters.
2. COVERING LANDS UNLAWFULLY TRANSFERRED
As a general rule, after 15 June 1988 agricultural lands may not be sold or transferred if it
will result to the transferee obtaining more than five hectares of the land. Furthermore,
these may not be transferred without prior clearance from the DAR. Unfortunately,
agricultural lands were still transferred against the abovementioned rules.
In 2011, the DAR issued a special rule that in these cases, the NOC shall still be issued in
the name of the landowner as of 15 June 1988 but copies thereof shall also be furnished
to the current owner. The just compensation shall be deposited in the name of both the
landowner as of 15 June 1988 and to the current landowner.
In January 2012, the DAR and the Land Registration Authority executed a joint issuance
directing the Registry of Deeds to annotate to the Titles of the landowners the fact of
issuance of NOCs, if issued. This will give due notice to any prospective buyers that the
land is covered by and being processed under CARP.
3. COVERING LANDS OF LANDOWNERS WHO REFUSES ENTRY
In processing the acquisition of landowners, land surveys must be conducted to
segregate those areas not covered by CARP (i.e., irrigation canals, etc.) and to subdivide
the land to individual lots for the several ARBs. A field investigation must also be
conducted in order to make the correct valuation of the just compensation.
Unsurprisingly in cases of compulsory acquisition, some landowners barred the DAR
from entering their landholdings.
In 2011, the DAR issued a special rule that in these cases, a perimeter survey will be
conducted and the entire land will be initially valued as if it is an idle land. Upon
payment of the initial value, and subject to due process, the Title of the land will be

End of Term Report by Secretary Virgilio de los Reyes Page | 38


transferred in the name of the Republic of the Philippines. Once ownership is transferred
to the State, it can now enter the land and take possession thereof in order to conduct the
necessary surveys and field investigations. The just compensation may be adjusted as a
result thereof.
4. FASTER ISSUANCE OF NOTICES OF COVERAGE (NOC)
Under the general rules issued by the Department, the person that will be issued and
served with a Notice of Coverage is the landowner as of 15 June 1988 as indicated in the
registered Titles. As a matter of course, therefore, the DAR took pains in obtaining
certified true copies of the Titles of the landowner before issuing the NOCs.
The CARPER law allowed the DAR to initiate the acquisition and distribution proceeding
only until 30 June 2014. After the said date, only landholdings already initiated or is a
subject of a pending case may be acquired and distributed under CARP unless a new law
is promulgated.
Due to this, on February 2014, the Department issued a new rule that in case there is
difficulty in obtaining certified true copies of the Title as of 1988, the basis of who to send
the NOC to may be based on mere photocopies of the Title, tax declarations, and other
public documents. Under such rule, however, the NOC must also be published.
5. CHANGES TO THE RULES IN IDENTIFYING QUALIFIED FARMWORKERS
CARP expanded the coverage of the agrarian reform program from tenanted lands to
plantations. However, the same law deferred the coverage of commercial plantations for
a period of ten years. After the ten year period expired, as previously mentioned, the
DAR set out to acquire first government-owned lands and those that are voluntarily
offered for the program. When the present administration came in, CARP has already
been running for more than twenty years and there were still a lot of haciendas which
acquisition and distribution process has yet to be initiated.
From this historical context arose a conceptual issue in the identification of qualified
beneficiaries after twenty years, who are qualified to become beneficiaries of the land?
Do we limit it only to those presently working on the land, or are the former
farmworkers also qualified? The law is silent. It appears that the legislators didnt
expect this kind of problem.
Pursuant to its rule making power, the DAR resolved this quandary by issuing an
Administrative Order in 2014 allowing all those who have worked on the land from 15
June 1988 to the date of the FBID process to present evidence of their qualification.
6. ON OTHER LAND TENURE SERVICE ISSUES
a. Wrapping Up Operation Land Transfer
Operation Land Transfer entered into effect through the issuance of Presidential
Decree No. 27 in 21 October 1972. Under this statute, tenanted rice and corn lands
were to be acquired from the landowner and distributed to the agricultural lessees.
Lands covered by this program were mostly distributed during the 1980s to the early
1990s. Decades later, however, the documentation of many of these lands have
remained incomplete or defective. In order to resolve this, the DAR issued an
Administration Order in 2015.
The same Administrative Order made clear the formula and procedure in computing
the just compensation of landowners, taking into account the pertinent laws and

End of Term Report by Secretary Virgilio de los Reyes Page | 39


jurisprudence on the matter. In order not to allow the delay to cause undue harm to
the landowner, it was made, as a matter of policy, and in recognition of the pertinent
jurisprudence, that the valuation shall be based on the government support price of
rice and corn as of the date of taking of the land (i.e., registration of the EPs) rather
than that of 1972 (date of commencement of OLT). The same AO protected the
beneficiaries from the increase in the just compensation of the landowner caused by
the updating of the formula by pegging the amount to be amortized to the
government support price as of 1972. The difference between the amount of the just
compensation of the landowner and the amount to be amortized by the beneficiaries
was designed to be carried (subsidized) by the government.
b. Stabilizing Collective CLOA Issued
From the mid-90s to the early 2000s, to expedite the acquisition and distribution
process, the DAR opted to skip altogether the subdivision of the land (to provide
beneficiaries with distinct individual lots) and opted instead to issue single CLOAs in
the name of all pertinent beneficiaries covering entire landholdings these were
referred to as Mother CLOAs or Collective CLOAs. In some cases, especially in
government-owned lands which do not have predecessor Titles, the segregation of
non-A&D portions was also skipped resulting to some CLOAs encompassing non-A&D
areas (such as timberland or lakes).
As generations passed, the extent of ownership of each beneficiary has been muddled.
The extent of what each beneficiary owns is unknown. Since the groups of
beneficiaries within collective CLOAs, in most cases, were forced to be together by
virtue of their proximity of the land they are tilling (in case of government-owned
lands) or the fact that they belonged previously to the same employer, differences in
opinion as to how to move forward has become a problem.
In recognition of this, the DAR issued an Administrative Order to stabilize the
ownership and tenure of the beneficiaries in collective CLOAs. It aims to firm up the
list of beneficiaries (this is vital considering the number of generations that have
already passed since the collective CLOAs were issued), and afterwards allow once
and for all each beneficiary to decide whether they want their own individual Titles,
or to group together under a collective Title (should they choose the latter, it is of
their own volition, rather than being forced to do so for the expediency of the
process).
7. ON REFERRAL OF CASES
Section 50-A of R.A. No. 6657, as amended, requires courts and prosecutors to refer cases
to the DAR whenever there is an allegation from any of the parties that the case is
agrarian in nature. This will enable DAR to determine whether or not the issue of the
case, or a prejudicial question thereof, is within the jurisdiction of the DAR. The law
requires the DAR to make a determination within fifteen days.
In 2011, the DAR issued the Rules to implement the said provisions. At the same time,
the Office of Secretary recommended in writing to the DOJ and the Office of the Court
Administrator rules which they may opt to issue in order to implement the
abovementioned provision of the law. Unfortunately, to date, the letters of the Secretary
remains pending with the said offices.

End of Term Report by Secretary Virgilio de los Reyes Page | 40


8. ON AGRIBUSINESS VENTURE AGREEMENTS
Many issues have cropped up in connection with Agribusiness Venture Agreements
(AVAs) in the last decade. This required the Department to undertake studies and
consultations18 to look into these matters. Relatedly, many international principles19
related to AVAs were issued in the said period. Based on the results of the consultations
and studies, particularly that which was conducted in cooperation with the IFAD, the
guidance of new international principles, and in keeping with the policies provided by
our Constitution and Republic Act (R.A.) No. 6657, as amended, a new rules on AVA were
issued.
The following are the major parts of the AO:
The delineation of the general principles to which the rules are based on. These
are mainly culled from the Philippine Constitution and the Comprehensive
Agrarian Reform Law, as well as the VGGT and the RAI.
The procedures for investors and agrarian reform beneficiaries to negotiate and
enter into AVAs.
Dispute resolution mechanisms where mediation and conciliation processes are
given premium, making it mandatory before proceeding to arbitration or
institutional adjudication.
The intervention of the government with respect to the negotiation and execution
process is two-pronged:
On the one hand, the government will serve as an advocate of the beneficiaries by
strengthening their bargaining position through the provision of capacity
building, coaching or mentoring services on business development services,
market-oriented agricultural extension services and legal services, and the
provision of relevant data on feasibility studies, industry analyses, crop data, and
annual reports of potential partners and other pertinent information to aid the
ARB-Owners in decision-making. The DAR will also orient the beneficiaries of
other government and private sector services which are available to them.
On the other hand, the government will act as an observer of the proceedings in
order to ensure that the beneficiaries consent in the execution of the AVA is given
freely, without force or duress.
At the end of the day, pursuant to the provisions of the law, the PARC has the discretion
to approve or deny the AVA.

18 The Philippine Government, through the Department of Agrarian Reform, sought the technical and financial
assistance of the United Nations Food and Agricultural Organization (UN FAO) and the expertise of the World
Resources Institute (WRI) in conducting a Multi-Sectoral Study on Agribusiness Venture Arrangement (AVA)
Policy and Implementation under the Comprehensive Agrarian Reform Program (CARP) in order to install
more responsive policies and guidelines addressing the needs of agrarian reform beneficiaries, smallholder
farmers, and their farmer organizations in increasing their farm-based income, and the private investors with
regard to sustaining the profitability of their investments.
19 Such as the (a) the Principles for Responsible Agricultural Investment That Respects Rights, Livelihoods and

Resources (CFS-RAI); (b) the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries
and Forests in the Context of National Food Security (VGGT); and (c) the UNIDROIT, FAO and IFAD. 2015.
UNIDROIT/FAO/IFAD Legal Guide on Contract Farming. Rome

End of Term Report by Secretary Virgilio de los Reyes Page | 41


9. ON TRANSFERRING AGRICULTURAL LANDS
Any transfer of ownership of agricultural lands must pass through DAR first before being
registered. There are certain restrictions placed by R.A. No. 6657 in agricultural
ownership and on transfers that DAR must check before being implemented. These
restrictions are:
As a general rule, the aggregate agricultural landownership of any person must
not exceed five (5) hectares. The only exception to this that is expressly provided
by the law is the acquisition by banks upon foreclosure of lands mortgaged to
them.
With respect to awarded lands: during the holding period, awarded lands may
only be transferred through hereditary succession, or to the government or other
qualified beneficiaries. The holding period with respect to awarded lands is ten
years from registration plus full payment of the amortization of the awarded land
to the government (thus, even after the ten-year period, if the amortization is not
yet fully paid, then the holding period is not yet deemed terminated; vice-versa,
even if the amortization is already fully paid, if the ten year period is not yet over,
then the holding period is not yet deemed terminated).
In 2016, the DAR issued an Administrative Order simplifying the process and
documentary requirements in the issuance of Clearance to Transfer. Prior rules on
Transfer require documents pertaining to matters which are outside the mandate of DAR
such as payment of irrigation fees (NIA), taxes (LGU Treasurers office), and loans (LBP).
These were all removed in the new rules.

E. ADMINISTRATIVE AND OPERATIONAL SYSTEMS IMPLEMENTED


1. LCMS AND LCIS
The roll-out and full implementation in early 2012 of the web-based Legal Case
Monitoring System (LCMS), the first of its kind, scale, and complexion in government
service, provided a central storage of legal case records, and accordingly designed to be
an efficient means of capturing data (with its multi-use features including built-in word
processors, accessibility over the internet, and utilization of barcode technology to
ensure easy tracking and integrity of documents). The LCMS enabled DAR to undertake
the following:
The efficient monitoring of:
Various kinds of agrarian administrative cases pending with DARs
provincial, regional, and central offices;
Agrarian disputes and special cases lodged before the DARs Adjudicators
salas; and
Cases where DAR lawyers represent and defend clients before the courts
and quasi-judicial bodies.
The tracking of the movement of specific or high-profile cases and have real-time
detailed reports on the status of all cases anywhere in the country;
The generation of summaries that can be accessed anywhere by any authorized
personnel, and lawyers and legal officers on the other to likewise use the system

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itself with its pro-forma templates, Facebook-style features, Global Search tool;
and
The ability to automatically print Registered Return Cards (RRC) for documents
that need to be registered in the postal office along with mail labels for envelopes,
among many others.
The LCMS is therefore not just a comprehensive database, it is also a management and
planning tool, a personnel performance indicator, and a new (web-based) work sharing
or work coaching environment, all rolled into one.
In mid-2014, the public access module of the LCMS, called the Legal Case Inquiry System
(LCIS), was launched, enabling parties to a case, or their counsels or representatives (and
even the general public for that matter) to find out, through the internet, the latest status
of their cases pending in any office within the Department, without having to call or
travel to a DAR office to follow-up on the case.
The LCIS contains the following data, namely, Case Title, Case Number, Status, Case
Category, and Processing Office.
The LCIS may be accessed through the DAR's website.
2. DAR LIS
The DAR Legal Information System (DAR-LIS at www.lis.dar.gov.ph) or electronic legal
library was launched in 2011. DAR-LIS is the first of its kind in the executive branch of
the government.
It contains all agrarian reform laws, jurisprudence, administrative issuances, course
outlines, articles, templates, and related materials, and can be accessed through the
internet (also available on CD-ROM).
On account of the sheer volume of uploaded internal (agrarian reform-related)
documents (over 12,000 issuances), an internal search engine which is site-specific,
customized search templates for the website, full-text search capability, and the linking
of cited issuances are found in the body of the documents themselves.
3. PBD LAWYERING
Program Beneficiary Development (PBD) Lawyering Program in eighty-one (81)
provinces, otherwise known as the Enterprise Lawyering Program, was institutionalized.
PBD Lawyering is a unique training intervention aimed at developing the skills of
agrarian reform beneficiaries (ARBs), and their organizations, in accessing credit
facilities and in managing their farms as business enterprises. Such training intervention
is done through the assistance of DARs legal officers and support services personnel who
comprise the PBD Lawyering Teams in the provincial level. They serve as learning
coaches in various aspects, such as documentation, contract negotiation, governance
and technical assistance, financial literacy, awareness of the regulatory environment and
possible models of agricultural business enterprises, risk mitigation, creation of growth
opportunities, and capturing private investments, among others.

End of Term Report by Secretary Virgilio de los Reyes Page | 43


F. URGENT PENDING CASES IN THE SUPREME COURT/COURT OF APPEALS
AFFECTING DAR AND CARP
1. FL PROPERTIES AND MANAGEMENT CORPORATION AND LLL HOLDINGS INC. VS. DAR ET. AL. GR
SP NO. 139472 (FINALITY OF REVOCATION DECREE/ LOWER COURTS PERMANENTLY ENJOINING
DAR)
The Court of Appeals (CA) ruled that the DAR can no longer disturb an Exemption Order
on the ground that it has become final and executory. Thus it issued a Permanent
Injunction as DAR was proceeding with the inspection of the affected lands through the
conduct of an On-Site Investigation and Inspection in connection with a Petition for
Revocation filed by the farmers after the finality of the Exemption Order.
The CA ruled that while the current agrarian reform laws only allow the Supreme Court
(SC) to issue a TRO or PMI against the DAR, the CA (and other Courts), may issue a
permanent injunction. The OSG agrees with the CA Decision and refrained from
representing the DAR.
Since the CA denied the Motion for Reconsideration, DAR will elevate the matter before
the SC via a Petition for Certiorari under Rule 65.
2. DAR AND PABLO MENDOZA VS. ROMEO C. CARRIEDO, S.C. G.R. NO. 176549, (CLOAS AS MERE
CLTS/ DAR ADMINISTRATIVE ORDER NO. 5 SERIES OF 2006 AS NULL AND VOID FOR BEING
ULTRA VIRES)
The SC ruled that CLOAs do not have the same status as TCTs. The CLOAs are mere CLTs
which only evidence an inchoate right over the land.
It also nullified DAR Administrative Order No. 5, Series of 2006, for being Ultra Vires. The
AO treated the first five hectares of agricultural land sold by a landowner without DAR
clearance as the retention area of the said landowner. The SC ruled that the said
provision of the AO is tantamount to a forfeiture and is therefore penal in nature. A
criminal penalty is not in the laws.
DAR filed a Motion for Reconsideration which is pending at this time.

G. LEGAL DEFENSE FUND


The strict implementation of CARP has put DAR employees at the constant risk of being the
subject of both administrative and criminal complaints of a party who felt aggrieved by a
decision or order, particularly when the implementation thereof requires the physical
removal of obstructions, and confrontation of the parties to a case is unavoidable.
To free them of having to worry about sourcing funds for their legal defense in the event of
legal reprisals and ensure an unhampered discharge of their official functions, a Legal
Defense Fund is provided for the purpose under the 2016 Appropriations Act.
However, according to the Department of Budget and Management (DBM), the fund cannot
be released absent an approved IRR by its Department. It is highly recommended that the
next administration follow up and pursue the immediate issuance by the DBM of the IRR for
the use of the Legal Defense Fund. The welfare of our employees relies on this.

IV. SPECIAL POLICY AND RESEARCH STUDIES


DAR is undertaking policy and research studies to determine whether the various CARP
interventions and operating policies have responded to the needs of the agrarian reform

End of Term Report by Secretary Virgilio de los Reyes Page | 44


beneficiaries and smallholder farmers in achieving the desired objectives of increased
productivity and income as well as improved welfare in the rural communities. The outcome
and results of these studies will help to further improve the delivery of support services and
best bring the program to a conclusion, providing options beyond land distribution. For the
conduct of the studies, DAR has engaged the services of institutions with relevant experience
and expertise in the specific field of study. The engagement of institutions is carried out
through the agency to agency procurement arrangements.

A. COMPREHENSIVE AGRARIAN REFORM PROGRAM: AN ASSESSMENT AFTER


TWENTY-FIVE YEARS AND BEYOND CARP ISSUES
The study addresses continuing policy questions on the contribution of CARP to agricultural
productivity, improving the well-being of the rural poor, and other related issues. It is
designed to respond to remaining questions about how to best bring the current program to
a conclusion and facilitate robust land markets in the agricultural sector looking forward
(including options beyond land distribution). The study aims to:
Identify the mechanisms by which CARP could have enhanced or inhibited farm-
household welfare, e.g., increased equity, changes in credit access, and where the
evidence permits, determine the empirical relevance of said mechanisms.
Identify the mechanisms that enhance or detract from farm productivity and
profitability and, where the evidence permits, determine the empirical relevance of
said mechanisms. This includes obtaining and augmenting more recent data as
appropriate.
Determine how the results differ, data permitting, by type of land transfer (voluntary,
government land, or confiscatory), crop, and other characteristics of the land and
beneficiary.
The study made a comparative analysis of the CARP impact assessment during the 1990 -
2000 period with the 2010-2015 and initial results indicated that the reduction in the
incidence of poverty was higher in the ARC areas than in the non-ARC areas. DAR engaged
the services of the UP-Philippine Center for Economic Development (PCED). The study is
expected to be completed in June 2016.

B. SURVEY OF AGRARIAN REFORM BENEFICIARIES


There are recurring issues hurled to DAR by militant groups and civil society organizations
such as status of the awarded lands, issues on voluntary land transfer, second generation
problems on land distribution, household level welfare of the ARBs and other related issues.
The ARB Survey is intended to determine the household welfare level of ARBs and other
related issues under the CARP. The survey will involve 9,400 respondents of which 6,000 are
ARBs while 3,400 are non-ARBs to determine the status of the awarded lands, issues on
voluntary land transfer and the second generation problems on land distribution.
Specifically, ARB survey will, i) establish the status of the awarded lands per mode of
acquisition both in individual and collective CLOAs, ii) assess the welfare conditions of the
ARB households, and iii) draw on the perception of the ARBs on rural development, rural
conditions, and government intervention in rural areas.
The ARB Survey Report will contain four (4) parts, as follows:

End of Term Report by Secretary Virgilio de los Reyes Page | 45


Part I: Profile of ARBs. This includes demographic information, household data, education,
employment and livelihood, income level, acquired household and farm-related
assets.
Part II: Analysis on the status of the ARBs vis--vis the awarded lands in each mode of
acquisition. This will cover land use, productivity, income from the awarded land,
status of cultivation, status of ownership, amortization payments, engagement in
AVAs, status of land conversion and other related issues.
Part III: Welfare conditions of the ARBs compared to non-ARBs. This will assess the status of
living conditions, development of capabilities, participation in organization,
community and political affairs, access to support services and adoption of farm
technologies.
Part IV: ARBs perception and level of satisfaction on rural development, rural conditions,
and government intervention e.g. DA, DAR, DENR, LGU.
DAR has commissioned the Philippine Statistical Research and Training Institute (PSRTI), an
attached agency to the NEDA. The ARB survey report will be completed by end of July 2016.

C. COMPREHENSIVE STUDY ON AGRICULTURAL CREDIT FOR SMALLHOLDERS


This Study addresses the need to redesign the credit facilities and financial resources
currently available to consider the needs of smallholders including landless farmers. The
prevailing credit facilities are designed to accommodate landed smallholders and ARBs.
Agricultural tenants, who are oftentimes living in more dire conditions, are overlooked. Re-
orientation of credit facilities can be met only with the active involvement and investment of
concerned government institutions and even private companies and financial institutions.
The study will review and document existing practices (i.e. program and policy environment)
and conditions in the credit market and policies for credit access of smallholders with due
emphasis on the gaps and limitations of prevailing credit programs and how to properly
address them. It will assess existing programs of lending institutions, banks and other
government financial institutions (GFIs) in terms of loan purpose, loan terms and condition,
monitoring and collection.
A program review of the Agrarian Production and Credit Program (APCP) will be undertaken
in terms of credit assistance, program organization and beneficiary feedback. On this basis,
an assessment will be done on the capacity of smallholder organizations (ARBOs and non-
ARBOs) in terms of preparing credit proposals, implementing re-lending schemes and
managing credit and providing appropriate interventions. Relevant policies and strategies of
government and private banking institutions will be crafted to improve credit delivery to
smallholders, and identify appropriate credit enhancement measures, e.g. insurance,
guarantees. The Study will identify key parameters that should be considered in designing an
appropriate lending and capability development program for smallholders to enhance their
credit access with formal lending institutions. The Philippine Institute for Development
Studies (PIDS) has been engaged by DAR to undertake the study, which is expected to be
completed in June 2016.

D. MULTI-SECTORAL STUDY ON AGRIBUSINESS VENTURE ARRANGEMENT


(AVA) POLICY AND IMPLEMENTATION UNDER CARP
There are many ARB groups and cooperatives that entered into AVAs with investors to
ensure the continuity of commercial operations of the plantations acquired through CARP
that require massive investments, technology, and market linkaging. This AVA study will

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address the prevailing problems in the current status of AVAs such as problems and issues in
contractual arrangements between producer small farmer cooperatives/organizations and
investors/buyers (e.g., contract duration, pricing arrangements, etc.) including indebtedness
status of small farmer producers from investors and banks. The Study will review and assess
government policies and programs in the concerned industries and AVA commodities,
agricultural productivity of lands devoted to AVAs and the competitiveness of the plantation
crops in relation to the export markets demand and the effect and impact of the incoming
tariff regime in 2015.
The methodology for the conduct of the study will involve the conduct an institutional and
policy environment analysis of the institutions involved that impact on the agribusiness
venture arrangements in CARP covered areas and small holders. An analysis will be
undertaken of the supply and value chain of the crops and commodities under AVAs
including but not limited to banana, pineapple, rubber, oil palm, and other high value crops.
The Study will also analyze the key institutional factors that influence the value chain
dynamics and actors behavior in the crops/commodities covered by AVAs, and recommend
appropriate arrangements. On this basis, the Study will develop an industry-wide and inter-
agency plan of action which includes policies and strategies to address the issues and
problems besetting the industries (crops and commodities). Along with existing DAR
guidelines on AVA, the Study will develop the framework and procedures for reviewing
existing and proposed AVAs taking into account the FAO Voluntary Guidelines on the
Governance of Tenure (VGGT) and the Principles on Responsible Investments in Agriculture
that ensure food security and safeguard tenure rights, environment, and human rights.
The conduct of this Study is a collaborative effort of DAR, the World Resources Institute
(WRI) and the UN Food and Agriculture Organization (FAO). A Team of International and
National Experts has been engaged by FAO to undertake the Study. The Team has submitted
the draft Final Report to the FAO for review and endorsement to DAR.

E. TENURE VS. AGRARIAN REFORM: LESSONS FROM THE PHILIPPINE


COMPREHENSIVE AGRARIAN REFORM PROGRAM FROM COMMONWEALTH
TO CONTEMPORARY PERIODS
The study will review the original intent and objectives of the Philippine Agrarian Reform
experience, starting from the commonwealth regime, the martial law period (P.D. No. 27) to
the Comprehensive Agrarian Reform Law (CARL or RA 6657) when it was passed in 1987,
and then the called CARP Extension with Reform (CARPER or RA 9700). This study attempts
to understand how CARL has shaped the institutions related to the land distribution and use
of the land, and how such institutions affect the welfare the productivity of the households
and farms in the rural economy. It is intended to determine the social and political outcomes
arising from of the institutional and social changes, brought about by the law and the DAR
itself, which is its major proponent and implementer.
The specific intent of the Study is to review the CARL in order to determine the objectives
and goals of the law as well as the process and inputs that the program intends to deliver. It
will examine the inputs and outputs of the program as implemented by the DAR, taking note
of the scale and the different types of agricultural lands being distributed. On this basis, the
Study will assess the outcomes of these inputs of the programs especially of the institutional
changes that occurred historically in the rural economy. An assessment will be made on the
impact of the law to the country as a whole in terms of their effects on farm productivity and
employment, poverty and economic growth, especially in the agricultural sector and on the
redistribution of power.

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DAR has engaged the experience and expertise of the National Historical Commission of the
Philippines (NHCP) to undertake the Study which is expected to be completed in July 2016.

V. Support to Operations
Many of the reforms in the PNoy administration were implemented as good governance
mechanisms of the DAR. This brief portion provides an orientation of the governance
reforms that were undertaken based on the context in 2010. It also gives a listing of the
activities that must be done as well as the policy and program decisions that are flagged for
the consideration of the next administration. For full details, refer to the report of the
Finance, Planning, and Administration Office (FPAO).

A. IN 2010
DAR, like other agencies, had a budget, which covered activities for one year but is valid for
obligation for two fiscal years. The General Appropriations Act (GAA) as an appropriation
authority was not a complete document as agencies needed an Obligation Authority in the
form of an Agency Budget Matrix or Special Allotment Release Orders (SAROs) containing
detailed funding requirements that were necessary to release the funds to agencies and
offices. At that time, and even in the early years of this Administration, there was no
matching of physical (e.g. hectares of land and status of farmers organizations) and financial
plans, as well as no strict monitoring of budget utilization and no assessment of physical
accomplishments. The budget was crafted top-down where the DAR Central Office
determines the fund requirements of regional, provincial and municipal offices.
In terms of transparency and accountability, the DAR in 2010 also had numerous Trust
Accounts that contained the savings from projects that have ended. Instead of returning
the funds, the remaining resources from previous local and foreign projects were kept in
these Trust Accounts for use in other activities such as bonuses, conferences, and workshops.
The procurement of goods, services, and to some extent, civil works, was not compliant with
RA 9184 or the Government Procurement Reform Act. Moreover, there was also no clear
inventory record of plant, property and equipment (PPE) of prior years whether at the DAR
Central Office or field offices.
Human capital was a concern in the bureaucracy. In 2010, Executive Order 366 or the
Rationalization Program was already in place but the DAR was not submitting its
Rationalization Plan to the Department of Budget and Management (DBM). As such, the DAR
was not allowed to fill up the vacant positions and could only designate Officers-in-Charge
(OICs). At that time, only around 11,000 of the 15,000 available positions were filled up.
When the reforms in planning, budgeting, procurement, accounting, and auditing were being
introduced, two major issues surfaced. First, at the onset, there was resistance to the
reforms that were introduced because these needed time, long-term planning, and evidence
to substantiate plans and proposals. These were not business-as-usual and thus, difficult to
implement. Second, around mid-term of the administration when there was already an
acceptance that reforms must be put in place, the absorptive capacity of the human resources
in the bureaucracy became a concern. The people had difficulty absorbing or internalizing
the major overhauls. Although they were able to absorb and accept the needed changes, they
had difficulty assimilating and applying the new knowledge in their work.
Timing, unfortunately, was a concern. The governance reforms being implemented
coincided with the mandate of RA 9700 to expedite land acquisition and distribution and to

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improve the delivery of support services within five years. The DAR had a looming deadline
but the reforms instituted by the DBM, other oversight agencies, and the DAR itself entailed
utilizing information and communication technology, plugging gaps, placing human
resources where needed, and enhancing capacities and competencies (both those in
operations and administrative offices). To an extent, these reforms affected the delivery of
the results in land tenure services and support services.

B. REMEDIAL MEASURES UNDERTAKEN


To address the need to deliver concrete results through a transparent, accountable and
participatory manner, the DBM and the DAR implemented reform measures.
1. SYNCHRONIZATION OF PHYSICAL PLANS AND FINANCIAL PLANS
On the part of the DBM, one of the policy measures that was put in place was the
synchronization of physical plans and financial plans for three years in advance. This
needed long-term planning as well as data and evidence but when it was finally rolling
out, it became clear which landholdings were ripe for distribution and budget cover and
which support services projects and activities were clearly planned out.
2. BOTTOM-UP BUDGETING
The DBM also implemented the BUB or the bottom up budgeting to avoid budget
proposals that were not fit to ground plans and realities. In the DAR, the BUB was also
operationalized through three cuts or iterations combining top down and bottom up
processes to ensure a grounded physical and financial proposal.
3. INVENTORY OF PPES
An inventory of PPE was also undertaken although until this juncture this remains
incomplete because of the length of time between the acquisition of the assets up to the
present and the changes in human resources and institutional memory. Out of this
inventory, many of the SUVs which were in the DAR Central Office were transferred to
regions and provinces that had high land tenure and support services targets.
4. CLOSURE OF TRUST ACCOUNTS
Trust Accounts were closed. This was in line with the DBM policy on One Account per
agency. As such, the source of fund was centralized to the GAA as the ultimate final
document. This thoroughly enhanced the transparency and accountability in the DAR.
5. COMPLIANCE WITH THE PROCUREMENT LAW
In the PNoy administration, procurement became compliant with RA 9184, whether
these involved goods or services. Since the DAR no longer had a budget for farm-to-
market roads, there was no more need to procure civil works. At first, most of the
procurement requirements were centralized at the DAR Central Office. To address the
need for participatory and more accountable governance, many of the procurement
requirements were eventually downloaded to regional and provincial DAR Bids and
Awards Committee. This was accompanied by a package of capacity building activities to
address the knowledge gap not only on RA 9184 but also on the connection of
procurement with planning, budgeting, accounting and auditing. More importantly, from
2014 onwards, most of the DAR procurement requirements were turned over to the DBM
Procurement Service to ensure that the purchase of goods and services is open to more
providers and thus, more transparent and fair.

End of Term Report by Secretary Virgilio de los Reyes Page | 49


Thus far, the major accomplishment on governance reforms is lessened leakage and plugging
of gaps. Hence, the funds remain intact and wholly used for legitimate activities. Moreover,
the budget is now being used for its intended purposes. Cases or incidents where funds were
fully utilized without corresponding physical accomplishments were minimized. It is now
isolated in select field offices.
Unfortunately, there is also consistent underspending of funds. This is because of the
difficulty in harmonizing the plans with targets and budget. The tendency to use unreliable
data and evidence remains among the personnel where they would ask for funds despite
non-readiness to execute such plans. As such, during implementation, it would become clear
that the plans will not work and the funds will not be used.

C. UNDERSTANDING UNDERSPENDING
1. GENERAL REASONS FOR UNDERSPENDING (2011-2015)
a. Disruptive Innovations
The PNoy Administration ran and won on the platform of good governance;
expectedly, disruptive innovations became par for the course. Public Financial
Management, Public Expenditure Management, Results Based Performance
Management System, Zero-Based Budgeting, Bottom-Up Budgeting and recently, the
Two-Tiered Budgeting Approach took time to be understood and implemented
effectively.
b. Absorptive Capacity
The Absorptive Capacity Index of an organization is a measure of the agencys ability
to obligate and disburse the budget appropriated and cash allocated on its planned
activities for the fiscal year. The AC Index is dependent on the agencys Absorptive
Capacity: the ability to absorb, assimilate and apply new knowledge to the
accomplishment of the organizations goals and objectives. With the mean age of the
departments personnel complement just a few years shy of optional retirement age,
the agencys absorptive agility is on the low side.
c. Path Dependence
The introduction of improved governance mechanisms necessitated a revisit of the
way things were and are being done in the bureaucracy. Systemic changes focused on
process improvements in order to streamline process throughputs and reduce the
various sectorial activities throughput rates. This required a shift from output-based
standard cost approach to activity-based costing approach to budget preparation.
These systemic changes continue to be work in progress.
2. SPECIFIC REASONS FOR UNDERSPENDING (2011-2015)
a. Overbudgeting in LTS (Land Tenure Services)
Budget allotment by DBM for 2010-2014 followed the 5-year implementation period
for LAD as provided for in RA 9700, which assumed a standard approach to land
acquisition of generic landholdings. Landholding evaluation of the balance CARPable
lands which are predominantly private agricultural lands subject to compulsory
acquisition, unfortunately, was akin to a biopsy of cancer cells: the complexity of the
necessary and appropriate LAD activity was known only after all the claim folders
documentation were dissected. Interruptions in the LAD process for targeted
landholdings for acquisition during the year negatively affected budget utilization.

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b. Overbudgeting in ALS (Agrarian Legal Services)
Absent a clear causal mechanism, Case Load cannot be stochastically forecasted but
only projected based on historical trends and patterns. Aberrations in actual cases
received by each operating unit during the year compared to budgeted number of
cases as projected resulted in over- or under-spending.
c. Overbudgeting in TASS (Technical Advisory / Support Services)
Deficiencies in sub-project equity contribution on the part of the ARBO (for locally
funded projects) and of the LGU (for foreign assisted projects) delayed or even
aborted sub-project implementation.
3. CONSTRAINTS TO DISBURSEMENT ACCELERATION
a. SC Ruling on the Definition of Savings
The Supreme Court decision on the definition and conditions required to declare
savings out of the Congress-approved annual appropriation resulted in the loss of
flexibility to realign funds within the year to unprogrammed but necessary activities.
b. Constraints in Budget Preparation
Budgets are prepared a year in advance based on planning assumptions valid at that
time. Accordingly, PAPs (program, activities, and projects) are planned and budgeted
based on those assumptions. These assumptions oftentimes are no longer valid
during the activity execution period.
c. Constraints in Budget Execution
Budget execution guidelines prevent realignment of appropriations across Object
Class (PS, MOOE, CO) and PAPs (MFOS and MFO activities). During the year, the
Secretary is only allowed to realign allotments across Object of Expenditures. Only
after the fiscal year ends will the DBM Secretary act on request for realignment
across Object Class and programmed PAPs. Request for realignment to
unprogrammed PAPs require Presidential clearance.
4. INTERVENTIONS TO IMPROVE FINANCIAL PERFORMANCE
a. Decoupling Land Acquisition and Distribution
With the realization of the complexities involved in the LAD process for the balance
CARPable lands, land distribution was decoupled from acquisition, meaning different
targets and budgets were set for acquisition vs. distribution.
b. Throughput Accounting
Although the critical path for LAD activities was established to be from 9-10 months,
dependencies on other CIAs (CARP implementing agencies) extended this period to
1.5 to 2 times the standard time. A computer-based application called the LTI OpTool
was deployed to monitor throughput (work-in-process) status and fund utilization.
c. Improving Organizational Absorptive Capacity
Retooling of the bureaucracy was undertaken in order to improve the organizational
and operating units ability to absorb, assimilate and apply new knowledge towards
the attainment of organizational goals

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D. THINGS TO DO
There is a need to review existing Special Orders (SOs) that place people in DAR committees
(as chairs and vice chairs) such as the PARC Council and the Bids and Awards Committee.
Bank signatories must be also be changed through a concomitant Special Order. Doing the
review and placing immediately would ensure the regular functioning of activities and the
smooth transition of administrations.
The DAR Secretary or his/her designated alternates have seats in the Board of Directors of
the Land Bank of the Philippines, the Development Academy of the Philippines, National
Dairy Administration, and the Quedancorp.
The following are more fundamental issues which need the consideration and decisions of
the next administration.
1. CNA BETWEEN DAR AND DAREA
The 6th Collective Negotiation Agreement (CNA) between the DAR Management and the
DAR Employees Association (DAREA) would occur in October 2016. The Civil Service
Committee had some recommendations in the 5th CNA that need attention and decision
before the 6th CNA.
2. TULAY NG PANGULO PROJECT
The Tulay ng Pangulo para sa Kaunlarang Pang-Agraryo (TPKP), a foreign-assisted
project, requires consideration. The materials for the implementation of this project
have already been delivered from France and are now lodged in the DPWH depots in
Bataan and Cagayan de Oro. However, because of the Blue Ribbon Committee
investigation of the Senate, the implementation of this project was held in abeyance. A
clearance from the Office of the President is necessary to resume project implementation.
3. QUEDANCORP AND PHILFRUITS
Two GOCCs also need attention. In Quedancorp where DAR has a board seat, the
Department has substantial collectibles. However, Quedancorp has not been funded by
the national budget during this administration.
In the case of PhilFRUITS, a GOCC that was attached to the DAR, there were outstanding
issues. In 2010, upon assuming office, this administration looked into the status of
PhilFRUITS and requested the Commission on Audit to conduct a special audit. The
Special Audit Report of the COA notes the problems of this GOCC including lack of funds,
lack of clear records such as Books of Accounts, unauthorized disbursements, and
existing contractual obligations. PhilFRUITS has been ordered by the Office of the
President for dissolution and this was initiated by the Governance Commission for GOCCs
(GCG). Unfortunately, PhilFRUITS cannot pay its contractual obligations because it is
already insolvent.
4. TASK FORCE COLLECTION
A Task Force Collection (TFC) was set up to recover the loans accruing from the direct
lending programs of the DAR before (see discussions on DRDAP, SPO). At present, there
are only a few remaining accounts that require the attention of TFC members. As such,
this task of pursuing loan payment collection from farmers organizations may now be
mainstreamed with the Finance and Legal offices of the DAR.

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CARP and the Philippines Economic
and Agriculture Policies
I. Introduction
The silos in government policymaking and programming made agrarian reform distinct and
separate from agriculture in terms of project conceptualization, implementation mechanism
and funding sources. The DAR is tasked to improve the income and quality of life of agrarian
reform beneficiaries through land redistribution and agriculture-based support services, the
DA strives to improve productivity and attain food sufficiency while the DTI looks at the
competitiveness of the agri-industry. Also, since agriculture is a devolved function, local
government units are in charge of providing technical extension services to farmers. These
different mandates, agencies, and funds led to various initiatives which make economic and
agriculture policies disjointed.
Unfortunately, the task of improving the income and enhancing the quality of life of agrarian
reform beneficiaries is largely affected by agriculture and economic policies. The delivery of
agriculture-based support services cannot be divorced from the policies and programs of the
DA and the efforts of LGUs in providing technical extension services. Where these are
assistance are not aligned, it is a challenge to make a dent on agri-income increase and it is
very difficult to sustain the gains.
More unfortunately still, poverty reduction and inclusive growth are important goals that are
affected by the disjointed economic and agriculture policies. The poor in rural areas, the
landless rural workers whose contribution to factors of production is their provision of labor,
are not in the general programs of DA, DAR, and DTI; thus, they fall into the cracks of the
different silos. The assistance on agricultural support services provided by DA and DAR are
for farmers with land, whether these are large owners or smallholders. DTIs main
stakeholders are the agri-industry players. DOLEs assistance also falls short because the
poor in agriculture, the seasonal farmworkers, are largely ambulant and are not formal and
documented laborers. This is probably the reason why economic growth is not making a
huge dent in rural poverty.
These disjointed policies are compounded by the strong hand of the state in agriculture or
what this report refers to as centrally-planned agriculture. In most cases, agriculture
policies are extremely state-driven to the point of distorting the workings of the market and
crowding out private investments in agriculture. While this tendency for strong state was
more predominant in the late 1980s (in the beginning of CARP) and stayed on till the 1990s,
there are still some tendencies up to this point for strong government preference. At this
juncture, however, centrally-planned agriculture is more tempered by support services that
are not market-distorting.
It is very important to underscore that despite the challenges brought about by these
disjointed policies and the governments insistence on a centrally-planned agriculture, the
support services initiatives of the DAR throughout the years have shown successes and the
gains were kept. Many of these successful initiatives were through the efforts of DAR
officials and staff that coordinated with the DA, LGUs, DTI, and DOLE to ensure the delivery

End of Term Report by Secretary Virgilio de los Reyes Page | 53


of the needed support services. Many of the successful initiatives, as such, were through
national and local level convergence efforts to fill the many gaps in the agri-enterprise efforts.
However, these successes need to be institutionalized by a more cohesive agricultural vision
and policy, one that is biased for smallholder farmers and orchestrated by clear institutional
arrangements. This cohesive vision and policy for agriculture should also be in sync with
programs on poverty reduction and inclusive growth. In particular, this meant improving
rural job generation and reducing the soaring and erratic cost of food especially rice.

II. State of Agriculture, Smallholder Farmers and Farm Labor


This portion highlights the critical information that informed the decision and policy making
of the DAR. In this administration, these data were important in gearing policies towards
improving the income of ARBs and other smallholders and in striving to reduce rural poverty.

A. AGRICULTURES CONTRIBUTION TO THE COUNTRYS GROSS DOMESTIC


PRODUCT
Agriculture in the Philippines is the lowest contributor to the gross domestic product. In the
first quarter of 2016, agriculture only contributed 9.49% to the GDP while industry
contributed 33.48% and services 57%. Poverty incidence and magnitude are also prevalent
and severe in rural areas. Agriculture is often the source of income for many poor people. In
2012, agriculture employed around 32% of the total labor force. For more details on poverty
in agriculture, please look at the section on Agriculture Policy has no poverty focus and no
bias for smallholder farmers.

B. PREDOMINANCE OF SMALLHOLDER FARMS


Smallholder farms make up the bulk of Philippine farms. Smallholder farmers could be
described as:
1. HAVING SMALL LAND SIZES
They usually cultivate less than 5 hectares. Compared to medium and large-sized farms,
they have lower yield due to the use of lower quality and quantity of inputs like seeds
and fertilizers. They also have higher production costs. It is also interesting to note that
smallholder farms are getting smaller. The 2012 Census of Agriculture reported that
there are 5.56 million farms/holdings in the Philippines, which covers 7.19 million
hectares. This translates to an average area of 1.29 hectares per farm/holding. This is in
contrast to the average area of farms/holdings in 1980 which was 2.84 hectares (See
Table 14). Per CAF definition, a farm/holding is any piece of land used wholly or partly
for agricultural production and operated as one technical unit by one person or with
others. The Philippine Statistics Authority (PSA) notes that these findings could be
accounted to the partitioning of farms/holdings from one generation of agricultural
holders/operators to their succeeding generation [PSA, 2015].
2. USUALLY RELYING ON FAMILY LABOR
While smallholder farming has limited access to farm machines and equipment, they
compensate by using household labor and excess farmworkers. This is true not only in
the Philippines but other countries [see Studwell, 2013].

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3. USUALLY LACKING ACCESS TO FORMAL FINANCE
Financial services like credit and savings mechanisms are important in funding
agricultural, consumption, education and health, and investment requirements of
smallholders. However, most formal financial institutions hesitate to lend to them
because of high risks (natural disasters, lack of insurance), volatile cash flow, and lack of
acceptable capital.
4. HAVING MULTIPLE SOURCES OF INCOME
Smallholders have on-farm, off-farm, and non-farm sources of income including
remittances and transfers. IFAD [2011] estimates that around 30 to 60% of households
in rural areas earns around 75% of their total income from more than two sources. As
such, although generally lacking in formal finance, smallholders could manage their risks
and losses.

C. AGRICULTURAL LABOR AND WAGES


Agricultural labor has various arrangements in terms of wage payment: prevailing daily
wage rate, wage per hectare, and wage per unit of production (e.g. per sack, per kilo, per
picul, etc.). Wages could be paid based on a written contract or verbal agreement. Laborers
may also be paid based on number of rows covered or number of bundles or pieces of
handled input/output. Sharing arrangements are also observed; for instance, there could be
a 70:30 percent sharing in the production between the farm operator/manager and farm
laborer. Depending on the agreement between the farm laborer and the operator or farm
manager, the farm worker may perform one or more activities for an agreed amount.
Regardless of the mode of payment, the PSA, which conducts surveys for various crops,
translates the payment modes into average wage rate per day to allow wage rate
comparisons. Their latest annual publication, Trends in Agricultural Wage Rates was
released in November 2014 covering the results of the 2013 Agricultural Labor Survey. The
highlights of the findings are as follows:
1. WAGE RATE INCREASED FROM 2011 TO 2013
Compared to prior years, wage rate increased in 2013. Among the regions, the Davao
region and Cagayan Valley reported high wage gains. Among the crops, sugarcane farm
workers had the biggest increment followed by coconut farm workers and then by rice
and corn laborers.
In 2013, the agricultural wage rate for all types of labor averaged PhP 282.31 per day.
The highest daily wage rate was reported in the Ilocos Region (PhP 473.84) and the
lowest was in Eastern Visayas (PhP 228.00). In general, farm activities performed by
person-machine labor were paid higher daily wages (e.g. land preparation using farm
machines) than person labor alone (e.g. manual weeding). Moreover, male farm workers
earn better than female workers in 2013 and payment in cash was a more common
practice.
2. AVERAGE LABOR UTILIZATION
In general, sugarcane farms use more labor inputs at 86.52 person days per hectare as
compared to palay farms at 57.29 person days and corn farms at 51.32 person days.
Coconut farms utilize the least labor requirement at 28.77 person days.

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D. LOW INCOME OF SMALLHOLDER FARMERS
Smallholder farmers lament many reasons why their farm income is low and barely enough
to supply their needs. Listening to them, they would discuss high cost of inputs, labor, and
transportation. They would also bewail the low prices of products. This is often the reason
why most farmers would insist on government providing input subsidies and controlling
prices of output. If asked about the translation of their proposals, most smallholders would
ask for free or subsidized seeds and fertilizers and would note the need to put a cap or ceiling
on cost of inputs. In regard to marketing, they would ask for minimum or floor prices for
their products. They recommend setting up a price control council to monitor and regulate
prices. These suggestions are important but the reasons behind low farm income must be
analyzed and recommendations should be balanced based on different considerations such
as economic growth, prices of food products, and corruption.
Based the results of studies and observations in the implementation of support services with
different farmers organizations, the reasons why smallholder farmers have low farm income,
are as follows:
1. INEFFICIENCIES AND LOSES DUE TO LIMITED MECHANIZATION AND POST-HARVEST FACILITIES
The farmers limited mechanization and post-harvest facilities lead to inefficiencies and
losses. Cuevas quotes the study on rice made by PhilMech and PhilRice [2010] that
inadequate facilities lead to around 16.47% of losses. The lack of drying facilities and
low mill recovery also contribute to total losses.
2. HIGH TRANSPORT COST
Transport costs are also high due to sea freight issues and inadequate infrastructure such
as roads and port facilities [Cuevas, 2010]. Dawe et al [2008], which also studied rice,
showed that it is more expensive to transport, dry, store, and mill a ton of dry paddy rice
in the Philippines than in Thailand. Gross marketing margins and percent mark-up
between market levels are higher in the Philippines than Thailand. Relative to Vietnam,
the rice marketing margin is also more expensive in the Philippines. This means that in
the Philippines, before rice gets to end consumers, there are different stakeholders that
handle the product and add costs.
3. LIMITED ACCESS TO FARM FINANCING AND CROP INSURANCE
The limited access to farm financing and crop insurance also pose a concern. Capital
constraints stifle farmers agri-investment. In some cases, the farmers have
opportunities for improved land preparation (e.g. increased area) and marketing
arrangements (e.g. new partners), but lack of access to reasonable financing limit their
expansion or scale up. Moreover, the lack or limited crop insurance increases farm risks.
The lack of crop insurance adds to the risks being considered by formal financial
institutions and increases their hesitation to lend to smallholders.
4. FARMERS INADEQUATE ACCESS TO INFORMATION
Fourth, the farmers inadequate access to information (e.g. prices, production, potential
sources and partners) add to their dependence to middlepersons and traders.
Inadequate information limits the choices that could be maximized.

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5. LIMITED AVAILABILITY OF STOCK KEEPING UNITS
Limited stock keeping units do not allow farmers to store their products and sell these
based on the requirements of the market. The limited storage facilities in rural areas do
not allow farmers to maximize high price offers.
It could be seen that aside from high prices of inputs and low prices of products, there are
more reasons for low farm income. In fact, addressing the other reasons for low income (e.g.
infrastructure, information asymmetry, access to finance) would be less distorting than
government tampering on prices. Other sections of this report discuss concrete
recommendations for improving smallholders farm income.

III. Agrarian Reform and Agricultural Policy


As of 2012, Filipino farmers have a 38.3 poverty incidence, defined as the proportion of
farmers with per capita income less than the per capita poverty threshold to the total
number of farmers. This poverty incidence was worse for 2009 (38.0) but slightly better
than 2006 (38.5). The PSA defines farmers as employed individuals 15 years old and over
whose primary occupation is farming, plant growing, or animal production. Across regions,
ARMM posted the highest poverty incidence for farmers in 2012 followed by Region X and
Region IX. (See Table 15)
Poverty incidence for farmers is a major concern except perhaps in Regions I and III (See
Table 15). It could be deduced that for Central Luzon, the relatively low poverty incidence
accrues from its proximity to the Metro Manila, as such, the farmers have more input options
and lower logistics and marketing costs.
Compared to different types of sectors and groups, poverty incidence for farmers is high
although the poverty incidence for fisherfolks is higher.
The data on poverty corroborate prior analyses that poverty is largely rural and that while
the Philippines, in general, shows sterling GDP growth, development is not inclusive. This
portion of the report surmises a few reasons for this rural poverty.

A. POLICY FOCUS ON IMPROVING PRODUCTIVITY AND NOT ON FARM INCOME


The agriculture policy is focused on enhancing technical efficiency (yield per hectare).
Unfortunately, the quest to improve yield in an area could mean having an oversupply of
products if there is limited market and if there are no accompanying farmers capacity
building on farm-business management. In this case, technical efficiency does not
necessarily result in leaps in farm income.
The agriculture-based support services of most government offices (DA, DAR, DTI and local
governments) are for farmers with land. However, poverty is prevalent and stark among
landless rural workers particularly with the suppliers of manual labor who earn the least
from farmwork. These are usually the seasonal farmworkers who are ambulant based on the
availability of farm jobs. Albeit one of the options for addressing poverty among these
seasonal workers is providing them with land, the finite and limited land simply could not
accommodate this need.
Even food sufficiency initiatives do not necessarily address farm workers poverty including
their food poverty. DAR is relied upon to address poverty but its support services program is
limited to ARBs or smallholder/landowners. DARs support services projects are also small

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in magnitude, budget, and reach. As such, while DAR improves the farm income of farmers
with land, it contributes less to the income increase of landless rural workers.

B. DISJOINTED POLICIES BASED ON CENTRALLY-PLANNED ECONOMY


Agriculture policies in the Philippines are disjointed with their confusion of goals, programs,
and providers. On the one hand, the government often insists on a strong hand of the state in
prioritizing crops and industries (as evidenced by the focus on rice), in setting floor prices
for certain crops and commodities like rice and tobacco, in providing subsidies like fertilizers
and inputs without clear exit mechanisms, and in approving the substance or actual contents
of agreements between private investors and smallholder farmers in the case of agribusiness
venture arrangements involving ARBs. On the other hand, the government could be slack in
providing public goods like capacity building, extension services, and infrastructure that are
needed by smallholder farmers.
Even the policies on rice sufficiency need to be evaluated. It mandates quantitative
restrictions and. thus, the big proportion of rice supply comes from domestic sources. But
logistics and transport costs are likewise high and thus, this combination contributes to high
food prices. Unfortunately, despite this policy decision to prioritize domestic rice, there are
no proactive decisions to improve wages to increase the purchasing power of the people. To
an extent, the cash transfer program addresses the poors buying ability; but this is not
enough given that the cash transfer program is for extremely poor while high prices of rice
affects even the poor and near poor.
Agrarian laws and the AFMA are also disjointed. While the RA 6657 or the Comprehensive
Agrarian Reform Law and RA 9700 or the law that extended RA 6657 showed a preference
for a strong hand of government in providing support services to beneficiaries (see
discussion on support services), RA 8435 or the Agriculture and Fisheries Modernization Act
or AFMA mandates the pursuit of aggressive market-driven programs and projects to make
products more competitive.
1. LAPSES IN INSTITUTIONAL COLLABORATION
The focus and deliverables of agriculture-related rural agencies (DA, DAR, DTI, and
DOLE) are not properly coordinated and suffers from institutional lapses. The agencies
have different mandates. While the DA aims to achieve food sufficiency, DAR intends to
implement land redistribution and improve the income and welfare of the agrarian
reform beneficiaries while the DTI promotes and enhances the growth of industries
including agri-export industries. DOLE, for its part, ensures the labor rights and
implementation of labor standards. These agencies implement their programs without a
solid agricultural and inclusive growth vision that could orchestrate efforts. It could be
surmised that it must be one of the reasons why growth is exclusive; because the landless
rural workers or the poor in rural areas are not covered by agriculture and other
programs. Both the DA and DAR look into farmers with land, the DOLE handles the plight
of regular and contractual laborers, and the DTI addresses the growth of the agri-
industry. This is probably one of the reasons why agriculture has little or no dent on
poverty reduction.
The overall agriculture policies and programs of the Philippines play an important role in
improving the agri-income of agrarian reform beneficiaries and other smallholder
farmers. Agrarian reform does not exist in isolation from agriculture. In fact, improved
land productivity and ARBs welfare are affected to a large extent by the incentives and
regulations from agricultural policies. Even the decision on whether to stay in

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agriculture or to start inching away to other fields are judgments based on the perceived
future that could be reaped from farming.
Agriculture in the Philippines could be characterized as one that is guided by the strong
hand of the state. It is focused on improving productivity (especially of rice) and partly
on improving income and reducing poverty. Agriculture programs, as implemented by
the DA, are focused on improving yield and attaining food security. To achieve these
ends, agriculture strives to protect farmers particularly those that are into rice. Until
2017, the quantitative restrictions (QR) on rice will be in effect so the government
controls the volume of rice that may be imported from overseas markets. A forty percent
(40%) tariff is imposed on imports within the minimum access volume (MAV) and 50%
tariff is imposed outside of the MAV. As a result, it is not easy to import rice. This works
against poor consumers given that the supply of rice is low and that prices are high.
However, DA is not the only agency that has a strong government role. Agrarian reform
laws, particularly the implementation of support services, show evidence of strong role
for government. In this policy and regulatory environment, market operations are
distorted resulting in particular inefficiencies.
2. STRONG HAND OF THE STATE IN AGRARIAN REFORM POLICIES AND ACTIVITIES
The policies on agrarian reform show evidence of strong government. Unfortunately,
support services for smallholders are largely a function of the market. Without allowing
the market on its own, assistance must be effective and strategic.
RA 6657 or the CARL, as amended by RA 7905 and RA 9700, mandated the provision of
support services to ARBs. While RA 6657 or the CARP law provides for the funds for
support services, RA 7905 created agrarian reform communities (ARCs) and the DAR
Support Services Office. RA 9700 provided details that show the perceived ideal roles of
government in improving the income of beneficiaries.
a. Credit: budget, mechanisms, collateral and loan purpose
RA 9700 mandated the appropriation of 30% of all budget for support services to be
set aside and made available for agricultural credit facilities. Moreover, 1/3 of this
segregated appropriation will be dedicated for subsidies to support the initial
capitalization for agricultural production of new ARBs. The remaining 2/3 will be for
socialized credit. The law also directs the Land Bank of the Philippines and other
government financial institutions, cooperatives and banks to provide the delivery for
the disbursement of credit assistance to individual ARBs.
The law mandated the government and private institutions to create the delivery
mechanisms for providing agricultural credit. RA 9700 also states that all financing
institutions may accept as collateral for loans the purchase orders, marketing
agreements or expected harvests: Provided, That loans obtained shall be used in the
improvement or development of the farmholding of the agrarian reform beneficiary
or the establishment of facilities which shall enhance production or marketing of
agricultural products or increase farm income therefrom. In this sense, the law
mandates provisions which are already being undertaken. Also, collateral, like
delivery mechanisms, is a business decision of financial service providers. Similarly,
how beneficiaries will use their loans should be left to their decisions.

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b. DARs role in creating farmers organizations
Prior to the passage of CARL, the DAR organized agrarian reform beneficiary
associations and based on the recollection of people in DAR, this coincided with the
land transfer of settlement areas. When CARL was passed, the law only mandated
the direct and active DAR assistance in the education and organization of actual and
potential agrarian reform beneficiaries. The assistance is to help them understand
their rights and responsibilities as owner-cultivators developing farm-related trust
relationships among themselves and their neighbors, and increasing farm production
and profitability with the ultimate end of empowering them to chart their own
destiny. Direct organizing of ARBs and other farmers was discouraged. However,
based on some observers, this role of DAR remained in ARCs where in most cases,
especially when there are no NGOs or large POs that would organize the farmers, the
DAR takes on this role.20
Definitely, this was the story behind the agribusiness venture arrangements
particularly the land leases in plantations. The DAR organized the farmers when land
was covered and the collective land title was named to their organization. The DAR,
likewise, assisted the farmers organizations in engaging in agribusiness ventures.
Unfortunately, this role of DAR is hit or miss; in some cases, the farmers remained
together and this led to better demand for support services while in some cases, the
groups did not succeed probably because the decision for organizing is not
endogenous and it has become difficult to create their internal mechanisms. The
government-organized groups often do not develop the needed social capital or
relations of trust to enable them to work together. Elinor Ostrom [1999] notes that
self-organized groups (including locally organized farmers organizations) are better
understood as complex adaptive systems that show coherence without any central
and external (or government) direction.
Later on, particularly in the case of agribusiness venture arrangements, this strong
role of government brought problems when it became apparent that the informed
and valid consent of individual farmers was not sought. Decisions on securing a loan
and entering into agri-arrangements were made by the farmer leaders without the
consent of their members.
c. DARs Participation in Agribusiness Venture Arrangements (AVAs)
Within the DAR, the perceived ideal role of government is the heavy involvement in
agri-business venture arrangements (AVAs). In the AVAs, the DAR approves the
CONTENT of the contracts between the smallholder farmers and the agro-enterprise
investors. The contract contains details like contract period, production target, price
of produce, and land rental and other fees. Years later, the few AVAs that were
approved by the PARC/DAR showed problems and loopholes. In some cases, the
farmers lament that the price of their produce was pegged so low and there were no
price escalation measures in the contracts. In some cases, the farmers complain the
terms of the contract is too long and they already want to be released from the

20 In the past, it was assumed that NGOs and civil society in general had funding, mostly from foreign donors, to
undertake farmers organizing. This was an assumption that was good while foreign funding or philanthropy
was available. At present, many of these donor funds have dried up and while NGOs or CSOs could source
organizing funds from government, they might lose independence and flexibility.

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agreement. In some cases, the farmers note that they were not consulted by their
leaders during contract negotiations. For further details on this, see particular
discussion on AVAs. The discussion on AVAs is further expounded in several portions
of this report.
The crux of this issue lies with the role that the government played in the contracts
between the farmers and the agro-enterprise investors. This strong role of
government led to problems and legal cases. The PARC/DAR, who is not competent
to decide on issues like price, contract period and production targets approve the
contracts. In some cases, it also did not ensure that the farmer leaders sought the
informed consent of their members.
In sum, having a centrally-planned support services misses out on the vital role of the
farmers as the empowered players in the agri-enterprises. It likewise misses out on
the vital role of the market as the partners of smallholders in agri-enterprises. The
government intervenes where it should not be and creates inefficiencies and a host of
other problems which manifest much later.

C. POLICIES CONTRIBUTING TO LOW INCOME AND HIGH FOOD PRICES


The issue of food prices in the country has been the source of contention in agriculture
policies and programs in the Philippines. Unfortunately, land redistribution is associated
with policies that contribute to high food prices. This paper posits that while many factors
contribute to high food prices, the main culprit is the countrys disjointed agriculture policy,
one that is confused on whether to open up agriculture to liberalization or to protect it by a
policy of non-importation. High food prices are also due to having a centrally-planned
agriculture, one that insists on a heavy hand of the state in agricultural policies to the
detriment not only of consumers but also of smallholder farmers.
What is glaring is that land and property rights concerns could not be divorced from
agricultural policies and from overall issues of poverty reduction and inclusive growth.
Addressing one concern alone (either land or agriculture concerns) is myopic and makes
only a little dent on poverty reduction. Moreover, it is becoming apparent that public policy
choices should be appropriate for both farmers and consumers. As some analysts aptly
noted, public policy must wrestle with a balancing act between poor farmers and poor
consumers, and which group must bear the burden of agricultural development and the
vagaries (or not) of the international market since autarky is not feasible (or desirable)
[Montes, Briones and Cuevas, 2015]. Smallholder farmers, landless rural workers, and many
food consumers are poor or near poor and inclusive growth should address both the issue on
farm income as well as food accessibility and availability.
Agriculture policies, especially on the food staples and with particular emphasis on rice, have
been favoring protectionist policies. Trade barriers including the quantitative restriction on
rice have been set up with the goal of making the Philippines rice self-sufficient. The
intention is noble: to improve the productivity of agriculture so there would be less
dependence on importation. The protectionist stance, it is argued, would secure the food
source and improve the income of Filipino farmers.
Unfortunately, restricting trade and importation does not necessarily improve the farm
income of smallholder farmers. Aside from the fact that they are also consumers of high-
priced food, they also do not necessarily reap the main benefits of trade protection. First,
rice farming siphon off or crowd out the public investments that could be provided to other
smallholder farmers who do not plant rice. It also dissuades farmers to shift to other crops

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even if their income from rice is not high. Second, trade protection mostly benefits rice
producers who have the wherewithal to consolidate land and products, those who have
economic power, and those who could maximize the benefits from the agricultural chain.
While it is true that smallholder rice farmers also stand to lose from opening trade barriers,
the literature and experiences from other countries show that smallholders could be given
public support to diversify to other crops or to shift to non-farm sources of income.
1. FOOD PRICE TRENDS
According to the Food and Agriculture Organization (UN-FAO), the annual growth rates
of domestic food prices across Asia for 2000-2011 appear to be more stable compared to
global food price inflation. Domestic food price inflation in Asian countries during the 11-
year period averaged 4.29% per annum, lower than the regional average of Latin
America (8.63%) and sub-Saharan Africa (5.70%), although this was higher than
European countries (3.74%).
From 2000 to 2011, the Philippines recorded relatively lower annual growth rates of
food prices among Asian countries, with an average annual food price inflation of 2.93%,
as compared to Indonesia (9.39%), South Korea (9.18%), India (7.43%), Peoples
Republic of China (6.05%), and Thailand (5.04%). Asian countries with comparable food
price inflation rates in the same period include Singapore (2.66%), Laos (2.63%), Hong
Kong (2.95%), and Malaysia (3.65%). Japan (0.07%) and Nepal (1.52%) reported very
low inflation in domestic food prices.
However, in the first half of 2014, the consumer price index for food in the Philippines
went up to 6.5% (PSA), which reduced the growth in income per capita of Filipinos and
contributed to the increase in poverty incidence among families by 1.1 percentage points
in the first semester of 2014. Prices of rice, which is a staple food for low-income and
vulnerable families and usually accounts for around 20% of their budget, posted a
growth of 11.9% in the first half of 2014 from only 1.7% in the same period the previous
year.
Higher food prices in January to June 2014 led to a huge increase in food poverty
threshold and poverty threshold. In the same period, 10 out of the 17 regions
experienced double-digit increases in their poverty thresholds. The highest was observed
in Region VIII with 14.2 percent, possibly due to the lingering effects of Typhoon Yolanda,
then in NCR with 13.5 percent.
The increase in food prices slowed down towards the second half of 2015 and into the
first quarter of 2016. Despite this, NEDA (2016a) observed that the risk of higher food
prices remains, and that while the impact of El Nino is gradually weakening towards the
second half of 2016, the summer season may constrain farm output which may lead to
higher consumer prices.
3. BEYOND TRENDS: FOOD PRICE COMPARISON
Beyond the existing times series data, it is also important to look at static findings on
food prices in the Philippines compared to other countries.
The Philippine Institute for Development Studies (PIDS), in a discussion paper, noted
that the domestic price of rice and sugar in the Philippines in 2010 is higher than world
price [PIDS Discussion Paper, August 2014]. The discussion paper used domestic
resource cost and import price parity ratio as indicators of competitiveness. Based on a
comparison of price, the study showed that rice and sugar in the Philippines were not

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competitive in 2010 because rice was 43% more expensive and sugar was 28% more
expensive. (See Table 16)
In 2015, when the Global Food Security Index (GFSI) was released, it ranked the
Philippines 72nd among 109 countries with a score of 49.4 out of possible 100. The GFSI
is developed by the Economist Intelligence Unit (EIU) from 28 unique indicators and
considers affordability, availability, and quality and safety as core issues. Food security is
when people at all times have physical, social, and economic access to sufficient, safe and
nutritious food that meets their dietary needs and food preferences for a healthy and
active life.
The GFSI ranked Singapore as the worlds second most food secure next to the United
States. Among neighbors in the ASEAN, Malaysia ranked 34th overall with a score of 69,
Thailand ranked 52nd and Vietnam 65th. The Philippines has the following sub-
rankings: 73rd in affordability, 66th in availability, and 68th in quality and safety while
16.2 percent of the population was undernourished.
4. CAUSES OF HIGH AND VOLATILE RICE PRICES
In the Philippines, David [1997] attributes the 1995-1996 price peak as primarily a result
of policy failure, where, presumably due to political pressures from producers groups,
the government adopted a highly protectionist position regarding tariffs on sensitive
agricultural commodities. The study argues that the government could have prevented
the sharp increases in food prices by allowing more imports, and that the timing of
imports exacerbated seasonal price fluctuations as well. Imports of rice in 1995 were
only 240,000 MT as compared to the high of almost 600,000 MT in 1993, 540,000 MT in
1985, and 450,000 MT way back in 1972. Furthermore, whereas a major portion of
imports should have been in the country by the beginning of the lean season in July, only
4% of total rice imports in 1995 arrived towards the end of the month. It is important to
underscore that some of these reasons, the low importation and late decision to import
are also nominated as main causes of the food price spike in 2013-2014.
Since 1995, the most significant reform in rice policy was its compliance with WTO rules
and decisions, particularly on the articles on conversion of quantitative restrictions
(QRs) into equivalent tariffs. However, the Philippines obtained a Special Treatment, and
thus a QR, for rice up to 2005 (now extended to 2017). The Agricultural Tariffication Act
of 1996 (RA 8178) converted trade barriers into tariffs but this exempted rice. The
National Food Authority or NFA was mandated to undertake direct importation of rice or
allocate the import quota among licensed importers. Private sector importation began in
2008, which intensified in 2010 onwards. By 2011, the private sector (inclusive of farmer
organizations) was allowed to import 77% of that years import quota of 860,000 tons.
However, the annual import quota is now restricted to the minimum market access
owing to the self-sufficiency target of 100% by 2013, to be sustained up to 2016.
In the more recent global rice crisis of 2008, the price spike was viewed as partly caused
by the overreaction of both the major exporting countries such as India, Vietnam,
Thailand, and importing countries like the Philippines to a tightening global rice situation.
For the more recent price surge in 2013-2014, there were two views in general. One
view highlights the weaknesses in the decision-making process in the price stabilization
function (Montes, Briones and Cuevas, 2015). This view blames the shortcomings in
applying the established practices during natural disasters (such as Yolanda) and the
delays in decisions and delivery of imported rice on the part of the NFA. Montes, Briones
and Cuevas [2015] note that the efforts to reform the NFA itself led to the delays and

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indecisions. Habito [2015 and 2016] has an alternative view. He said the ambition of
self-sufficiency caused the rising prices. Habito notes that the insistence on rice self-
sufficiency makes most Filipinos food insecure by making rice much more expensive than
it needs to be, especially for the poor.21
Beyond the price surges, several studies note that rice and sugar prices are more
expensive in the Philippines compared to its neighbors for various reasons. Cuevas
[2015] cites a benchmarking study conducted by the IRRI and PhilRice [2015] indicates
that the cost of producing rice in the Philippines is higher compared to exporting
countries like India, Thailand and Vietnam. Rice is cheapest to produce in Vietnam. On
the flip side, the cost of production of palay is lower in the Philippines relative to China
and Indonesia. The comparison is based on crop year 2013 from irrigated rice growing
villages in East Asia. The study notes that the cost share of hired labor, as well as the cost
of credit, in the Philippines is one of the highest in the region. Montes, Briones and
Cuevas [2015], however, cautions against misinterpreting this study given that the cost
comparison is incomplete for not taking into account subsidies and not considering long-
term dynamics and possible distortions.
Cuevas [2015] notes that the marketing cost for producing rice is higher in the
Philippines than Thailand. Dawe et al (2008) showed that it is more expensive to
transport, dry, store, and mill a ton of dry paddy rice in the Philippines than in Thailand.
Gross marketing margins and percent mark-up between market levels are lower in
Thailand than in the Philippines. Compared to Vietnam, data from FAO and World Rice
Statistics [see Cuevas, 2015] also show that the marketing margin of rice in the
Philippines is also consistently higher (1992-2010).
Cuevas offers four bottlenecks. One, transport costs are higher in the Philippines
compared to other Southeast Asian countries. This is largely due to sea freight concerns
and inadequate infrastructure (i.e. roads and port facilities). Two, there are high
postharvest losses in the Philippines. Cuevas cites the PhilMech and PhilRice study
[2010] that estimate losses due to inadequate facilities at 16.47%. Drying, which is often
done through solar and pavement drying, results in 5.86% loss and accounts for 36% of
total postharvest losses. Low mill recovery also contributes to total losses. Three, the
farmers inadequate information on prices, production, and area harvested also
contributes to their dependence to traders and millers. Four, limited access to credit or
capital constrains rice farmers to financing mechanisms with high interest rates.
A benchmarking study on sugar was also conducted by the University of Asia and the
Pacific. The study states that production costs (e.g. inputs, hired labor) and low
investments in infrastructure are some of the major reasons why Philippine sugar is
more expensive to produce and purchase than Thailand sugar. Thailand also has a large
land mass as compared to the Philippines where inter-island travel entails huge costs
[Center for Food and Agri Business of the University of Asia and the Pacific, 2012].

21 The whole discussion on high food prices is often centered on rice because it is the crop that receives attention
(and budget) of government. It must be noted that while nothing is wrong with this focus, it unfortunately
crowds out or eases other farmers planting other crops. This focus incentivizes the planting of rice (and other
staples) because of subsidies that reduce the farmers production costs. More unfortunately still, other farmers
and areas have low efficiency in rice farming (for various reasons including having marginal lands). There are
no resources for structural adjustment and diversification projects for these rice farmers so they could not shift
away from rice. Further discussion on this is in the discussion on policy levers in agrarian reform and
agriculture.

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5. EFFECTS OF HIGH AND VOLATILE FOOD PRICES
Food price inflation erodes the purchasing power of households especially those with
low income. It can therefore undermine gains in poverty reduction and human
development. Many people who were poor before food price increases may fall into
severe poverty manifested by hunger and malnutrition, while those barely above the
poverty threshold may slip back into poverty. For the average household in developing
countries, food expenditures literally eat more than half the total budget. For the poor,
the share is much higher (around 60% to 70%). Estimates by the Asian Development
Bank show that in the Philippines, the increase in food prices helped push 1.72 million
Filipinos back into poverty annually (ADB, 2013, p.32).
High food prices, even temporarily reducing disposable income, may force households to
put up for sale their assets, reduce their spending on health, or pull out their
children from school to secure food. At the macroeconomic level, higher prices
also hurt countries that provide substantial food subsidies. In turn, the high
agriculture support for staple food and the subsidies for food take away the
public investment in other priority sectors such as health, education, and
infrastructure.

D. REVIEW OF RELATED POLICY STUDIES


A supply-demand scenario analysis of the Food Staples Sufficiency Program [Briones, 2010],
which ran scenarios from 2009 to 2020, projected that rice self-sufficiency is unlikely to be
achieved, even over the course of the decade (until 2020). Simply raising productivity
growth higher would still fail to eliminate imports. And raising barriers to rice imports
makes rice substantially more expensive. Briones [2010] argues that the goal of self-
sufficiency must not be equated to zero imports and protectionist measures against rice
imports should be discouraged. Rice importation policies need to be rationalized in order to
protect the interests of producers, consumers, and other market participants. Quantitative
restrictions on imports and other high barriers to entry raise the domestic price of rice and
allow the concentration of legally imported supplies in the hands of a few.
Briones [2010] estimates that if quantitative restrictions were eliminated and rice imports
were allowed to freely come in the country, total rice imports would have reached 4.2 million
tons. Such high level of imports would have brought down the retail price of rice to
PhP19.80/kg and PhP17.66/kg at the wholesale level (2013 data). Consumer surplus would
have increased by PhP178,075.65 million, albeit leading to a P33,985.01 million reduction in
producer surplus. In totality, the economy would have benefited by as much as
PhP138,464.10 million above the baseline of PhP442,485.98 million total economic surplus
in the rice market.
The NFA needs to be recapitalized at the same time that substantial policy and bureaucratic
changes in the national government and operational improvements at NFA have to be made
[Intal, 2012]. NFAs focus must be trimmed down towards primarily the management of the
strategic reserves, monitoring of the global rice market which will inform the government on
the tariff on rice imports, and regulating the private sector to prevent collusion and
monopoly at the local level. This will significantly reduce the budget spent by the
government on NFA subsidies. As a result, the amount that is released can be used more
productively for more productivity enhancing agricultural functions like agricultural
research and development, irrigation investments and improvement of facilities to monitor
implementation of standards by the private sector.

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Montes, Briones and Cuevas [2015] in their midterm review of the Food Staples Sufficiency
Program also recommended that NFA must be strengthened in its buffer stocking and price
stabilization functions. They recommend making the NFAs operational funding independent
of its buffer operations so that it will have more independence from market and political
pressures. If the private sector would be certain of its involvement in the international rice
trade, it might be tapped to give supply reliability. After all, the private sector needs to be
allowed to import (or export as the case may be) as is warranted in order to address
domestic supply and demand mismatches as well as to manage rice inventory and thereby
reduce cost. Intal (2012) notes that the private sector, unlike the NFA, can ink long-term
contracts with exporters, as such, they provide certainty in rice supply.
Consistent growth and rising labor productivity (more and better jobs) need the
transformation of the entire value chain towards improved competitiveness, a bigger variety
of goods produced, and wider dispersion of processing activities in the countryside.
Important to this expansion is logistics development to encourage storage and transport;
also important is setting up a utilities system which will give electricity and water on a
reliable and cost-effective basis (Briones, 2013).

E. THE AQUINO ADMINISTRATIONS POLICY: DIVERGENCE AND ADJUSTMENT


PROGRAMS
During the campaign period and the early parts of the PNoy administration, the government
committed the achievement of food sufficiency, which includes rice, corn, cassava and
banana. Montes et al [2015] notes that the Food Staples Sufficiency Program (FSSP) has
been an innovation from past centrally-planned and protectionist programs for the
following:
replacement of the seed subsidy approach to propagation of high quality seeds
(relying more on local and private entities),
irrigation interventions by getting existing irrigation services operational rather than
new construction of irrigation,
introduction of Sikat Saka that exploits innovations of microfinance but at lower cost
and creates a record of individual borrowers,
intervening in mechanization stimulated private mechanization from demonstration
effect
Because of these innovations, the FSSP, at mid-term was able to meet its targets on improved
productivity brought about by widened area for rice and enhanced yield as a result of
interventions in irrigation, access to credit and other program interventions [Montes,
Briones and Cuevas, 2015]. It also had good results in terms of irrigation, mechanization,
and access to credit. Importation was also limited particularly in comparison to the Arroyo
administration where at its peak, it was estimated that importation reached around 20% of
domestic demand.
It could be seen from most of the literature [Briones, Cuevas, Montes, David, Intal] and the
PNoy Administrations FSSP that the FSSP carried out many of the reform requirements to
make rice production sufficient, non-distorting, and less expensive. The divergence lies on
two aspects: a) timing of liberalization and b) provision of structural adjustment program
and diversification program.
While most of the researchers prefer the ending of the QR in 2017 and the entry into a tariff
regime and eventually to a free trade regime, the administration, at least as signaled by the

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FSSP, would make efforts to strengthen rice farmers so they could be better prepared for
liberalization and while doing so, market-distorting, inefficient and corruption-prone aspects
like seed and fertilizer subsidy were not considered. Existing irrigation systems were
rehabilitated and the quality of farm-to-market roads was improved (thicker and concrete).
It could be seen that the FSSP is in the direction towards removing protectionist policies.
The seeming divergence could also be seen in the details of the structural adjustment and
diversification programs to be provided to farmers who will remain planting rice and those
who need to migrate to other crops or to non-agricultural work. There appears to be no
consensus on what programs would be undertaken and as such, there are no details available.
The efforts of the DAR on support services including the ARCCESS project could be expanded
to serve as structural adjustment efforts (see details, the discussion on ARCCESS and AVAs).

IV. Policy Levers for Agrarian Reform and Agriculture


A. ADDRESSING RURAL POVERTY
The disjointed agricultural policy that favors a strong hand of the state does not reduce
poverty. The poor in agriculture - the landless, seasonal, manual workers are not the focus
of the agencies that work on agriculture. Moreover, their poverty as farmworkers is
exacerbated by high food prices because of the protectionist stance of government
particularly its bias for rice.
Three major recommendations are provided for the next administration. Efforts were
initiated on these but there was limited time.
First, consider the provision of jobs in rural areas. These need not be agriculture in nature
but these should not be in overcrowded cities. However, investments and jobs would not be
forthcoming without infrastructure and telecommunications so the national government
should provide these necessary public goods. Improving ports and inter-island travel to
reduce costs should also be a top priority. In creating the favorable environment for rural
employment, there is a need for a reform on institutional arrangements since the problem is
bigger than can be addressed by one agency to solve. The latter part of this paper focuses on
the proposed institutional arrangements. It is also important to note that since land sizes are
already small, providing the landless workers with land, like the ARBs, is also not a palatable
solution.
Second, continuously improve human capital. The efforts of TESDA to provide technical
vocational courses could enhance knowledge and upgrade the skills of the landless rural
workers so they could compete in the search for employment.
Third, there is a need to improve the supply of food to lessen consumer costs but this should
not be done without strategic support for smallholder farmers who will be affected by
importation. This proposal is expounded in the next section.
One option is to provide the landless workers with land. Part of the answer is availability of
land. Landholdings, as seen in the other parts of this paper, are already small and further
subdividing it might run counter to anti-poverty efforts. The other answer is the fact that
Section 22 of the CARL limits or excludes farmers based on a priority and landless rural
workers are not high in the order of priority. Technically, laws may be amended but again,
there might not be enough land for every landless farmer.
As such, perhaps the more feasible solution is to ensure job generation for landless rural
workers. This proposal rests on two requisites. First, it requires investments in rural areas

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that will generate employment and thus, the question is what will incentivize investors
(public and private) to set up their investments in Philippine countryside. Two, job
generation needs human capital investment where the workers would be provided with
knowledge and skills necessary to make them employable.

B. ON RICE SUFFICIENCY AND HIGH FOOD COSTS


The theory as well as the results of food sufficiency programs in the Philippines shows that
insisting on food self-sufficiency, usually equated with a no-import policy, as well as
government indecisions during critical periods hurt food consumers. Benefit cost analyses
also show that the support to rice producers do not make them globally competitive. In fact,
Briones [2013] even points out that no amount of assistance on irrigation could make rice
farming competitive. Others, like Habito, insist that food sufficiency as a policy and program
leads to high prices [Habito, 2015]. Roumasset [1999] states that objectives like food
security begets black-holes.
While rice producers stand to lose from opening the rice market to imports, smallholder
agriculture, in general, could benefit from channeling the budget and assistance from rice
production to other crops. It could be seen that insisting on a centrally-planned agriculture
frame hurt not only consumers but also non-rice smallholder farmers because resources are
being crowded out by rice producers. Since rice and other staples receive the governments
budget and attention, it unfortunately eases other farmers planting other crops. However,
not all rice farmers are efficient. But the focus on rice means less resources for structural
adjustment and diversification efforts for rice farmers so they could shift away from rice.
Moreover, it is unlikely that smallholder rice farmers take most of the benefits from
protectionist policies. Trade barriers usually benefit producers who could consolidate
resources and who could maximize the agricultural chain and sell to downstream domestic
markets.
In this context, two policy levers are being proposed for the consideration of the next
administration. In both levers, there is a need to assist rice farmers who are not efficient in
rice farming with structural adjustment programs so they could move out of rice or to move
to other endeavors. There is no sense in insisting on higher productivity and better
irrigation if the land is really marginal and if there are better ways of using the land and
human capital. Moreover, in both levers, effective and efficient rice farmers should be
assisted so they could also diversify to other crops and other sources of income to cushion
against shocks including entry of cheaper rice in the country.
If the decision is to remain protectionist, to retain the QR, or to put high barriers to entry
of imported rice, then support to consumers (including raising labor income and possibly
expanding the cash transfer program) needs to be provided so that poor consumers could
afford high food prices.
If the decision is to immediately remove the QR and to shift to a tariff regime or to a free
trade regime, then support should be immediately provided to less productive smallholder
rice farmers so they could move out of rice farming or out of agriculture. Some of the
proposals on this include providing cash transfers to cushion immediate the loss or
reduction in income. Farmers who will remain planting rice must have improved rice
productivity without incurring high production cost. However, a signal must be sent to the
farmers that they are not being abandoned. In the legislative arena, the Agricultural Rice
Tariff Act must be revised to include rice.

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Whether the decision is to immediately or gradually import rice, the point is to provide
assistance to different types of farmers (whether planting rice or not, whether productive or
not) so they could diversify their farms and be more resilient to shocks. Regardless of the
agricultural trade decision, support services aimed at diversification could mean providing
support services that are responsive to the needs of the farmers and the demands of the
market. These include the provision of public goods similar to the recommendations of
Balisacan, Sebastian and Associates [2006]: rural infrastructure like roads and irrigation,
information, market-oriented extension, research and development, favorable investment
climate, access to credit and crop insurance, market linkage, and transparent and
accountable agriculture governance. Moreover, other assistance such as the provision of
revenue-generating starter asset like select farm machines and equipment could also be
provided to strengthen the organizations of smallholder farmers. The experience in the DAR
ARCCESS project shows that the provision of the needed common service facilities gels and
solidifies farmers organizations and allows them to experience synchronized or organized
farming leading to improved scale. Some of the experiences in DAs FSSP show that the
distribution of farm equipment inspired private mechanization.
Regardless of whether to liberalize rice or not, there is a need to allow more competition in
the transport sector particularly in the management of ports. High transportation costs must
be curbed because this neither benefits smallholder farmers nor poor consumers.
Finally, whether the decision is to immediately or gradually import rice, there is a need to
continue the role of the NFA as the buffer stock of rice. The changes in climate and food
patterns not only in the Philippines but also in neighboring countries that have a competitive
advantage in rice must be anticipated. These countries might be constrained to export rice.
Vice versa, changing conditions in the Philippines might not allow domestic farmers to
produce the needed rice. In this regard, the NFA must determine the consumption
requirements and ensure that a sufficient stock is available. However, the NFA must not
control who should import. The private sector must be allowed to import rice into the
country to add to the buffer and to send a signal that there is sufficient supply.
A final note on food prices: Recommendations from smallholder farmers
Discussions with various smallholder farmers in the Philippines including the result of the
nationwide focus group discussions conducted by the Development Academy of the
Philippines [2016] show that smallholders, when asked for thoughts on how their agri-
income could improve, recommend putting up price control mechanisms to address the
buying price of their products. They lament the low price they put up with various traders
and thus want the government to set floor prices for agricultural goods. In many discussions,
smallholders would also want subsidy on the cost of inputs like seeds and fertilizers. They
recommend having a price ceiling for these important production inputs.
Listening to smallholders through participatory governance efforts could sway government
officials to agree to these protectionist suggestions. These are important and reasonable
recommendations coming from specific sub-sectors (e.g. rice farmers, sugar farmers).
However, these proposals should be viewed in light of the whole agricultural sector (in terms
of the resources that could be used for other crops) and in light of the countrys economic
and fiscal considerations (in terms of resources that could be used for other public goods like
health and education). Moreover, as discussed, the unintended consequences of food self-
sufficiency - high food prices and rice mono-cropping - should be managed by improving
peoples purchasing power. The other unintended consequence, the maintenance of costly

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and corruption-prone agencies, which are tasked to set price ceilings and price floors, should
be part of policy considerations.

C. CARP COMPLETION AND AGRICULTURE POLICIES


The non-favoring of traditional crops like rice, the setting up of mechanisms to put up rural
non-farm investments, and the freeing of land markets are often included in packets of
recommendations for improving agriculture and overall growth. Completing the agenda
usually include the swift completion of CARP and developing a flexible and responsive
market for land rights [World Bank, 2007; Briones, 2013]. While this package of proposals is
well-founded, a discussion on completing CARP in relation to secure property rights must
be closely examined.
Secure property rights means knowing who owns or possesses the property (including the
agricultural land), who benefits from it, and who should carry its costs. Secure property
rights means knowing who rightfully decides on and makes transactions over the land and
its produce. Non market distorting support services removing the QR, ending the seed and
fertilizer dispersal programs, providing infrastructure, eliminating asymmetry of
information, facilitating access to credit and building the capacity of smallholder farmers
will not be effective without secure property rights. If land tenure and ownership is unsure,
it is difficult to provide clear assistance including the incentives to diversify from rice or
totally from agriculture.
However, completing CARP should not just be on finishing the remaining land acquisition
and distribution (LAD) balance. That is a huge part particularly because the bulk of the
balance is in sugar-producing Negros Island where most of the landless farmers are below
the poverty line. However, completing CARP must also mean looking at the insecure land
tenure of smallholders from the land that had been distributed. Second generation land
problems are prevalent particularly the issue of actual land transfer (either through
succession or purchase/mortgage) without documentation and concomitant change of title
owner/s. The land administration system and the archaic taxation system make it very
difficult and expensive to transfer agrarian land title. The frowning on ARBs who sold or
pawned their awarded land added to the numerous under-the-radar transactions.
As such, there is a need to simplify and to remove the opaqueness and vagaries in the land
administration system, taxes on estate, filing of estate settlement and land registration to
make sure that agrarian land, which were informally transferred would be reflected in actual
land titles.
Aside from succession, the subdivision of collective land titles must also be completed to
truly complete CARP. Abruptly ending the program without subdividing the land based on
the preferences of ARBs (e.g. individual or small group land title) is perpetuating their land
tenure insecurity. This insecurity could contribute to difficulties in deciding to diversify out
of rice or out of agriculture.

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Analysis of the Support Services
Program and Its Implementation
This section discusses the implementation of the support services delivery of CARP since it
started. It begins with a clear context: there were demographic factors that were not
considered (e.g. the aging of beneficiaries), events that were not foreseen (e.g. accession to
WTO), and agrarian relations that were not clearly factored (e.g. the difference between
tenants and farmworkers) in terms of managing their own agri-enterprise. All of these
affected the implementation of DARs support services.
In discussing the actual efforts at support service for beneficiaries22, this section attempts to
put into context the decision points that were made in the past e.g. the lack of resources
entailed the seeking of ODA. This section elucidates that while the decisions and efforts were
a product of times and contexts, the situation has clearly changed. Support services during
the time of the PNoy administration provided public goods that strengthened farmers
groups so they would have better bargaining power. In this case, the improved leverage
included having economies of scale or volume of production that contributed to enhancing
their farm-based income.

I. Unconsidered and Unforeseen Factors, Events, and Relations


6. GROWING RURAL POPULATION

A. IN 1972, UNCONSIDERED FACTORS


when Presidential Decree 27 was promulgated, the Philippines was estimated to have a
rural population of 25 million. In 1988 when the Comprehensive Agrarian Reform
Program was instituted, Philippine rural population had risen to 31.5 million [WDI,
2015]. By 2010 rural population stood at 54.7 million [PSA, 2013] which is double that of
the 1972 rural population.
In contrast, agricultural land area in 1980 was estimated at 9.7 million hectares which
increased to 9.97 million hectares in 1991 but currently is estimated to be 9.67 million
hectares. [PSA, 2013]
There has, thus, been no substantial increase in agricultural lands over the years while
rural population has increased substantially. Thus the land reform program cannot, by
itself, be a solution to rural poverty. There is just not enough land for distribution to
landless farmers and rural workers.
1. AGING AGRARIAN REFORM BENEFICIARIES
It is a sordid joke but it is something that has grown clear: agrarian reform policies and
programs assumed a static situation where the beneficiaries would remain as the farmer
cultivator and leader/member of his/her organization. The projects insist on their
involvement in agricultural extension services and trainings on organizational
management. Moreover, the agrarian reform law also did not provide for succession. It

22 Formerly known as Program Beneficiaries Development (PBD) but recently renamed Technical Advisory and
Support Services (TASS).

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also did not provide for the transfer of awarded land when the beneficiary grows too old
to till the land.
2. THE EFFECT OF DIFFERENCE BETWEEN TENANTS AND FARMWORKERS (REGULAR AND
SEASONAL) ON POST-DISTRIBUTION AGRI-ENTERPRISES
When the CARL decided to expand the coverage of agrarian reform to plantations and
haciendas, it did not take into account prevailing farm and employment practices in these
plantations and haciendas. This neglect resulted in issues related to the provision of
support services and the handling of post-distribution agri-enterprises.
Most former tenants knew the supply chain, from production to markets. When land was
awarded to them, most of them would know how to manage their land and make these
productive. Human capital was almost a non-issue. In most cases, their challenge was
their lack of agricultural financing, which was provided by their former landlords. To an
extent, these tenants are similar to regular farmworkers in knowing their production and
processing of crops. However, regular farmworkers would have difficulty managing ARB
cooperatives, which were snowballed from their old workers cooperatives or labor
unions.
In contrast, the more feudal hacienda system that predominate the sugar lands of Negros
had no tenants and few regular employees since most farmworkers were
temporary/seasonal workers and were usually organized into work gangs. Many were
migrants from other places. Some own land where they live and take on temporary farm
work in other places while waiting to harvest their own land. Seasonal farmworkers,
when turned into ARBs, would often have a hard time making their land productive and
earning from their awarded land. Human capital and financial wherewithal are usually
not available to immediately undertake farm and enterprise work.

B. UNFORESEEN EVENTS
1. DEVOLUTION OF AGRICULTURAL EXTENSION
While the DAR provides support services to agrarian reform beneficiaries, its
intervention is limited since most of the fund for assistance for the agriculture sector and
the farmers are with the Department of Agriculture. It was originally conceived that the
Department of Agriculture (DA) would be the agency that will provide technical and
other assistance to the ARBs such as the provision of agricultural extension services,
provision of agricultural inputs, assistance in marketing, facilitation of credit access and
provision for rural infrastructure.
But the Local Government Code of 1991 devolved agricultural extension and on-site
research services and facilities to barangays, municipalities, and provinces. The
supervision of agricultural extension workers was turned over to local governments and
is now the responsibility of provincial and municipal agriculturists. The power and
responsibilities of the Department of Agriculture are now only at the national and
regional levels only. It could be surmised that this is the reason why DA became focused
on improving the productivity of crops.
As a result of devolution provincial and municipal level programs were disrupted. Many
LGUs were not prepared or lacked the resources to implement agriculture-related
programs previously undertaken by the national government in their respective
provinces and municipalities.

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2. PHILIPPINE ACCESSION TO THE WTO AND COMMITMENTS TO THE ASEAN
In December 1994, the Philippine Senate ratified the Uruguay Round of the General
Agreement on Tariffs and Trade (GATT) signaling the Philippines accession to the World
Trade Organization (WTO). This committed the Philippine government to, among others,
the Agreement on Agriculture and this commitment was actualized in subsequent
amendments to existing laws and policies which were not aligned with the rules of the
WTO.
In 1992, the member-states of the ASEAN established the ASEAN Free Trade Area (AFTA)
and committed to progressively reduce tariffs to a 05 percent band within a specified
timetable under the Common Effective Preferential Tariff (CEPT). Tariff reduction was
further accelerated under the ASEAN Trade in Goods Agreement (ATIGA). The
Philippines committed to reduce rice and sugar tariffs to 35 percent and 5 percent
respectively by 2015 (BITR 2012).
Thus, in the middle of the implementation of the agrarian reform program, the
Philippines committed itself to the progressive lowering of tariff barriers of all
agricultural products as well as the easing off, and eventually removing, quantitative
restrictions on rice imports. This exposed agrarian reform beneficiaries to competition
imported agricultural produce, many of which were cheaper than local produce.

II. Support Services Delivery Mechanism


A. SUPPORT SERVICES DELIVERY MECHANISM BEFORE THE PNOY
ADMINISTRATION
Complementary to the land distribution efforts, CARP required the delivery of integrated and
multi-sector support services consisting of production technologies, credit and marketing
assistance, organizational capacity development and rural essential infrastructure. The
inadequacy of government resources for support services was another critical concern that
needs to be addressed to achieve the needed impact of CARP.
DAR adopted the agrarian reform community (ARC) development approach in 1992 and
pursued a resource mobilization strategy for program beneficiaries development to provide
the needed resources for essential support services. Through the ARC strategy, barangays or
cluster of barangays with the highest concentration of ARBs were identified and eventually
transformed the ARCs as focus areas and convergence points to channel resources and
synchronize the delivery of support services. The ARC strategy made it easier for DAR to
encourage other CARP implementing agencies to provide technical and financial assistance
from their regular funds for support services.
The initial gains from the ARC strategy were further enhanced with promulgation of Republic
Act 7905 that was issued in 1995 to strengthen CARP implementation. The law stipulated the
definition of ARC as a barangay or cluster of barangays primarily composed and managed by
agrarian reform beneficiaries who shall be willing to be organized and to undertake the
integrated development of the area and/or their organizations. RA 7905 authorized DAR to
package and obtain grants and other forms of financial assistance from any source.
Given the authority, DAR embarked in more aggressive resource mobilization in 1993 to fill
in the funding gaps in delivery of support services to ARCs. As a tactical measure, DAR
diligently promoted the ARC strategy as a platform for development cooperation and
undertook a thorough marketing effort that eventually paved the way for multilateral and

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bilateral support to program beneficiaries development. DAR was able to access official
development assistance (ODA) by presenting ARC development packages focused on a
defined and manageable area with a complementary menu of development interventions,
from institutional capacity building to agri-enterprise development and support rural
infrastructure. The package of development interventions in the ARCs triggered
considerable interest of international development partners and donor institutions to extend
loans and grant assistance to DAR.
The considerable inflow of ODA from multi-lateral and bilateral development partners
became the significant source of needed funds to supplement limited government budget
particularly for program beneficiaries development of CARP. For the past 2 decades (1992-
2012), investment in the ARCs has been substantial, encompassing a wide spectrum of
development assistance to ARBs including, smallholder farmers, landless workers,
fisherfolks, indigenous people, rural women and the other marginalized sector in the rural
communities. The increasing ODA portfolio of DAR manifested the strong support and
confidence of donor communities and international financial institutions to implement
development cooperation programs.
DARs foreign assisted projects (FAPs) enabled the transformation of ARCs into economic
growth points in rural countryside and continue to serve as convergence areas for inter-
agency collaboration and meaningful partnership with international development partners.
The FAPs are aimed to contribute significantly in providing the necessary support services
with the end goal of uplifting the socio-economic status of the beneficiaries of CARP. The
FAPs provided DAR considerable leverage in implementing integrated area-focused
development that enabled ARBs to expand production areas with better market
opportunities and access to credit and to engage in agri-enterprises business, and increase
income with more livelihood opportunities.
Focused on agrarian reform communities (ARCs) - Agrarian Reform Communities are
clusters of barangays or villages which are composed and managed by agrarian reform
beneficiaries who shall be willing to be organized and to undertake the integrated
development of an area and/or their organizations/cooperatives (RA 9700). ARCs were
designed as nucleus estate, kibbutz, or moshav for integrated economic development. ARCs
were intended to group together farmer beneficiaries or their cooperatives under one
umbrella (sponsorship speech of Rep. Cojuangco on HB 13875 and sponsorship speech of
SB 2019 by Sen. Alvarez).
When RA 9700 was being deliberated by both the Senate and the House of Representatives,
ARCs were envisioned to be provided with post-harvest facilities such as warehouses and
storage facilities including refrigeration equipment for perishable crops; moreover, in ARCs,
processing plants such as rice mills, corn dryers, copra dryers and coconut oil mills will be
set up depending on the situation and demand of each ARC (sponsorship speech of Rep.
Cojuangco on HB 13875 and sponsorship speech of SB 2019 by Sen. Alvarez). This was the
reason why the DAR established ARCs. The DAR and other stakeholders of CARP viewed
ARCs as the vehicle of assistance intended for ARBs.
The ARCs were clever mechanisms at the time when DAR had limited resources for support
services. The ARCs, particularly the ARC Development Plans, were utilized to propose and
develop foreign-assisted projects.
The preliminary findings of the DAR-commissioned Philippine for Economic Development
(PCED) study notes that poverty incidence in ARCs went down faster than non-ARCs. The

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full results of the study will be available in June 2016 (see study details in the section on
policy studies).

B. SUPPORT SERVICES DELIVERY MECHANISM DURING THE PNOY


ADMINISTRATION
One of the critical efforts introduced during this administration was the strengthening of the
smallholder farmers organizations in ARCs and outside of ARCs (also called agrarian reform
areas) to complement the crafting of ARC Development Plans. To complement the creation
of ARCs, DAR endeavored to facilitate discussions with and eventually helped farmers
organizations become strong and more resilient. The unit of assistance, and later on, of
analysis and monitoring, became the farmers organizations. This was evident in the creation
of new projects and business models that provided direct and strategic assistance to farmers
organizations.
1. ARCCESS
The Agrarian Reform Community Connectivity and Economic Support Services
(ARCCESS) was a project conceptualized in 2010 to 2011 and eventually rolled out
starting 2012. The ARCCESS project aims to address the high production cost, low profit
and thus, low agri-income of smallholder farmers. These goals will be met by
strengthening farmers organizations by providing them access to important goods (such
as farm machines and equipment) and services (capacity building and credit facilitation).
In receiving these interventions, farmer-members bond together to converse about how
to implement their sub-project. The ARCCESS project assisted farmers organizations in
synchronizing and organizing the activities of smallholder farmers in order to attain
economies of scale and agricultural efficiency. In so doing, numerous ARCCESS
subprojects were documented to obtain lessened production cost and improved net
income.
In a sense, the ARCCESS project addresses the gaps in the provision of support services.
It has two major components: first, the provision of professional services and second, the
provision of common service facilities or farm-machines and equipment to farmers
organizations. (See Table 17 for the Framework of the ARCCESS Project)
Professional services are technical services which were performed by independent
organizations civil society organizations, private institutions, public institutions - with
proven track record in the provision of such services. Their main goal was to increase
the farm income of ARBs and other smallholders by improving the capacity of the
farmers organizations to undertake agri-business activities. As such, the provided
services were usually on, (a) market-oriented agri-technology or agri-extension, and (b)
business development. The service providers conducted training, mentoring and
coaching activities with smallholders and farmers organizations on organizational
development, product or crop development, operational management and financial
management. In some cases, back office support such as bookkeeping and record-
keeping were supplied by the professional service providers that were contracted by the
DAR to assist the smallholder farmers organizations. The ARCCESS project did not
provide one-size-fits-all assistance.
The other component of the ARCCESS project was the provision of common service
facilities or CSF to smallholder farmers organizations. CSFs are farm implements,
equipment and machineries that were given as grant to farmers organizations on
condition that these will be used as a business asset. As a business asset, the CSF exacted

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the payment of user fees that were utilized to sustain the operation and maintenance of
the CSFs. In many cases, the user fees were used by the farmers organizations to buy
new equipment or better implements. The CSFs were downloaded to farmers
organizations with accompanying professional services.
Aside from professional services (business development and agri-extension) and
common service facilities, the ARCCESS project also included three other important
components: enabling access to credit and crop insurance, provision of rural
infrastructure, improving the policy environment.
Enabling access to credit and crop insurance meant developing new loan packages
(including the Agrarian Production Credit Program), providing business and financial
assistance to farmers organizations, and helping financial institutions manage their risks
attendant to dealing with farmers: these include credit guarantees, weather-based
insurance, and collation of credit information.
Provision of rural infrastructure (e.g. irrigation, post-harvest facilities, and local roads)
enhanced the productivity, reduced farm inefficiencies, and improved the mobility of
goods and people. The DA and DAR provided clear mechanisms for prioritizing the
provision of rural infrastructure, particularly on farm-to-market roads. Among the
criterion for prioritization are the road network and connectivity validated through geo-
tagged maps, the influence area of the road where it is located in an area with highest
number of poor but with economic potentials for agri-enterprise development and the
availability of partnership between smallholder farmers and investors.
Improving the policy environment meant providing assistance to enhance the
smallholder farmers property rights. This included the stabilization of their land tenure
through subdivision of collective title and transfer of land title to heirs and others. Aside
from this, efforts were also made to ensure simplify the procedures for registering and
re-registering farmers organizations and cooperatives (with the SEC and CDA) and
putting them in the formal economy (with the BIR).
The ARCCESS project had clear exit mechanisms (since it was a project that provided
subsidies particularly in the form of professional services and common service facilities).
The ARCCESS project ends assistance to farmers organizations through three
mechanisms: i) Farmers organizations developed their capacity to sustain their
agricultural enterprise and they no longer need their professional service providers; ii)
Farmers organizations decided to retain their partnership with their service providers
using their own funds or they were able to source other means to fund their service
providers; and iii) Farmers organizations failed to make their enterprise fly and as such,
in extreme cases, the CSF were transferred to other farmers groups.
Under the ARCCESS project, two types of subprojects emerged as good models of support
services that synchronize the efforts of smallholder farmers without compromising their
property rights. These are the sugarcane block farms and the subprojects on cacao
contract growing.
2. SUGARCANE BLOCK FARMS
Sugarcane block farming is the synchronization of the activities in small sugar plots so
there was organized planting, buying of inputs, hauling of canes, and bidding of
warehouse receipts. It is the management of small plots of sugar land into a business
unit composed of 30 to 150 hectares. This business unit, managed by the farmers
organizations, implements the activities of the block farm in order to reach scale and

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enjoy reduced cost from buying inputs and undertaking farm to marketing logistics. This
operational management of small sugar farms produces scale without consolidating land
ownership or threatening the property rights of the farmers.
The following are some of the elements of sugarcane block farming:
The primary element in block farming is the strengthening of farmers juridical entities.
The farmers organizations manage the block farm, at first, with the assistance of
professional business development specialists and agri-extension workers. The
organizations also manage the CSF, the production financing of the participants, and the
bidding of the quedan or the warehouse receipts. It is surmised that sugar block farms
are succeeding because the government tapped their farmers organizations as business
unit. The farmers groups, which are complex, adaptive systems [Ostrom, 1999], are able
to enforce agreements [Greif, 2005] within block farms.
The second element is the provision and transfer of agri-technology and agri-extension
services as well as business development services including the provision of back office
assistance through record keeping and bookkeeping. The third element is the
synchronized buying of inputs resulting in discount rates. When inputs like canes,
fertilizers, herbicides and pesticides are purchased in bulk and before other farmers are
start buying their inputs, farmers from block farms benefit from wholesale prices and
early buying discounts.
The fourth element is organized harvesting, hauling and marketing of the canes in order
to reduce trucking costs. The consolidated handling of the quedan or the warehouse
receipt could also lead to better price [Capacio and De Los Reyes, 2016].
The fifth element is farm mechanization. The DA, DAR and SRA provided farm machines
and equipment to block farms as business assets. The sixth element is access to financing.
The farmers need resources to be able to utilize high-yielding varieties, buy inputs, hire
farm workers, and hire farm machines and trucking services. The farmers also need
resources for consumption, education, health and other household requirements given
the long gestation of sugarcanes [Capacio and De Los Reyes, 2016].
With these elements in place, the first year of sugarcane block farm implementation in
the Philippines showed encouraging results. In pilot areas/organizations, block farms
gained an average increase of 32.8% in terms of cane yield per hectare. In peso terms,
this could translate to an income increase of PhP 25,000 per hectare at current prices.
(See Table 18 for production increase in pilot sugar cane block farms)
3. CONTRACT GROWING ON CACAO
The cacao contract growing subproject, a partnership among smallholder farmers
organizations, the DAR, and Kennemer Food International (KFI), has been ongoing since
2013. Some of the ARCCESS subprojects that were engaged in cacao production decided
to partner with KFI which sells their produce to Mars Chocolate. The smallholder
farmers purchase their seeds from KFI through agricultural financing from LANDBANK
and during harvest, the farmers sell their produce to Kennemer. In this partnership, the
DAR shouldered the initial costs of meetings or the getting to know you phase to lessen
the farmers and Kennemers transaction costs. The DAR also provided business
development services to farmers organizations. In cacao areas that were also covered
by the Second Agrarian Reform Communities Project (ARCP II), funded by the Asian
Development Bank, the cacao subprojects which is one of the key activities under agri-

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enterprise component also received rural infrastructure such as farm to market roads
and post-harvest facilities.
4. THE MISCONCEPTION ABOUT THE ARCCESS CSF:
When the project was being rolled out, there were misconceptions about its objectives
and project concept. One of the misinterpretation is in the provision of free common
service facilities or farm machines and equipment. Others initially thought the DAR was
undertaking a machinery dispersal program. Others thought the DAR was providing the
full package of CSF requirements of the farmers groups.
A Congressman even raised the issue of tractors and trucks that were allegedly
overpriced and provided with wrong implements.
The common service facilities intends to contribute to the strengthening of smallholder
farmers organizations so they could synchronize their members farming activities and
reach volume or scale in buying inputs, undertaking production, and marketing their
products. The CSF were meant to help improve the farmers bargaining power, reduce
their costs, and improve their income.
Given this model, the DAR ARCCESS project DID NOT MEAN to:
Provide the full package to farmers organizations - The assistance was meant to
provide the initial CSF which would earn the net income that is sufficient for the
groups to operate, maintain and replace the starter package when the organizations
are ready to scale up or expand their operations. The CSF were meant to induce
organized and synchronized management of small farms and not to address all the
farm mechanization requirements.
Assist smallholder farmers infinitely - In the design, there are clear entry and exit
mechanisms. The entry mechanisms are to look for smallholder farmers
organizations that are ready to undertake agricultural enterprises and to provide
these with tailor-fit assistance (including CSF). The exit mechanism is to ensure than
in 2 to 3 years, the farmers groups could already manage their agri-enterprises, be
able to pay for their service providers and buy replacement, new, or additional CSF.
Give assistance to all smallholder farmers organizations - The intent is to reach as
many smallholders and ARBs as possible through business hubs and service areas
that could benefit from spillover knowledge and skills and use of CSF (provided user
fees are paid).
As a business and starter asset, the DAR (through its own Bids and Awards Committee or
through the Procurement Service) wanted to procure 120 HP tractors because these will
earn more user fees among members and could be used by other farmers in service areas
during downtime. In this case, 120 HP tractors could use better implements (e.g.
subsoiler and mouldboard plow) and could result in better land preparation. However,
90 HP tractors were also procured for areas where these were the request of farmers
groups and during the period when supply availability was mostly 90 HP.
In Negros Occidental, at least three of the smallholder farmers organizations, which are
part of the sugarcane block farm project, were able to purchase improved and additional
implements out of the positive income from their 120HP tractors and implements. One
of these organizations was able to give a loan (without interest) to another smallholder
organization using its tractor proceeds.

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The Occidental Negros Agrarian Reform Planters Association (ONARBPA) was provided
with three 120HP tractors and implements so they will be able to effectively manage
their total service area of 610 hectares covering 782 smallholder sugar farmers. Like
other organizations, they were likewise given agri-extension as well as business
development services to aide in their farm management.
In their latest assessment of income and expenses (6 August 2015), their gross income
from use of these CSF was PhP 1,940,478.59 and their expenses amounted to PhP
934,217.97 (to cover fuel, payment of tractor operator). (See Table 19). This latest
report is consistent with the trend of increasing income and expenses in sugar block
farms.
Out of their net income, ONARBPA was able to undertake the following activities:
Maintain their tractors through change oil and purchase of new tires;
Purchase Geographical Positioning System (GPS) that were used during the survey of
actual area for plowing and harrowing. The GPS amounted to PhP 23,000.00;
Purchase 90HP tractor amounting to PhP 2,200,000.00;
Bought a mouldboard for improved land preparation. This cost them PhP 110,000.00
Bought 2 disc plow amounting to PhP 140,000.00 each;
Provided a loan to Nagasi ARB Cooperative (NARC) amounting to PhP 140,000.00.
NARC used to buy 2 disc plow; and
Invested PhP 500,000.00 to cultivate 6-hectare sugarcane farm.
Like ONARBPA, the NARC was provided with a 120HP tractor with implements. Their
income and expenses from these CSF are steadily increasing. Out of their net income,
NARC was able to maintain their equipment, and purchase a second plow amounting to
PhP 35,000.00. Through a PhP 140,000.00 loan from ONARBPA, whom they consider
their big brother organization, they were able to purchase 2 disc plow.
Out of their positive net income from their 120HP tractor and implements, the
smallholder farmers in Sag-ang in La Castellana were able to purchase a furrower
amounting to PhP 81,000.00. They also purchased two units of GPS amounting to PhP
35,000.00. For their part, the Gen. Malvar ARB MPC was given a 120HP tractor. Out of
their net income, they purchased one unit of GPS amounting to PhP 23,000.00.
5. PARTNERSHIP AGAINST HUNGER AND POVERTY.
DAR, DSWD and DA are undertaking collaborative efforts to increase farm productivity
and income, ensure food security and mitigate levels of malnourishment in the rural
communities through the Partnership Against Hunger and Poverty (PAHP). This
partnership program builds on the success of the Brazilian Government in providing
agricultural extension services linked to the nutrition needs of the national feeding
program. The direct recipients and key stakeholders of the PAHP are the
Day care children and parents group
Smallholder farmers organizations and family farms, and
Participating local government units (LGUs) and collaborating national government
agencies.

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Under the PAHP, pre-schoolers enrolled in the day care children under the DSWD
Supplementary Feeding Program will benefit from the nutritional gains of fresh and
chemical-free vegetables that will be supplied by the farmer organizations under the
agri-enterprise development of DAR and the food security program of DA. Farmer
organizations will benefit from increased income through organized production and
logistics as well as market-referenced price of their produce. The PAHP will enhance the
delivery mechanism of social and economic services in the rural communities. DAR and
DA provide essential support services (business development and agri-extension) and
business assets (farm machines and equipment) to the farmer organizations to produce
the required food items for the supplementary feeding program. The DSWD and the local
government units (LGUs) render assistance through determining the nutritional needs of
children, organizing the parents for food preparation and provision of funds for the
supplementary feeding program in the Day Care Centers.
During the initial phase of PAHP implementation, the United Nations agencies,
particularly the World Food Programme (WFP) and the Food and Agriculture
Organization (FAO) extended technical assistance and advisory services on the
production and consumption of the food items for the supplementary feeding program.
The implementation of PAHP, which was pilot-tested in the provinces of Camarines Sur,
Camarines Norte and Sorsogon in Region V was rolled out in priority municipalities in
Regions VIII (Eastern Visayas) and IX (Zamboanga Peninsula). DAR and DA continue to
provide technical assistance to ARC organizations and family farms in the production of
food items required by DSWD for the supplementary feeding programs in the Day Care
Centers. The PAHP Convergence Team at the regional and provincial levels are closely
coordinating with the local government units and local organizations the implementation
of agreed PAHP work and financial plan in the respective municipalities.
DSWD and DAR has prepared and submitted to the Government Procurement Policy
Board (GPPB) the proposed Community Participation Procurement program that would
allow DSWD and LGU to directly purchase food items from agrarian reform beneficiary
organizations (ARBOs) and farmers association involved in the PAHP.
DAR conducted regional planning and budgeting workshops to ensure fund availability
for PAHP activities from its regular budget for 2016 and 2017. In like manner, DA has
allocated funds to provide technical assistance and production inputs to participating
farmers organizations. DSWD has also allocated its budgetary support for
supplementary feeding program and support to the parent service providers in the day
care centers. The PAHP Convergence Team is assisting the LGUs in the monitoring of the
PAHP activities.
The Memorandum of Understanding (MOU) between the DAR, DA and DSWD has been
prepared and is awaiting the signatures of the Secretaries. The signing of MOU will allow
the roll-out and expansion of the PAHP to other regions in the country.
DAR, WFP and IFAD had initial discussions and agreement on the integration of the PAHP
in the on-going foreign assisted projects of DAR such as the Convergence on Value Chain
Enhancement for Rural Growth and Empowerment (ConVERGE) as a social protection
component.
DAR, DSWD and DA have adopted the following strategic measures to ensure
sustainability and institutionalization of the PAHP;

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The establishment of PAHP Convergence Team at the Regional and Provincial level
comprising of representatives from DAR, DA and DSWD to oversee and coordinate
PAHP implementation at the field levels.
An agreed-upon procurement procedure to include policies on market-referenced
pricing to ensure that the market is not distorted when government offices purchase
in bulk from smallholder farmers organizations. DAR, DA and DSWD have prepared a
community participation procurement plan which has been submitted to the
Government Procurement Policy Board (GPPB) for approval.
Provision of regular budgetary appropriation for PAHP implementation in the
covered regions. DAR will continue to allocate funds through its agri-enterprise and
capacity building programs, DA through its food production and agri-extension
programs, and DSWD through its Supplementary Feeding Program and Sustainable
Livelihood Programs.
Continuing collaborative efforts of DSWD, DA, DAR and LGU in sustaining the gains of
the initial phase of PAHP implementation toward rolling out the PAHP in other
regions of the country.
Lobby for Legislative support for PAHP implementation and budgetary support for a
nation-wide coverage.
Drawing on experience gained and lessons learned from the initial phase of
implementation, and building on the support of WFP and FAO, the PAHP will also lend
support to the School Feeding Programs of the Department of Education (DepEd), the
Feeding Program for Severely Malnourished of the Department of Health (DOH), the food
requirement for inmates of the Department of the Interior and Local Government (DILG)
and the Community Canteens for affordable meals workers and laborers in special
economic zones.

C. FOREIGN-ASSISTED PROJECTS (FAPS)


1. FAPS BEFORE THE PNOY ADMINISTRATION
During the period 1992 to 2010, bilateral and multi-lateral financial institutions
manifested strong support for the ARC development strategy of DAR with the
implementation of 61 FAPs with a total amount of PhP76.79 billion. Of this amount, 66%
were funded through loans while 9% came from grant assistance. The balance of 25%
was the counterpart of government that was provided in cash or in kind and sourced
from the national government budget, participating local government units, ARBOs and
farmer cooperatives. (See Table 20)
The DAR consistently showed that it could implement projects with minimal cost.
Internal assessments of past and existing projects as of 2010 also showed that household
income increases could be attributed to foreign-assisted projects or FAPs. (See Table 21)
Beyond its results, the DARs PBD performance, specifically its implementation of
foreign-assisted projects, is well-appreciated by donors and the National Economic
Development Agency (NEDA). In NEDA portfolio reviews, the DAR has been commended
for the following:

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Satisfactory achievement of project objectives (ARISP 2, ARCDP 2, ARCP 1, STARCM,
WMCIP, NMCIREMP)23 ;
Consistent satisfactory performance in disbursement and availment of resources;
Demand-driven approach to rural development;
Establishment of DARs unified Project Management Office (DAR-FAPsO), which
serves as an oversight unit of all ongoing FAPs; and
Establishment of a results monitoring and evaluation system, which is an effective
tool for project management.
2. FAPS DURING THE PNOY ADMINISTRATION
By the time the PNoy administration came in 2010, the DAR has gained a solid track
record among foreign financial institutions (e.g. World Bank, ADB, CIDA, JICA, and EU) for
being a credible partner in agrarian, agriculture and rural development projects. During
this time, DAR continued to engage ODA support to further enhance meaningful
collaboration and productive partnership with donor organizations and financial
institutions to sustain the gains of FAPs in the ARCs.
By end December 2015, the cumulative number of FAPs increased to sixty six (66)
projects with a total investment cost of PhP84.37 billion that was sourced from loan
proceeds and grant assistance including the GOP counterpart. Of these 66 FAPs, 60
projects worth PhP42.37 billion were completed during the period while the remaining
six (6) projects amounting to PhP42 billion are in various stages of Project
implementation. There were 9 projects in the pipeline that were being prepared and
packaged for resource mobilization and possible funding assistance from donor
organizations and multi-lateral financial institutions. (See Table 220
ODA from bilateral and multi-lateral development partners provided DAR considerable
leverage in pursuing integrated area-focused development. It enabled ARBs to expand
production areas with better market opportunities and access to credit, engage in
agribusiness, and increase income with more livelihood opportunities.
a. Agrarian Reform Infrastructure Support Project Phase III (ARISP III)
The ARISP III was designed to provide basic support services to 136 ARCs
nationwide to boost their growth potentials for agricultural production and
agribusiness and increase farm incomes of ARBs. This JICA-supported Project include
investments in promoting ARC connectivity by consolidating and marketing the farm
products from the cluster of ARCs to increase value-added and spread the benefits of
economic growth to a greater number of small farmers.
The Project commenced operation in 2008 and was projected to be physically
completed in August 2014. The Project experienced delays during the Project start-
up particularly on the operational issues associated with the difficulties of
participating LGUs in putting-up the required 50% equity and prolonged pre-
engineering works and procurement process. To address this problem, DAR obtained

23 Note on acronyms. ARISP means Agrarian Reform Infrastructure Support Project, ARCDP means Agrarian
Reform Communities Development Project, ARCP means Agrarian Reform Communities Project, STARCM
means Support to Agrarian Reform in Central Mindanao, WMCIP means Western Mindanao Community
Initiatives Project, while NMCIREMP means Northern Mindanao Community Initiatives and Resource
Management Project.

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the approval of the NEDA Investment Coordination Committee (ICC) for one-year
extension to December 2015. The Project loan closing date is slated in April 2017.
As of 15 March 2016, the Project achieved the following:
An over-all physical accomplishment of 95.40% with the completion of all the
approved institutional and agriculture and agribusiness development support
subprojects.
A total of 394 support rural infrastructure subprojects were completed. Of the
completed subprojects, 162 are farm-to-market roads (FMRs) and 12 units of
bridges, 120 irrigation facilities, 68 post-harvest facilities (PHF) and 70 units of
potable water supply (PWS) and six (6) Agrarian Information and Marketing
Centers (AIM-Cs).
Financial performance progress was 99% with the funds almost fully obligated.
There were 68,000 ARBs who participated and benefitted from the
complementation of development support services.
To date, there are still 44 on-going rural infrastructure subprojects whose
implementation will be completed during the 3rd quarter of 2016. These consist of
16 FMRs, 2 bridges, 12 irrigation facilities, 8 PWS and 6 PHF. The delay in
implementation of these remaining subprojects were caused by the delays in the
procurement process by the implementing agencies like DPWH for FMRs and bridges
and NIA for irrigation facilities, and adverse weather conditions affecting the
schedules of civil works and construction activities being undertaken by the
implementing agencies.
DAR secured the approval of the NEDA/ICC approval on the extension of the Project
and the endorsement of DOF for the increase in cash deposit and corresponding
reallocation of the ARISP III loan proceeds. DAR also obtained the concurrence of
JICA on the Project extension and the increase in cash deposits and reallocation of
loan proceeds. Payments due to NIA and DPWH are now being processed which are
expected to expedite completion of the remaining subprojects during 2016.
The remaining project supervision and monitoring of Project activities including the
preparation of Project Completion Report are now mainstreamed to the Project
Management Service (PMS) of DAR. Processing of full payments and closing of
financial books of accounts are also mainstreamed to the Finance and Management
Service of DAR.
b. Second Agrarian Reform Communities Project (ARCP II)
This Project supported the PNoy administration policy of providing support services
not only to ARCs but also to non-ARCs in the Project covered areas in Southern
Philippines. ARCP II is aimed to reduce poverty and thus improve the socio-economic
status of the identified communities in selected ARC clusters. The Project was
designed to implement complementary support services that would improve access
of the small farmer and landless farm workers to sustainable livelihoods, develop
agribusiness increase and strengthen local organizations.
ARCP II which is supported with financial assistance from the Asian Development
Bank and OPEC Fund for International Development (OFID) commenced
implementation in March 2009 and expected to be completed in March 2015. There

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were problems encountered during the Project start-up which is due to the difficulty
of participating LGUs in complying with the NG-LGU cost sharing policy of 50-50 for
5th and 6th class and 40-60 for 3rd and 4th class. DAR sought the assistance of the
oversight agencies and the approval of the Office of the President for the suspension
of the NG-LGU cost sharing policy. ARCP II extended capacity building and technical
assistance to the accounting and budget staff of the LGU Project Office in the
preparation and timely submission of fund disbursement reports including
assistance in the procurement procedures for civil works.
As of 31 March 2016, the Project achieved the following:
Based on global targets and approved workplans, ARCP II accomplished 71% of
its physical targets.
A total of 263 subprojects were completed. In terms of subproject type, this is
broken down as follows: i) 115 access infrastructure with total length of 325.43
kms., ii) 4 small scale irrigation with a total service area of 1,230 hectares, iii) 29
units of post-harvest facilities, iv) 109 social infrastructure consisting of 99
classrooms and 61 units of multi-purpose buildings.
Under the Agri-enterprise component, there were 18,219 ARBs and non-ARBs
who were enabled to access credit from micro-finance institutions and Land Bank
through the AGRICASH program. A total of 2,703 small farmers who were
assisted in value-adding agri-enterprises such as organic rice production,
processing and marketing, pili processing, wellness products among others.
There were 234 ARB and non-ARB organizations assisted through capacity
building in organizational strengthening and financial management.
THERE ARE STILL 205 ON-GOING RURAL INFRASTRUCTURE PROJECTS THAT NEED
TO BE PHYSICALLY COMPLETED BY DECEMBER 2016. THE DELAYS IN THE
IMPLEMENTATION AND COMPLETION OF THE RURAL INFRASTRUCTURE
SUBPROJECTS WERE DUE MOSTLY TO THE TEDIOUS PROCUREMENT PROCEDURES
AND SUBMISSION OF COMPLETE FUND DISBURSEMENT REPORTS BY THE
PARTICIPATING LGUS PARTICULARLY IN REGION VIII AND IN THE ARMM. FOR THIS
PURPOSE, DAR OBTAINED THE APPROVAL OF NEDA ICC FOR PROJECT EXTENSION
OF 1 YEAR TO COMPLETE PHYSICAL WORKS BY DECEMBER 2016 AND THE
FINANCIAL LOAN CLOSING BY JUNE 2017.
c. Mindanao Sustainable Agrarian and Agriculture Development Project
(MinSAAD)
The MinSAAD project builds on the innovative approaches, best practices and lessons
learned from the earlier Phase I Mindanao Sustainable Settlement Area Development
Project and other local and foreign-assisted projects of DAR. The MinSAAD is
designed as an integrated, area-based approach to rural and agriculture development
with funding assistance from the Japan International Cooperation Agency (JICA). The
Project objective is to increase agricultural productivity and income of agrarian
reform beneficiaries (ARBs) and other small farmers through the provision of rural
infrastructure and agricultural support services, organizational capacity building.
The implementation of the Project will contribute to increased competitiveness and
sustainability of agriculture in twelve (12) settlements within seven (7) provinces in
Regions X, XI and XII.

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Upon the effectivity of the Loan Agreement, MinSAAD commence in 2012 and is
expected to be completed in 2018. During Project start-up activities, MinSAAD
undertook preparatory implementation involving barangay consultations, updating
the participatory settlement development plans establishing Project management
and organization structure. However, actual implementation of rural infrastructure
particularly for farm to market roads, bridges and irrigation were deferred due to the
delay in the procurement and engagement of consulting services under the Project.
After three (3) bidding process, the Project completed the procurement process in
October 2015 and eventually mobilized the Project consultants on November 2016.
The MinSAAD implementation plan involves preparation, approval and
implementation of 349 subprojects of which 215 are rural infrastructure and 134
subprojects under agriculture, agribusiness and agro-forestry development. Project
consultants have been engaged for the Phase I involving the review, validation and
design supervision of 136 subprojects. The remaining 213 subprojects will be
covered under the proposed Phase II contract of consulting services which is
scheduled for procurement starting July 2016.
As of 31 March 2016, the MinSAAD Project undertook the following:
Preparation, review and approval of 68 subprojects under agriculture,
agribusiness and agro-forestry development component that will directly benefit
a total of 36,029 ARBs and small farmers
Review and approval of 99 rural infrastructure subprojects of which 24 are FMRs
(156.45 kms.), 5 bridges (223 linear meters), 14 communal irrigation projects
(1,099 hectares), 59 units of PHF, solar dryer/warehouse and 16 units of potable
water supply.
Of the approved rural infrastructure subprojects, 3 units of potable water supply
were installed directly 831 households, 2 units of PHF have been completed, and
15 units are on-going construction while the remaining units are under
procurement process.
Under the institutional development, there were 52 ARB organizations and 6
women organizations that were provided capacity building for organizational
strengthening. In addition, there were 14 water users association that were
organized and trained to operate and maintain the installed potable water supply
system.
MinSAAD is closely collaborating with DPWH and NIA for detailed design review and
finalization program of works for the approved FMRs and bridges and communal
irrigation projects. The outcome of the review and program of works will be
presented to the Subproject Approval Committee (SAC) on 15 June 2016 for
concurrence. On this basis, DPWH and NIA will undergo the procurement procedures
for the civil works. Actual implementation of civil for these rural infrastructure
subprojects is expected to commence in September 2016.
d. Italian Assistance to Agrarian Reform Community Development Support
Program (IARCDSP)
This Project is designed to contribute to the improvement of the living conditions of
rural families in 35 ARCs and non-ARCs in Saranggani, Sultan Kudarat, Maguindanao
and Lanao del Sur. The Project aims to increase farm incomes and improve access to

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key services through the implementation of integrated and complementary
interventions in:
Community Infrastructure Development
Agriculture and Enterprise Development
Local Capacity Building and
Project Management.
Through this Project, the Italian government manifests its support and commitment
to the peace and development process in Mindanao
IARCDSP commenced in 2012 and is expected to be completed in 2016. The project
encountered critical delay during Project start-up due to required institutional
clearances. Although the Department of Finance declared the Italian loan effective in
December 2012, the Department of Foreign Affairs (DFA) required ratification of the
Memorandum of Understanding (MOU) and Financing Agreement between the GOP
and Italian Government regarding certain provisions of the agreement. This pertains
to the provisions to the requirement for 20% Italian content in loan utilization and
the payment of all contracts in Euro. In order to address this problem, DAR
conducted series of meetings with NEDA, DOF, DFA and the Italian Embassy. As a
result, the Note Verbale was issued by DFA on 27 August 2013 ratifying the Financing
Agreement with the agreed amendment to correct the provisions of the agreement
that payments can now be made either in Euro or Peso and that the requirement for
20% Italian content be reduced to 5%. On this basis, DAR requested the endorsement
of NEDA and DOF of these amendments in the MOU which eventually was concurred
by the Italian Government only on 17 November 2015.
It was during this amendment process that disbursements from the loan proceeds
were put on hold, resulting in the low financial performance of the project. During
the process, DAR in close coordination with the Italian CTA, proceeded with review
and approval of 45 validated rural infrastructure subprojects amounting to about
P150 million to be charged under the loan proceeds. This amount has been obligated
by year end of 2015 immediately after the issuance of the Note Verbale.
The Project Management Office which is based in General Santos City is working
closely with DAR field offices and participating line agencies in the preparation,
review and approval of proposed subprojects emanating from LGUs, ARB
organizations and small farmer associations in the project areas.
e. Tulay ng Pangulo para sa Kaunlarang Pang-Agraryo (TPKP)
This Project involves construction, installation, and establishment of universal
bridges (Unibridges) in priority Agrarian Reform Communities and CARP covered
areas. With the assistance of the Government of France, TPKP is intended to promote
rural development by linking the ARCs and non-ARCs in the economic mainstream
and open up development potentials to increase productivity and income of the small
farmers. The Project is designed to promote rural development, improve productivity
and income, and alleviate poverty in the ARCs and other rural areas. It is envisaged to
link rural communities to the economic mainstream and open up their development
potentials in line with the National Agenda of job creation and poverty alleviation.

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DAR identifies the priority areas for the TPKP based on the needs defined in the ARC
development plans and local development plans and in close consultation with local
authorities. The DPWH through their district offices is tasked to construct, install and
establish the bridges.
f. Convergence on Value Chain Enhancement for Rural Growth and
Empowerment (Project ConVERGE)
This Project builds on the initiatives of DAR to provide integrated and
complementary support services that would benefit ARBs and other smallholder
farmers in 11 ARC cluster spread across 11 provinces in Regions IX, X and CARAGA. It
is also intended to support the peace and development process in Mindanao. The
Project is designed to contribute to the reduction of poverty through the promotion
and development of value chain approach in agri-business for key commodities (rice,
rubber, coffee, cassava, coco sugar, among others) that are deemed competitive in the
Project areas.
Aligned to the current policy directives, Project ConVERGE will enable ARBs,
smallholder farmers and rural workers to become highly productive and competitive
entrepreneurs and contribute to the achievement of broad-based rural economic
growth by:
Increasing the quantity and improving the quality of commodity production
Improving the phasing of production to meet market demand;
Adding value to farm produce by improving post-harvest handling/management;
Strengthening/developing farmers linkage to selected value chains; and
Diversifying sources of income in partnership with the private sector.
On 26 October 2015, the Financing Agreement between the Government and the
International Fund for Agricultural Development (IFAD) was approved. With the
issuance of the legal opinion by the Department of Justice and the concurrence of the
Financing Agreement by the DOF, the Project ConVERGE was launched by DAR on 21
January 2016.
As of March 31, 2016, Project ConVERGE has undertaken the following activities:
Preparation and submission to IFAD the required Annual Work Plan and Budget
for 2016 and the Annual Procurement Plan (APP),
Setting up of the Central Project Management Office, three (3) Regional Project
Management Offices, and 11 Provincial Project Management Offices with
designated personnel.
Opening up of a special designated account for the loan proceeds at the Bangko
Sentral ng Pilipinas and the Bureau of Treasury
Close coordination with the IFAD Country Program Office on the approval of the
withdrawal application for the initial fund releases of the loan proceeds.
Opening up of a combo account for the dollar denomination of the loan proceeds
and the peso account for the GOP counterpart fund.
Preparations for the procurement of contract of services of Project Consultants
and staff, including project vehicles, furniture and fixtures.

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The Central Project Management Office (CPMO) will be based in Cagayan De Oro City.
DAR Region X has already designated a working office space for project management and
staff within the DAR Regional Office compound. DAR has already received the designated
representatives from participating government agencies and institutions that will
compose the Project Steering Committee. This committee is scheduled to meet during
second week of July 2016.
3. REMEDIAL MEASURES UNDERTAKEN
To address those gaps and delays in the implementation of FAPs, the DAR took measures
to enhance the transparency and efficiency of the projects. DAR in close collaboration
with the government implementing agencies and participating LGUs prepared concrete
catch up with established timelines to meet physical targets and financial disbursements.
In the case of ARISP III, the necessary supervision works, monitoring of physical progress
and processing of remaining payment claims have now been mainstreamed to the DAR
Project Management and Financial Services. To address the inability of LGUs (belonging
to 3-6th income classes) to put up project equity under ARCP II, DAR requested the
suspension of the cost sharing policy into one that is responsive to the development
concerns of low-income LGUs. With the support and endorsement of the oversight
agencies, DAR eventually obtained the approval of the Office of the President (OP). To
further ease the LGU burden on required equity and avoid Project loan cancellation, DAR
also sought OP assistance for the provision of NG Assistance to LGUs (NGALGU) funds
which shouldered the 25% of the required LGU equity.
In addition, ARCP II extended capacity building and technical assistance to the
accounting and budget staff of the LGU Project Office in the preparation and timely
submission of fund disbursement reports including assistance in the procurement
procedures for civil works. In addition, a Performance-Based Grant System (PBGS) was
also set up where LGUs will receive 20% of total project cost at the end of the project
term if they comply with all the reforms stipulated in the project agreement. In the case
of the Italian ARCDSSP, DAR closely coordinated with the Department of Finance (DOF),
Department of Foreign Affairs (DFA) and the Italian Embassy to amend the critical
provisions of the Financing Agreement related to the requirement for 20% Italian
content in loan utilization and the payment of all contracts in Euro. This was eventually
addressed with the issuance of the Note Verbale by the DFA and concurrence of the
Italian Government.
Despite these concrete changes, some of the FAPs remain delayed. In-depth data
gathering showed that concerns on project bidding and to some extent, issues on project
design and monitoring contributed to the delays. These are being addressed even as the
administration ends in June 2016.
4. FAPS IN THE PIPELINE
DAR conceptualized and proposed the Inclusive Partnership for Agricultural
Competitiveness (IPAC) Project which encapsulates lessons learned and best practices
on agri-enterprise support services and addresses the hurdles accruing from locally-
funded interventions. The proposed IPAC (formerly named as Project GROWTH) was
discussed with the NEDA and got the nod of the World Bank, given its worldwide
experiences on implementing projects on property rights of smallholder farmers and the
use of the matching grant scheme and productive partnerships for agribusiness proposed
by farmers organizations. Unfortunately, IPAC was not deliberated in the NEDA Board
before the 2016 election.

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The IPAC Project sums up the five lessons that could be gleaned in implementing agri-
enterprise support services for smallholder farmers:
Instead of pre-identified priority agri-enterprise sub-projects, it is better to have a
call for proposal so that sub-projects are attuned to the requirements of farmers and
private investors;
Instead of pre-identified beneficiaries, it is better to have a competitive selection of
proposed agri-enterprise projects of farmer groups;
Instead of supply-driven interventions which were the models in the past, it is more
profitable and more sustainable for farmers to know and respond to the demands of
the market;
Instead of one-time or occasional selling to private investors, it is better for
smallholders and investors to have long-term productive partnership arrangements;
and
Instead of the government procuring some of the critical public goods needed for
productive partnerships (e.g. farm machines, post-harvest facilities and professional
services), it is better if the farmers organizations receive a certain grant, in cash, to
procure the goods and services themselves.
IPAC gleans the lessons from DARs and other agencies experiences in providing agri-
enterprise support services to smallholder farmers and included these in the design of
the project. It took lessons from previous projects, which improved the production of
farmers, only to find a supply glut because there were not enough buyers. IPAC
incorporated the lessons from the ARCCESS project where the procurement of the
needed professional services and farm machines were undertaken by the government
due to limits in R.A. 9184 or the Government Procurement Reform Act. Although the
smallholder farmers were grateful of the professional services and common service
facilities procured by the government, they would rather buy some of the services and
brands that they were familiar with. However, these preferences could not be
realistically procured by government. For instance, the government could not
buy a known and more expensive brand (e.g. John Deere tractor) even if the
farmers are familiar with this brand and would rather receive a used (second
hand) tractor than a new one that they have not used before. This was the reason
the IPAC project designed the matching grants project and community
procurement. In this way, IPAC also learns from the effectiveness and efficiency of
the KALAHI CIDDS projects community procurement.
a. Project Objectives and Rationale
The IPAC project is intended to improve the access to markets and enhance the
competitiveness of smallholder farmers in key ARC clusters. To be able to do this, the
proposed project will:
enhance the capacity of smallholder farmers and farmers groups to engage in
market-oriented production and agribusiness,
increase the access of smallholders and their groups to appropriate and
sustainable production and processing technology, and post-harvest facilities,

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enhance linkage of farmers and their groups to viable markets and to establish
productive partnerships between smallholder farmers organizations and
commercial investors,
stabilize land tenure of farmers particularly the subdivision of collective titles;
likewise, the study will conduct policy studies to guide second generation land
market arrangements, and
provide or upgrade rural infrastructure to support agri-enterprise development.
Beyond these objectives, this administration also had two major reasons why IPAC
was packaged as a foreign-assisted rather than a locally-funded project. First, to avail
of the development expertise and experiences of international financial institutions
on account of their wealth of information and analysis of the experiences of various
countries. The World Bank, in particular, has implemented productive partnerships
and matching grants projects. The World Bank also has access to impact assessment
studies of programs and projects worldwide that utilized rigorous research methods.
Second, to ensure continuity of the innovations and policies beyond June 2016. IPAC,
as a reform initiative for smallholder farmers could be sustained through a signed
loan agreement. In effect, the innovations and reforms in IPAC, like other official
development assistance (ODA) projects, could be insulated from possible political
capture.
b. IPAC Recipients
The proposed IPAC project will cover 650 farmers organizations in 44 provinces
benefiting 300,000 farmers and rural workers over a period of five years. The
assistance to farmers organizations is for a duration of 1 to 2 years after which these
farmers organizations are expected to sustain and grow their agri-enterprises.
c. IPAC Components
The proposed project has two major components. The first is the provision of
support services to smallholder farmers for enhanced market linkages. The support
would be in the form of agri-extension services, business development services, land
tenure services, and rural infrastructure. The second component is the linkage of
farmers to private investors or viable markets through productive partnerships. To
entice productive partnerships, the project will employ matching grants.
The mechanism for the matching grants is two-fold. There is a small grants window
for farmers organizations where PhP 400,000 to PhP 1 Million could be given to
eligible farmers groups, cooperatives or federations. The government provides 60%
of the grant in cash provided this is matched by the recipient organization with the
remaining 40%, 20% being cash and 20% being in-kind grant. There is also an
agribusiness grants for farmers organizations where PhP 1 million to PhP 10 million
could be given to eligible farmers groups, cooperatives or federations. The
government could provide 60% of the grant in cash and the remaining 40%, in cash,
should be matched by the recipient.
d. IPAC Budget and Source
The budget for the proposed project amounts to PhP 10.154 Billion. PhP 4.359
Billion will be sourced from World Bank as loan to fund the productive partnerships
or matching grants while PhP 4.564 Billion will be sourced from government funds to

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support the repair or provision of rural infrastructure. PhP 1.232 Billion will come
from the beneficiaries of the project
The sourcing of the budget is one of the innovations of the proposed IPAC project. In
most projects including DARs past ODAs, rural infrastructure is shouldered by loan
proceeds. IPAC changes this since there are human and financial resources from the
national government for roads, irrigation and other critical infrastructure. The
national government also has a road network plan that would be used to connect
rural with national roads. Thus, the loan proceeds will be for the productive
partnerships or matching grants since this is the component that needs the expertise
of the World Bank.
5. UNFINISHED BUSINESS OR WAYS FORWARD: HARVEST AND IPAC
The Land Bank proposed an agricultural financing project with the World Bank and the
IFC entitled Harnessing Agribusiness Opportunities through Robust and Vibrant
Entrepreneurship Supportive of Peaceful Transformation or HARVEST. This project will
lend support to investors and processors in agribusiness investment in the Autonomous
Region for Muslim Mindanao (ARMM). This project has no component supporting
smallholder farmers and ARBs in mostly in ARMM; as such, there is danger that
implementing HARVEST alone without IPAC (or other project focusing on smallholder
farmers) might lead to serious issues on land tenurial rights and agribusiness contractual
arrangements concerning smallholder farmers. Given that only investors and processors
would have a facility for generating funds, HARVEST might lead to transfers of land rights
and farm-based contracts without a serious regard for the consent and bargaining power
of smallholder farmers.
Implementing HARVEST in ARMM without IPAC or other complementary projects which
support smallholder farmers means tilting the bargaining power in ARMM towards
investors and processors. Without an initiative that could level the playing field, such as
the proposed IPAC project, there is a danger that the smallholders might get into
arrangements over their land and their farm produce without negotiating power and
without their real and informed consent.
The Manual of Operations of the HARVEST project, which will be implemented by the
Land Bank, needs to include provisions that itemize the processes that will be followed
before investors and processors can borrow from funds from the HARVEST project. The
processes must show that in cases of agri-businesses that utilize the landholding of ARBs
and other smallholder farmers, there should be a thorough discussion of issues and
implications with individual farmers or land-owners. Also, should the farmers opt to be
represented by any agent (e.g. spiritual leader or group leader), then the farmers must
issue a Special Power of Authority. For a deeper understanding of consent and
bargaining power and the problems on agribusinesses involving farmers land, see next
Section.
In the case of the IPAC Project, the next administration may consider the following
options:
Option 1. Considering that the IPAC Project has been approved by the NEDA
Investment Coordinating Committee (ICC), DAR can push for the approval of
IPAC by the NEDA Board in order to complement the efforts of DAR and
other agencies to assist farmers organizations in pursuing agri-enterprise
ventures with private investors. Upon approval, DAR will discuss and

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negotiate with the World Bank the provision of technical and financial
assistance for productive partnership and matching grants for viable agri-
enterprises proposed by farmers organizations.
Option 2. The IPAC Project becomes a locally-funded project under DAR. Prior to the
approval by the NEDA Board, DAR can obtain the concurrence of the
oversight agencies (NEDA and DBM) to provide budgetary allocation for the
implementation of the productive partnerships and matching grants for
viable agri-business and support rural infrastructure identified in the IPAC
Project.

D. AGRIBUSINESS VENTURE ARRANGEMENTS (AVAS): THE NEED TO GET


FARMERS CONSENT AND IMPROVE THEIR BARGAINING POWER
1. AVAS IN 2010
One of the glaring problems that this administration faced in the DAR was the case of the
agribusiness venture arrangements or AVAs. In 2010, some of the contracts led to legal
cases filed in the DAR and most had questions and issues ranging from price and period
of lease agreement to prices of bananas being sold by the ARBs and smallholders to the
private investors. The difficult cases were the AVAs that involved the property rights of
the farmers such that removal of AVAs meant losing ownership of agricultural lands.
Lacking in resources to make their agricultural land productive, ARBS and smallholder
farmers enter into different forms of agribusiness contracts with private sector investors.
Based on Administrative Order 6, s. 2009, agribusiness venture arrangements are
classified into four major investment models:
Contract farming is an agreement between the investor/buyer and the
smallholder farmers where the investor/buyer provides the inputs, monitors the
growth and quality of the crop, and buys the products at some previously-agreed
upon price and date.
Joint venture agreements are contracts where the smallholder farmers and
investors form a joint venture corporation. Usually, the smallholders contribute
their land as equity and provide labor while the investor shoulders the capital as
well as the technology for production, processing and marketing of agricultural
goods, or for construction, rehabilitation, upgrading and operation of agricultural
assets, infrastructure and facilities.
Lease agreements are arrangements where the smallholder farmers give land
control to the investor including use and management of the land in exchange for
an agreed lease rental amount. In most cases, land leases run for a long and
definite period (25 to 50 years).
Leaseback agreements are similar to lease agreements; however, with leaseback,
the investors are the previous landowners of the awarded lands which were
transferred to the smallholder farmers.
In some cases, the AVAs are in the form of marketing and financing contracts while in
other cases, these take the form of long-term land leases. In most cases, the smallholder
farmers provide the land and farm labor while the investors shoulder the financing and
manage the whole chain from production, processing, logistics, all the way to marketing
to final consumers. Since the investors have the financial resources, industry

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information, and business acumen, the farmers could not maximize the negotiation
opportunities or in worse cases, they are at the losing end of the bargain (De Los Reyes et
al, 2015).
The predominant analysis from 2010 onwards was that the DAR or the government
should step into the AVA disputes and settle the issues. The prevailing policies (AO 9
series of 2006 and AO 2 series of 2008 ) mandate the government, to approve the AVA
contracts and eventually, to uphold or rescind these. In order to address the AVAs, this
administration to studied, assessed, asked difficult questions and eventually, addressed
the concerns in the existing AVAs and change the overall policies concerning upcoming
AVAs.
Below are what the studies and the hard questions revealed.
a. DAR and CSOs created farmers organizations
In studying the AVAs and the legal cases, it has become clear that in most cases in
Mindanao, DAR personnel encouraged the farmers that were provided with
agrarian land and CLOAs to form organizations (usually cooperatives) which served
as their vehicle in entering into agribusiness agreements. In most cases, the
government and some CSOs organized the farmers based on the production units
prior to land transfer.
It has become clear that the composition of the farmers organizations was
essentially the same as that of the former labor union prior to the agrarian coverage
of the landholding. In some cases, government officials enjoined the farmers to form
groups or join existing organizations in order to simplify the delivery of services
including access to credit and capacity building. In almost all cases the agricultural
business investor similarly encouraged the formation of organizations to make it
easier for them to deal with large groups of farmer-beneficiaries.
The situation is aggravated in cases where the certificate of title issued by the DAR is
collective in nature (with a list of individual farmers), and the farmers organization
is indicated in the title. In some cases, the names of the agrarian reform beneficiaries
or the smallholders were not annotated in the collective certificate of title, although
the farmers organization is named. The farmers groups and its leaders, become
powerful because these could have sole decision-making on the use of the collective
certificate of title and the land covered by the certificate. There were cases where the
farmers land tenure became equivalent to their membership shares in the
organization as such, the farmers could not leave their organization for fear of losing
their land. They must also continuously abide by the rules and customs of the
organization for it may cause them their membership share and concomitantly, their
land.
b. DAR encouraged ARBs to enter into AVAs
It has also become clear out of the studies and the discussions in the past years that
the government, through the DAR, also had a strong hand in encouraging the
farmers, through their farmers groups, to enter into AVAs. This is particularly true
in lease contracts.
With agrarian reform, the ARBs faced the prospect of undertaking the cultivation and
managing of the agri-enterprise on their own. This they will do without access to
financial services and other mechanisms. Thus, in many instances, the farmers really

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had no choice but to enter into contracts (from land lease to other long-term
production contracts) as soon as the agrarian reform program covered the land. The
ARBs were aided by the government to enter into these AVAs.
c. Very little consideration for individual farmers consent
This is not to state that the government, the DAR, in particular, committed errors and
must be made accountable for its strong hand or pro-active role in both the creation
of farmers organizations and their entry into partnership agreements. It could be
argued that this strong role was their orientation and their judgment call at that time.
It could even be pointed out this strong role came from the strong centrally-planned
economy tradition of the DAR officials at that time.
However, continuing this tradition, the current rules on AVAs, or treating the
contracts with business-as-usual attitude goes against the property rights of the
ARBs. It contradicts the very nature of the land titles issued to them under agrarian
reform.
Theoretically, the farmers had freedom of will because they were not forced into the
farmers groups, into the lease or the land control arrangement. But it must be noted
that freedom of will was grossly vitiated by the prospect of an immediate loss of
wages and the insufficient resources of the new landowners. It must be carefully
noted that in most of these AVAs, the ARBs were former farm workers and not
tenants. Prior to becoming small landowners or beneficiaries of the CARL, the
farmers were employees who had no control of the production processes in the farm.
This is distinguished from tenants who became landowners. Since tenancy required
only the cultivation of small plots by families, the whole farm cycle was known to the
tenants. As such, when tenants become landowners, there was not too much
disruption in the production process. Compared to tenants, former laborers or farm
workers, knew only specific or particular tasks in the farm, not the whole value chain.
In the exigency of the situation, the new ARBs and the investors came into an
agreement over the farmers land and the government ratified their agreement by its
silence, tacit approval or failure to act on applications for approval. Tacit ratification
by government was seen in the inaction and lack of clear policies on these alternative
modes. With the continued control of the agricultural chain, the investors continued
to provide for the financing requirements as well as the ancillary services (e.g.
trucking services, back office support, provision of security guards). In this case, the
agricultural chain remained centralized with the investors.
Consent, then, becomes an issue. Agrarian reform beneficiaries are landowners with
clear tenure rights (emanating from clear grants of ownership and the resulting
certificates of titles). Their agreement to enter into organizations or to engage in
agribusiness contracts must be arrived at using clear mechanisms for generating
viable and informed consent.
The seeking of consent includes a nuanced discussion of the range of implications of
the contracts that the famers will get into. In the case of most AVAs, the agreements
that were formed undertook short-cuts. First, consent was secured not from the
individual smallholder but from their representatives e.g. organization, community
or spiritual leaders. Second, consent was obtained without a serious discussion of
issues including the costs of such agreement.

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d. No proactive efforts to improve the farmers bargaining power
One of the issues of the farmers that kept resurfacing since 2010 was the ARBs and
smallholder farmers relatively low leverage in the negotiations with private agri-
investors. A review of the contracts show that land and labor are the only equity
contributions of ARBs and smallholders. They also did not know important
information (e.g. prices, industry outlook) that could have aided their decisions and
the content of the AVA contracts. It could be seen that in entering AVAs, the
smallholder farmers did not have much bargaining power.
Bargaining power is often defined as the relative ability of parties in a particular
situation to exert influence over each other. It is sometimes referred to as advantage.
In most cases, the bargaining power of smallholder farmers only rests on their
ownership or possession of farm land and their capacity to provide farm labor.
Meanwhile, the bargaining power of investors is based on their access to capital,
technology, and institutional markets. The investors also have access to market and
salient information and they have networks and connections that could provide them
help. In other words, in engaging in agri-business, the smallholders usually have
lesser contribution and thus, lower leverage (De Los Reyes and Capacio, 2016).
More importantly, it can be seen from the contracts that since government has not
provided assistance to the farmers or to the agri-enterprise agreement, the needed
roads, irrigation, post-harvest facilities and capacity building of the farmers were
made available by the private investor. The investors shouldered these costs and
expectedly, these were recouped from the investment and from the profit that could
have been shared with the farmers. In these instances, the contracts that were
negotiated and signed showed did not contain better terms for the farmers. If the
government spent for these support services and made these available to the farmers,
they would have had increased bargaining power in the AVAs.
e. No analysis on why there are skewed relationships
The predominant thinking was that business is plain greedy. Unfortunately, the
conversations in DAR and among farmers and civil society groups in 2010 (and even
a few years after) did not delve on issues on consent and bargaining power and why
and how the AVAs were skewed. The predominant and default thinking was simply
that business was greedy and it was in their (class) interest to improve and keep to
themselves their bottom line. While some of these may be true and while some
private investors were truly greedy and they willfully deceived the farmers, it must
also be noted that part of the skewed contracts were brought about by factors that
were not related to plain greed.
The farmers were almost forced into organizations and contracts and there was
literally not enough time for the farmers to thoroughly discuss the issues and the
implications and they were not able to put in their organization papers and the
contracts their objectives and stand on issues. The seeking and giving of viable
consent was not evident in the circumstances.
In not providing support services to the farmers, particularly to the ones that were
involved in AVAs with investors, the government abdicated its role as the one that
could improve the farmers bargaining power.

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2. REMEDIAL MEASURES THAT WERE UNDERTAKEN: STUDYING THE AVAS
Two studies were undertaken: the AVATAR and policy research being undertaken by
FAO. The first was an in-house study by the DAR Region XI Office to review and assess
the AVA contracts and the issues being raised by the parties to the contracts. The study
team was creatively named Agribusiness Venture Arrangement Task Force Appraisal and
Review (AVATAR). The study was undertaken in Region XI because of the presence of
banana plantation lands distributed under CARP. Initially covering only the banana-
based ARBs, the review was eventually expanded to include other high value crops in
plantations, leased, and retained areas. The matrix below shows the issues and concerns
of both the smallholder farmers and investors over the agribusiness venture
arrangements:

Table 1

Issues Party Particular concern


Contract period Smallholder - The period is too long; No specified timeframe for renegotiation
- Contract growing (15 to 20 years) farmers - Some contracts have no provision for economic review and price
- Lease agreements (10 to 30 years) adjustment
- Leaseback agreements (20 to 30 years - The farmers are aging
renewable for another 20 to 30 years) Investors - Longer term contracts are better to recoup investments and secure
better markets
- Price provides assured income for the smallholder farmers
Production / yield (applicable to contract Smallholder - It is sometimes hard to meet the target because of issues like changing
growing) farmers rain patterns and pest infestation
- In cases of excess production, the investors do not wish to buy the
excess goods
Investors - There is low and varying quality due to issues like type of soil, changing
rain patterns and pests
Pricing (applicable to contract growing) Smallholder - Low buying price despite high cost of inputs and the smallholder
farmers farmers need to hire extra farm labor. Other buyers are willing to buy
at higher prices
Investors - Prices are dictated by the market
Land rental (applicable to lease and leaseback Smallholder - Rental is based on the production potential of the land
arrangements) farmers
Investors - Cash advances are deductible from the land rental without interest.
Wages of farm laborers (applicable to lease and Smallholder - The payment is usually below the minimum wage requirement
leaseback arrangements) farmers
Payment of land amortization and real property Smallholder - In some cases, the payment of land amortization and RPT is not
taxes (RPT) In most lease agreements, investors farmers updated
shoulder the payment of part or all of the
amortization and RPT
Issues on the juridical entity (JE) of the farmers Smallholder - Some members lament that they were not given options in joining or
Applicable to lease and leaseback agreements farmers not joining the juridical entity (JE) that served as contracting party.
- In some cases, the membership in the JE became part of the land
transfer scheme and became synonymous to land ownership, as such,
the governing rules on succession, transfer, or pull-out have become
opaque
- There are evidence of corruption and cooptation of the leaders of the
organization
Investors - Some of the JE leaders lack skills in running their organization. Some
are also showing indications of corruption
Issues on the joint venture contract of farmers Smallholder - Some smallholder farmers claim that they were not consulted and they
and investors farmers were unaware that they became part of the joint venture contract

It could be seen that the agri-business ventures involving smallholder farmers are
surrounded by problems and concerns, which defeat the fundamental goals of poverty
reduction and inclusive growth. In many cases, the smallholder farmers wanted to exit
from the agreement because they believe they were short-changed (the products are
bought at low prices, the lease rental is low, and a host of other issues). Most of them

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also lament that the contract period is too long. The situation is more complicated when
a group of farmers wants to break the contract while another group wants to uphold the
contract. This is more difficult when the certificate of title issued to the farmers is a
collective certificate of title and the names of the farmers are not even annotated on the
certificate. Farmers who want to break the contract will not walk away from the
agribusiness venture, if leaving also means losing their share of the un-subdivided land.
On the part of the investors, they lament the quality and quantity of products and timing
of delivery. They also worry about the risks of contract reneging and thus, not having a
steady supply of products. There are also reputational risks involved when their
company names are dragged into court and administrative cases.
When the issues were traced, it became clear that in most cases, the smallholder farmers
were represented by their labor unions (that later metamorphosed into cooperatives) in
signing their AVAs. The agreement to enter into a land lease and provide farm labor
immediately succeeded their receipt of their certificate of title.
3. FAO-ASSISTED AVA STUDY
In 2015, DAR discussed with the United Nations Food and Agriculture Office (UN FAO)
the possibility of studying the AVAs further. FAO provided DAR technical assistance in
the undertaking the Multi-sectoral Study on Agribusiness Venture Arrangement (AVA)
Policy and implementation under the Comprehensive Agrarian Reform Program (CARP)
that would provide third-party analysis of the issues and challenges confronted by
agrarian reform beneficiaries and rural cooperatives as they enter into AVAs and to
recommend program and policy ways forward. Towards the latter part, the World
Resources Institute or WRI provided their comments to the drafts.
The Study made an assessment of the AVAs between agribusiness firms and the ARBs,
focusing on banana, cacao, oil palm and pineapple plantations in Mindanao. With both
temporal and financial constraints, the study focused only on leasehold and contract
growing arrangements which are the predominant modes of AVAs. As an approach, the
study conducted a review of literature, interviewed key informants and conducted six
focus group discussions (FGDs) in Cagayan de Oro and Davao, where representatives of
farmers groups, business investors and government/private stakeholders met separately
to assess the state of agribusiness arrangements from their perspective.
After the analysis of the FGD outcomes, a national workshop was conducted to report
and validate the recommendations for the agribusiness sector. The study revealed that
despite the 26 years AVAs have been in existence, there are very few examples of
successful arrangements between ARBs and investors. Most of the ARBs are not aware of
their obligations and entitlements under their contracts, for most are written in a
language that they do not understand. Their lack of understanding of their agreements
has been exacerbated by the lack of adequate legal representation and full transparency
from their own cooperative leaders. The capacity of the farmers organizations to run and
operate their farms, make collective decisions, understand financial statements and enter
into intelligent negotiations with regard to the terms and conditions of their agreements
was also identified as a major setback.
An analysis of the AVAs indicated the need for improvement and renegotiation. For lease
agreements, there is no objective standard for the determination of market rates for land.
While various figures have been suggested, based on annual land amortizations, real
property taxes and the poverty threshold, there is a need to conduct a market study to

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inform policy on what is a reasonable lease rate. As farmers cannot rely solely on lease
payments to improve their living conditions, additional on-farm and off-farm income
(such as employment, income generating projects) must be sought to supplement their
income stream from the land.
The study proposed that automatic and yearly increases in the land lease rates based on
core inflation be utilized to avoid the erosion of the value of the land lease. One sided
provisions on lease agreements have also been flagged. Renewals of lease agreements
should be mutual and not unilateral. Ownership of the improvements after the lease
agreement should accrue to the ARB. Force majeure should not be a reason for the non-
payment of the lease since the investor is in a better position to absorb the uncertainties
of nature. The duration of leases should be well negotiated and should not be so long to
provide a disincentive for the ARB in becoming an independent and knowledgeable
grower.
In the case of contract growing where prices are fixed prior to the delivery of products,
the Study suggested that this is no longer tenable, for world commodity prices and the
prices of inputs are in a constant state of flux. ARBs and investors need to collaborate
more closely within the value chain to achieve efficiencies in inputs and outputs, and to
share more equitably the risks inherent in global food supply chains. Clauses in the
contracts which allow investors to take-over the management of the farm and the
exclusive right to provide and charge the cost of inputs to ARBs, need to be revisited to
make the process more mutually acceptable and transparent. ARBs and investors need to
learn how to deal with side-buyers to avoid pole vaulting and assure a continuous and
harmonious relationship in the supply chain. Mechanisms for the social protection of
ARBs such as crop insurance to protect against revenue losses should be seriously
explored.
The study strongly supports capacity building for the ARBs and their cooperatives in
various aspects of business, legal, institutional governance and financial management. To
achieve this, close collaboration among DAR, DA and LBP is required to set up a capacity
building fund that will foster the growth of the ARBs and their cooperatives over time.
The study emphasizes the need to invest resources in making ARBs more capable of
understanding and renegotiating their contracts. This can be done through legal
education and representation, rather than the review and approval process which DAR is
currently focused on. A highly decentralized process is recommended for the approval
and review at the regional level for all agreements with the default scenario of approval
within 90 days if the contract is not acted upon by DAR. This puts the onus on DAR to
strengthen its review processes and to put to an end the uncertainty created by delays in
the review and approval process, especially for contracts that have to be approved at
DAR Central Office.
The study encourages adherence to the Voluntary Guidelines on Governance in Tenure
(VGGT) and the Principles on Responsible Agricultural Investments (PRAI) as enunciated
by the UN Committee on Food Security. These best practice guidelines are being
promoted by the FAO to ensure a sustainable and environmentally sound partnership
between smallholder farmers and agricultural companies investing in agribusiness
enterprises.

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a. Analyzing the roles of state in agri-business venture arrangements: the middle
ground between the strong hand of government and unfettered markets
It could be seen that the government can choose to play a strong hand or it could
swing to the extreme of having very limited roles in the AVAs. Dilemmas and
tensions arise when there are no clear policy handles for the ideal degree of
involvement of the government.
The government plays critical roles both in the policy environment of contracts (in
stabilizing property rights of smallholder farmers). It also has roles before a contract
between private investors and smallholders is inked. These ex-ante government
roles could be assumed in the various stages of contract drafting, negotiation, and the
safeguarding of agreements (Williamson, 1985) but only to the extent of ensuring the
consent of every smallholder-landowner and in improving the bargaining power of
the farmers to improve their leverage. However, in the end, the decision on the
contents of the contract is between the farmers and investors. DAR, thus, would
decide on the process than on the actual contents of the contract. Ex-post, the role of
government is on dispute resolution including mediation and conciliation.
The ideal role of government is not in the two extremes. It lies in the middle or a
third way. In between the extreme roles of government is a third way that fluctuates
and borrows between and from the two opposite poles: increasing the bargaining
power of the smallholder farmers but allowing smallholders to negotiate freely. The
main goal of the third way is to improve the leverage of the smallholder farmers vis-
-vis private investors. This objective is founded on the notion that increasing the
bargaining power of the smallholder farmers is the road by which becoming the
party of power can be achieved over the long term. Moreover, increasing the
negotiating power of the smallholder farmers is expected to provide benefits not just
for the smallholder farmers but also for the investors since they would no longer
have to shoulder all the capital and operational requirements of the agribusiness.
Risks to the investor may also be lessened. As such, the third way encourages parties
to enter mutually beneficial agreements.
In the third way, the government has a diminishing role in the relationship, although
never absent; and yet it allows the market forces to operate freely. The ideal roles of
government are enumerated in the discussion of new regulations on AVAs and
embodied in the new Administrative Order on AVAs.
Essentially, given the need for poverty reduction and inclusive growth and the bundle
of assistance for smallholder farmers that utilize public funds, the contracts involving
smallholder farmers are imbued with public interest. In this role, the government
must provide support services to farmers so they would have improved bargaining
power in contracts with private investors. The government must also ensure that the
smallholder farmers understand the contract and the implications and fully agree to
the AVA. Moreover, the government has a clear role in improving the policy
environment of contracts including the stabilization of farmers property rights.
Doing this would also stabilize the contracts with investors since the parties to the
contract are clearly identified.
b. In 2016: Addressing the Existing and Future AVAs
All of the lessons from the studies on AVAs, the contracts that led to legal cases, the
review of the international standards, the sifted learnings on securing the consent

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and improving the bargaining power of smallholder farmers, and the lessons on the
ideal roles of the government in contracts involving ARBs and smallholder farmers
led to concrete solutions. The solutions address both the past issues on existing
AVAs and the future issues of upcoming agribusiness contracts involving ARBs.
i. Addressing the existing AVAs
In addressing the legal and community issues accruing from the existing AVAs, it
is important to scrutinize the contracts that were signed by the parties
(smallholder farmers and investors) and approved (or un-acted on) by the
government. Who are the parties in the agreement? Who were the farmers who
agreed to the contract? Did they all agree to the terms and conditions? Did they
have legal authority to sign the contracts? Were they forced to enter the
organization or sign the contract for lack of other choices? What are the intra-
organization issues? In other words, was consent freely given? Was there
ratification of the improperly secured consent due to the receipt of the benefits
arising from the assailed contract? Who were the proper principals? Who were
their agents?
In the end, the existing AVAs should also consider the principle of the sanctity of
contracts and its attendant sub-principles. Taking the route of arbitration and
judicial determination of the rights and obligations in existing contracts may not
be the most expeditious way to move forward. The complexity of the rules and
the notoriously long and winding appeals process in the Philippine setting may
just end up being the same exigencies that gave rise to the formation of this
existing contracts except that this time the existing contracts may just be
continued while the adjudication finds its way in the appeals process.
The new regulations should likewise establish clear mechanisms to allow and
foster contract re-negotiation between the parties after addressing the issue of
consent and bargaining power. Finally, it is also important to consider if
alternative dispute resolution is still possible. If it is, enjoin the parties for
mediation of the conflicts arising after the contracts were made and signed.
ii. Addressing the future AVAs
DAR approves the process of agri-enterprise contracts and AVAs and ensures the
securing of consent and improving of bargaining power. The new regulation
secures the individual ARBs or smallholder farmers consent through:
Stabilizing land tenure where the AO on collective CLOA subdivision
accompanies the AO on AVAs. In this way, there will be clarity on the
contracting parties based on clear delineation of the land. In turn, the
investors will have a clear idea of the principals and the agent, in the
negotiation of the contract; and
Strengthening farmers organizations where the government has easing the
mechanisms for doing business with smallholder farmers. It simplifies the
registration of farmers organizations and the regulatory framework.
The new regulation also improves the ARBs or smallholder farmers bargaining
power:
Synchronized government intervention and investments The government will
spend for strategic and non-distorting public goods so that the farmers

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improve their own investments in agriculture. In so doing, the investors do
not have to spend for these public goods like local roads and irrigation, and
capacity building of farmers. Since the government will use scarce resources,
it will prioritize farmers organizations that have actual or potential
agricultural enterprise partners.
Access to credit Financial services are made available not only for
smallholder farmers but also for investors. In this way, the investors do not
have to shoulder the cost of buying inputs, undertaking land preparation and
other expenses.
Reduced information asymmetry and nebulousness of policy environment
Business and industry plans, sector studies, land tenure status and other
important information are made available for both parties.
It is also important to note that the revised AO on AVA is inspired by the
international standards and informed by various lessons. It can be seen in the
new AO that the government will not be the one to negotiate for the beneficiaries,
nor will it unnecessarily stifle the gamut of possible agreements that may be
undertaken by the two parties.

E. AGRICULTURAL FINANCING
1. AGRI-FINANCING IN THE PAST: DIRECT LENDING AND WHY IT DID NOT WORK
Like other government agencies, the DAR was lending directly to farmers organizations
and cooperatives at subsidized interest rates. Directed credit was treated as an input,
similar to seeds, fertilizers and pesticides, and thus, were incorporated into programs. In
the DAR, there were three directed credit programs that utterly failed in terms of
repayment such that until the present, a task force remains in effect to go after the
collection of arrears.
The Dutch Rural Development Assistance Program (DRDAP) was one of the direct credit
programs of the DAR. The DRDAP is a full grant sourced from the proceeds of the sale of
the fertilizer grant from the Dutch Government. It was initially given to DA, but
transferred to DAR. It was meant as fertilizer assistance to farmers through direct
lending. The DAR Central Office handled the funds and farmers organizations and
cooperatives went to the DARCO to loan money. The request for loans needed minimal
requirements.
DRDAPs repayment rate was dismal. Even farmers groups that were deemed fly by
night were loaned money. Moreover, in many cases, the members of the farmers
groups and cooperatives lament that their leaders secured the loans without their
knowledge and approval. The mode of implementation was 3-pronged: direct from/to
the beneficiary coops, or from the LGUs, or through the DAR field offices. However,
approval was at the Project Office at the DAR Central Office.
Two other direct lending programs followed the DRDAP: the SPO Direct and the Direct
DAR-Lending Financing Program (DDLFP). Like the DRDAP, SPO Direct and DDLFP had
minimal requirements and suffered dismal repayment rates. The field offices gave their
best effort in collecting but encountered difficulties. Thus, the Task Force Collection was
created to guide and improve collection.

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2. AGRI-FINANCING IN 2010: DAR PROVIDES FUNDS FOR CAPACITY BUILDING, NOT DIRECT
CREDIT
The government, the donor community, and civil society learned hard lessons from
directed credit so these were discontinued. By 2010, DARs credit assistance to ARBs
was largely in the form of counterpart funds for capacity building or technical assistance.
These were excellent innovations. However, the interventions were relatively small.
In 2010, the DAR had at least five credit programs. These were CAP-PBD Windows II and
III (with LBP), the Grassroots Microfinance in Agrarian Reform Areas (GMFA), the
Agricultural Solutions or AGRISOL program of ARCDP II (in partnership with the LBP and
with donor support from the World Bank), and the Agri-Enterprise Credit and Agri-
Finance Services or AgriCASH program of ARCP (in partnership with the LBP and with
funding support from the Asian Development Bank). Table 23 summarizes all the credit
programs of the DAR as of November 2010 and Table 24 summarizes the locally-funded
credit programs of the DAR as of November 2010.
It could be seen that the reach of the credit programs was small. The innovations were
worth noting because of the complementation between DAR and the LandBank and
private credit providers (NATTCO and CARD) and these innovations served as lessons
learned in succeeding efforts on agricultural financing.
3. AGRI-FINANCING DURING THE PNOY ADMINISTRATION
Agricultural financing, which includes access to credit, savings mechanisms, and crop
insurance, is one of the accomplishments of this administration. Given the available
funds, not only the budget allocation for the DAR but also for DA and other government
institutions (i.e. LANDBANK, PCIC), a new credit facility, the Agrarian Production Credit
Program or APCP, was launched and thus far, it has shown good results in terms of
availment and repayment rates. Based on the external assessment made by a PIDS study,
the APCP adopted a simpler lending process and the ARBs are generally satisfied with the
lending facility although there are definitely a lot of areas for improvement [Llanto et al,
2016].
Agricultural financing, particularly agricultural credit, is also one of the contentious,
albeit abundantly studied, issues being related with agrarian reform. Numerous studies
noted that the restrictions of CARP (ceiling on landholding and the prohibition on making
land transfer) as well as its long period of implementation hinder the flow of credit. The
lack of collateral value of CARP lands, it has been argued, discouraged formal financial
institutions, particularly banks, from lending to ARBs [Llanto, 2005 and 2015; Fabella,
2014].
This analysis needs serious rethinking and unfortunately, new data and analysis. Talking
to countless stakeholders including formal financial institutions in the past six years
casts doubt on the soundness of the proposition that CARP restrictions discouraged
lending to beneficiaries. It may have been true in the past but the lapse of time, the
improvements in technology, and the mainstreaming of business models involving both
smallholder farmers and financial institutions may have changed the landscape of
agriculture and agrarian credit in the Philippines. Moreover, where there are studies
that blame CARP for banks hesitation to provide loans to ARBs, there are equally the
same number of studies that show a different set of findings.

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4. DATA, STUDIES AND BEST PRACTICES ON CREDIT
The access to credit of smallholder farmers, in particular, the ARBs, received a wide
attention from studies on and impact assessments of agrarian reform. This part
discusses some of the data and literature
Smallholders, especially ARBs, are high risk and thus, could not access credit from formal
financial sources: This old analysis needs to be assessed. There are many reasons that
have been identified why credit is not flowing to smallholder farmers. Most of these
reasons are true. First, smallholders have low productivity compared to medium and big
landowners. Their low yield is not necessarily a function of their small land sizes but
could be due to lack of access to optimal inputs such as seeds, fertilizers, farm equipment
and irrigation. Second, they are considered as high risk by lending institutions. The
perception, according to studies, is based on their constraints such as vulnerability to
economic shocks, seasonality of crops and income schedule, limited market information
and heavy concentration in specific areas making them vulnerable to same climatic
conditions.
It is tougher for ARBs to access credit, according to studies. In particular, owning
agrarian-awarded land has not improved ARBs access to financing from formal
institutions. The restrictions and limitations of transferring and using as collateral lands,
which are not fully paid and within 10 years from award, discouraged formal sources
from lending to ARBs [Llanto, 2005; Llanto et al, 2016; and 2016; Fabella, 2014]. Studies
also surmise that this is the reason why rural banks, the ones that primarily serve the
agriculture and fisheries sector, could not meet the 10% loan allocation for ARBs under
the Agri-Agra Law [Llanto et al., 2016; Almario and Mendoza, 2014]. CARP may have
weakened the value of land as collateral and consequently, its capacity to encourage
credit [Teves, 2014].
The ARBs low access to formal credit is true, as evidenced by data; but the hesitation to
lend to ARBs because of the restrictions on land transfer and non-use of land as credit
collateral are not necessary the accurate reasons. These may have been true before but
not anymore. First, there are already lands, which were government-owned, and have
passed the 10-year prescriptive period but the ARBs in these lands are still not being
given farm credit by banks. In other words, other reasons, apart from agrarian land,
serve as reason for the non-flow of credit to these ARBs.
It is also important to note that smallholder farmers have diversified sources of income.
According to the annual Small Farm Indebtedness Survey of the Agricultural Credit Policy
Council or ACPC, around 60% of smallholder farmers borrowed in 2014. Around half of
smallholders borrowed from formal sources (53%) while 40% borrowed from informal
sources and 7% borrowed from both formal and informal sources. Interestingly, the
proportion of those who borrowed from formal sources went high from 48% in 2006 to
52% in 2008 and 53% in 2014. Conversely, the proportion of those who borrowed from
informal sources went down. It could be seen that although decreasing in proportion,
informal sources of credit remain an important source of smallholder financing.
Despite this trend, the total production loans released by all banks (PhP 246.7 B for
2014) is around half of the estimated credit demand of smallholder farmers and
fisherfolks (PhP 524.9 B for 2014). Of this total demand, around PhP 82.1 B are from
ARBs (Llanto et al, 2016). However, these data would not provide a clear picture or a
solid policy handle if it does not plug in the fact that smallholder farmers have multiple
sources of income. IFAD (2011, based on Llanto, 2016) estimates that 30 to 60% of rural

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households earn approximately 75% of their total income from more than 2 sources.
This allows them to manage their risks and to compensate for a decline or loss in one
source of income.
Unfortunately, the fact that smallholders and ARBs have multiple sources of credit
(formal and informal) and multiple sources of income are not factored in the analysis of
the credit gap. As such, this type of information and analysis are not part of any policy
lever.
5. COMPREHENSIVE STUDY ON AGRICULTURAL CREDIT FOR SMALLHOLDER FARMERS
The access to agricultural credit is one of the essential support services of DAR to
improve productivity and more importantly increase farm income of smallholder
farmers in the rural communities. Along this line, DAR intends to come-up with strategic
measures on improving access of smallholder farmers to rural finance and assess the
effectiveness of credit programs designed and implemented by government for
smallholders. For this purpose, DAR engaged the services of the Philippine Institute for
Development Studies (PIDS) to undertake a Comprehensive Study on Agricultural Credit
for Smallholder Farmers.
Aside from assessing the effectiveness of existing credit programs, the Study was
intended to, a) determine the effectiveness of the Agrarian Production Credit Program
(APCP) designed and implemented by DAR to provide credit assistance to agrarian
reform beneficiaries and smallholders in general; and b)identify specific gaps and issues
in providing smallholders with access to credit, and recommend strategic interventions
by both government and the private sector to address the credit access problem.
a. Findings of the Study
The outcome of the series of focus group discussions (FGDs) conducted with ARBs
indicated satisfaction on the program due mostly to:
low interest rate. APCP interest rate on end borrower (15%) is deemed lower
than the 2 to 3% per month charged by cooperatives on their members loans;
less tedious documentary requirements; and
assistance from DAR program officer in accomplishing and completing required
documents.
The FGDs also confirmed that smallholders need credit not only for their farm operations
but also for consumption smoothing. Aside from using their own funds, smallholders
borrow from either the formal (banks, coops) or informal sources (friend, family,
relatives, input dealers and traders). Effective demand for smallholder credit depends on
their ability and willingness to access and use credit services. Some may have access but
prefer to use their own funds or borrow funds from family and friends to finance their
operations.
The highlights of the keys findings of the Study include the following:
Private financial institutions (PFIs) are constrained to lend to agriculture because
of the risks and costs associated with agriculture lending. To address these, PFIs
require collateral (e.g. REM) and documentary requirements that are considered
tedious by smallholders. PFIs rarely accept marketing contracts and standing
crops as collateral and prefer to lend to agricultural enterprises or to
smallholders with landholdings or properties that are acceptable as collateral.

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Because of this, growth of smallholder finance, particularly financing from private
financial institutions has relatively been slow.
One way by which risks associated with agriculture lending is addressed is
through the use of insurance. Crop insurance is used to protect farmers against
loss of crops due to risks associated with natural disasters such as typhoon, flood,
earthquake etc. The current crop insurance is an indemnity-based insurance
where insurance pay-outs are based on actual damage.
While the implementation of guarantee and crop insurance programs may help in
reducing risks in lending to agriculture, banks and other formal financial
institutions interested in lending to agriculture may also need to design products
and adapt lending methodologies that are tailor-fitted to the needs and
circumstances of smallholders. New and/or different lending processes and
procedures may be designed and adopted. Use of a conduit that are familiar and
located closely with smallholders is also important.
b. Key recommendations to improve credit access by smallholder farmers
i. For the Government Sector.
Demand and supply side constraints to smallholder finance show that it is
unique, costly and risky. As such, very few private financial institutions are
interested in lending to smallholders or if they lend, they impose stringent
requirements that smallholders find difficult to comply with. Because of this,
there is always a tendency for government to intervene in the credit market by
directly providing credit at low-cost subsidized interest rates. However,
empirical and theoretical evidences from previous studies and experience show
that the government, particularly government non-financial agencies, is a poor
creditor. The provision of financial services is best done by financial institutions,
which have the necessary expertise and required infrastructure for lending.
Government has a distinctive role in smallholder finance. Learning from the
lessons of previous subsidized directed credit programs in agriculture, results of
various studies show that governments role in smallholder finance should be
focused on i) establishment of the appropriate policy and regulatory
environment, and ii) provision of the necessary basic and support infrastructure
that will reduce the costs and risks associated with agricultural lending in
general and smallholder finance in particular. To date, DAR has heeded this role
by focusing its efforts on building and strengthening ARB organizations and on
the provision of revenue enhancing farm machineries.
ii. For the Private Sector.
Recognizing the constraints to agriculture lending, banks can overcome the
barriers by employing innovative lending schemes. A few banks have done this
through a mix of product, distribution and collateral customization that serves
the financing needs of smallholders effectively. These include the following:
Use of agents in distributing finance and in collecting relevant information
about smallholders.
Collaborating with agricultural experts to design loans with flexible
repayment terms that are linked to actual crop cycle. This can help improve
the farmers ability to pay on time.

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Use of farmers organization as hub for loan distribution and collection, use
of warehouse receipts and equipment leasing as collateral substitutes.
Understanding the value chains and buyer relationships to determine future
cash flows and improve the credit assessments of smallholders.
Product innovations (e.g. credit card concept, with accredited input dealers
and suppliers).
Use of mobile/electronic banking for farmers --- also to provide digital
footprints for smallholders
iii. For Development Organizations.
Donors can help both the government and the private sector in unlocking
demand and supply side constraints to smallholder financing. On the demand
side, donors can provide support in reducing the riskiness of smallholders as
borrowers by helping them acquire skills in financial literacy (e.g. focus
budgeting, roles and responsibilities as borrowers) and in improving their farm
productivity. On the supply side, donors can provide technical assistance to
financial service providers in assessing the risks associated with smallholders
and using the results in designing and customizing appropriate agricultural
financial products.
Some donor are willing to make equity investments in banks that have showed
interest and commitment to smallholder finance. They provide equity
investments and offer training and technical support in adopting specific lending
methodologies as well as in establishing relevant lending procedures, systems
and processes for effective and efficient smallholder financing.
6. VIABLE AGRI-ENTERPRISE WITH DIFFERENT SOURCES OF FINANCING
Given the analysis of the past and current agri-financing programs and the findings and
recommendations of policy studies on credit, two (2) key measures would be essential.
First is on improving the APCP: Modeling a better financial inclusion program (ag
financing + support services + guarantee + insurance + removed pass-on rate). Second is
improving the generation of credit information and developing a farmers scorecard.
It is proposed that agri-enterprise efforts involving smallholder farmers that use
different models should be encouraged by government so long as these agri-enterprises
have the viable consent of farmers. The farmers and their organizations should be
provided with support services (see discussion on non-market distorting assistance) to
ensure that they have bargaining power in the agreement.
Key stories are discussed in this report albeit the role of DAR in the agri-enterprise
models below is not prominent. It is recommended that these models are encouraged by
filling in the gaps in their respective value chain.
a. Kalasag onion farmers and Jollibee
The story of the Kalasag farmers and Jollibee shows the true requirements for
accessing credit: Having a marketing agreement, knowing the contribution of value
chain actors and eventually knowing the farmers. Much has been written about the
success story of the Kalasag Farmers who were able to sustain its supply agreement
with the Jollibee Foods Group (JFG). Kalasag is the first and only farmers
cooperative that supplies onions to Jollibee. To finance the smallholder farmers

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production, the National Livelihood and Development Corporation (NLDC) requested
Alalay sa Kaunlaran Inc. (ASKI), a microfinance NGO, to provide agri-financing.
ASKI provided loans despite the farmers lack of collateral. The risk-taking behavior
was propelled by the solid and dependable supply agreement between the farmers
and Jollibee. ASKI was also aware that other actors in the supply chain are
strengthening the chain by contributing the following: the City Agricultural Office
provided technical supervision, DA Region III gave a multi-tilling machine and
motorized sprayer, the DA Bureau of Post-Harvest Research provided a cold storage
bin while the Peace and Equity Foundation extended a loan for cold storage, the
Agricultural Credit Policy Council granted a buying or financing fund worth PhP 1.5
M.
As a result of the value chain financing, Jollibee bought metric tons of white onions
and continues to do so. The farmers are improving in terms of increasing the yield
and lessening the percentage of rejection.
This well-documented success story on value chain financing shows that even
without the usual requirements for securing credit (e.g. collateral, credibility),
smallholder farmers could secure agri-loans from formal financial institutions. They
key lies in having institutional markets that secure the purchase of good quality
produce and in having other partners/actors that fill the gaps in the supply chain (e.g.
agri-extension services, equipment, farmers strengthening).
Out of initial implementation of the partnership, the farmers obtained records in the
microfinance NGO making them known to formal financial providers. With the
Credit Information Act being implemented, having a financial record could improve
the credit standing of smallholders.
b. Nueva Vizcaya ARBs and leaseholders partner with Organic Options, Inc. (OOI)
The (evolving) financing story of ARBs and leaseholders partnering with Organic
Options Inc. also tells the same lesson: formal financial providers lend to
smallholders with supply agreements. In Nueva Vizcaya, ARBs and leaseholders used
to sell their vegetable produce to the Nueva Vizcaya Agricultural Trading (NVAT), a
physical trading post that buys and sells various farm products. NVAT is prone to
price fluctuation and on periods when the supply is plenty and the prices are too low,
the farmers could not recoup their costs. There was a time when these farmers, after
discussions between the Nueva Vizcaya governor and Quezon City mayor, started a
Farmer-to-Consumer (F2C) program where the smallholders delivered vegetables to
Quezon City. They thought F2C meant institutional markets but it became physical
selling on the streets of Quezon City. As a result, they kept bringing back to Nueva
Vizcaya their boxes of vegetables.
After attending the FAO-DAR-DA Farm Business School, a course on farm clustering,
synchronization, management and marketing, the farmers from three organizations
were introduced to Organic Options Inc. or OOI. The OOI operates the Melendres
Farm in Antipolo, Rizal and sells organic vegetables to more than 40 stores including
SM hypermarkets, Robinsons Groceries, Shopwise, All Day, and other groceries and
restaurants. Since OOI has unmet market demand, it partnered with the Nueva
Vizcaya smallholders so it could deliver to Shopwise and other stores under the
brand, Veggie King, which is being marketed as products that are transitioning from
chemical to organic farming.

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After three years of partnership, the OOI picks up vegetables three times a week from
the farmers and delivers monthly payments. In one farmers group, the Conwap
Valley Multipurpose Cooperative, production loans and buying funds for individual
cooperators were provided by the cooperative. However, in the two other groups or
clusters, their organizations could not shoulder the production loans, as well as
buying or financing funds, so they secured these from the Cooperative Bank of Nueva
Vizcaya (CBNV).
At first, CBNV hesitated to provide production and buying funds to the two other
groups or clusters, Villaverde farmers and Kasibu Farmers, because these lacked
records and collateral. However, CBNV also knows that these clusters have supply
agreements with OOI. At first, CBNV used the employees provident fund to provide
the production loan but eventually, CBNV utilized the bank funds.
In regard to the buying fund, both the CBNV and the Conwap Valley Multipurpose
Cooperative were tapped by OOI to issue buying or financing funds to farmer-
cooperators. When the farmers deliver to OOI and the latter issues receiving reports,
the CBNV and the Conwap Valley Multipurpose Cooperative pay the farmer-
cooperators and eventually, these will be paid by OOI, which shoulders the cost of
credit. This arrangement addresses the need to pay the farmers in cash which the
OOI finds difficult to do.
As a result of their arrangement with the farmers of the two clusters, CBNV says it
now knows the farmers. The smallholders now have records with the cooperative
bank and could request for increased production loans. The farmers supply
agreement with OOI and the government offices provision of the supply chain
requirements (i.e. capacity building and synchronization of activities) make them less
risky borrowers.
c. Nestle COFFEE Project
In Tagbina, Surigao del Sur, smallholder coffee farmers are engaged in the Coffee
Technologies and Funds to Fuel Economic Empowerment (COFFEE) project with
Nestle, DA, DENR, and the municipal local government unit. Nestle is a partner of the
National Convergence Initiative of DA, DAR and DENR. In the COFFEE project, which
is expected to expand to other coffee areas, smallholders are introduced to the latest
technologies in robusta coffee including high-yielding seedlings and fertilizers and
provided with farm machines, post-harvest facilities, and truck. The capacity of
farmers is also enhanced so they will have Common Code for the Coffee Community
(4C) accreditation. 4C is a worldwide platform that brings together producers, trade
and industry actors, and civil society to work together for improving the livelihood of
coffee farming communities and the natural environment of coffee production areas.
Although it is a global standard and difficult to obtain, Nestle mentors the farmers
and their group to obtain this parameter and maintain it. Despite these efforts, the
smallholders are NOT obliged to sell their (enhanced) produce to Nestle (although it
must be noted that the project saw improved sales to Nestle). In this arrangement,
Nestle provides stem cuttings and other needed requisites for the setting up of coffee
a nursery in the farmers community. In this way, Nestle, through its third party,
buys from the nursery of the farmers and income from this adds to the farmers
overall income. Along with their income from selling actual beans, earnings from the
nursery serve as their capital for their next planting season.

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d. Philip Morris Fortune Tobacco Corporation (PMFTC) tobacco growing contracts
In key tobacco growing areas, PMFTC engages in contract growing with individual
farmers. PMFTC provides assistance to farmers including the possibility of providing
production financing without needing to pay interest rates. PMFTC also provides
capacity building on tobacco agronomy.
7. RESIDUAL ISSUES AND WAYS FORWARDS
House Bill 3785 authored by Butil Party List and Representative Teddy Baguilat among
others proposes that 5% of LANDBANKs loanable funds be dedicated to smallholder
farmers, ARBs and small fisherfolks. It notes that there is a need to create a credit facility
in the LANDBANK to support these subsectors.
To date, the total regular loan portfolio of the Land Bank of the Philippines is around PhP
450 billion and thus, around PhP 22.5 billion constitutes the required 5% of the proposed
law. As of April 2016, the loans of Land Bank to small farmers and fisherfolks (including
agrarian reform beneficiaries) amount to PhP 32.4 billion, which is around 7.3% of the
banks total loan portfolio. In fact, loan to agriculture, in general, is around PhP 258.2
billion (58.3% of total loan portfolio). It could be seen that the LANDBANK even
exceeded the required 5% of the proposed bill by already reaching 7.3% of the total loan
portfolio.
It must be noted that while rate and ratios are important, the more prevalent concern is
how smallholder farmers, ARBs and fisherfolks could access the loans. Apparently,
access rather than availability of funds is the issue. Corollary to this, there is a need for
government agencies, particularly the DAR and DA, to improve the capacity of
smallholder farmers, ARBs and fisherfolks to access the loans. The provision of capacity
building to prospective and current borrowers should not the task of banks including the
LANDBANK. This is not a good practice since banks may be placed in a conflicting
situation where it would be forced to provide loans to farmers that it assisted. This role
is better fit for DA and DAR so that there is an arms-length relationship when it comes to
accessing and providing credit.

F. EVIDENCE-BASED SUPPORT SERVICES


The DAR utilizes several management tools to plan, monitor and assess different aspects and
objectives of CARP including its delivery of support services to beneficiaries. Since 1996, the
DAR used the ARC Level of Development (ALDA) as an internal management tool to assess
the several aspects including the level of organizational maturity of farmers groups in ARCs
and in 2011, it attempted to document the household income of ARBs in ARCs.
Unfortunately, the ALDA showed huge limitations as evidenced by the misuse and
misinterpretation of the 2011 ALDA results. This was one of the reasons for the assessment
and rethinking of the ALDA and eventually, the development of the IT-enabled Monitoring
Assessment (ITEMA) to replace ALDAs organizational maturity assessment.
Prior to 2010, the ARB Carding and ARB Profiling projects were meant to complement the
data gathering on status of ARBs and complement the ALDA. But these failed to provide data
that could stand scrutiny.
The limitations on ALDA and other internal monitoring tools and the failure of the ARB
Carding and ARB Profiling projects contributed to DARs low utilization of concrete evidence
in developing and implementing support services. The non-use of evidence also partly
explains why most of programs of the DAR were not integrated and synchronized and why

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there was a seeming preponderance to undertake pilot projects rather than scale up or
expand successful models based on the data and analysis from the ALDA and other tools.
1. ALDA IN 2010
ALDA was being used in 2010 and it had clear strengths and limitations. It was the main
tool to assess these six areas in ARCs:
Land tenure improvement
Organizational maturity of ARB organizations
Economic and physical infrastructure
Farm productivity and income
Basic social services, and
Gender and development.
From 1996 until 2010, the ALDA was conducted by the Bureau of Agrarian Reform
Beneficiaries Development. In 2011, the national conduct of the ALDA was transferred to
the Policy and Planning Service so that together with the ARC-MTS, these instruments
formed part of the DARs planning, monitoring and evaluation system (see Memorandum
No. 147, dated 4 May 2011).
ALDAs strengths lie in its reliable measurement of some of the key areas in ARCs
including the delivery of economic and physical infrastructure, basic social services, and
gender and development. These areas used quantitative indicators that were easy to
gather and verify. And since the interventions in these areas were mostly on capacity
building and delivery of concrete facilities and rural infrastructure, their effectiveness,
efficiency, and other results are easily grasped.
ALDA, however, had huge limitations particularly in the areas of organizational maturity
and farm productivity and income. In a review workshop spearheaded by the DAR Policy
and Planning Service, the feedbacks of ALDA users are as follows:
It is not responsive to current monitoring needs.
The organizational maturity assessment tool is biased for cooperative-type of
organizations
The inclusion of non-functional farmers organizations in the assessment tilts the
ratings.
There is difficulty in securing data or information
There is a short time allotted for data gathering.
It utilized non-acceptable methods of data gathering such as focus group
discussions to gather data when it should only be used for validation.
It is prone to recycling of previous years data.
Unfortunately, ALDA findings have been misinterpreted and misused by policymakers
and academics who do not check the methodology of the ALDA and would use its findings
as the DARs official results. It can be seen that the use of the ALDA, even despite its
limitations, was akin to shooting oneself. It was allowing data to be misinterpreted and

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used against the CARP and the DAR. This was one of the reasons for the rethinking on
the ALDA.
2. THE DEBATE ON THE USE OF THE 2011 ALDA
The UP School of Economics issued a Discussion Paper in February 2014 authored by
Professor Raul Fabella. In this paper and in the lectures that he gave, Fabella insisted
that it is time to let go or to finish CARP. He cited the 2011 ALDA and other studies as
evidence for ending CARP. He was answered by his colleagues, Toby Melissa Monsod and
Sharon Faye Piza, in a UPSE Discussion Paper in March 2014. There were rejoinders to
these debates but were not released as UPSE Discussion Papers.
Fabella, in CARP: Time to Let Go, cited Adriano [2013] who used the ALDA to criticize
the productivity of lands awarded under CARP and the ARBs quality of life. Fabella said
that CARP messed up on these important measures. The 2011 ALDA showed that the
average (ton/hectare) yield among ARBs in ARCs in palay was 10% higher than national
average, 50% higher in corn, 40% lower in coconut, and 8% lower in sugar. Fabella
noted that only 54% of ARBs are in ARCs and ARCs were poured with government and
non-government aid. He surmised that the figure could have been worse for ARBs in
non-ARCs. The figures for coconut and sugar yield among ARBs in ARCs are chilling.
Moreover, the 2011 ALDA, according to Fabella, also showed that 54% of ARB
households in ARCs fell below the poverty line. This is starkly higher than the 2009
Family Income and Expenditure Survey (FIES), which show that 36% of farmers fell
below the poverty line. Fabella further infers that since the plight of ARBs in non-ARCs
can only be worse, the figures could probably look more indicting, and that CARP, it
seems, has created a new class of farmers: the landed poor!
Monsod and Piza answered Fabella by addressing the limitations of the ALDA. They
noted that ALDA is a management tool used to monitor key interventions to ARCs and to
ARB households and ARB organizations in ARCs. They emphasized that the ALDA is not
designed to support statements attributing increases or decreases in productivity to
CARP. They even went on to say that if productivity will be attributed to CARP, then
Fabella should explain why the figures are chilling when rice and corn (representing 62%
of area planted in ARCs) show yields that are higher than the national averages. They
also provided a better or more acceptable way of determining the effect of CARP on
productivity.
Monsod and Piza also addressed Fabellas observations on ARBs quality of life. They
stated three points. First, DAR initially targeted economically-depressed areas in picking
up and launching ARCs so this population, a meager universe of 1.43 households in less
than 10,000 barangays, could be further biased. Second, it is erroneous to compare
poverty incidence estimates from the ALDA household income survey with the 2009 FIES
because both are not comparable. Third, without data from the same households at an
earlier point in time and for comparable ARBs who are not in ARCs, there is no basis to
claim that CARP created the landed poor.
Fabella issues a methodological rejoinder [18 March 2014] to Monsod and Piza
essentially stating the same arguments using the same data and Monsod and Piza
reiterated their points in their own rejoinder [29 March 2014]. In one of their endnotes,
Monsod and Piza insisted that the meaning, use and comparability of ALDAs indicators
and estimates are highly specific. They noted that the estimates from the household
income survey, undertaken for the first time in 2011, are of little use beyond their

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internal purpose given the major limitations in the survey instrument and design.
Because of the danger of the ALDAs misuse and misinterpretation to undiscerning
researchers, the 2011 ALDA was not meant for public release but it was featured in
Adriano [2013] and picked up by Fabella [2014] without proper disclaimers.
3. THE ARB CARDING PROJECT AND THE ARB PROFILING STUDY
a. Description of the Project
In 2006, the DAR started the implementation of the ARB Carding and Identification
(ID) System that aimed to provide information on the magnitude of the ARBs still
owning, cultivating, and making the awarded lands productive. The system intended
to generate the database and registry of ARBs awarded with lands. An automated
system was established from the DARPO to DARCO through the Management
Information System (MIS) to facilitate the generation of field reports and ID cards.
The DARCO issued Memorandum Circular No. 04, Series of 2006, which gave the
mechanism for monitoring the whereabouts and status of ARBs in relation to land
ownership, socio-economic conditions, and access to support services.
The field offices were provided with ARB index forms, complete set of computer units,
printers, scanners and cameras. However, despite the setting up of the system and
the provision of a package of support facilities to field offices, there was low
accomplishment. Field offices reasoned the following: limited competent DAR staff
to undertake data gathering activities, the computer units that were provided were
below quality standard for data storage, limited number of cameras for photo
generation, and absence of self-repaired Data Entry System program.
To address the concerns, DAR issued Administrative Order No. 3, Series of 2008 to
integrate and institutionalize the ARB Carding and ID System in the DARs LAD
procedures as a means to document the status of the ARBs, aid in policy and program
development, research and advocacy, resource allocation, and in monitoring and
evaluation of program interventions to ARBs. Around this time, the congressional
deliberations on CARP Extension were ongoing and DAR needed to provide data.
The CARDing system, Barrios [2011] noted, could have been an ideal investment in
setting up a monitoring system internally to the Department but it had serious
bottlenecks. For instance, there was a limited number of personnel and capabilities
that can be tapped to implement the project in addition to their usual duties and
functions. However, the main pitfall of the project though is its lack of an
implementation mechanism on how tracking can be realistically done [Barrios, 2011].
In 2009, Berkman International, Inc. (BII) was commissioned to conduct the ARB
Profiling. The DAR reasoned that this will ensure impartiality on the internal data
that were gathered. When the results of the data analysis were presented in April
2011, it was observed that there are discrepancies on some data and because of
concerns on data collection and methodology, there might be concerns on the
reliability of data generated.
b. The Critique on the ARB Profiling Study
Dr. Erniel Barrios was commissioned to in mid-2011 to scrutinize the BIIs ARB
profiling output to identify if it could still be used for program and policy purposes.
In August 2011, Dr. Barrios submitted a report. The following were some of his
major concerns on the ARB Profiling that was undertaken:

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i. Intention
The intention of the ARB profiling conducted by the BII was to undertake
complete enumeration. However, the resulting design was neither a complete
enumeration, nor purposive sampling nor representative sampling.
ii. Data collection strategy
There was no standardized data collection strategy. In first priority provinces
(characterized as ARCs with considerable population of ARBs), BII conducted
barangay carpeting or complete enumeration of ARBs before transferring to
another priority area. In these provinces, BII used a combination of approach
including interviews in the command post, house-to-house surveys, focus group
discussions, and group interviews. In second priority provinces, BII used group
interviews, FGDs and other local-based applicable schemes. In some areas, they
used barangay carpeting and not in other areas. Barrios had huge concerns on
BIIs data collection method. First, there was no uniformity in the approach so
the collected data were not compatible and cannot be aggregated and
standardized. Second, the individual forms had farmer-specific questions but
FGDs and group interviews were used. Respondents could have adopted similar
responses.
iii. Questionnaire
The portion of the questionnaire on LTI had needed details like serial number
and title number so it was virtually impossible for ARBs to respond to the
needed information if the documents were not easily accessible. In cases of
FGDs and group interviews in a common place, it was impossible for these
details to be provided. The portion of the questionnaire on sources of annual
household income also had problems. A reference point was not used in the
question on income so memory recall bias and guessing were probably high.
There were also no probing questions when these should have been used to
generate as reliable information as possible. Moreover, since the ARBs were
gathered in common areas, other family members were not around to help in
recalling income-related details. The results therefore are doubtful: the farm
income of ARBs was lower than the 2006 poverty threshold and their off-farm
and non-farm income were too small to be their sources of income.
Barrios recommended the conduct of new a representative sampling survey instead
of continuing the BII profiling study.
It was unfortunate that despite the resources spent for both the ARB CARDing and
ARB Profiling, these were not correctly implemented and thus, these were not used
for evidence-based support services. These could have been good sources of data to
understand the demographics, productivity and income of farmers and DAR and
other stakeholders would have had a sense of their quality of life.
4. REMEDIAL MEASURES THAT WERE UNDERTAKEN
Remedial measures were undertaken to address the limited use of evidence in DARs
support services. This included the rethinking of the ALDA.
Given the need to monitor and measure the DARs interventions (on both land tenure
services and support services), data are needed to assess the progress of interventions
and to at least gauge their effectiveness and efficiency. For around 15 years, the ALDA

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was used to monitor the ARCs and it was the monitoring tool for programming and
budgeting of local and foreign-assisted projects. However, the ALDA had serious
shortcomings. These limitations even became the source of academic misuse and
misinterpretation [See Monsod and Piza, 2014, on Adriano, 2013, and Fabella, 2014].
Aside from its limitations, the ALDA also needed rethinking when this administration
enhanced the focus of assistance towards enhancing the capacity of farmers
organizations in synchronizing their agri-enterprise efforts and linking with viable
markets. This meant going beyond ARCs or undertaking integrated area-development;
rather, it meant that the farmers organizations became the center of assistance. Thus,
the needed metrics should not just track and measure the assistance poured in the
physical area but these should gauge the actual interventions to and the progress evident
in the assisted smallholder farmers groups. Note that assistance was provided to the
farmers groups, whether these are inside or outside of ARCs, especially if there are
possibilities of marketing arrangement with private investors.
ITeMA changed the OMA of ALDA; but note that ITeMA is also limited - In 2015, the DAR
rolled out a new monitoring tool to enhance the organizational maturity assessment or
OMA portion of the ALDA. This is consistent with the support services interventions that
focus on farmers organizations as main unit for receiving agri-enterprise assistance.
Comprehensively and realistically assessing the organizations capacity, performance,
and viability would provide insights about the development gaps and lessons on how to
improve the smallholders income by assisting their organizations.
The IT-enabled Maturity Assessment for ARB organizations or ITeMA is a new system
replacing the OMA of ALDA. ITeMA has 30 variables under six major indicators namely:
a) Organizational management, b) Resource management, c) Social enterprise operations,
d) Financial performance, e) Alliance building, f) Environment and social responsibility
Farmers organizations that have been functional for a minimum of one year are included
in the ITeMA for evaluation. Non-functional groups are not subjected in ITeMA. Data
gathering is conducted through face-to-face interviews using a structured instrument
programmed in smartphones. ITeMA uses smartphones with installed data applications
that facilitate the conduct of data gathering, the verification of culled data, and the
location of the discussion. The ITeMA also eliminated some layers of activities that were
present in ALDA. With ITeMA, there is no more need to encode answers afterwards
because responses were keyed-in using smartphones. Moreover, there is no tedious
integration and consolidation processes because responses are uploaded to the DAR
Central Office. In this way, recycling and tampering of data are no longer possible.
Another remedial measure was the stopping of the ARB carding and the tapping of the
Philippine Statistical Research and Training Institute (PSRTI), an attached agency to the
NEDA to undertake an ARB profiling. The ARB Survey intends to determine the
household welfare level of ARBs and other related issues under the CARP. The survey
involves ARB and non-ARB respondents to determine the status of the awarded lands,
issues on voluntary land transfer, and second generation problems on land distribution.
The ARB survey report will be completed by end of July 2016.

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General Analysis of the Land
Distribution Program
I. CARP, Property Rights and Land Records
In most discussions involving Philippine agrarian reform, the aspect of land management and
administration is mostly neglected. This neglect cannot continue given the fact that
completing the land acquisition and distribution aspect of agrarian reform involves the
acquisition of more than 600,000 hectares of private agricultural lands for distribution to
beneficiaries. Moreover, because of agrarian reform, around 5 million small owners of
private agricultural lands have been added to the number of owners of titled properties.

A. COLONIAL INSTITUTIONS AND LAND INEQUALITY


Land inequality has its roots from the countrys colonial legacy. The Spanish colonial regime
imposed the Regalian Doctrine upon the Philippines. Under this doctrine, the state owned all
lands and the territorys natural resources. Moreover, it has the monopoly power to grant or
recognize private ownership of land. To be able to access land and natural resources, the
natives needed to purchase or request a documented property right from the Spanish regime
or its state successors. Most of the rural poor failed to do this and as a result, only those who
could afford and those who had educational background, received land. Huge tracts of lands
were given to Spains loyal subjects or cooperators in their colonial enterprise such as
religious orders.
The American colonial regime instituted occupancy-based distribution and titling of lands.
The Torrens system of land registration was adopted. This pushed the non-occupants and
the occupants with limited resources (in essence, those who have no access to courts and
surveyors) to the hinterlands or to becoming tenants or farm laborers. The Americans also
acquired and distributed large tracts of land owned by the religious order through the Friar
Lands Act.
These colonial institutions governing land and natural resources persisted even after
Philippine independence. The elite found these colonial institutions to their benefit and had
little incentive to change these. Thus current property rights regime exhibit inequalities,
retaining its colonial characteristics.

B. THE CURRENT PROPERTY RIGHTS REGIME GOVERNING LAND


The current land property rights regime is governed by opaque, complex, inaccessible and
overlapping rules and institutions.
1. MULTIPLE FORMS OF LAND OWNERSHIP AND USUFRUCTUARY RIGHTS
There are multiple forms of ownership and usufructuary rights to land. This includes
native (communal) titles as recognized by the IPRA, agrarian reform titles, forest
stewardship contracts, pasture lease agreements, mineral production sharing
agreements (MPSA) and other instruments that may grant usufructuary rights (and not
necessarily ownership)and other land tenure instruments. In some cases these land
tenurial instruments overlap causing conflict and instability in land tenure.

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2. MULTIPLE LAND LAWS
There are multiple land laws (some outdated, some conflicting) and multiple titling
processes. Current land registration rules allows both judicial and administrative titling.
3. MULTIPLE AGENCIES RESPONSIBLE FOR LAND DISTRIBUTION AND LAND MANAGEMENT AND
ADMINISTRATION.

a. Three land distribution agencies


Three agencies distribute land: DAR, DENR and NCIP. It is not unknown for two or
three of these agencies to issue overlapping land grants to their respective
beneficiaries. The Tampacan case and the Mangyan-Buhid case are two of the more
prominent examples.
b. Two survey approval agencies
The Land Management Service (LMS) of the Department of Environment and Natural
resources verifies and approves both original surveys and subdivision surveys. The
Land Registration Authority can also review and approve subdivision surveys of
titled properties except those meant for reselling.
c. No single repository of land records
There is no single government agency in the country that maintains complete records
of all landholdings. Instead, different government agencies keep different kinds of
records.
The Land Registration Authority (LRA) and its Registers of Deeds in various parts
of the country keep records of titled properties. Until recently, there was no
centralized database of all titled properties. And until now, the LRA cannot
determine the total area of all titled properties.
The DENR and the LRA have copies of approved survey plans but the DENR itself
does not know which of the survey plans resulted in the titling of the land.
The LRA and the DENR does not have information on which of the titled
properties are used for agricultural purposes. This information is with the
various assessors offices in the provinces and municipalities have tax
declarations and tax maps, as well as real property tax records. But, land use
information filed with the assessors offices are self-declarations of owners or
claimants of the land.
LGUs each have their own zoning ordinances/regulations and the Housing and
Land Use Regulatory Board regulates zoning and keeps a registry of all zoning
ordinances.

C. EFFECT OF GAPS IN LAND MANAGEMENT AND ADMINISTRATION ON THE


AGRARIAN REFORM PROGRAM
Gaps in land information, the fragmentation of landholding records, errors in land
registration and classifications, and incomplete cadastral information and survey errors
hindered the agrarian reform program especially the acquisition and distribution of private
agricultural lands.

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1. OUT-OF-DATE LAND RECORDS IMPEDE COVERAGE OF PRIVATE AGRICULTURAL LANDS
Unless land is transacted/transferred, many land records are not updated. In many cases,
it is only when the DAR processed a private landholding for coverage that it is found out
that this had been transferred (sold or transferred to heirs). Many of the titles and survey
plans are still in the name of the original landowners even if they have long been
deceased and the properties have been subdivided among the heirs. In many other cases,
several land transactions have already occurred but the titles remain in the name of the
original owners because most of the transactions are not registered. This stymies the
land distribution process since the current owner(s) of a landholding must also be served
a copy of a Notice of Coverage to satisfy due process.
The problem is exacerbated when a landholding is transferred without DAR clearance or
when the landholding is divided and parts of it are transferred.
2. TECHNICAL PROBLEMS INVOLVING LAND RECORDS AND SURVEYS DELAY LAND DISTRIBUTION
Several problems related to land records and surveys delay the land distribution process
particularly of private agricultural land. This is so because government has to pay for
acquired private lands. These problems include:
Overlapping titles;
Duplicate/multiple titles covering the same properties;
Spurious titles, survey plans, tax declarations
Erroneous technical description in titles;
Erroneous surveys
3. DIFFICULTY IN DETERMINING ACTUAL SCOPE OF AGRARIAN REFORM
Gaps in land information are the reason the DAR had difficulty in establishing CARP
scope and balance. The attempt to determine CARP Scope suffered from a fatal
assumption that checking records of titles with Registers of Deeds and tax declarations
were enough. CARP scope validation was done with poor records, subject to vagaries of
discretion of the record keeper. Moreover, DAR itself did not keep a reliable central
database of landholdings for CARP coverage until recent years.
In 1987 when President Corazon C. Aquino issued Proclamation 131 and Executive Order
No. 229 instituting the Comprehensive Agrarian Reform Program, CARP scope (target for
coverage) was initially estimated to be 9.7 million hectares with 10 million agrarian
reform beneficiaries. This increased to 10.3 million hectares and targeted beneficiaries
declined to 3.9 million in 1989, a year after enactment of the Comprehensive Agrarian
Reform Law (RA 6657). The Presidential Agrarian Reform Council (PARC) issued these
estimates using the 1980 Census of Agriculture as basis. (Note: CARP Scope includes both
DAR and DENR scope. DENR scope includes non-land transfer program, the ISF.)
In 1992, towards the fourth year of CARP implementation, the incoming DAR
administration realized how difficult it was to do realistic planning and programming in
the absence of a reliable landholdings database. DAR launched the CARP Scope
Validation Project, which tried to establish a comprehensive CARP database. Initial
results in 1994 indicated that the estimate of total scope decreased by more than 2.2
million hectares to only 8.1 million hectares. DARs jurisdiction went up to 4.29 million
hectares (53%) while DENRs share went down to 3.77 million hectares (47%).

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Further adjustments were made when DAR conducted its Inventory of the CARP Scope
starting 2006. This again changed and at present, total CARP scope is around 9.2 million
hectares, 5.4 million hectares are under DAR and 3.8 million hectares are under the
DENR.
4. ON LAND CLASSIFICATION AND LAND USE
There are two general classifications of land in the Philippines: alienable and disposable
(A&D) lands and forest lands. As of 2014, around 14.2 million hectares (47.6% of total
land area) are classified as alienable and disposable while 15.8 million hectares (52. 4%
of total land area) are forest land. (See Table 25)
For decades, forest lines remained virtually unchanged. The DENR had only recently
completed the delineation of the countrys forest line. But the final delineation of the
forest line needs legislation for it to be in effect.
There are approximately 755,009 hectares that remains unclassified non-A&D land, 55%
of which are in the Southern Philippines (See Table 25). Unfortunately, many of these
lands are currently occupied by forest dwellers, landless farmers, indigenous peoples,
and other occupants who do not have any ownership or possessory rights.
In many places, land use does not correspond with land classification. Many classified
forest lands are actually used for agricultural use.
Clearly, land use classification needs updating. This needs the passage of the National
Land Use bill which has languished in Congress for more than two decades.

D. DESIGN FLAWS IN CARP


1. FLAWED ASSUMPTIONS
The Comprehensive Agrarian Reform Program in its inception had major conscious and
unconscious assumptions that were flawed.
a. Assumption 1: Land administration system is functional.
As mentioned above, the countrys land administration system had a number of flaws
that made the distribution of land difficult or caused second generation problems.
Errors in land records and survey records caused delays in the acquisition of private
agricultural land. Lost or destroyed titles can only be reconstituted by the courts.
Some courts do not allow the DAR to file for reconstitution of titles. Errors in
technical description in titles and in survey returns need a long process of correction.
There is administrative reconstitution by LRA which also takes a long period of time.
Under the current land registration systems, if the Registrar of Deeds is not diligent, a
CARP-covered landholding can be transferred even if these have been served Notices
of Coverage. Even if the land was illegally transferred, only the courts can annul the
transfer. The current Administration sought to prevent illegal transfers by causing
the annotation the NOC into the title of the covered landholding but some Registrar of
Deeds are slow in complying. Moreover, a number of landowners have filed cases in
court questioning the legality of the DAR-LRA Joint MC 17 Series of 2011 which
instructs the various Registers of Deeds to annotate the NOC on the title of covered
landholdings.

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b. Assumption 2: Social justice measures for tenants and farmworkers in private
lands is the same as social justice measures for tiller-occupants of in
government-owned lands.
When the Comprehensive Agrarian Reform Program was implemented in 1988, there
were four types of land: tenanted private agricultural land, plantations in private
lands, plantations in public lands and government-owned lands. The tenurial
arrangement and production processes in each are different. Necessarily, the process
of distribution would have to be different.
Social justice measures for private and public lands differ and these aspects of the
social justice goal are not clearly delineated. For private lands, restitution of social
wrong involves breaking up large private agricultural lands and distributing these to
its tillers or farmworkers. For public lands, the social justice goal is the recognition
and confirmation of the rights of actual occupants/tillers.
A number of the rules, policies and processes for the distribution of private lands are
more fitted for tenanted lands. But tenancy is only prevalent in certain parts of the
country. In some parts of the country, the main produce are sugar and high-value
crops and cultivation is through a plantation set-up where landowners hire regular
and seasonal farmworkers.
This is especially true with beneficiary identification. In tenanted lands, beneficiary
identification is easier since tenants have specific parcels that they till. Such is not
true for farmworkers who work in haciendas and plantations. Therefore, lot
allocation can sometimes be a problem. The law said the permanent, seasonal and
temporary farmworkers can be beneficiaries. Oftentimes, beneficiary identification
can cause farmworker-to-farmworker conflict that delays land distribution. Then
there is the question of when a farmworker had worked in the plantation/hacienda
to be qualified to be beneficiary. In any cases, farmworker-beneficiaries would
receive farm lots of uneconomical sizes.
Restitution of social wrongs is the rationale for distributing land to tenants and
farmworkers of large agricultural lands. Social justices for tiller-occupants of parcels
of government lands involve the recognition of possession.
c. Assumption 3. Marcos substantially completed the distribution of tenanted rice
and corn lands.
This was not the case. The original implementing rules of PD 27 provided that
Emancipation Patents can only be issued to beneficiaries only upon full payment of
the awarded land. This policy was only changed in 1982 and EPs were issued to
tenant-beneficiaries after payment of only two successive amortizations. Right before
he was deposed, Marcos again revised this requirement and ordered the then
Ministry of Agrarian Reform to issue EPs regardless of land amortization made.
However, by the end of the Marcos regime, only around 15,061 hectares have been
issued Emancipation Patents. This was continued after the Aquino Administration
was installed. In pursuit of accomplishment, DAR accelerated the issuance of EPs.
From 1987-1990, the DAR rushed the issuance of PD 27 lands issuing Emancipation
Patents for 326,818 hectares of land. For this period, OLT lands constituted almost
all of DAR accomplishment in the distribution of private lands. Indeed OLT comprised
84% and 83% of total accomplishment for the years 1988 and 1989 respectively. In
the six years of the administration of President Corazon Aquino, EPs for 359,000

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hectares of tenanted rice and corn lands were issued to beneficiaries of which EPs for
284,007 ha (48% of total OLT accomplishment) were issued within the three-year
period from 1988 to 1990 (See Table 1).
The rush to distribute EPs resulted in problems that are still being resolved today. In
this rush, EPs were distributed even if land valuation had not yet been set and
landowners compensation had not yet been paid. Until now, payment to former
landowners of 10,056 landholdings totaling 55,456 of tenanted rice and corn
lands are still under process.
d. Agrarian reform models from Japan, Taiwan and South Korea can be
transplanted in toto to the Philippines.
The modeling could be seen on the rules on the identification of lands to be covered,
the selection of beneficiaries, the formula for land valuation, and the structures of
governance.
However, it must be noted that the land reform laws of Japan, South Korea and
Taiwan were largely land-to-the-tiller programs fit for tenancy and not necessarily
for plantation areas cultivated by regular and seasonal farmworkers.
Japan utilized village agrarian reform committees as mechanisms for implementing
land reform. This is similar to the barangay agrarian reform committee created to,
among others, assist in beneficiary identification. There is value with this mechanism
given the need for local knowledge in redistributive reforms. However, it has become
clear that while the BARC is effective in tenanted lands, this mechanism fails in
plantation lands. The village leader simply does not know who the regular and
seasonal farmworkers are who till the plantations and haciendas especially those
that span several barangays and even municipalities.
Taiwans land valuation formula shows a striking similarity with the land valuation
formula of Presidential Decree 27 [Prosterman and Brown, 2007]:
Land value = Annual Gross Production x 2.5 x Government Support Price
This valuation was fixed even if farming seasons and market prices were different.
Since land valuation is a function of the court system, this formula has been a source
of court disputes for many years. At present, there are different jurisprudence on
valuation and the wide discrepancies on the rulings is becoming worrisome.
2. CARP POLICIES AND PROGRAMS WERE NOT EVIDENCE-BASED BECAUSE OF INACCURATE OR
INCOMPLETE DATA.
As stated above, no single government agency maintains complete records of all
landholdings. The fragmented of land record mad it difficult to accurately identify which
lands are covered by agrarian reform.
In addition, national level land use data remains unclear up to the present.
This is exemplified by the difficulty in determining the CARP Scope. CARP is supposed to
have a working scope: the amount of land (public and private) that will be distributed by
the agrarian reform program. There were a number of attempts to fix this figure but in
the end, for practical reasons, this scope is a derived/computed figure: accomplishment
plus balance equals CARP Scope.

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As previously stated, in 1987, CARP Scope was initially estimated to be 9.7 million
hectares with 10 million agrarian reform beneficiaries. This was revised in 1989 to 10.3
million hectares and targeted beneficiaries declined to 3.9 million in 1989. In 1992, the
incoming DAR administration launched the CARP Scope Validation Project in order to
establish a comprehensive CARP database.
Initial results in 1994 indicated that the estimate of total scope decreased by more than
2.2 million hectares to only 8.1 million hectares. DARs jurisdiction went up to 4.29
million hectares (53%) while DENRs share went down to 3.77 million hectares (47%).
Further adjustments were made when DAR conducted its Inventory of the CARP Scope
starting 2006.
The Inventory of CARP Scope or ICS Project that was conducted prior to CARPER
(Memo Circular was issued on 2003 but actual validation started in 2007 and was
completed in 2010) actually validate the balance, not the scope. What was certified on
February 18, 2010 by the DAR Executive Committee (DAR Executive Committee
Resolution No. 1, Series of 2010) was the 1,034,661 hectare balance (not the scope of 5.2
Million). This was after the PAROs and the PARCCOM Chairpersons jointly certified the
provincial CARP balances. Planning Service then computed the scope by adding the
cumulative accomplishment to the Balance. (1,034,661 + 4,119,196 hectares = 5,153,857
hectares).
This again changed and at present, total CARP scope is around 9.2 million hectares, 5.4
million hectares are under DAR and 3.8 million hectares are under the DENR.
3. OVERLAPPING LAWS AND COMPLEX LEGAL SYSTEMS
a. RA 6657: a result of compromise
RA 6657, like other laws that seek to change the status quo in a democratic setting, is
a result of compromise.
While land reform advocates got what they wanted (coverage of all private and
public agricultural lands regardless of tenurial arrangement and commodity
produced), the landowner lobby got an implementation schedule that prioritizes
public lands and lands subject to voluntary modes of acquisition. The result is the
non-prioritization of private lands subject to compulsory acquisition that in turn
resulted in a bureaucracy that got used to distributing lands that are easier to acquire
and are non-contentious.
b. Residual powers of old laws over newer ones
Old land laws retain residual powers over the new ones because the old laws were
not necessarily repealed and some of their sections were merely superseded,
replaced, or amended in part by new legislation. This results in a complex system of
laws that are hard to navigate.
For instance, laws enacted in the last century are still used for land administration,
with drastically different circumstances.
Lands initially processed under PD 27 were continuously covered under the same
law even if a more comprehensive law, passed in 1988 (and amended in 1998 and
2009),was already in place. To this day, outstanding issues from the 1972 law,
including cases of undocumented landholdings and unpaid landowners, are still
being addressed.

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An area could be claimed as agricultural/agrarian land, indigenous peoples land, and
protected site at the same time. In some cases of this nature, the land was split and
thus rules across boundaries are complicated.
4. EMPLOYMENT RELATIONS AND PRACTICES IN PLANTATIONS AND HACIENDAS WERE NOT
CONSIDERED
When RA 6657 decided to expand coverage of agrarian reform to plantations and
haciendas, it did not consider the employment practices in plantations and haciendas.
Agri-business plantations where capitalist relations prevail had a more stable workforce;
regular employment is predominant with few contractual/temporary workers. During
the ten-year deferment period, the owners of some of these plantations dismissed some
of their more troublesome employees. When these agri-business plantations were
distributed after the deferment period, there were pending illegal dismissal cases. When
the time came for the identification of beneficiaries, many of these illegally dismissed
farmworkers were left.
In contrast, the more feudal hacienda system that predominates in the sugar lands of
Negros had few regular employees. Most farmworkers are temporary seasonal workers
and are usually organized into work gangs. Many are migrants from other places. Some
own land where they live and take on temporary farm work in other places while waiting
to harvest their own land.
Employment relations are further complicated by the arriendo system. Usually, when the
arriendador leases land, they have their own regular and temporary farmworkers usually
displacing the landowners own farmworkers.
Thus, beneficiary identification in sugar haciendas are usually more complicated and
prone to beneficiary-to-beneficiary conflict that, in many cases, persist even after the
land has been distributed. Add to this that coverage of haciendas usually take longer than
other types of landholdings. In that interval, farmworkers change, further complicating
beneficiary identification.

E. CARP LACKED FOCUS ON LARGE PRIVATE LANDS


During the first four years of CARP implementation, only lands already covered by previous
land reform programs (OLT and landed estates), government lands already reserved for or
devoted to public use or subject to private rights (GOL, settlements, public A&D lands, and
ISF areas) can be covered. Non-OLT private agricultural lands could only be covered if they
were idle and abandoned, or were voluntarily offered (under VOS or VLT). Although big
landholdings could already be compulsorily acquired during the first four years, only the
excess over 50 hectares could be covered. The remaining 50 hectares could be covered only
starting the fourth year of program implementation. Furthermore, big landholdings devoted
to commercial farming were granted a 10-year period of deferment, which meant that they
could only be covered after 1998.
Over the years, in the pursuit of land distribution accomplishment, there was a tendency for
DAR personnel to prioritize the coverage of public lands over private lands because of the
distribution of public lands was easier and less contentious and the processing shorter.
1. HISTORICAL TREND IN LAND DISTRIBUTION
OLT lands comprised the biggest proportions of total accomplishment of DAR in the early
years of RA 6657 as earlier stated.

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But from 1990-1996, settlement lands formed either the biggest or second biggest
proportion of DAR-distributed lands. Distribution of government-owned lands (mainly
KKK lands) rose steeply in the period from 1991 until in 1994 contributing 36% of
accomplishment during that period. GOL/KKK lands and settlements together comprised
56.9% of accomplishment during this same period. Non-PAL continued to be a very
important contributor to DAR accomplishment even though eclipsed by voluntary modes
of acquisition (especially voluntary land transfers) from 1996 to 2009 (although even the
highest annual VLT accomplishment never approached the magnitude of the high annual
accomplishments in either settlements of GOL/KKK.). (See Table 1)
In recent years, government-owned lands reported distributed were not even in the
database and were only added after the fact in the LAD Balance Accounting as additional
landholdings (See Table 5). Estimated total area of land under PP 2282 is around 1.5
million hectares; cumulative GOL/KKK accomplishment is still lower than this.
From 1996 to 2009 when RA 9700 put a stop to Voluntary Land Transfers as a mode of
compliance with agrarian reform, VLT became the preferred method of distributing
private lands because of its non-contentious nature.
All in all, 879,800 hectares of land were distributed through VLT from 1988-2015. (Note.
Though RA 9700 was supposed to have stopped VLTs as a mode of acquisition and
distribution, DAR continued to distribute VLT lands which were in process by 2009 on
the basis of DOJ Opinion No. 81 series of 2012). In terms of magnitude, it is second only
to GOL/KKK in terms of distributed hectarage, even higher than settlements. VLT
comprised almost 18% of all distributed lands and 32% of distributed private lands (See
Table 1).
Most landholdings that were distributed through VLT are the smaller landholdings.
Moreover, VLT rules allow the transfer of land below the retention limit of five hectare .
The highest levels of accomplishment were achieved in the years 1993 (411,960
hectares) and 1994 (433,678 hectares). However, most of these are GOL and Settlements
and in the form of collective CLOAs (See Table 1 and Table 6).
2. UNDISTRIBUTED PRIVATE LANDS
Thus, a significant number of large private lands remain undistributed. DAR records
show that 2,608,770 hectares of private land were distributed from 1972-2015. Only
1,773,209 hectares were LBP-compensable. (See Table 2) There remains 575,272
hectares of undistributed private agricultural land (See Table 3).
Private lands subject to compulsory acquisition (CA) got left behind. Since these are the
more contentious and more tedious to process, the more easily distributable lands were
prioritized. By late 2000s, the CA lands that were left were mostly those with landowner
resistance, with technical problems or with beneficiary identification issues (especially in
sugar lands in Negros). From 1988 to 2015, the DAR distributed 357,106 hectares of
private land through compulsory acquisition (See Table 1). A greater number (410,332
hectares) are still for acquisition and distribution (See Table 3).

More than 40% of the LAD balance are large private agricultural lands (See Table 3). Of
the LAD balance, 15,613 private landholdings covering an area of 237,896 hectares are
large landholdings of more than 24 hectares in size (See Table 4).

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F. INAPPROPRIATE COLLECTIVE CLOAS AND QUESTIONABLE VLTS NEGATED
AGRARIAN REFORM GOALS
1. COLLECTIVE CLOAS
Awarding of collective CLOAs was prevalent in the 1990s tapering off at the start of the
new millennium.
The issuance of Collective CLOAs was found to be a convenient way to abbreviate land
acquisition and distribution protocols and was a useful means to enable the DAR to
award the land to beneficiaries pending resolution of certain problems. It was supposed
to be just an interim measure. However, since it could shorten the elapsed time of the
land acquisition and distribution cycle by skipping a major activity, it became an
expedient strategy to fast track accomplishment. However, individual titling did not
begin immediately since the landholding from which the collective CLOA was awarded
had already been booked as an accomplishment; there was very little incentive for the
DAR field offices to complete individual titling.
Moreover, in a number of collective CLOAs, only perimeter surveys were conducted.
Oftentimes, there was not even a segregation survey (survey that will delineate portions
of a land not suitable for agriculture and will not be distributed to beneficiaries). It was
only starting 1999 that the problem was recognized and funds started to be appropriated
for the subdivision of collective CLOAs. In effect, the government spent twice for the
individual titling of awarded lands if a collective CLOA was awarded.
What is disturbing is that some collective CLOAs include areas not suitable for
agriculture (roads, creeks, rivers, marshlands, etc.) and areas that are not alienable and
disposable (timberland, forest land and therefore are not for distribution/ titling. As of
this writing, a total 115,816 hectares (5.34% of the total area of lands covered by
collective CLOAs) were found to be areas which should have been segregated and not
included in the collective CLOA (See Table 7).
In the case of public agricultural lands, the award of collective CLOAs defeated the stated
purpose of recognizing or formalizing the occupancy of a farmer who is tilling a parcel of
public land. Until the collective CLOA is subdivided, property rights of the tiller/occupant
will be unstable. This discourages investment in the land. (This disincentive to invest is
also true for collective CLOAs issued to beneficiaries of private agricultural lands.)
Almost half (48.32%) of distributed public agricultural land was awarded collective
CLOAs (See Table 6). Of the awarded collective CLOA from public lands, only 40.21% has
been subdivided.
2. VOLUNTARY LAND TRANSFERS
From 1988-2015, 835,561 hectares of land were distributed through VLT (See Table 1).
As stated above, it was the dominant mode of acquisition of private lands for many years
until 2009.
Voluntary Land Transfers have been criticized as a way of circumventing land reform
because the landowner can retain control over the land especially if the preferred
beneficiaries are relative, close friends and tenants unable to cut his/her relationship
with the landowner. This is a loophole of the agrarian reform program.
A statistic that bears analyzing is the data that more than half of the beneficiaries of
Voluntary Land Transfers (VLT) were awarded collective CLOAs. One wonders why
beneficiaries would consent to collective titles when VLTs are supposed to be a

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transaction between willing landowners and landless farmers who presumably are tillers
of the land. Beneficiaries pay the landowners directly and so logically would want an
individual title for his/her land. Around 432,829 hectares out of a total of 835,561
hectares of VLT lands are covered by collective CLOAs (See Table 6).
But equally disconcerting is that VLT rules allow the transfer of land below the retention
limit of five hectares. This is the only mode of acquisition that allows distribution of land
below the retention limit. Owners of less than five hectares of land can sell this to
preferred beneficiaries without paying capital gains tax. And government pays for the
land survey and titling. This, thus, defeats the purpose of distributing large landholdings.
One can imagine the time, effort, and expense expended in distributing these small
landholdings when the DAR should have been concentrating on the distribution of large
landholdings. In some provinces, notably in the northern part of the Philippines,
distribution of private agricultural land was almost exclusively through VLT.

G. DISTRIBUTED LANDS WHOSE ORIGINAL LANDOWNERS ARE UNPAID


As previously stated, one of the residual tasks of the DAR is the completion of the
documentation for distributed lands whose original landowners remain unpaid. In 1982, in
order to accelerate the land reform accomplishment, President Marcos revised the original
requirement of full amortization payment and allowed the release of EP after payment of
only two successive amortizations by the ARB. Thus, EPs were distributed even when land
valuation was not yet done and landowners compensation had not been paid.
Affected landowners problems arose because the completion of documentation of their
claims took a back seat. Field personnel attended to the documentation of new lands which
would contribute to new accomplishments.
Many of the remaining OLT claims have long been pending and documents are already
missing. Some landowners claim that they have already submitted all the required
documents but they are now lost. Many of those who have handled the processing have long
retired from service.

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Recommended Policy Initiatives and
Institutional Arrangements
There are several initiatives that ought to be taken in two main lines: agricultural policy and
land administration. This section will present a summary of these initiatives including the
institutional arrangements to reflect the proposals.

I. On the Role of the State in Agricultural Policy


Agriculture has always been the focal point of any administration. Rightly so because a
significant number of the population is dependent on agriculture and poverty is largely rural.
The value-added, and necessarily the income from agriculture, is similarly very low due to
the minimal processing necessary for crops or livestock to be consumed (except coconut and
sugarcane). Still, while agricultures contribution to GDP is significantly lower than industry
and services, agriculture is a major provider of employment and the source of food for the
country. Administrations have fallen or have been subjected to criticism when rice or food
staples are unavailable or highly-priced.
These are among the reasons that have made agricultural policy at the top of the agenda of
any administration. These have also driven governments to devote a major chunk of its
resources to agriculture. In this administration alone, the expenditure for agriculture has
significantly increased.
The question that needs to be asked is the role of the state in reducing poverty and
promoting inclusive growth, while providing sufficient and affordable food on the table for
every Filipino. Should the state pursue food self-sufficiency or should it allow market forces
to determine food supply and price. These questions, often swinging either to a strong role
or a very minimal role of the state, are not often asked. In the industry and services sectors,
the role of the state is clear, it is an enabler.
Policy frowns upon protection by government, although incentives (fiscal and non-fiscal)
may be granted. However, such bias is not clear in agriculture where the state plays a heavy
role in intervening in the market. This is evident in the government driving the preference
by way of allocation of resources (e.g. programs and budget for rice and other staples), price
support, or erection of trade walls. This conversation is further enhanced by the demand of
some sections of society to correct historical injustice (land concentration).
The heavy hand of the state in agriculture, particularly in the policy and program
conversations on rice, is not consistent with its policy and resource bias for infrastructure
and logistics that could reduce the cost of marketing agriculture products and eventually, the
cost of food. In many cases, the government abdicates its role in providing capacity building
and rural infrastructure to the private sector, which in turn, recoups these costs from
farmers or consumers. The highly protectionist stance on agriculture is not matched by its
lack of support in other aspects. It is also not consistent with the limited support it provides
for consumers who can barely afford the cost of food prices. The various sections of this
report show the evidence of disjointed policies.
Unfortunately, adding to this spaghetti-mix of policy options is the assumption that increases
in the income of the agriculture-dependent population must necessarily come from

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agriculture, as if the only pathway out of poverty for rural poor is only through agriculture
and farm-based efforts. As if the interventions to increase the income of farmers (with or
without land) can only be done using the levers available in agriculture. Moving out of
poverty by being employed in the industry or services sector is normally not part of the
considerations. Even smallholder farmers, when asked regarding their suggestions on
improving the income and quality of life of landless rural workers, would recommend
providing them with livelihood opportunities from agriculture. Processing of agricultural
goods for sale is the favorite means of intervention. Young people who move out of
agriculture are generally frowned upon often by those who are not of the sector.
Yes, conditional cash transfers (CCT) for landless farmers are part of the policy mix, but the
conversations often note that livelihood programs for landless farmers must be rooted in
agriculture initiatives. Hence any intervention on this matter is generally left to the
convergence of government departments and agencies related to agriculture. In sum,
making markets work in agriculture is not an accepted policy option. The heavy hand of
government is generally accepted as a reality in agriculture, but not in industry or services.
This must be re-visited, or at the very least adjusted.
Similar to the two other sectors, the government is simply an enabler rather than the driver
of agriculture. True, the state has a role. However, it is time for us to redefine that role.
There are no clear and neatly defined mathematical formulae to answer this question of the
role of an enabler. A big part of the answer is in defining public and private goods.

II. Support Services: Public Goods vs. Private Goods


The distinction is critical in determining the intervention that can be undertaken by
government. Public goods/services are properly the domain and responsibility of the state.
Provision of private goods/services is generally provided by private actors, save in
exceptional situations, and within clear exit mechanisms. For the longest time, this
distinction has been blurred or, at the very least, the exit mechanisms are unclear.
This distinction is even more pronounced with the movement away from a centrally-planned
economy. The framing of the dichotomy between the two poles of central planning and a
market-led economy is really specious, at best. In fact, many thought leaders do not even
think that the debate should even be framed with such poles. However, the appropriate mix
for each situation will always be the issue. This is not the time or the place to distill such
debate. Instead, the need to put forth the mix that can perhaps clearly establish the
parameters for the role of government is proposed.

A. PUBLIC GOODS
1. RURAL INFRASTRUCTURE
This is clearly the primary role of government. There seems to be no argument because
of the resources needed for this. The abdication of the government in this role has also
been the cause for unbalanced relationships between farmer-beneficiaries and their
investor-partners in large-scale agricultural development. Due to this abdication, the
private investors that have invested in rural infrastructure seek to recover their costs
against the business relationship that was forged.
While this role is clear, more nebulous is the determination of the prioritization of the
location of the rural infrastructure. Roads and irrigation are important.

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This has been the age-old issue of politically-motivated determination. It is proposed
that priority should be given to locations which will result in a higher number of farmers
whose income may increase coupled with a bias for those with clear plans on how to best
utilize the infrastructure. In short, a poverty-alleviation bias must be clear, based on a
feasible and practicable business venture primarily managed by the farmers themselves.
Government must also enlarge the coverage of roads and irrigation beyond rice land.
This is critical in order to encourage farmers to enter into other activities or crops that
may increase their income. Selection of locations for rural infrastructure should also be
based on its potential to effect the decrease in production costs of the farmer rather than
on political considerations.
2. CREDIT FACILITATION AND RISK MITIGATION
Credit facilitation is not the same as grant of credit. For many years, the executive
agencies have been barred from granting loans. Credit facilitation means creating the
policy framework that will allow financial institutions to be able to grant credit to
farmers. It goes hand-in-hand with risk mitigation measures for the lenders and the
borrowers.
Credit access has mostly been framed as lower interest rates and lengthy requirements.
It is a known fact that interest rates from formal institutions may be high relative to the
usual borrowers, but they are low relative to the informal lenders. It is not interest rates
that make credit unavailable, but access. Lengthy requirements may be lessened, but
some are just simply unavoidable. Issues like tax identification numbers, birth
certificates, board resolutions and business plans are requirements that cannot be
dispensed with. However, steps must be taken to ensure that these can be easily sourced.
Business plans can be discussed in the latter portion of this paper.
Credit information is one that has not been addressed squarely in the past. Non-formal
lending institutions ranging from suppliers, buyers and neighborhood lenders are able to
lend to farmers primarily because they know the identity and behavior of individual
borrowers. This, coupled with their financial power to control sales of outputs and/or
supply of inputs, they are able to lend funds to farmers. The information known to these
informal lenders is one that is not available to formal institutions. This knowledge allows
them to be able to quantify the risk they face in lending to farmers. On the one hand, by
controlling the supply and purchase of the outputs, these informal lenders are also able
to ensure payment. Let us discuss these two issues separately.
The Credit Information Systems Act was passed in 2008, yet the benefit to agriculture
has not been felt. While banks lend to cooperatives and other farmers organizations, it is
only these conduits credit performance that are captured by the current system. After 8
years of effectivity, the benefits of a credit score to the individual borrowers from these
conduits have not been attained. It is critical that systems should be established to
include credit assessments of the individual borrowers. This will allow the banks to lend
to the conduits, but at the same time, it will allow the conduits to have the information
necessary. This will prevent defaults of an entire organization due to the non-payment of
only a few borrowers. Groups can still facilitate the credit access but the risk can be
better managed.
Risk to the lender can be mitigated by a functioning guarantee system. The QUEDANCOR
was supposed to have undertaken this function, but due to the mismanagement in earlier
administrations, it has not fulfilled this function.

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On the other hand, the insurance system for agricultural loans must be enhanced. The
PCIC coverage must be expanded beyond the current portfolio and the crops it covers.
There is a need to look at the manner by which adjustments for claims are made and
coverage of losses. While these may result in higher premiums, catastrophes are better
covered by insurance rather than ineffective and untargeted seed subsidies or assistance.
There will always be discussions on the use of awarded land as security for loans.
Several attempts in the past have tried to pass a bill. The recent DOJ opinion states that
only those lands, which are less than ten years from issuance and not yet fully paid, are
covered by the prohibition.
In sum, landholdings emanating from government land, those distributed more than 10
years and those for which amortizations are paid are prohibited from being used as
security. The DOJ opinion clearly lays out the interpretation that the limitation arises
from the theory that land which cannot be sold cannot be mortgaged because they
cannot be the subject of an auction. A discussion on succession issues and taxation is
discussed in this Report.
3. RESEARCH AND DEVELOPMENT
Research and development that is responsive to the needs of farmers and buyers
and is environment-appropriate is a function of the state. Market-appropriate
R&D refers to initiatives that will result in the products of the farmers being
responsive to the needs of the market. Being responsive to the market refers to
technology that will lower the costs of production and result in higher incomes of
the farmers. This is distinguished from R&D that is driven by pure science.
Environment-appropriate R&D are initiatives that take into account the physical
characteristics of each unique ecosystem of the archipelago. If government
abdicates from this function, the farmers will suffer the same fate as many other
farming systems in the world R&D controlled by input providers and buyers.
This is the current fate of many systems in advanced countries where farmers are
tied to such systems. Biodiversity suffers at the fate of the agglomeration of food
producers, costs are controlled by vertically integrated agriculture combines.
4. MARKET INFORMATION
Government is the repository of a significant chunk of market information. Note that
while government possesses a major database of market information, it is not the only
source of market information. However, the dissemination of this information, both from
private and public sources, is within government.
5. CAPACITY BUILDING
Capacity building has been an oft-used term, but poorly understood. Current
government efforts are big on capacity building but it sorely misses the point and does
not maximize the assistance to farmers. Capacity building efforts are mostly
government-determined and government-led. There are two main thrusts of capacity
building efforts: technical capacity and organizational management.
Technical capacity, better known as agricultural extension, is a critical factor in order to
be able to disseminate the latest trends in R&D that is market-appropriate and
environment-appropriate. This goes in tandem with state-sponsored R&D.

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Capacity building for organizational management is a function that must also be
addressed. There has been a lot of discussion of the disappearance of economies of scale
in agriculture due the CARP. However, recent experience tells us that lower costs of
production and higher income (which is the end result of economies of scale) can be
achieved by strategic organization of groups of farmers. After all, one can argue that
economies of scale are achieved in consolidated land ownership, not because of the
consolidated land ownership per se but due to the organization that arises from
consolidated land ownership. The question that needs to be asked is the manner by
which capacity building for organizational stability is achieved.
In both of these areas of capacity building, government has to be able to allow the
farmers to determine the efforts that THE FARMERS need rather than what government
has to offer.
Other initiatives can be examined. The use of pre-designed courses by the TESDA can be
explored. Currently, each agency involved in agricultural development (DA, DAR, DOST,
DTI and TESDA) offers a whole range of courses. The TESDA and DAR have begun to
develop courses that are open to managers, employees, members of farmers
organizations. This can be expanded and vouchers made available from which farmers
can choose. The various training and capacity building efforts can be synchronized and
streamlined.
6. EASE OF DOING BUSINESS FOR FARMERS
There have been efforts at tracking the ease of doing business indicators. However, these
have not included the ease of doing business for marginalized sectors such as farmers
and fishers. These efforts range from establishment of business, compliance
requirements to taxation. The basic assertion is that if we are able to make it easier to
formalize the business operations of the farmers, then it will be easier to allow access to
services of government and financial inclusion will follow. The primary driver should
not be to be able to collect more taxes or revenue for government, but to allow
information on the basic sectors to be obtained.
Of particular interest under this topic is the work of the Cooperative Development
Authority, Securities and Exchange Commission and the Bureau of Workers with Special
Concerns. These three agencies regulate the formation of juridical entities composed of
farmers and fishers. Establishment of juridical entities are ways to be able to mitigate
business risk and to allow easier formation of capital. Unfortunately, farmers, who need
this most, are denied the benefits of forming juridical entities due to the regulatory hoops
and loops they need to navigate.
The CDA has focused more on regulation rather than on development. Given the
incentives and breaks under the Cooperative Code, the trend in the CDA seems to be to
ensure reportorial requirements to ensure that the incentives, privileges and breaks are
properly availed of by the cooperatives. This has made it extremely tedious for ALL
cooperatives. There may be opportunities to streamline these reports and regulations in
establishing cooperatives. The capacity building for regulatory compliance of the
cooperatives may focus more on the employees or professional staff of the cooperatives
rather than just the members of the board of directors of the cooperatives. Development
of the cooperatives can be the primary role of the different executive agencies (e.g. DAR
and DA for farmers, DTI for consumer).

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The Corporation Code is up for review. This is a 36-year old code that has outlived its
usefulness. The requirement of having at least five incorporators (with 2 hectares each
per farmer, this means 10 hectares, if family are not included as incorporators) must be
re-evaluated. The Cooperative Code requires 15 cooperators. The message seems to be
that if a group of farmers wish to unite and form a juridical entity, you will require a large
group. There may be room to explore limited liability corporations with less than 5
incorporators. A special section in the revised code can be had with special emphasis on
start-ups.
There have been several attempts in recent decades to ease regulations in government
from barangay-based enterprises to Kalalakan 20 (patterned after the Italian law).
However, these have been largely unsuccessful and unused. The reason, I suspect, is that
the efforts focused more on the easing of regulations rather than on developing a proper
business plan that is viable. These short-cuts and insulation from various regulations
(particularly the LGU strictures) will never be enough if they are promoted without
conjunction to developing a business-friendly atmosphere and all the interventions
stated in this paper. Insulating juridical entities of farmers and fishers from LGU
regulations is not enough, although it is a good start. The local government regulations
will need to be harmonized and made more accessible.
Finally, the rules on taxation both local and national has a lot of room for improvement. It
is not the rates, because the income of farmers and their juridical entities may, in fact, not
be subject to tax. Compliance with reports for taxes imposed on sales and income are
tedious to fulfill and file. These may be the subject of review to make it easier, with less
transaction costs for the farmers or fishers (and all start-ups). The approach to tax
compliance is not necessarily in tax breaks or incentives. By its very nature the
determination of who will be entitled is, quite often, determined subjectivity and
resulting political capture. Easing compliance is more neutral and less subject to
distortions.

B. PRIVATE GOODS
Private goods may simply be defined as goods granted to a specific set of farmers or a farmer
with such good becoming part of the asset of the group or individual. In sum, the grantee
becomes the owner with full rights of excluding others from the use of such asset. Private
goods as part of a package for support services have always been problematic. They present
a challenge because provision of private goods is subject to unclear rules and issues of
allocation. In the past, the provision of seeds, planting materials and fertilizers to farmers
and farmers organizations was the default mode of assistance. In recent years, the provision
of these recurring inputs has been mostly limited to situations of calamities. The issue of
allocation during these periods has not been totally addressed, but at least these have been
minimized.
1. ON THE ALLOCATION OF GOVERNMENT-PROVIDED PRIVATE GOODS: ISSUES AND CONCERNS
The provision of private goods such as farm machines and equipment has continued in
the DA, DAR and even in the case of the DTI for processing agricultural products.
Equipment dispersal has ranged from shallow tube wells, tractors, mills and warehouses.
The distinction now is that these assets are granted to farmers organizations and has
moved away from grants to local government units. The problem previously with the
grants to LGUs has been the allocation of the time to use and the maintenance of these
equipment. In many cases, the selection of the user is subject to political considerations.

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With the grant to the organizations, this has been largely eliminated. The current
problem now has to do with the equity required from the farmers organization. This
equity is mostly sourced from the LGU. This makes the grant of equity still subject to
political consideration. In some extreme cases, the LGU pressures the grantee
organization to allow the use of the equipment, particularly during the political season or
calamities. The identification of farmers organizations which will be the grantee is also
mostly determined by the LGU, particularly in the case of the DA and DTI. This is due to
the devolved nature of these agencies. As such, the identification, possible political
capture, occurs in two levels: identification and the grant of equity. While there are
similar instances of political capture in the DAR, this is largely avoided due to the lower
equity and the kind of equity (in kind or provision of a garage) and selection is mostly
done by the DAR itself on the provincial, or in some cases on a municipal level.
The question that a policy maker confronts with private goods (particularly equipment
or small warehouses) is an issue of allocation. The initial question that a policy maker
has to consider is to determine if the current resources of the government can provide all
the farmers or the groups of farmers all the equipment they need. Inevitably, the answer
is in the negative. One may argue that not all the same time. In both cases the issue is
one of prioritization and the criteria for prioritization. And, even if a clear criteria was
put in place, without a clear design the first group or farmer granted a hand tractor will
most probably have his tractor broken by the time the last group or farmer is granted his
or her tractor. This assumes that the government has the funds and resources to be able
to buy all the equipment for all the farmers.
Many policy makers refuse to acknowledge this because of the disjointed policies that are
now in place. For many, it is a matter of trying to push the allocation for agriculture,
without worrying about the classrooms, hospitals or roads that cannot be built. There are
trade-offs that need to be recognized. This attitude pushes the question aside and leaves
it as simply a prioritization that must be addressed in the next budget cycle.
2. CONCEPT INTRODUCED BY DAR UNDER THE AQUINO ADMINISTRATION: PRIVATE GOODS AS A
BASKET OF STARTER ASSETS FOR ARBS
The recent experience of the DAR may point a way for a possible solution. The current
program sees private goods as a basket of starter assets for AR beneficiaries with
the clear objective of using the private goods as the catalyst to strengthen the farmers
organization.
Note that the objective is not just to lower production costs, but to strengthen farmers
organizations. While lower production costs may be achieved, this is not the primary
objective. The theory behind the program is that if the farmers organizations become
robust and strong, access to equipment and other cost-lowering assets can be better
sourced from the government or from their own resources (capital build-up or loans).
The experience of DAR with these starter assets also show that in giving farmers
organizations initial revenue-generating assets, the farmers groups will maintain and
eventually upgrade or replace their equipment due to improved income. In this way, the
machines and equipment contributed to mechanization and the purchase of better
machines from private providers.

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C. WHICH GOVERNMENT AGENCIES SHOULD PROVIDE THE PUBLIC GOODS
AND STARTER ASSETS?
This reports points to a role of the state that is neither absent nor too much. Rather, this
report, as evidenced by the support services provided by the DAR in partnership with the DA
and other agencies, showed that the government plays an enabling role to the drivers of
agricultural production and enterprises, the smallholder farmers themselves. However, a
critical query follows: which government agency should provide which good or assistance?
This is particularly true given the proposal to shift to a federal form of government.
It is proposed that the government agency which is nearer to the people or the smallholder
farmers should provide the assistance on technical extension while national government
agencies that are involved in agriculture, rural development and economic growth should
provide tone from the top (economic growth vision and agriculture policy) to address the
disjointed agriculture policy. The following are the concrete recommendations:
1. LOCAL GOVERNMENT UNITS OR LGUS TO PROVIDE AGRI-TECHNOLOGY AND AGRI-EXTENSION
SERVICES
This role of the Municipal Agriculture Office (MAO) should be continued and
strengthened. Assistance should be provided to LGUs so they will be able to provide the
important role of reaching farmers and coaching them on how to plant new varieties and
how to address challenges like pests and diseases.
2. DA, DAR, AND DTI TO SET THE AGRICULTURE VISION GUIDED BY THE NEDA TO ENSURE THAT
THE AGRICULTURE POLICY IS IN SYNC WITH THE NATIONAL ECONOMIC AGENDA

The institutional arrangement where the DA addresses agricultural productivity and thus
renders support to all farmers while the DTI looks into trade and agri-industry growth
and the DAR provides agricultural support services mainly to ARBs needs to be reviewed.
The vision and overall policy for agriculture should be clearly spelled out. Will the
government pursue rice self-sufficiency or will it drop this policy and pursue importation
or will the policy be somewhere in the middle? Will the government pursue to
championing of particular crops or commodities? Regardless of the answer, there will be
costs and trade-offs and these must be well coordinated with the economic and fiscal
agencies namely NEDA and DOF.
This does not imply a linear decision-making but rather an iterative one. The economic
goal should pursue the strengthening of agriculture and industry (or manufacturing) and
prepare for the eventual lessening of agriculture because people from rural areas will
shift to jobs in manufacturing. There could be no leap-frogging without growth in
agriculture because this will again entail leaving the poor in agriculture behind. In this
overall scheme, the following support services should be assigned to national agencies:
a. Research and development (R&D):
While the LGUs provide the farmers with assistance on how to plant and how to
address crop-related challenges, what to plant is a function of the agriculture vision
and policy and should be lodged with the DA and its affiliated offices like PhilRice,
Philsurin, and PCA. Research and development is expensive since it entails
experimenting on varieties of crops that are better suited to a particular soil and
rainfall pattern and could withstand extended dry spell or flooding. As such, R&D
should inform which regions and provinces are suitable in the production of certain

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crops and food items.24 However, although R&D remains with DA, a national agency,
R&D offices should have satellite or field offices in key areas.
b. Market and other valuable information:
National government agencies should diminish information asymmetry on prices,
destination of products, industry status, and industry prognosis and make the vital
information to smallholder farmers who often have no access to these details.
Making these available to smallholders, private investors and other stakeholders
could inform their decisions on agriculture and farm enterprises.
c. Linkage with big institutional markets:
The linkage with large institutional markets should also be pursued by the DA, DAR,
DTI or their new/combined agency if it means lessening transaction costs. It does
not preclude, however, LGUs and local field offices from pursuing and linking farmers
to other private sector investors and institutional buyers.
d. Rural infrastructure:
The national agencies, guided by economic goal and agriculture vision, should
prioritize the provision of rural infrastructure (roads, bridges, irrigation). These
agencies should determine the suitable criteria for distributing the rural
infrastructure. Among the suggested considerations are the following: number of
rural poor and potential for viable agri-enterprise activities.
e. Credit facilitation
The national government should think of and develop medium to large credit
facilities without serving as the direct credit provider. The efforts of the DA, DAR and
DENR to tap the LANDBANK to develop and implement credit facilities like the
Agrarian Production Credit Program and Sikat Saka are worth continuing and
improving.
f. Secure land tenure:
This is a function of six national agencies namely DENR, DAR, NCIP, DOJ-LRA, LGUs
and courts, which need to be harmonized (see discussion later). These agencies or
the combined institutional arrangement should ensure that the land tenure of
smallholders is secure and stable. This means ensuring not that large remaining
agricultural lands are covered under CARP or other land tenure instrumentalities,
collective titles are subdivided and residual issues from prior laws are addressed.
It is better if the national agencies undertaking these roles are merged in one agency.
See discussion below on institutional arrangements.

D. ADDRESSING THE FOOD SELF-SUFFICIENCY POLICY DEBATE


Agriculture policy always has twin goals: increased income for farmers and ensure
affordability of food for consumers. Many times, people forget that farmers are consumers
and producers at the same time. With more than 48% of the Philippine population in urban
areas and more than 68% of the population dependent on agriculture, this policy takes
center stage.

24 The agriculture agenda of the incoming administration that pinpoints the creation of a nationwide agriculture
guide map that indicates soil suitability, climatic conditions, and rainfall patterns is excellent.

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The Food Staples Sufficiency Program has been at the forefront of this administration. There
is enough literature that has analyzed this program and the current policies. This is not the
portion to capsulize this debate. However, the only issue that needs to be put at the forefront
is that this must be grappled with and a clear policy crafted, taking into account the trade-
offs. These are issues like the role of the state in intervening in markets, rice importation,
and producing the entire food needs of the country. One of the main criticisms, not only of
this administration as regards the current policy of a bias for rice self-sufficiency, is that it is
an unattainable goal. Others will say that with research and development, strategic
infrastructure, and proper extension services, this can be achieved. The counterpoint is the
cost of investment that needs to be made, even assuming that the logic, rhyme and reason for
intervention is clear and unassailable.
There are rumblings that the food staples policy is in effect anti-poor because it keeps the
prices of food high in exchange for being able to produce everything within our borders. One
thing is clear this debate cannot be ignored. Options based on evidence must be clearly
spelled out and a decision on the options made. It cannot be assumed that the current
system is ideal or even appropriate. The policy levers, which were also contained in the
section on food self-sufficiency, are reiterated below.
If the decision is to keep the protectionist and limited or non-importation goal, then the
following must be carefully considered:
Address the high prices of food particularly the price of rice because it affects the poor
and near-poor including the smallholder rice farmers. Support should be provided
(including expanding the conditional cash transfer) so the poor and near-poor will be
able to buy the high-priced food. Review labor wages and if needed, address the low
buying capacity of the poor.
Assist rice farmers in marginal lands to diversify because even if the goal is to be
sufficient in rice and other staples, there should still be a semblance of efficiency in
providing scarce government resources including irrigation support. Goals and
projects like rice and food sufficiency should not be through expansion even in areas
which are not productive or suitable to planting rice.
Move for the extension of the quantitative restriction (QR). This means preparing to
provide concessions on other crops and commodities and providing assistance to
affected agricultural stakeholders.
If the decision is to remove rice and staples protectionism, then the following must be
considered:
Assist rice farmers who are expected to be affected by the importation of cheaper rice
from other countries. This means determining how much is the cost of providing
temporary support (possibly cash) while rice farmers, particularly in less efficient
areas, are diversifying out of rice or possibly out of agriculture. This also means
providing capacity building and other support services (e.g. farm machines, post-
harvest facilities) to these farmers and their organizations so they could move out of
rice and other staples.
Do not extend the QR and shift to a rice tariff regime.
Whether the decision is to remain protectionist or to veer away from protectionism, two
important assistance are needed:

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Assist farmers in crop diversification. All farmers, whether they are rice farmers or not
and whether or not they are effective in planting rice or other crops, need to learn to
diversify their farms. This will ensure that they would have varying sources of food
and income and will make sure they will be able to address food and price shocks.
Continue the role of the NFA as the buffer stock of rice. The changes in climate and food
patterns not only in the Philippines but also in Thailand and Vietnam, which have
competitive advantage in rice, must be anticipated. These countries might be
constrained to export rice. Vice versa, changing conditions in the Philippines might
not allow domestic farmers to produce the needed rice. In this regard, the NFA must
determine the consumption requirements and ensure that a sufficient stock is
available. However, it must not control who should import. The private sector must
be allowed to import rice into the country to add to the buffer and to send a signal that
there is sufficient supply.

E. CLEAR LAND POLICIES AND MORE EFFICIENT AND MODERIZED LAND


ADMINISTRATION
There have been numerous studies made on land policies and land administration in the
Philippines. Foremost among these are the Land Administration Management Project
(LAMP) funded by the World Bank and the Australian government and the Land Governance
Assessment Framework (LGAF). The LGAF benchmarked the land governance in the
Philippines with that of the world. These are all important inputs in analyzing the land
administration system. All these point to the disjointedness and opaque nature of land
governance in the Philippines. The LAMP has developed initiatives in land valuation,
residential free patent and even an institutional re-organization. However, these studies
have failed to cut to the heart of the debate there is a need to harmonize the land laws
before we even discuss the institutional arrangements.
The current laws relating to land were developed decades ago. The population of the
Philippines has grown, the land area has not. Technology has progressed but the benefits of
new processes have not yet been fully exploited. The biggest criticism of the land laws is that
it is anti-poor. It is over-reliant on accurate surveys and titling processes which incur high
financial and transaction costs that are beyond the reach of the poor in the Philippines.
First of all, there is a need to remove the inherent bias against rural titles. At present, it
needs thirty (30) years of uncontested possession to obtain a rural title, as compared to 10
years for urban land. There appears to be no solid reason for this longer requirement. As
such, it is recommended that the number of years for both urban and rural land be set at 10
years.
Second, it is highly recommended that the lengthy and onerous procedures of acquiring land
be simplified and decentralized. Third and in line with the second, there is a need to clarify
land use regulations so these will be clearly reflected in land documents and become easily
enforced.
Fourth, there is a need to enact a Land Code, a comprehensive law to replace outdated and
harmonize existing land laws and regulations such as the cadastral law, public land law,
property registration decree, and surveying rules. Fifth, as a companion to the Land Code,
the forest delineation bill must be sent to Congress for passage.
Sixth, in reviewing the land laws, there is a need to clearly define the policy on the use of land
that is not classified as alienable and disposable as well as the rules by which usufructuary

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rights to non-A&D land are granted. Under current rules, possession may be recognized, but
the possession is not subject to transfer. In principle, there is a clear bias of award of
usufructuary rights to communities and the disadvantaged. However, the same rules are
similarly opaque and the award criteria are not clear. This is the reason why the poor who
may be granted use rights can be utilized by third-party entities or persons with capital for in
order to be able access and exploit non-A&D land. Overlay this with various uses of the non-
alienable and disposable land, such as mining, pasture, farming, renewable forests and there
emerges competing and conflict-prone utilization of the forest or timberland (the other
description of non-A&D) land is unclear. On top of this is the elephant in the room the
IPRA25. The IPRA was passed without a clear assessment of its effects on the laws pertaining
to use of timberland. Conflicting claims remain largely unsettled and unaddressed and is a
main source of insecurity of property rights.
Seventh (and particular to rural, agricultural areas), there is a need to accelerate and
improve the process of administrative titling and adjudication of property rights in untitled
A&D lands. The process should commence in areas of high agricultural potential. In these
areas, government can proceed from plot to plot and determine land ownership in a
transparent and participatory manner. Immediately after, patents could be issued.
Lastly, it is highly suggested that a single, integrated land information system containing all
land record for all types of land be established. This land information system shall record
property rights, interests, land use, regulations and restrictions, and boundaries. Moreover,
to remove the silos in land administration, the land information system should be shared
among agencies and should be accessible to the public, including the LGUs.

F. CARP RESIDUAL ISSUES


One of this administrations main accomplishments draw up the policies and set up the
systems to address the so-called second-generation problems or residual issues involving
CARP-awarded lands. These issues make property rights insecure, even if government has
booked these as accomplished or distributed..
1. DISTRIBUTED BUT NOT PAID (DNYP) LAND
The rush to issue emancipation patents in the period between 1988 to 1990 resulted in
the incomplete or defective documentation of many OLT lands. The lack of
documentation means that the land owners are not paid, the farmers do not know how
much they owe, and the titles issued are unstable. Parenthetically, these arose because
the 14 years of Marcos administration did not result in securing the promises he had
made in 1972. The land reform program transferred possession, but did not result in
secure property rights.
The processes for the documentation and valuation (to be paid to the land owner and the
amount to be paid by the farmer) have been laid out26. These simply have to be
implemented.
2. COLLECTIVE CLOAS
Collective titles were the result of similarly inordinate rush to puff up the numbers of
accomplishment of the DAR. These collective titles were very pronounced in the earlier

25 Indigenous Peoples Rights Act of 1997 (RA 8371) which belatedly recognized native titles and the rights of
indigenous peoples to their ancestral domain.
26 In DAR Administrative Order 06, series of 2015 and MC 03, series of 2016.

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years of the implementation of RA 6657. Collective CLOAs were awarded with the
expressed intension to go back and subdivide these collective CLOAs into individual
CLOAs at a later time. Unfortunately, no funds were allocated for this until the mid-
2000s.
In 2010, in pursuance of RA 9700, there was a push for the parceling of these collective
CLOAs. However, funds remained largely unutilized. An inquiry by this Administration
initially showed that due to the passage of time, the process had to begin from the initial
step of identification/revalidation of the farmer-beneficiaries. It turned out, that many of
the FBs were not to be found and new possessors were in place. A deeper investigation
showed that, in a number of collective CLOAs, the FB identification process was defective
to begin with particularly in government-owned land.
Further analysis also showed that numerous collective titles were issued over land that
were not alienable and disposable. As a consequence, the DENR-LMS will not approve
collective CLOA subdivision surveys submitted by the DAR even if the survey of the
original collective CLOA was approved by this same body years earlier.
These two issues have stalled the parcelization of collective titles. The processes for
validation/re-identification of beneficiaries are in place27. However, the policy on
erroneously issued collective title on timberland remains mired in inter-agency
processes. This will have to be addressed squarely.
3. AGRIBUSINESS VENTURE ARRANGEMENTS (AVAS)
The distribution of government lands leased by large agricultural corporations and of
private lands utilized for commercial farms28 with high value crops had brought in many
unanswered issues. These have to do with the contracts (ranging from lease to various
forms of joint exploitation) entered into by the new land owners and the corporations
that provided the capital for the production of high value crops. The same corporations
normally processed the same crops in order for them to be sold in the market.
In many cases, farmworkers cooperatives and organizations were created or
transformed into ARB cooperatives/organizations under whose names collective CLOAs
were issued. So as not to disrupt the production by the corporations or the income flow
of the new owners, these ARB cooperatives were encouraged to enter into contracts with
agricultural corporations. Many of these contracts entered into are now subject of a lot of
disagreement. The FBs have aged, some are even not working anymore on the farm. The
large investments of the corporations required long periods of effectivity. The
government was also remiss in the provision of support services (both hard and soft) to
the FBs.
The policy question that needs to be addressed are numerous. The FAO study conducted
for the DAR is informative. DAR AO The new administration needs to evaluate this
clearly.
4. SUCCESSION AND TAXES
It is a sordid joke to say that the CARP law failed to consider that people do pass away
and do not live forever. However, this is the reality. The CARP law, property registration

27 AO 3 series of 2016
28 RA 6657 deferred the coverage of commercial farms for ten (10) years from its passage in 1988.

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decree, PD 27 and other rules did not take into consideration this reality. As such, the
operative law is the Civil Code. Layered on top of this is the National Internal Revenue
Code and its strictures on estate taxes or donors taxes. In tandem, these two rules
impede and discourage the formal transfer or donation of awarded lands upon death of
the FB (and agricultural land in general). The transaction costs to transfer the title from
one generation to the next results in titles in the name of a deceased FB, sometimes for
two generations. This is one major source of insecure property rights in agriculture.
5. THE NOC EXTENSION BILL (CARP COMPLETION BILL) AND OTHER PROPOSED AGRARIAN
REFORM MEASURES
RA 9700 was unequivocal in stating that land acquisition was for only until June 30, 2014.
The escape clause (Section 30 of RA 9700) came with a provision that lands which are in
the process of acquisition could be acquired even beyond such period. At the end of June
30, 2014, almost 67,000 hectares of land were not served with notices. A review of the
notices sent shows that there may be an almost equal number which had erroneous
entries (wrong title numbers, names, area, etc.).
These errors or failures were due to the records within the DAR and the difficulty in
obtaining certified true copies of records in the registrars of deeds. In many cases,
requests remained un-acted upon or the copies in the RoDs were lost, but the registrars
refused to certify the loss.
Coverage of military reservations, lands of state-owned colleges and universities and
other large tracts of lands owned by government entities should be discussed by the
government entities concerned. But, first, it is strongly recommended that government
should make an inventory of all of these land and thereafter, create an inter-agency body
that will determined which of these lands remain with the agencies concerned and which
lands will be subject to distribution under the agrarian reform program. The
determination of which lands should be distributed cannot be done piecemeal; there
should be an overarching policy on the use of these lands.
There is nothing inherently unconstitutional in foregoing the collection of ARB
amortization for distributed LBP-compensable lands. The rough estimate of the fiscal
implication of distributing LBP-compensable land for free was given in the first part of
this paper. This can be further refined to take into consideration the cost of collection,
the effect on the budget deficit, the schedule by which this cost will be absorbed by the
national government and others. Then the government can make a choice on whether it
is willing to forgo the collection of ARB amortization.
These three measures are not inextricably linked and it may be more feasible to propose
these measures in Congress separately so that if one measure encounters strong
opposition, the other two measures are not affected. In the opinion of the author, the
NOC Extension Bill takes priority since this will enable the completion of the agrarian
reform program.
6. LAND USE POLICY
The National Land Use Bill has remained mired in every Congress. It has always been
certified, but never passed. Without these, the parameters for delineating land use have
not been put in place. Hence, the area to be delineated for use in agriculture, industry,
recreation, institutions will always remain nebulous. Some sectors benefit from this
failure to set policy. The passage of this bill needs no further discussion, a room can be
filled with studies on this topic.

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G. INSTITUTIONAL ARRANGEMENTS
1. AGRICULTURE AND RURAL DEVELOPMENT
There was a time when there was a ministry for public highways, and one for public
works. There was one for industry and another one for trade. This was the same time
when there was a ministry for agriculture and one for agrarian reform. The first two
separated twins have since been joined. The one dealing with agriculture has not. Not
only has the horizontal relationships remained unchanged and disjointed, the vertical
relationship between LGUs and NGA was also severed. DAs agricultural extension
function was the subject of devolution while the DAR maintained its presence up to the
municipal level.
The idea in devolution was good if the agricultural policy of the country remained one
that closed our borders and closed it to trade. In short, it was good if the agricultural
policy was mainly one determined by the state, rather than the market. Under a centrally
planned economy, agricultural extension was simply extending the technology of
production. Prices of inputs and outputs were controlled by the state. Imports and
exports were undertaken via state trading enterprises. We have started to move away
from this centrally-planned economy; yet the old paradigm of agricultural extension
remained focused on technology on how to produce.
In the years following the opening of our borders, we passed the Agricultural Fisheries
and Modernization Act (AFMA). This law had a clear bias market-led agriculture with
the state acting as the enabler. Prior to the passage of the AFMA, the CARL was amended
to enhance the support services of the DAR. RA 7905 was passed. A comparative reading
of the two laws will show that the disconnect is apparent. RA 7905 assumed heavy state
involvement in all aspects of agricultural development of the ARBs and left this function
with the DAR. Thus, there were two policies in place, running alongside each other.
In the past, there were attempts at the convergence of the DA, DAR and DENR. This was
also the same attempt in the early years of this administration. However, the alignment
and convergence will not happen unless there is a common policy and this common
policy is reflected in the budget of the three agencies. Today, it has remained disjointed.
The budget of the DA is almost 50 times bigger than DAR for support services. The
discussion in the field level is spotty. Yet, the ARBs and the non-ARBs co-exist in one
barangay. There will be a spatial development plan: a SAFDZ from DA and an ARC plan
from DAR.
The proposal of this Report is to consolidate support services in one national agency.
However, the LGUs (province, cities and municipality, where applicable) should maintain
an office devoted to agriculture. The function of the LGUs agriculture office should be
primarily that of production technology. However, the national agency should handle the
other functions that were not necessary in the old economic paradigm of closed markets.
These functions ought to be handled by the national agency because its breadth and
depth cannot be properly handled by the LGU or are within the confines of the LGU.
These are: rural infrastructure; credit facilitation and risk mitigation; research and
development; market information; capacity building (except production); ease of doing
business; and provision of starter assets.
To be able to do this, the DA will have to extend its offices to the provincial level. The
core of these personnel can be the current employees of the DAR in its provincial offices.
The delivery of support services currently undertaken by the DAR is in these same offices.

End of Term Report by Secretary Virgilio de los Reyes Page | 140


The personnel in the regional office of the DAR can be added to the regional office of the
DA in order to adjust to its added functions.
The presence of the national government is not an encroachment into the functions of
the LGU. It is simply a way to be more strategic and efficient in the use of resources and
to allow a wider view of agricultural concerns.
2. LAND ADMINISTRATION
The dispersal of the different agencies handling land administration in three
departments has really been problematic. The system wherein LRA is under the DOJ,
LMS is under DENR, NCIP is under the OP and land distribution is under the DAR is a
system that has brought about dysfunctions in land administration. As stated earlier, this
has been aggravated by the disjointedness of the laws being implemented by these
different agencies. The proposal is to transform the DAR into an agency called the
Department of Land Administration (DLA) that will fulfill four functions: issuance of
certificates of title, approval of surveys, land distribution (of both private and public
lands), and adjudication of all land matters (except zoning). The NCIP can be
attached to the DLA. This means that all functions related to recognition or grant of
ownerships will be under one department. Grants of use rights in timberland can remain
with the DENR. All grants or recognition of private ownership over all alienable and
disposable land, land re-distribution under the CARP will be handled by the proposed
DLA. Resolution of applications for recognition of ownership rights including conflicts
over claims (such as original registration) will be with the adjudication board of the DLA.
The new land code may remove this from the purview of courts to expedite this.
A central database of certificates of title, approved surveys and other records will allow
faster adjudication in all issues on land.
Addressing residual or second-generation issues in the CARP can be handled by the DLA.
With a merger in one department, the usual turf war or wrangling can be readily avoided.
3. HANDLING THE BACKLASH OF RE-ORGANIZATION
EO 366 and RA 6656 are insufficient to handle this re-organization. It may be better to
pass a law that can address this, after the passage of the land code. This will also allow a
retirement package that MAY be availed of by employees of the DA, DAR, DENR and LRA.
The recommendation is to provide for an additional benefit equivalent to 1.5 months
salary for every year of government service. The choice to retire should be left with the
employees.
In the case of employees who would rather find a place in the new organization some re-
training of the remaining personnel would be in order to address their new functions.
Details of the reorganization may be found in the study conducted by the Development
Academy of the Philippines in pursuance of Administrative Order 34 (2012). The report
is fairly complete with costs.
4. SHORT-TERM INSTITUTIONAL ARRANGEMENTS
While all these bills (land code and re-organization) are being crafted and deliberated, an
interim measure can be made. This can be done by appointing a presidential assistant
for rural development that will handle the coordination of the rural development and
land functions of the DA, DENR, DAR and LRA.

End of Term Report by Secretary Virgilio de los Reyes Page | 141


Conclusion
For more than 20 years, the Comprehensive Agrarian Reform Program (CARP) has been the
Philippine governments principal area-based rural development program. Asset reform has
long been recognized by the government as key to improving agricultural productivity and
reducing rural poverty. For its part, DAR which is the lead government agency of the
Program has been working closely with government agencies, local government units, and
development partners in pursuing the enabling measures for competitive and sustainable
agriculture focused on improved food security and increased rural incomes, and enhanced
agrarian reform and agriculture policy environment. Toward this end, DAR lends support to
the harmonization of development efforts of various stakeholders engaged in the agriculture
and rural development sector to maximize impact on rural poverty reduction.
The pursuit of sustainable rural development would draw lessons from past experience
while meeting the prevailing challenges and harnessing available opportunities. The
pervading challenges in the agriculture and rural development sector have been the rapidly
growing population, increasing pressure on limited resources and climate change. The
enormous opportunities include advances in information technologies, resilient agricultural
methods and increasing private sector participation. Such challenges and opportunities will
necessarily build on DARs efforts in drawing the active support and participation of various
stakeholders including the rural communities that were strengthened through institutional
local capacity building programs.
With CARP as both social justice and poverty alleviation program, DAR will continue to play a
critical role in the overall effort to pursue the rural development strategy through its
mandate in ensuring land tenure improvement and the provision of essential support
services with the end goal of improving agricultural productivity and farm income of the
small farmers. The economic policy thrusts of the new administration for sustainable rural
development will further enhance DARs assistance to small farmers through complementary
measures for improved market and credit access and accelerating the provision of essential
support infrastructures that would link rural communities to economic and social services.
DAR will remain to be at the forefront in forging effective coordination among government
agencies and institutions to address the bottlenecks in land administration and management.
This is to ensure the stability of land tenure and ownership and to encourage more
investments in the rural areas.

End of Term Report by Secretary Virgilio de los Reyes Page | 142


Tables
Table 2: DAR-Distributed Land from 1972-December 31, 2015
by Year, by Administration, by Land Type/Mode of Acquisition (in hectares)

Non Private Agricultural Land


Private Agricultural Lands (PAL)
Land Type/ (Non-PAL)
National
Year Landed
OLT GFI VOS CA VLT Settlements GOL/KKK
Estate
DAR WORKING SCOPE 5,413,630
TOTAL DISTRIBUTED 4,718,845 594,175 171,391 650,537 357,106 835,561 811,242 81,494 1,217,339
2015 27,670 1,538 546 5,062 15,745 976 1,403 53 2,347
2014 92,199 3,228 720 6,223 15,220 7,648 8,274 28 50,859
2013 112,036 3,033 421 8,553 13,662 18,338 7,336 35 60,657
2012 101,847 3,345 1,224 6,933 9,738 23,361 10,016 136 47,094
2011 111,889 3,697 1,237 9,438 9,937 24,677 16,943 84 45,877
2010 107,180 4,524 755 6,937 6,236 26,566 18,698 70 43,393
2009 59,495 4,743 1,336 7,890 1,777 26,683 2,103 89 14,875
2008 146,274 3,458 2,746 15,198 7,828 56,401 16,901 187 43,553
2007 134,041 5,221 1,419 24,144 10,269 49,029 9,298 82 34,578
2006 125,177 4,319 1,594 27,166 9,883 42,875 12,394 116 26,830
2005 131,069 3,653 2,779 27,262 16,501 39,010 9,427 132 32,305
2004 104,069 3,238 6,098 27,062 13,733 28,060 13,322 705 11,851
2003 97,795 3,847 3,880 30,045 11,986 23,452 10,452 491 13,642
2002 111,722 5,150 2,364 30,984 14,502 23,271 18,072 119 17,260
2001 104,261 5,651 3,930 28,292 17,542 22,434 11,695 172 14,545
2000 110,478 5,972 3,315 26,288 14,348 24,840 11,810 330 23,575
1999 132,069 7,521 4,454 30,341 19,919 27,848 17,426 290 24,270
1998 137,358 8,592 5,634 31,768 21,374 34,902 7,552 616 26,920
1997 210,126 12,803 4,109 35,207 25,485 58,882 22,598 552 50,490
1996 300,195 19,398 17,932 43,873 24,248 78,755 66,800 1,737 47,452
1995 289,324 25,166 11,647 38,470 17,724 66,151 72,005 10,527 47,634
1994 433,678 31,565 22,212 43,312 14,319 60,439 91,918 4,608 165,305
1993 411,960 33,447 33,413 54,187 19,662 34,954 63,956 3,431 168,910
1992 267,381 25,760 16,426 45,036 14,761 20,312 52,091 22,592 70,403
1991 293,219 23,428 15,138 30,005 10,168 12,882 88,202 14,365 99,031
1990 191,903 65,739 2,075 9,902 539 2,317 93,096 7,093 11,142
1989 118,092 98,687 3,987 959 0 497 10,386 1,273 2,303
1988 142,079 119,581 0 0 0 0 1,967 293 20,238
1987 44,081 42,811 0 0 0 0 1,024 246 0
As of 1986 70,178 15,061 0 0 0 0 44,076 11,041 0
* Note: Area is CARP Area or Net Area, that is, this is the area reported as actually distributed to agrarian reform
beneficiaries.
Source: Field Operations Office, Department of Agrarian Reform

End of Term Report by Secretary Virgilio de los Reyes Page | 143


Table 3: Cumulative DAR Accomplishment by Year
by PAL/Non-PAL, LBP-Compensable/Non-LBP Compensable (in hectares)

Compensable/Non-
PAL/Non-PAL
Compensable
Land Type/
National Non-Private
Year Private LBP Non-LBP
Agricultural
Agricultural Land Compensable Compensable
Land
WORKING SCOPE (ao 2015) 5,413,630 3,244,341 2,169,288 2,364,541 3,049,088
CUMULATIVE LAD
4,718,845 2,608,770 2,110,075 1,773,209 2,945,636
ACCOMPLISHMENT
2015 27,670 23,867 3,803 22,892 2,389
2014 92,199 33,038 59,161 25,390 66,809
2013 112,036 44,008 68,028 25,670 86,367
2012 101,847 44,601 57,246 21,239 80,608
2011 111,889 48,985 62,904 24,308 87,580
2010 107,180 45,018 62,162 18,452 88,728
2009 59,495 42,428 17,067 15,746 43,749
2008 146,274 85,632 60,642 29,231 117,043
2007 134,041 90,082 43,959 41,053 92,988
2006 125,177 85,837 39,340 42,962 82,215
2005 131,069 89,205 41,864 50,195 80,874
2004 104,069 78,191 25,878 50,131 53,938
2003 97,795 73,210 24,585 49,758 48,037
2002 111,722 76,271 35,451 53,000 58,722
2001 104,261 77,849 26,412 55,415 48,846
2000 110,478 74,763 35,715 49,923 60,555
1999 132,069 90,083 41,986 62,235 69,834
1998 137,358 102,270 35,088 67,368 69,990
1997 210,126 136,486 73,640 77,604 132,522
1996 300,195 184,206 115,989 105,451 194,744
1995 289,324 159,158 130,166 93,007 196,317
1994 433,678 171,847 261,831 111,408 322,270
1993 411,960 175,663 236,297 140,709 271,251
1992 267,381 122,295 145,086 101,983 165,398
1991 293,219 91,621 201,598 78,739 214,480
1990 191,903 80,572 111,331 78,255 113,648
1989 118,092 104,130 13,962 103,633 14,459
1988 142,079 119,581 22,498 119,581 22,498
1987 44,081 42,811 1,270 42,811 1,270
As of 1986 70,178 15,061 55,117 15,061 55,117
Source: Field Operations Office, Department of Agrarian Reform

End of Term Report by Secretary Virgilio de los Reyes Page | 144


Table 4: LAD Balance by Land Type/Mode of Acquisition
as of January 1, 2016, in hectares

DEDUCTIBLE PROBLEMATIC WORKABLE TOTAL


LAND TYPE/MODE
OF ACQUISITION Number Gross Number Gross Number Gross Number Gross
of LHs Area of LHs Area of LHs Area of LHs Area
CA 3,756 24,725 12,858 111,836 32,428 273,771 49,042 410,332
EO 407/448 147 567 357 2,656 1,051 10,396 1,555 13,618
KKK/GOL 119 3,084 408 3,677 215 16,926 742 23,687
Landed Estate 6 7 160 143 14 6,431 180 6,581
OLT/PD 27 201 1,043 2,891 11,829 1,558 9,254 4,650 22,126
Settlement 4 12 217 1,296 555 14,237 776 15,545
VLT/DPS 216 1,112 512 3,342 814 22,258 1,542 26,713
VOS 298 1,555 1,104 14,833 6,905 86,094 8,307 102,483
Grand Total 4,747 32,107 18,507 149,612 43,540 439,367 66,794 621,085
Source: Field Operations Office, Department of Agrarian Reform

Table 5: LAD Balance (Private Lands Only)


by Aggregate Size of Landholdings
as of January 1, 2016 (in hectares)

Number of Percent of Percent of


Gross Area
Landholdings Landholdings Gross Area
5 hectares and below 2,575 4% 5,390 1%
More than 5 hectares up to 10
27,809 43% 145,338 25%
hectares
More than 10 hectares up to 24
19,099 29% 188,648 33%
hectares
More than 24 hectares up to 50
4,991 8% 59,914 10%
hectares
More than 50 hectares 10,622 16% 175,982 31%
Total 65,096 100% 575,272 100%
Source: Field Operations Office, Department of Agrarian Reform

End of Term Report by Secretary Virgilio de los Reyes Page | 145


Table 6: LAD Balance Accounting (July 2010 December 2016), in hectares

Non-
CARPable CARPable
# of LHs Area Area* Total Area
LAD BALANCE BEGINNING JULY 1, 2010 144,514 1,053,413 143,008 1,196,422
(JULY TO DECEMBER 2010 ACCOUNTING OF LANDHOLDINGS)
Add: Additional Landholding/Increase in Area/Splitted LH 21,485 129,821 9,277 139,099
Records
Less: Deducted/Deductibles 22,525 103,133 31,147 134,280
Less: Accomplishment from July 2009 to June 2010 4,135 14,270 392 14,663
Less: Accomplishment from July 2010 to December 2010 10,189 88,537 4,800 93,337
LAD BALANCE ENDING DECEMBER 31, 2010 129,150 977,294 115,946 1,093,240
(JANUARY TO DECEMBER 2011 ACCOUNTING OF LANDHOLDINGS)
Add: Additional Landholdings/Adjustment in Area (Increase) 17,765 157,695 27,657 185,352
Less: Deducted/Deductibles/Adjustment in Area (Decrease) 28,396 170,127 26,207 196,334
Less: Accomplishment January to December 2011 10,880 111,889 8,395 120,284
LAD BALANCE ENDING DECEMBER 31, 2011 107,639 852,973 109,001 961,974
(JANUARY TO DECEMBER 2012 ACCOUNTING OF LANDHOLDINGS)
Add: Adjustment in Area (Increase) 13,761 21,535 35,296
Less: Adjustment in Area (Decrease) 20,144 1,404 21,548
Add: Additional Landholdings (Inclusion) 6,321 108,625 8,225 116,850
Less: Deducted/Deductibles 12,083 82,776 21,174 103,950
Less: Accomplishment January to December 2012 9,366 101,847 17,594 119,441
LAD BALANCE ENDING DECEMBER 31, 2012 92,913 770,592 98,589 869,181
(JANUARY TO DECEMBER 2013 ACCOUNTING OF LANDHOLDINGS)
Add: Adjustment in Area (Increase) 7,777 7,479 15,255
Less: Adjustment in Area (Decrease) 18,463 4,766 23,229
Add: Additional Landholdings 5,895 113,078 10,937 124,015
Less: Deductibles 12,079 69,814 18,052 87,866
Less: Accomplishment January to December 2013 7,392 112,003 13,559 125,561
LAD BALANCE ENDING DECEMBER 31, 2013 78,981 691,167 80,628 771,795
(JANUARY TO DECEMBER 2014 ACCOUNTING OF LANDHOLDINGS)
Add: Adjustment in Area (Increase) 8,275 2,833 11,108
Less: Adjustment in Area (Decrease) 2,161 3,190 5,351
Add: Deductibles Turned to Workable 271 6,575 141 6,716
Add: Additional Landholding 2,195 24,479 3,129 27,608
Less: Deducted 2,445 15,891 2,175 18,066
Less: Accomplishment January to December 2014 6,122 92,199 11,099 103,298
LAD BALANCE ENDING DECEMBER 31, 2014 73,722 624,658 70,127 694,784
(JANUARY TO DECEMBER 2015 ACCOUNTING OF LANDHOLDINGS)
Add: Adjustment in Area (Increase) 2,167 3,168 5,334
Less: Adjustment in Area (Decrease) 6,329 606 6,935
Add: Additional Landholding (Inclusion) 1,089 4,651 1,215 5,867
Less: Deducted 4,251 37,644 5,305 42,949
Less: Accomplishment January to December 2015 3,792 27,670 7,344 35,015
LAD BALANCE ENDING DECEMBER 31, 2015 66,794 559,831 61,254 621,085
Source: Field Operations Office, Department of Agrarian Reform

End of Term Report by Secretary Virgilio de los Reyes Page | 146


Table 7: Total Area of Collective CLOAs Issued by Land Type/Mode of Acquisition

Collective
Land Total CLOA % of
Accomplishment Issued % of
Type/Mode of Collective
Accomplishment
Acquisition (in hectares) (in CLOA Issued
hectares)
CA 357,106 143,513 6.62% 40.19%
VOS 650,537 405,893 18.72% 62.39%
OLT/PD 27 594,175 546 0.03% 0.09%
EO 407/448 171,391 125,446 5.79% 73.19%
VLT/DPS 835,561 432,829 19.96% 51.80%
Landed Estate 81,494 12,287 0.57% 15.08%
Settlement 811,242 339,036 15.64% 41.79%
KKK/GOL 1,217,339 708,565 32.68% 58.21%
TOTAL 4,718,845 2,168,116 100.00% 45.95%
Source: Field Operations Office, Department of Agrarian Reform

Table 8: Inventory of Collective CLOAs as of January 1, 2016

Total Area of Collective CLOAs Issued (Total Scope) 2,168,116


Less : Already Subdivided 1,064,746
Not for subdivision:
Timberlands, Forest, Road, Watershed, etc... 115,816
Co-owners opt not to subdivide (prefer Collective Title) 139,134 254,950
Sub Total: 1,319,696
Balance for Subdivision 848,420
Priority for Subdivision:
LBP Compensable Lands [Compulsory Acquisition (CA), Voluntary Offer to Sell 228,604
(VOS), Operation Land Transfer (OLT), Government Financing Institution
(GFI)]
Non-LBP Comp. Lands [Landed Estate (LE), Settlement (SETT), & Government 350,962 579,566
Owned Lands (KKK/GOL)]
Non-Priority for Subdivision:
Awarded to Farmers Association 22,295
Awarded to Farmers Cooperation 43,406
Voluntary Land Transfer (VLT) under Co-ownership 203,153 268,854
TOTAL 848,420
Source: Field Operations Office, Department of Agrarian Reform

End of Term Report by Secretary Virgilio de los Reyes Page | 147


Table 9: Landowners Compensation

LO Compensation Area No. of


Program Type No. of LOs
(PhP millions) (Hectares) Claims
PD27/EO228 3,263.75 422,695 21,530 36,236
RA 6657 54,585.63 1,039,878 57,058 94,909
RA 9700 11,593.76 85,483 5,555 8,191
TOTAL 69,443.14 1,548,056 84,143 139,336
Source: Agrarian Accounting Office, Land Bank of the Philippines

Table 10: Amount To Be Paid by Agrarian Reform Beneficiaries

LO Compensation Subsidy To Be Paid by FBs


Program Type No. of FBs
(PhP millions) (PhP millions) (PhP millions)
PD27/EO228 3,263.75 291.23 2,972.52 281,797
RA 6657 54,585.63 9,237.61 45,348.02 577,710
RA 9700 11,593.76 1,297.14 10,296.62 47,490
TOTAL 69,443.14 10,825.98 58,617.16 906,997
Source: Agrarian Accounting Office, Land Bank of the Philippines

Table 11: Agrarian Reform Receivables (ARR)


(amount in PhP millions)

Program Booked as ARR Not Yet Booked as ARR


Type Amount Area No. of FBs Amount Area No. of FBs
PD27/EO228 2,972.52 422,695 281,797 0.00 0 0
RA 6657 11,847.83 283,923 175,819 33,500.19 755,955 401,891
RA 9700 838.19 9,166 7,226 9,458.43 76,317 40,264
TOTAL 15,658.54 715,784 464,842 42,958.62 832,272 442,155
Source: Agrarian Accounting Office, Land Bank of the Philippines

Table 12: Amortization Paid by FBs (in PhP millions)

Account Due and Collectible (ADC) 7,681.78


ADC Collected 3,128.23
Not Yet Due (NYD) 7,976.76
NYD Collected 1,812.88
Total ADC and NYD Collected 4,941.11
Fully Paid 3,929.07
Currently Due and Past Due (CD and PD) Collected 739.96
NYD Collected 272.08
Source: Agrarian Accounting Office, Land Bank of the Philippines

End of Term Report by Secretary Virgilio de los Reyes Page | 148


Table 13: ARR Payment Performance of FBs

Area Number of FBs


Fully Paid 327,991 232,395
With Payment 196,969 112,234
Without Payment 190,823 120,213
Total with ADC/ARR 715,784 464,842
Source: Agrarian Accounting Office, Land Bank of the Philippines

Table 14: LAD Accomplishment, July 2010-December 2015


(Area in hectares)

Gross Accomp. % of Gross Net Accomp. % of Net Non-CARP


# of LHs % of LH
(Gross Area) Accomp. (CARP Area) Accomp Area

Total Accomplishment 47,727 601,267 534,182 67,085


LAD Accomplishment; Private Agricultural Lands (PAL) vs. Non-Private Agricultural Lands (Non-PAL)
Private Agri Land (PAL) 33,491 70.2 275,682 45.9 228,539 42.8 47,143
Non-PAL 14,236 29.8 325,586 54.1 305,643 57.2 19,943
LAD Accomplishment, July 2010-December 2015: Compensable vs. Non-Compensable Land
LBP-Compensable 18,497 38.8 175,518 29.2 134,348 25.2 41,170
Non-LBP Compensable 29,230 61.2 425,750 70.8 399,834 74.8 25,916
LAD Accomplishment, July 2010-December 2015 By Land Type/Mode of Acquisition
CA 8,031 16.8 91,355 15.2 69,379 13.0 21,976
VOS 4,376 9.2 53,158 8.8 41,720 7.8 11,438
OLT/PD 27 5,299 11.1 25,536 4.2 18,537 3.5 6,998
EO 407/448 791 1.7 5,469 0.9 4,711 0.9 758
VLT/DPS 14,994 31.4 100,164 16.7 94,191 17.6 5,973
Landed Estate 434 0.9 529 0.1 386 0.1 143
Settlement 4,173 8.7 65,544 10.9 62,591 11.7 2,954
KKK/GOL 9,629 20.2 259,512 43.2 242,666 45.4 16,846
LAD Accomplishment, July 2010-December 2015 By Crop (Top 5 crops)
Coconut 17,581 36.8 174,866 29.1 157,440 29.5 17,426
Corn 5,854 12.3 157,878 26.3 149,028 27.9 8,851
Rice 13,005 27.2 110,546 18.4 91,243 17.1 19,302
Mixed Crop 4,533 9.5 42,690 7.1 37,457 7.0 5,233
Sugarcane 2,393 5.0 39,689 6.6 32,129 6.0 7,560
LAD Accomplishment, July 2010-December 2015 By Land Size (Private Agricultural Land [PAL ] only)
Above 50 hectares 4,616 13.8 91,446 33.2 66,915 29.3 24,531
Above 24 has. to 50 has. 2,364 7.1 26,110 9.5 20,761 9.1 5,349
Above 10 has. to 24 has. 8,887 26.5 85,344 31.0 74,693 32.7 10,651
Above 5 has. to 10 has. 11,157 33.3 59,082 21.4 53,624 23.5 5,458
5 has. or less 6,467 19.3 13,698 5.0 12,546 5.5 1,153
Source: Field Operations Office, Department of Agrarian Reform

End of Term Report by Secretary Virgilio de los Reyes Page | 149


Table 15: Average Area of Farms/holdings

Average area per


Census reference Number of
farm/holding
year farms/holdings
(in hectares)
1980 3,420,323 2.84
2012 5,562,577 1.29
Source: PSA, Censuses of Agriculture and Fisheries 1980 and 2012

Table 16: Poverty Incidence, by Region: 2006, 2009, 2012


(as of July 2014)

2006 Poverty 2009 Poverty 2012 Poverty Increase/Decrease


Region
Incidence Incidence Incidence 2006-2009 2009-2012
PHILIPPINES 38.5 38.0 38.3 (0.5) 0.2
CAR 37.2 34.6 33.0 (2.5) (1.7)
Region I 25.4 21.1 15.8 (4.3) (5.2)
Region III 13.0 11.6 11.9 (1.4) 0.3
Region IVA 20.5 23.2 24.1 2.7 0.9
Region IVB 40.8 33.9 35.6 (6.9) 1.6
Region V 44.2 42.5 37.0 (1.8) (5.5)
Region VI 31.3 30.2 31.4 (1.1) 1.2
Region VII 54.6 48.4 47.4 (6.2) (1.0)
Region VIII 47.4 48.5 49.2 1.1 0.7
Region IX 58.9 58.1 50.6 (0.8) (7.5)
Region X 51.3 54.9 55.1 3.6 0.2
Region XII 44.0 44.7 45.2 0.7 0.5
Region XIII 39.9 39.7 47.9 (0.2) 8.2
ARMM 46.9 48.8 58.0 1.9 9.2
CARAGA 54.0 57.5 45.5 3.5 (12.0)
Source: PSA,
Notes: Poverty incidence estimates for farmers in NCR and Region II were excluded due to low level of precision
or small sample size. Poverty estimates for the basic sectors for 2006 and 2009, released on 7 June 2012, were
revised by the PSA to adopt the new urban and rural classification in the Family Income and Expenditure Survey
and to use the 2006 Consumer Price Index prices in computing thresholds

Table 17: Indicators of Efficiency of Domestic Production, select crops, 2010

Domestic resource Import parity price Domestic price Ratio


Crop
cost (1) (2) (1) / (2)

Rice 2.60 21.8 31.2 1.43

Sugar 0.78 16.01 20.44 1.28


Source: PIDS Discussion Paper, August 2014,

End of Term Report by Secretary Virgilio de los Reyes Page | 150


Table 18: Framework of the ARCCESS Project

Development Objectives Planned Results

Goal Impact
To improve the farm income of agrarian reform Improved economic well-being of women and men
beneficiaries (ARBs) in agrarian reform areas in 16 regions

Purpose Intermediate Outcome


To improve the performance of the smallholder Increased income of farmers organizations from
farmers organizations in managing agricultural agricultural enterprises
enterprises that support ARBs
Improved capacity of smallholder farmers
organizations to serve ARBs

Immediate Outcome
Enhanced capacity of smallholder farmers
organizations in agricultural technologies
promotion and enterprise development

Activities and Inputs Outputs


1. Provision of Common Service Facilities (CSF) 1. CSF or common service facilities
2. Provision of market-oriented agri-technology 2. CSF operations and maintenance manual
and extension services developed
3. Production technology and management 3. CSF business plan developed
4. Post-harvest 4. AES or agri-extension services
5. Primary processing 5. Agri-technologies and extension services
provided
6. Processing
6. Technoguides developed
7. Provision of Business Development Services
7. Farm production business plans developed
8. Organizational management
8. BDS or business development services
9. Financial management
9. Business development services provided
10. Market management
10. ARBO business plans (CSF business, business
11. Office management
operations, finance management, investment,
12. Conduct of Monitoring and Evaluation marketing) developed
11. ARBO enterprise manual developed
12. M&E
13. Smallholder farmers organizations monitoring
and evaluation tools developed

End of Term Report by Secretary Virgilio de los Reyes Page | 151


Table 19: Production increase of block farms during first year of implementation

Prior to block farm


Name of block farm Block farm TC/Ha % Increase
TC/Ha

Binhi ni Abraham (Concepcion, Tarlac) 40.00 70.00 75%

North Cluster Producers Coop (Paniqui, Tarlac) 50.00 100.00 100%

Lucban MPC (Balayan, Batangas) 37.00 50.58 36.7%

Kamahari MPC (Nasugbu, Batangas) 43.67 57.31 31.2%

Damba MPC (Nasugbu, Batangas) 41.00 47.31 13.3%

Prenza MPC (Lian, Batangas) 50.00 54.81 9.6%

Kauswagan MPC (Pontevedra, Negros Occ) 45.44 55.48 22.1%

Gen Malvar MPC (Pontevedra, Negros Occ) 38.00 53.27 40.2%

Minaba MPC (Kabangkalan, Negros Occ) 42.05 52.92 25.9%

Hda. Bernardita ARBMPC (Cadiz, Negros Occ) 77.00 82.75 7.5%

CASA MPC (Talisay, Negros Occ) 59.25 67.04 13.1%

Sycip Plantation Workers (Manjuyod, Negros Oriental) 80.00 123.55 54.4%

San Julio Farm Workers (Tanjay, Negros Oriental) 55.00 65.00 18.2%

KASFARBECO (Bais, Negros Oriental) 52.00 65.00 25.0%

LARBEMCO (Bayawan, Negros Oriental) 41.50 49.83 20.1%

Source: SRAs Sugarcane Roadmap 2020 PowerPoint presentation, February 2, 2015 version

Table 20: Comparative Assessment of Income and Expenses of Sugarcane Production by Season, ONARBPA

Assessment Date Gross Income Expenses Net Income


(in PhP) (in PhP) (in PhP)

1st Dec. 2015 460,953.00 241,323.52 219,629.48

2nd Feb. 2015 1,259,452.09 493,983.55 765,468.54

3rd May 2015 1,720,405.09 736,307.07 984,098.02

4th (off season) Aug. 2015 1,940,487.59 934,217.97 1,006,269.62

Source: DARPO Negros Occidental South, 19 August 2015.

End of Term Report by Secretary Virgilio de los Reyes Page | 152


Table 21: FAPs, Fund Source and Coverage as of December 2010

Area # of Project Cost


Project Title Fund Source
Coverage ARCs (PhP million)
A. On-going Project (7) as of
December 2010
1. Second Agrarian Reform World Bank 16 125 3,419.46
Communities Devt Project Provinces
(ARCDP II)
2. Agrarian Reform Infrastructure Government of Japan/ 54 134 7,964.63
Support Project III (ARISP III) Japan International Provinces
Cooperation Agency (JICA)
3. Agrarian Reform Communities Asian Development Bank/ IVB,V,VI, IX 152 8,647.21
Project II (ARCP II) OPEC Fund for and ARMM
International Development
4. Tulay ng Pangulo Para sa Government of France Nationwide 18,474.56
Kaunlarang Pang-Agraryo
Project (TP-KP)
5. Project on Bridge Construction GOJ/JICA Aurora, 2 347.68
for Expanded ARCs Quezon
Development: JICA-Bazal Bridge,
Aurora, JICA-Umiray Bridge,
Quezon)
6. In-Country Training Program- GOJ/JICA JICA- 25 25.00
Phase II: Empowering Farmers assisted
through Capacity Building in the areas
Operation and Maintenance
System and Technology in ARCs
(ICTP II)
7. Philippine-Israel Center for Government of Israel Region III 8 3.00
Agricultural Training Phase II
(PICAT II)
Sub-total (7 On-going Projects) 38,881.54
B. Completed Projects (54) 37,795.74
Total (61 Projects) 76,677.28

End of Term Report by Secretary Virgilio de los Reyes Page | 153


Table 22: Comparative Analysis in Poverty Incidence in FAPs Project Sites

Poverty ARISP 2(a) WMCIP( SPOTS MINSSAD STARCM(e) ARCD


Incidence (ARC) b) 2(c) (d) (Prov.) P 2(f)
Base Year 2001 2002 2006 2003 2002 2006
Aguinaldo 88 81 66 60 North Cotabato 73 55
Anao 62 Sultan Kudarat 78
Pinagsibaan/ 66 Lanao del 80
P.Kahoy Norte
Gloria cluster 76 Lanao del Sur 85
Estaca 84
Mambuaya 62
Kasuga 67
Angas-Awao-Sayon 71
Simbahan/Mapalad 62
Resurvey 2006 2006 2008 2007 2007 2009
Year Aguinaldo North Cotabato
44 74 59 36 58 52
Anao 8 Sultan Kudarat 68
Pinagsibaan/ 64 Lanao del 60
P.Kahoy Norte
Gloria cluster 32 Lanao del Sur 62
Estaca 60
Mambuaya 28
Kasuga 32
Angas-Awao-Sayon 48
Simbahan/Mapalad 56
Percentage Aguinaldo -44 -7 -7 -24 North -16 -3
Points Cotabato
Change
Anao -54 Sultan -10
(Decrease Kudarat
in poverty
incidence) Pinagsibaan/ -2 Lanao del -20
P.Kahoy Norte
Gloria cluster -44 Lanao del Sur -22
Estaca -24
Mambuaya -34
Kasuga -35
Angas-Awao-Sayon -23
Simbahan/Mapalad -6
(a) ARISP 2: Agrarian Reform Infrastructure Support Project Phase 2 (JICA)
(b) WMCIP: Western Mindanao Community Initiatives Project (IFAD)
(c) SPOTS 2: Solar Power Technology Support Project to Agrarian Reform Phase II (Spain)
(d) MINSSAD: Mindanao Sustainable Settlement Area Development Project (JBIC)
(e) STARCM: Support to Agrarian Reform in Central Mindanao (EU)
(f) ARCDP 2: Second Agrarian Reform Communities Development Project (World Bank)

End of Term Report by Secretary Virgilio de los Reyes Page | 154


Table 23: On-going FAPs by Fund Source, Area Coverage and Cost, as of December 2015

Project Fund Source Coverage Total Project Cost


(PhP Million)
1. Agrarian Reform Infrastructure Support Project GOJ-JICA 54 provinces 7,964.63
Phase III (ARISP III)
2. Second Agrarian Reform Communities Project ADB, OFID 19 provinces 8,647.21
(ARCP II)
3. Tulay ng Pangulo Para sa Kaunlarang Pang- Govt of Nation-wide
agrayo (TPKP) France 18,474.56
4. Italian Assistance to Agrarian Reform Govt of 4 provinces 2,518.75
Communities Development Support Program Italy
(IARCDSP)
5. Mindanao Sustainable Agrarian and Agriculture GOJ-JICA 7 provinces 4,402.74
Development Project (MinSAAD)
6. Convergence on Value-Chain Enhancement for IFAD 11 provinces 2.248.93
Rural Growth and Empowerment (Project
ConVERGE)

Table 24: Credit Programs of DAR, as of 30 November 2010

Regular Programs Foreign-Assisted Programs

Credit programs with LBP CAP-PBD Window II AGRISOL

CAP-PBD Window III AgriCASH

GMFA or Grassroots Micro-Agri Loan Product (MALP) -


Microfinance in Agrarian
Reform Areas MICOOP @ ARAs (with NATCCO)

Microfinance Capacity Development


for Partner Organizations (with CARD)

Source: Inputs from BARBD, and the paper, The Gains of PBD under CARP, (no author).

End of Term Report by Secretary Virgilio de los Reyes Page | 155


Table 25: Summary of DARs locally-funded credit programs, as of 30 November 2010

Coverage
Total amount of
Type of credit credit availed
No. of No. of No. of ARCs No. of non-
(in PhP)
provinces municipalities ARCs

CAP-PBD Window II 3 5 5 0 137,900,000

CAP-PBD Window III 13 24 22 3 22,670,000

Micro-Agri Loan 6 6 6 0 39,283,000


Product (MALP)

DAR-NATCCO 19 104 25 79 169,160,000


MICOOP @ ARAs

DAR-CARD MF 12 32 21 11 4,677,138
CapDev Program

TOTAL 53 171 79 93 373,690,138

Source: Inputs from BARBD, and the paper, The Gains of PBD under CARP, (no author).

Table 26: Philippine Land Classification (2014)


(in hectares)

TOTAL PHILIPPINE SURFACE AREA 30,000,000

Land 29,817,000

Inland Water 183,000

LAND CLASSIFICATION

CERTIFIED ALIENABLE AND DISPOSABLE (A & D) 14,194,675

FOREST LAND 15,805,325

Unclassified Forest Lands 755,009

Established Forest Reserves 3,270,146

Established Timberland 10,056,020

National Parks 1,340,997

Military, Naval and Civil Reservations, Fishponds 1,724,150

Source. FMB-DENR

End of Term Report by Secretary Virgilio de los Reyes Page | 156


ANNEX A:
Implementing the Supreme Court Decision on
Hacienda Luisita, Inc.
The vast landholding of Hacienda Luisita, Inc. (HLI) in Tarlac City, Concepcion, and La Paz
was distributed by the DAR pursuant to a final and executory decision of the Supreme Court.
The Antecedent
The vast Hacienda Luisita was once owned by the Tarlac Development Corporation
(TADECO). In 1988, Republic Act No. 6657 came into force. The law, among others, allowed
corporations owning agricultural lands, for a limited time (two years), to comply with the
mandate of CARP by distributing a portion of its capital stocks equivalent to the proportion
of the agricultural land bears in relation to the corporations total assets in lieu of outright
land distribution. TADECO took advantage of this law by creating a spin-off corporation
named Hacienda Luisita, Inc., to which it transferred the agricultural portions of the
Hacienda, and distributed shares of stock of the spin-off corporation to farmworkers. The
scheme was approved by the PARC on 21 November 1989.
On 22 December 2005, the PARC revoked the 1989 approval on the ground that HLI failed to
comply with its obligations under the law and the Stock Distribution Plan. The same issue
eventually reached the Supreme Court.
The Supreme Court, in its 5 July 2011 Decision, affirmed the revocation of the Stock
Distribution Option for two specific reasons:
1. The Stock Distribution Option Agreement stated that the number of shares each
beneficiary will obtain will be contingent on the number of man days / days they
worked during the year. This watered down the shares of the beneficiaries who were
supposed to get more shares than they actually received.
2. The same Agreement provided for a thirty-year time frame for the shares of stock to
be transferred to the farmworker beneficiaries. This violated the rules of the DAR
that the shares of stock must be distributed within three months from receipt of the
landowner of the copy of the approval of the SDO by the PARC.
Peculiar in the said Decision are the:
1. Declaration of the Supreme Court that on the basis of the Doctrine of Operative Facts,
the qualified farmworker beneficiaries as of 21 November 1989 shall have the option
either to remain as stockholders of HLI or to receive a portion of the land;
2. Actual size of land each beneficiary will obtain was provided by the Supreme Court
These are some of the portions that the DAR and PARC, under this Administration, through
the Office of the Solicitor General, questioned. Specifically, the DAR and PARC requested that
the Supreme Court remove the option to remain as stockholder and instead order the full
distribution of the land to all qualified beneficiaries as of 1989; and that to allow the DAR,
through its procedures, determine how large each beneficiary should get.
The Supreme Court rejected the reasoning of the DAR and PARC on the first, but nevertheless
decided to remove the option and declare the full distribution of the land. It then granted the
second abovementioned request of DAR.

End of Term Report by Secretary Virgilio de los Reyes Page | 157


It is well to note, at this point, that the DAR, during this Administration, determined that
portions of Hacienda Luisita which are agricultural in nature were not transferred to the
spin-off corporation, HLI, and thus was not part of the Supreme Court Order to acquire and
distribute. The DAR, nevertheless, in 2014, pursuant to its mandate, issued a Notice of
Coverage to TADECO covering these portions. The TADECO questioned the coverage of the
land, which is now pending with the DAR.29
Guidance from the Supreme Court Decision
In making the decisions on how to distribute the land, the DAR is first guided and limited by
the parameters set by the Supreme Court in its decision. These parameters set by, or can be
inferred from the, decision of the High Court are as follows:
1. Considering that the decision arose from the revocation of the Stock Distribution
Option (SDO) that covered portions of the landholding formerly owned by the Tarlac
Development Corporation (TADECO), it necessarily follows that what is to be
distributed pursuant to the decision is the land covered by the said SDO. This does
not necessarily mean that areas not covered by the SDO is not covered by CARP if
these areas are agricultural, then it may be acquired and distributed pursuant to the
regular procedures of the DAR (and not through the special process and parameters
set by the Supreme Court);
2. From the area covered by the SDO, the DAR cannot acquire and distribute the 500
hectare portion that were converted in August 1995, and the 80.51 hectare portion
already acquired by the government to be used as a portion of the Subic-Clark-Tarlac
Expressway;
3. The distributable land should be awarded to those farmworkers who were qualified
as of the date of the inception of the SDO (21 November 1989); and
4. The accounting firm that DAR must engage to audit the books of HLI and Centenary
Holdings, Inc. (to determine how much of the P1,330,551,500.00 proceeds from the
sale of the portions of the land must be distributed to the beneficiaries) must be
approved by the parties (note as well that according to the Supreme Court, the
services of the accounting firm shall be paid for by HLI).
Considering that the decision of the Supreme Court is final and executory, these parameters
are fixed and therefore the decisions of the DAR when it implemented the distribution of the
landholding were limited by these.
In no particular order, the following decisions were made by the Department in pursuance to
the abovementioned endeavor:
Decision #1: A Meticulous Drive to Determine the Qualified Beneficiaries
In the scheme of things, the hardest and most meticulous step that the DAR had to conduct in
the entire procedure of implementing the Supreme Court decision was determining who the
qualified beneficiaries of the Hacienda are. The Supreme Court in its Order stated that the
land should be distributed to those who were qualified as of 21 November 1989. This
required the Agency to look back more than twenty years in time, in order to generate a
masterlist of beneficiaries which is in keeping with the parameters of the SC Decision.

29 See discussion in residual tasks below.

End of Term Report by Secretary Virgilio de los Reyes Page | 158


In line with the directive of the Supreme Court to identify the qualified FWBs with certainty,
two rounds of interviews of Eight Thousand Six Hundred Forty-one (8,641) persons were
conducted from 23 May 2012 to 22 July 2012. A cross verification of the names of FWBs were
also conducted by the DAR to determine the bulk of the qualified FWBs of Hacienda Luisita
and produce a credible Master List of FWBs of Hacienda Luisita (or the heirs of the deceased
FWBs.) To determine the qualified FWBs, the following were considered: the HLI 6296 List,
the MOA Voters List (the list of those who voted whether they approve of the SDO or not
back in 1989), and the SSS records of TADECO at the time.
A back office was created by the DAR Central Office for the sole purpose of expediting and
simultaneously processing the duly accomplished ISFs during interview, and creating a
comprehensive database on all potential FWBs of Hacienda Luisita.
In addition to the massive information drives conducted by the DAR from 21 January to 18
May 2012 at the ten barangays covered by the hacienda to apprise potential beneficiaries of
the details of the Supreme Court Decision, consultation meetings were likewise held with
farmer organizations and barangay officials.
Consequently, the DAR came up with a Preliminary Master List, which included five thousand
three hundred sixty five (5,365) persons assessed to be qualified as FWBs of Hacienda
Luisita, and a Provisional List composed of one thousand two hundred twenty one (1,221)
persons who still need to submit additional proof of their qualification. These were posted
on 31 October 2012 in the ten (10) barangays of Hacienda Luisita, and copies of the same
were furnished to all parties of the case.
On 26 February 2013, DAR Secretary de los Reyes signed the Resolution resolving three
hundred fifty seven (357) Petitions for Inclusion filed with the DAR Tarlac as well as the
status of one thousand Two hundred Eighteen (1,218) names included in the Provisional List,
eight hundred forty seven (845) of these were determined to be qualified as farm worker
beneficiaries.30
On 27 February 2013, the Department of Agrarian Reform (DAR) released the Final Master
List of Farmworker-Beneficiaries of Hacienda Luisita following the Decision of the Supreme
Court.
It has to be said that the DAR did not look at affiliations or level of activeness/ passiveness
when it made the list. Some farmworkers of HLI were affiliate with certain groups, such as,
AMBALA, FARM, and the group of supervisors, although a majority of the farmworkers were
unaffiliated or at least not active with respect to any group. Not all farmworkers actively
pursued as well for the revocation of the SDO during the time it was being litigated. These
affiliations and passiveness were disregarded by the DAR considering that the parameters
set by the Supreme Court was clear give the land to those who were qualified as of the time
of the inception of the SDO. The Court did not say that those who were not affiliated to
groups and those who did not actively participate in the revocation of the SDO be disqualified
from being awarded a portion of the land.
Decision #2: Keep in RP Title Non-Distributable Areas
The landholding was too vast for the DARs employees to (land) survey. Following the
procurement laws and rules, the DAR engaged the services of FF Cruz to survey the land.

30 Paragraph I, Second Quarterly Report dated 11 April 2013.

End of Term Report by Secretary Virgilio de los Reyes Page | 159


The 500 hectare portion recognized by the Supreme Court as converted, and the 80.61
hectare portion used for the SCTEX were segregated. These were not acquired from HLI
pursuant to the directive of the High Court. The residential areas, cemetery, and access roads
to the SCTEX were also not acquired from HLI.
Thereafter, eroded areas, concrete road networks, canals, and creeks were segregated as
well. The DAR decided to acquire these areas from HLI (pursuant to the decision of the
Supreme Court) but not distribute the same to individual beneficiaries for two major
reasons:
1. Equal size of lots: as will be discussed later, the DAR decided to give equal size of
lots to all qualified beneficiaries. It would have been unfair to certain beneficiaries if
portions of their lands are not fit for agricultural use. Had the non-agricultural
portions been distributed to some of the beneficiaries, then the land area which they
can use for agricultural use will be smaller than those beneficiaries who have been
awarded lots which are completely agricultural in nature.
2. Common access: road networks, canals, creeks, and other areas, such as the
cemetery, are intended to be used by the community, and not just particular persons.
Had these lots been distributed to individuals, it would be unfair to the new owners
to limit their rights to the land they own, such as the manner on how to use every
area space therein. Following this logic, if these non-agricultural community areas
were subdivided into individual ownership, then either the community will be
deprived of the rights to use them should the individual owner chooses to close
these to them, or the individual beneficiaries will be deprived of the full use of
his/her land. In both cases, someone is bound to lose.
Due to the abovementioned reasons, the DAR decided that it would be more prudent for
these non-agricultural areas to remain under the ownership of the State. Thus, while these
areas were compulsorily acquired from HLI, it was not distributed to individual beneficiaries.
Decision #3: Equal Portions to All Beneficiaries; Access to All Lots
The first compulsory land-from-the-owner-to-the-tiller agrarian reform program of the State
was the Operation Land Transfer (OLT) of the Marcos regime. The OLT mandated the
compulsory acquisition of tenanted private agricultural land primarily planted with
rice/corn. This was expanded by the CARP which now covers all agricultural lands,
regardless of the tenurial relationship between the landowner and the tillers (as compared
to OLT which was limited only to those under agricultural leasehold), among others.
To a certain extent, it is easier to distributed OLT lands for the simple reason that the
qualified beneficiaries already have possession of the land. The very essence of tenancy or
agricultural leasehold is that for an agreed-upon (but regulated) consideration, the
landowner gives up the right of possession and use of the land to the tenant/lessee for the
latter to work on. Furthermore, by virtue of R.A. 3844, as amended, the tenure of the lessee
is generally permanent. This means that not only is the person already identified (the lessee),
but also that because the right of possession is given to him, the boundaries of the land
he/she is working on is already defined.
In distributing tenanted land, therefore, the DAR can simply recognized who the tenants are,
the portion of the land they are leasing, and then segregate this area from the original Title
and transfer the same to the beneficiaries, insofar as it does not exceed the awarded area
ceiling.

End of Term Report by Secretary Virgilio de los Reyes Page | 160


This is not the case in commercial plantations (or haciendas). The landowner maintains the
right to possess and use the land. Workers are hired for a particular task, on a particular
area of the land, for a particular period of time. It is more fluid. They dont have a defined set
of boundaries since they can be directed to work wherever it is needed.
Since the specific areas worked by farmworkers are not defined, a system least unfair to the
least number of people must be made.
It is due to this context that the DAR, in distributing commercial plantations (not just
Hacienda Luisita), uses a system wherein each individual farmworker will have a lot which is
equally as large as that of the other beneficiaries. Following this standard, this is the
principle that the DAR used in determining how large a lot shall be given to each farmworker
beneficiary of Hacienda Luisita deemed qualified by the Agency.
Furthermore, since Hacienda Luisita is so vast, and the number of qualified beneficiaries
reached more than 4,000 people, in order to prevent or at least mitigate potential conflicts
on ingress/egress, the DAR deemed it prudent to make sure that at least one side of each and
every lot has direct access to an access road. This decision of course has its repercussions.
By deciding that each lot must have direct access to a road, around 64 hectares will be
further excluded from the general aggregate area that may be used as farm lots by the
beneficiaries. Logically speaking, the larger the common areas (such as this road network)
are, the smaller each agricultural lot will result thereto. We have weighed the pros and cons
of this matter, and have decided that it would be better for the welfare, and peace and order,
of the beneficiaries in the long run to mitigate any cause of disputes among them,
particularly those that can come out of right of way issues.
After the converted area, the SCTEX portion, and the non-agricultural portions (see Decision
#2) had been segregated, and after determining the final number of qualified beneficiaries
(see Decision #1), the remaining area was subdivided into individual farm and road lots.
Under the scheme, each farmworker beneficiaries is allotted 6,600 square meters of land. A
beneficiary is not necessarily given just one lot. Due to the geography of the land, some
beneficiaries are given more than one lot (traversed by a road lot or a creek, for example),
but the aggregate area of these two or more lots of one particular beneficiary is still 6,600
square meters.
It must be noted that the area of the original TADECO titles was 6,388.2680 hectares. But per
1989 PARC Resolution, 1,238.7103 hectares were declared Not Agricultural leaving three
5,149.5581 hectares (covered by three big titles) which became HLI and was subject to the
SDO. In computing the area to be distributed to the farmworker-beneficiaries, the non-
CARPable areas (roads, canals, eroded portions, legal easement and residential areas)
segregated in 1989 was deducted along with the converted area, the land used for SCTEX, the
cemetery and the SCTEX access road. The acquired area included back the roads, canals, etc.
which will be included in the RP Title but will be for community use. From the acquired area
was deducted the eroded portions, creeks/irrigation, firebreaks/access roads, canals, legal
easement, the fishpond area, the lagoon, buffer zones. This leaves a net distributable area of
4,099.9199 hectares.

End of Term Report by Secretary Virgilio de los Reyes Page | 161


SUMMARY OF AREAS IN HACIENDA LUISITA (in hectares)
La Paz Tarlac Concepcion Total
Original TADECO Titles 1,448.6742 3,008.2870 1,931.3068 6,388.2680
(T-30414, T-30413, and T-30415)
Not Agricultural per the 1989 PARC 14.1913 1,224.5190 0 1,238.7103
Resolution
Original HLI Titles 1,434.4829 1,783.7684 1,931.3068 5,149.5581
(T-236740, T-236741, and T-236742)
LESS (Defined further in 1989-1990)
Roads 10.0653 19.5641 6.1821 35.8115
Canals 22.3791 26.1796 15.3719 63.9306
Eroded 4.0702 21.4215 12.5685 38.0602
Legal Easement 2.4815 0 0 2.4815
Residential 6.3668 38.1366 11.6206 56.1240
Total Deducted back in 1989-1990 45.3629 105.3018 45.7431 56.1240
Balance 1,389.1200 1,678.4666 1,885.5637 4,953.1503
LESS (Deducted pursuant to Supreme Court Order)
Converted area 0 500.0000 0 500.0000
SCTEX 47.9313 5.9715 26.6087 80.5115
Total Deducted 47.9313 505.9715 26.6087 580.5115
Balance 1,341.4788 1,172.4951 1,858.9550 4,372.6388
LESS (Not acquired)
Cemetery 2.1603 0 0 2.1603
SCTEX Access Roads 1.5936 7.0827 1.3424 10.0187
Total Deducted 3.6999 7.0827 1.3424 12.1250
Balance 1,337.4888 1,165.4124 1,857.6126 4,360.5138
ADDED (To be acquired from HLI and kept
under RP Title to be used by community)
Roads 10.0653 19.5641 6.1821 35.8115
Canals 22.3791 26.1796 15.3719 63.9306
Eroded 4.0702 21.4215 12.5685 38.0602
Legal Easement 2.4815 0 0 2.4815
Total Added 38.9961 67.1652 34.1225 140.2838
ACTUAL AREA TO BE ACQUIRED FROM HLI 1,376.4849 1,232.5776 1,891.7351 4,500.7976
LESS (Not awarded to individual beneficiaries
but kept under RP Title to be used by community)
Concrete Structure 0 0.0155 0 0.0155
Eroded (included add. eroded) 4.0702 24.164 12.5685 40.8027
Creeks/Irrigation 0.9031 0.9813 4.5736 6.4580
Roads (included new roads) 14.4053 21.7058 16.1287 52.2398
Fishpond 14.1317 7.3715 32.5872 54.0904
Lagoon 0 2.2315 0 2.2315
Railroad (Central) 0 3.7194 0 3.7194
Firebreaks/access roads 63.5341 39.0121 71.5298 174.0760
Buffer zone 0.3768 0.2836 0.1719 0.8323
Canals 22.3791 26.1796 15.3719 63.9306
Legal Easement 2.4815 0 0 2.4815
Total not to be distributed 122.2818 125.6643 152.9316 400.8777
NET DISTRIBUTABLE AREA TO INDIVIDUAL 1,254.2031 1,106.9133 1,738.8035 4,099.9199
BENEFICIARIES

Decision #4: Self-Determination on Groupings; Raffling of Lots to Beneficiaries


In recognition of the fact that many beneficiaries are related to each other, either by blood or
by affiliation (as mentioned above, groups and factions have formed among the
farmworkers), the DAR decided to allow the beneficiaries to choose among themselves

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whose lots do they want theirs to be adjacent to. This step would also make it easier for the
beneficiaries to organize themselves into business blocs in order to take advantage of the
economies of scale, since it would be easier for them to manage jointly adjacent lots.
Once the subdivision plan was made, and the beneficiaries have already indicated whose lots
they want theirs to be adjacent to, the next procedure was assigning the lots to the
beneficiaries. Following the standard procedures used by the Department in the distribution
of other plantations, the DAR decided to assign the lots among the qualified beneficiaries by
raffle.
It must be recalled that during the time of the inception of the SDO until around 2004,
Hacienda Luisita was run as a commercial plantation.
As previously mentioned, unlike in an agricultural leasehold arrangement where the
possession of defined portions of the land is transferred to the tenants, the landowner in a
plantation maintains the right to possess and use the land. Workers are hired for a particular
task, on a particular area of the land, for a particular period of time. The area tilled and toiled
by the workers during their stint in the landholding is therefore undefined. It is due to the
above reasons that the DAR, in crafting its procedures in distributing all plantations (and not
just Hacienda Luisita), used the method of raffling in assigning lots to qualified beneficiaries.
Some would argue however that the DAR should not have closed its eyes on the fact that
from 2004 (when the business of the plantation stopped) until the time the land was
distributed, certain persons have started, albeit informally, tilling defined portions of the
land. They say that it was unjustified for the Agency to not have recognized the area already
being (informally) tilled by these persons when the Agency decided to raffle all lots to all
beneficiaries.
In response to this, the current administration had to put into consideration the following
factors:
(1) The occupation by some of the old workers was done informally; it was without the
permission of the landowner at that time (the land was yet to be distributed when
the occupation was conducted) or by any government agency;
(2) Not all farmworkers occupied the land; in fact only a minority of them did so;
(3) The sizes of the land informally occupied by each occupant were not uniform;
(4) Although no official inventory were made, there is a chance that not all occupants
were deemed qualified as beneficiaries pursuant to the parameters set by the
Supreme Court; and
(5) As previously mentioned, the DAR does the raffle system in other plantations
Putting all the factors together, the DAR decided to push through with the raffling of the lots
to qualified beneficiaries instead of recognizing the informal occupation. To decide
otherwise would have served injustice to the majority of the old farmworkers who opted not
to informally occupy the land. Furthermore, as mentioned in Decision #3, it is only fair to
give equal sized lots to all beneficiaries. If the occupation has been recognized, then some of
them would have been awarded larger or smaller lots, than those who did not opt to
informally occupy. Finally, qualified beneficiaries informally occupying lots will be displaced
therefrom, this does not mean that they wont be assigned lots. In fact, they were still
included in the list of those who were assigned lots.

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It is vital to note, that during the raffling of lots, the residents of a particular barangay, as
indicated in the documents the beneficiaries themselves have submitted, were primarily
given priority on the awarded lots found therein. It is only when the number of residents in a
barangay outnumber the awarded lots therein are some of them (the excess) assigned lots
outside the barangay they are residing in.
Decision #5: Disqualification of Several Non-Participating Beneficiaries
The CARP law states that a basic qualification of a beneficiary is his/her willingness, aptitude,
and ability to cultivate and make the land as productive as possible. Section 26 of R.A. No.
6657 also provides that lands awarded pursuant to CARP must be paid by the beneficiaries
to the LBP in thirty annual amortizations. In order to enforce these provisions of the law, the
DAR has made it a mandatory prerequisite for all qualified beneficiaries to state under oath
that they have the abovementioned basic qualification and that they will pay the LBP for the
land. Otherwise, they will not be deemed qualified beneficiaries.
Unfortunately, a handful of farmworkers listed as qualified failed to execute the
abovementioned prerequisite. The DAR Provincial Office of Tarlac (DARPO Tarlac) exerted
efforts in reaching out to these beneficiaries including the issuance of Notices or Panawagan
and sending letters denominated as Paanyaya, in addition to actual field work undertaken
by DARs community organizers or field facilitators engaged for the purpose. On 15 January
2014, the DARPO Tarlac posted the Huling Panawagan in the Barangay Halls of the ten (10)
barangays in HLI, to inform the remaining farmworker beneficiaries that should they still
wish to undertake their obligations, they can still comply with the prerequisites until 15
February 2014.
Despite the Huling Panawagan, one hundred seventy one (171) farmworker beneficiaries,
out of the more than six thousand two hundred identified, still failed to comply on the date of
the deadline.
Forty six beneficiaries subsequently wrote letters signifying their intention to comply. In an
Order dated 26 August 2014, the Office of the Secretary granted the request and declared the
remaining one hundred twenty five (125) disqualified.
Thereafter, fourteen beneficiaries wrote that they are willing to comply with the prerequisite.
The rest filed a Motion for Reconsideration claiming that they have been deprived of due
process and that the threat of the DAR to disqualify them for failure to comply with the
prerequisite has no basis in law.
In a 1 February 2016 Order, the Office of the Secretary considered the request of the fourteen
beneficiaries and granted them ten days to fulfill the prerequisites. The same Order however
declared the remaining 111 disqualified for failure to comply. Contrary to the claim that the
125 disqualified FWBs have been denied due process, it is noteworthy to point out that from
the moment titles to the subject landholdings were transferred to and registered in favor of
the Republic of the Philippines, the DAR embarked on an extensive information scheme to
notify the FWBs of its lot allocation activities, specifically, the posting of the schedule of the
lot allocation activity in each barangay in the Barangay Halls and DAR Municipal and
Provincial Offices. DAR field facilitators were tasked to go around the barangays distributing
pro-forma manifestations and offering assistance to qualified FWBs, if needed. The DAR also
utilized the medium of paid advertisements. To address the matter of unclaimed LACs and
unsigned APFUs, the DAR Provincial Office even issued a Notice or PANAWAGAN, including
a PAANYAYA , to the FWBs who failed to claim their LAC or sign the APFU. Again, DAR
Facilitators were fielded to search for the said FWBs, on top of a public information campaign

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undertaken by the DAR. As earlier mentioned, the DAR accorded these FWBs ample time to
comply with the said requirements. The basis of the prerequisite has also already been
stated above.
On 10 May 2016, 11 May 2016, and 24 May 2016, the Office of the President, the Court of
Appeals, and the Supreme Court, respectively, issued certifications that the 1 February 2016
was not appealed to them. By virtue thereof, the Bureau of Agrarian Legal Assistance issued
a Certificate of Finality of the decision on 25 May 2016.
Note as well that 17 farmworker beneficiaries were inadvertently given lots that have
already eroded. The Office of the Secretary issued an Order on 27 May 2016 cancelling the
CLOAs granted to these seventeen beneficiaries and giving them, as replacement, lots from
those originally allocated to beneficiaries who were disqualified pursuant to the final 1
February 2016 Order.
Decision #6: Clarifying Issues Pertaining to the Audit
DAR was tasked to engage an accounting firm approved by the parties to audit the books of
HLI and Centenary Holdings, Inc. to determine how much of the P1,330,551,500.00 proceeds
from the sale of the portions of the land must be distributed to the beneficiaries. Three firms
signified their intention to audit: (1) Ocampo, Mendoza, Leung, Lim (OMLL); (2) Reyes-
Tacandong and Manabat; and (3) San Agustin & Co. (MS & Co.). The DAR then conducted
several meetings with the parties in order to get their approval on the firms. Despite this, no
consensus was reached.
In view of the foregoing, the DAR, through the Office of the Solicitor General, submitted to the
Supreme Court on 23 May 2013 an Urgent Motion and Manifestation requesting for
clarification on certain matters regarding the audit of HLI Books. The DAR resolved the
Motion by creating an auditing panel to audit the said books.
Since the only task of the DAR with respect to the auditing of the books is to engage the
accounting firm, and considering that the Supreme Court itself already appointed the panel,
the DAR has no further role on this matter.
Residual Tasks
1. Installation of Farmworker Beneficiaries
Most of the farmworker beneficiaries have already been installed. Out of the more than
six thousand beneficiaries, there remains only 77 who have yet to be installed (these
includes 14 of those who belatedly complied with the prerequisites and the 17 who were
relocated to new lots) and 14 who needs to be reinstalled. The 14 have already been
installed by the DAR but were subsequently driven away by those who were formerly
informally working on the land.
It is highly recommended that the next Administration push efforts to install the
remaining 91 beneficiaries (a little over 1% of the qualified beneficiaries) in order to
complete the full distribution process of Hacienda Luisita.
2. Support Service
In 2014, ARBs of Hacienda Luisita organized themselves into ten barangay-based
organizations to which the DAR can effectively channel support services, like agri-
extension and business development services. These organizations were granted not
only farm equipment but also agri-extension services and business development
trainings that will aid in strengthening their organizations and increase productivity. The

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DAR, DA, and LBP also extended affordable credit to the said organizations, while the
DAR and DTI synchronized their program interventions to provide the beneficiaries with
community-based trainings. The DA has conducted water and crop suitability testing and
provided training for the production of various crops. The Sugar Regulatory
Administration is lining up sugar block farm projects for those who wish to continue with
sugarcane production. These interventions are also being provided to other agrarian
reform beneficiaries and their organizations nationwide.
It is recommended that the support services programs of the government to the
beneficiaries of Luisita and other smallholders nationwide be continued.

Major Pending Cases


There are two major pending cases pertinent to Hacienda Luisita that are pending in the DAR
Central Office.
1. Petition for Revocation of the Conversion Order
The first is a Petition for Revocation of the Conversion Order. The basic legal issue that
has to be traversed by the incoming administration is the effect of the recognition of the
Supreme Court with finality that the 500 hectare portion of Hacienda Luisita has already
been converted. In fact, the counsels of RCBC pointed out that the Supreme Court
decision itself provides that the land is already partially developed. The DAR issued an
Interlocutory Order on 23 September 2015 requiring AMBALA to comment on this
matter. AMBALA has yet to comply.
2. Protest on the Coverage of the TADECO landholding
The second is a Protest on the coverage of a portion of the Hacienda still owned by
TADECO. The 358-hectare TADECO landholding is a portion of Hacienda Luisita located
in Barangays Balete and Cut-Cut, Tarlac City, which was not part of the Supreme Court
decision which was issued in the middle of 2011. The Supreme Court decision originated
from the revocation by the PARC of the SDO approved in 1989. The same SDO covered
particular portion of the area, the ownership of which was transferred from TADECO to
Hacienda Luisita, Inc. Areas within the Hacienda which were not transferred to HLI were
not covered by the SDO, and were, therefore, not covered by the ruling of the Court.
The fact that parts of Hacienda Luisita that remained with TADECO was not part of the
acquisition and distribution directive of the Supreme Court does not mean that these are
not covered by CARP. This is the reason why on 17 December 2013, the DAR Provincial
Office of Tarlac issued a Notice of Coverage informing TADECO that the landholding is
covered and giving it the opportunity to file its protest.
TADECO filed its protest, claiming that the land has already been reclassified.
On 8 January 2016, TADECO filed its formal offer of evidence and on 22 March 2016
arguing that it is improper for the DAR to rule on the matter. AMBALA will be given the
chance to answer the allegations of TADECO.
3. Valuation of the Homelots
The Supreme Court, on its 24 April 2012 decision in the case of HLI vs. PARC, directed the
government to pay HLI for the homelots that were distributed pursuant to the (revoked)
SDO.

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There are more than 6,000 qualified ARBs, as explained above. The HLI identified five
thousand four hundred seventy-eight (5,478) homelot awardees in the list it provided in
its letter to the DAR dated 27 May 2013.
Out of the said 5,478 homelot awardees, only 3,797 are qualified ARBs. There is,
therefore, more than a thousand homelot awardees from the HLI list that are not
qualified ARBs.
Out of the said 3,797 homelots, only 1,754 are with Titles and the remaining 2,043
homelots are without titles.
A request was made to the HLI, through a letter dated 07 August 2015, to furnish the
DAR of the following:
a. Certified true copies of the actual transfer documents signed between the HLI and
each of the beneficiaries
b. Certified true copies of other documents issued by the HLI to the recipients of the
homelots evidencing the award
To date, however, the DAR has yet to receive a reply from the HLI.
The LBP also raised the issue of payment of homelots.
On 10 November 2015, twenty-one claim folders involving 1,762 homelots awarded to
qualified FWBs, with registered homelot Titles covering a total area of 41.5617 hectares,
were submitted to the DAR Regional Office of Region III (DARRO) by the DAR Provincial
Office of Tarlac. The processing of these claim folders were held in abeyance due to some
queries of the DARRO on the provisions of the Deed of Conveyance of the homelots.
On 14 January 2016, the Presidential Agrarian Reform Council (PARC), through the Office
of the Solicitor General (OSG), filed a Manifestation and Motion with this Honorable Court
with the following prayers:
a. That the HLI be directed to furnish the DAR with (a) certified true copies of the actual
transfer documents signed between the HLI and each of the beneficiaries, and (b)
certified true copies of the other documents issued by the HLI to the recipients of the
homelots evidencing the award;
b. That the DAR be given ample time from the submission by the HLI of the requested
documents/data to complete the validation with respect to the awardees of homelots
outside those who were qualified as beneficiaries but within the 10,502 farmworkers
listed as HLI stockholders and thereafter to submit the claim folders to the LBP;
c. That the DAR be clarified by the Honorable Court on (a) whether the HLI is still
entitled to be compensated over the homelots given by HLI to the 10,502
farmworkers, in spite of the fact that said homelots were given freely to the
farmworkers, not by force of legal obligation under Sec. 30 of R.A. 6657, but through
stipulation under the SDOA, (b) whether the HLI is entitled to just compensation for
the agricultural land that will be transferred to the DAR under the CARP but because
the homelots had already been received by the 10,502 FWBs, composed of the 6,296
original FWBs and the 4,206 non-qualified FWBs, with no obligation to refund or
return them;
d. That the DAR be clarified with respect to the FWBs who were not awarded
agricultural land, but were awarded with homelots, on where the LBP will draw the

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payment for just compensation. Can the LBP draw funds from the Agrarian Reform
Fund (ARF) to pay HLI for the areas which are considered residential? and
e. That the DAR be clarified as to what Title shall be issued in favor of the FWBs who
were not issued Certificates of Title pertaining to their homelots, but were given
Certificate of Award by the HLI as of 22 December 2005. Is the DAR mandated to
issue CLOAs for the same?
The DAR is awaiting the High Courts clarification of these matters.
4. Investigation of Illegal Transfers and Leases
There have been reports that a number of beneficiaries have either transferred
ownership over their land (sold their lands) or leased it to other individuals or entities.
The law does not allow the transfer of awarded lands over a ten year holding period and
as long as the amortization to the government has yet been paid. In order to enforce this,
a clearance must be obtained from the DAR first. Unlawful transfers may merit
disqualification of the beneficiaries and cancellation of their Titles.
Leases are considered as agribusiness venture agreements that must be approved by the
PARC.
The DARPO Tarlac already started its investigation on these matters.
5. Quarterly Reports
The Supreme Court directed the DAR to submit to them quarterly reports on the status of
implementation of their directive. The next (fifteenth quarterly) report is due on 15 July
2016.

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ANNEX B:
Implementing the 1999 Supreme Court Decision on
the Roxas Properties in Nasugbu, Batangas
Roxas & Co. Inc., owned and operated principally by business magnates Roxas & Elizalde of
Makati City, is the registered owner of 2,943.7641 hectares of land in the different barangays
of Nasugbu, Batangas, composed of three (3) Haciendas namely: Hacienda Palico, Hacienda
Banilad and Hacienda Carmen/Kaylaway.
Name of Hacienda Location (Barangay) Title Number Area (has.)
Bilaran, Lumbangan, Reparo, Cogunan & T-985 1,023.9999
Hacienda Palico Catandaan
Hacienda Banilad Banilad & Tumalim T-924 1,050.0604
Hacienda Carmen/ Kaylaway & Aga T-44662 13.5296
Kaylaway T-44663 595.8480
T-44664 259.6777
T-44665 0.7088

Sub-Total 869.7243
Total Area 2,943.8244

Antecedents
On December 12, 1989, the DAR, through then Secretary Miriam D. Santiago sent a Notice of
Acquisition to Roxas Y Cia, Limited for Hacienda Palico and Hacienda Banilad based on two
separate Summary Investigation Reports which was issued and signed jointly by the MARO,
representatives of the BARC, LBP and by the PARO. On the other hand, Hacienda Kaylaway
(also known as Hacienda Carmen) was voluntarily offered for sale to the government on May
1988 which was accepted by the DAR on January 1989. Subsequently, on August 6, 1992,
Roxas & Co. Inc., through its president Eduardo J. Roxas withdrew its VOS of Hacienda
Caylaway. On September 28, 1992, the DAR denied the withdrawal request of the landowner.
DAR continued the acquisition of the three haciendas and subsequently, the DAR Provincial
Office generated the collective CLOAs based on the approved subdivision plans and
transmitted to the Registry of Deeds of Nasugbu, Batangas for registration. On October 22,
1993 the DAR registered and distributed the following CLOAs:
Name of Title No. Area /Title Coverage No. of Program Year
Hacienda CLOA# Area (has.) FBs Type Regd
Hda. Palico T-985 1023.9999 6654 513.5983 408 CA 1993
6646 107.1451
6645 60.6268
6644 18.6668
6643 233.1137
Sub-Total 933.1507
Hda. Banilad T-924 1050.0604 5189 964.0688 243 CA 1991
Hda. Carmen / T-44662 869.7641 Ind. CLOAs 779.0000 632 VOS 1993
Kaylaway
Total 2943.8244 2676.2195 1283

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Legal Cases Involving the Roxas Properties in Nasugbu
When the Hacienda Roxas properties were covered under the Compulsory Acquisition, the
Roxas management filed a protest on the ground that the subject lands are not agricultural,
based on the Nasugbu Municipality Zoning Ordinance No.2, series of 1982, classifying these
lands to be non-agricultural use and likewise, on the Presidential Proclamation No, 1520,
converting the entire municipality to tourism use. The protest was denied and the Roxas
management appealed to the Court of Appeals Sixth Division, but was again denied on April
28, 1994, prompting them to elevate their appeal to the Supreme Court. On December 17,
1999, the SC executed an order ruling out the cancellation of CLOA but remanding the case to
the DAR for re-acquisition to rectify the failure to observe due process in serving the Notices
of Coverage.
On May 16, 2000, Roxas and Co. this time filed an Application for Exemption for almost all of
the area occupied by the three haciendas. The application as well as the motion for
reconsideration was denied by then Sec. Hernani Braganza. Thus, the LO appealed their case
to the Court of Appeals (CA). On November 24, 2003, the CA promulgated a Decision setting
aside the Order of Denial of Sec. Braganza and declaring the entire properties exempted from
CARP coverage pursuant to PP 1520. This time, it was the ARBs who appealed the case to the
Supreme Court.
Roxas and Co. filed several other applications for exemption involving several parcels of land
during the year 2002 & 2003 and was granted by then Sec. Roberto Pagdanganan.
Armed with the CAs decision and Orders of Exemption, Roxas petitioned for the cancellation
of CLOA No. 6654 involving 513-hectare portion of Hda. Palico under T-985 and was granted
by the PARAD and the CA and reached its course to the Supreme Court under G.R. No.
169163.
Roxas petition for cancellation of CLOA No. 6654 involving 103-hectare portion of Hda.
Palico under T-985 that was granted by the PARAD but was denied by CA reached the
Supreme Court under G.R. No. 167845.
The ARBs through their counsel filed a number of Motion To Consolidate And Refer The Case
To The Court En Banc And For Oral Argument, in order to avoid situation where each
division of the Supreme Court will issue conflicting decisions on the subject cases pending
CARP Exemption on the entire 2,943-hectare property of Roxas and the petitions for same
CARP Exemption on various portions thereof including CLOA Cancellation Petitions.
Roxas & Co. was ORDERED to pay the disturbance compensation of affected farmer-
beneficiaries in the areas covered by the nine parcels of lands in DAR Administrative Case No.
A-9999-008-98 before the CLOAs therein be cancelled and is ENJOINED to strictly follow the
mandate of R.A. No. 3844.
In the implementation of the December 4, 2009 Supreme Court Decision, Roxas & Co., Inc.
filed a Motion for Reconsideration on January 13, 2010 and on January 29, 2010, DAMBA-
NFSW & KAMAHARI, Et Al. likewise filed a Motion for Partial Reconsideration. Both petitions
were DENIED for lack of merit on December 14, 2010 with the ORDER that no further
pleadings shall be entertained.
However, when the Department carried out the SC Decision dated December 17, 1999 and
issued the Notices of Coverage to rectify the lapses in the previous coverage as mandated,
Roxas management again filed an Application for Exemption/Exclusion under Sec. 10, RA
6657 involving the 685 has. in Brgys. Aga/Banilad/Tumalim, Nasugbu on July 4, 2014 (the

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case is still ongoing at the DARPO Legal Division) and on November 8, 2012, they filed an
Application for Exemption based on DOJ Opinion #44 for 285.2853 hectares in Brgys.
Lumbangan/Bilaran/Cogonan, Nasugbu. Consequently, they also filed for cancellation of
CLOAs issued within these barangays which are also already at the DARCO level.
Other Cases/issue:
1. Issue of the alleged illegal conversion (San Antonio Memorial Park & Palm Estate
Subdivision) is already at the DARCO for resolution; Petition for issuance of a CDO is
under evaluation at the DARCO-BALA based on the OCI conducted by DARCO investigation
team last July 1, 2013;
2. Disqualification of ARBs; Case No. A-9999-04-Bi-054-10, Roxas Hacienda Consumers
Cooperative, Inc. (RHCCI) Cornejo vs. Lauro Martin, DAMBA-NFSW president), DARRO-
IVA has issued a Resolution on September 26, 2006 granting the petition for
Disqualification of RHCCI members. The aggrieved parties filed an appeal at DARCO on
March 29, 2010. The case was forwarded to ULAO on January 14, 2014, for proper action.
3. Protest on coverage filed by the landowner: the case was denied by the Regional Office;
for resolution of MR;
4. Application for Exemption: Per inquiry, the case is pending at CLUPPI. The SCS Director
has issued a Memo to HEA La Chica recommending the case as priority/urgent.
5. Partial cancellation of CLOA on the 103-ha. portion in Hda. Palico: the case is pending at
DARAB-DARCO;
6. Petition for installation on the 51-ha. area was filed at the DARCO: waiting for the
instruction from DARCO.
Discussion of the Supreme Court Decisions
Roxas & Co., Inc. vs. Honorable Court of Appeals, et al.
G.R. No. 127876. December 17, 1999
This case involves the question of the validity of the governments acquisition of the three (3)
haciendas in Nasugbu, Batangas owned by Roxas & Co.
The Supreme Court held that DAR failed to comply with the requisites of due process in the
acquisition proceedings but that this does not give the Court the power to nullify the CLOAs
already issued to the farmer beneficiaries. The SC held that DAR must be given the chance to
correct its procedural lapses in the acquisition proceedings. The SC also said that it goes
against the basic precepts of justice, fairness and equity to deprive the agrarian reform
beneficiaries, through no fault of their own, of the land they till. According to the Supreme
Court, the farmer beneficiaries hold the property in trust for the rightful owner of the land.
Furthermore, DARs failure to observe due process in the acquisition of Roxas & Co., Inc.,
landholdings does not ipso facto give the SC the power to adjudicate over Roxas & Co., Inc.s,
application for conversion of its haciendas from agricultural to non-agricultural. The agency
charged with the mandate of approving or disapproving applications for conversion is the
DAR. The power to determine whether Haciendas Palico, Banilad and Caylaway are non-
agricultural, hence, exempt from the coverage of the CARL lies with the DAR, not with this
Court.
Consequently, the Supreme Court declared that the acquisition proceedings over the three
haciendas are null and void for DAR's failure to observe due process therein. However in the
interest of justice, the Supreme Court ordered the remanding of the case to DAR for proper

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acquisition proceedings and determination of petitioner's application for conversion in
accordance with the guidelines set forth in their decision and the applicable administrative
procedure.
Roxas and Company, Inc. vs. DAR, et al December 4, 2009
This case involves seven consolidated (7) cases filed by Roxas that likewise reached the
Supreme Court regarding their application for Conversion from Agricultural to Non-
Agricultural use of its three (3) Haciendas on the basis PP1520. Roxas contended that the six
parcels of land which are the subject of DAR Administrative case No. A 9999 142 97 and nine
parcels of land which are the subject of DAR Administrative Case No A 9999 008 98 involved
in GR No. 167505 have been reclassified to non-agricultural uses via Nasugbu MZO No. 4.
The Supreme Court held that PP 1520 merely recognized the potential tourism value of
certain areas within the general area declared as tourism zones. It did not reclassify the areas
to non-agricultural use.
The Supreme Court held that the Roxas application in DAR Administrative Case No. A9999
142 97 for CARP exemption in Hacienda Palico subject of GR No. 179650 cannot be granted
in view of the discrepancies in the location and identity of the subject parcels of land. Even as
the existence and validity of Nasugbu MZO No. 4 had already been established, there remains
in dispute the issue of whether the parcels of land involved in DAR Administrative Case No.
A-9999-142-97 subject of G.R. No. 179650 are actually within the said zoning ordinance. In
this regard, the Court finds that Roxas & Co. should have submitted the comprehensive land
use plan and pointed therein the exact locations of the properties to prove that indeed they
are within the area of coverage of Nasugbu MZO No. 4.
As regards the Roxas application for exemption from CARP Coverage in the DAR
administrative Case No. A- 9999-008-98 for nine (9)parcels of land identified as Lots Nos.
20, 13, 37, 19-B, 45, 47, 49, 48-1 and 48-2 which are portions of TCT No. 985 covering
45.9771 hectares in Hacienda Palico subject of GR No. 167505, the Supreme Court ruled that
the Petition for Exemption should be granted as the same is supported by substantial
evidence. It follows that the CLOAs issued to the farmer-beneficiaries in DAR Administrative
Case No. A-9999-008-98 must be cancelled.
Conformably, the CLOA Holders in those particular exempted lots are entitled to disturbance
compensation. Roxas & Co. is thus mandated to first satisfy the disturbance compensation of
affected farmer-beneficiaries in the areas covered by the nine parcels of lands in DAR AO No.
A-9999-008-98 before the CLOAs covering them can be cancelled. And it is enjoined
to strictly follow the instructions of R.A. No. 3844.
Roxas and Company, Inc. vs. DAR et.al - December 14, 2010
This case involves the resolution of the Motion for Reconsideration over the above-
mentioned decision and the motion to hold its judgment on its motion for reconsideration in
abeyance pending its application with the Tourism Infrastructure and Enterprise Zone
Authority (TIEZA) for designation of 14 geographical areas of the Roxas properties as
tourism zone pursuant to Tourism Act.
The Supreme Court held that the pending application with TIEZA is totally immaterial to the
resolution of the petitions which delve mainly on the issue of whether the subject lands are
exempt from Comprehensive Agrarian Reform Program.
Roxas raised another issue that DAR Memorandum Circular No. 7 has no force and effect
since the said DAR Memorandum Circular was not published and filed with the Office of the

End of Term Report by Secretary Virgilio de los Reyes Page | 172


National Administrative Register (ONAR). The Supreme Court held that there is no need for
the publication and filing of the said DAR Memorandum Circular with the ONAR as it is
merely an administrative interpretation.
Roxas further contended that its liability to pay disturbance compensation is limited to its
agricultural lessees only and not to farmer-beneficiaries, citing RA No. 3844, as amended.
The Court held that since the DAR had initially issued CLOAs to the farmer-beneficiaries of
the nine parcels of land in Hacienda Palico, the assailed Decision merely reiterated the
original designation of the affected individuals as farmer-beneficiaries who should be
entitled to disturbance compensation before the cancellation of their respective CLOAs is
effected.
Implementation of the Supreme Court Decisions
Previously, in 2011, a task force was constituted by then Undersecretary for Operations
Narciso Nieto to handle the implementation of the Supreme Court order. A relocation survey
was undertaken to determine the boundaries of the 513-ha. area covered by CLOA 6654 and
to determine and delineate the boundaries of the 45-ha. & 103-ha. exempted areas as
directed by the Supreme Court. Survey activities were completed on March 2012 with
submission of the TF Roxas of a technical report and color-coded map. In 2012, was decided
to adhere closely with the Supreme Court decision in order that any process undertaken will
result in the stabilization of property rights of the ARBs on the subject property.
Factors Considered
The following factors were considered in the implementation of the SC decision was mad:
Almost twenty years have passed since the issuance of the CLOAs and changes are
inevitable on the ground. Some of the original CLOA holders have died and some have
sold or transferred their land. There may be occupants/tillers that are not CLOA
holder.
A mix of individual and collective CLOAs was issued.
There are still various cases lodged within the DAR that must be resolved in a just
and consistent manner.
Process Being Undertaken to Implement the SC Decision
The 1999 Supreme Court decision ordering DAR to correct the acquisition process meant
that the DAR had to re-start the LAD process starting with the issuance and valid service of
the Notice of Coverage last September 27, 2012 and again on June 7, 201431.
Currently, a process similar to the FB identification stage is being undertaken. Since CLOAs
had previously been issued and the Supreme Court did not cancel the CLOAs, a process of
beneficiary revalidation was undertaken, instead, which aims to:
Find out if there were farmworkers who should have been identified as beneficiary
but was not; conversely, to find out if there are CLOA holders who should not have
been identified as beneficiaries;
Identify who among the CLOA holders are now deceased and who are currently
tilling the land of the deceased CLOA holder;

31 As can be expected, landowner filed a Protest which then-RD Pearl Armada denied. This case is under appeal at
the Court of Appeals.

End of Term Report by Secretary Virgilio de los Reyes Page | 173


Identify who among the CLOA holders are still tilling their land;
The FB revalidation process involves a massive information campaign, farmer-beneficiary
interviews and validation of interview results
As part of the FB revalidation process, a Preliminary Masterlist and subsequently a Final
Masterlist will be prepared and posted as required by the current rules. Land survey will be
conducted to correct existing survey plans, if needed, and to subdivide existing collective
CLOAs. The Claim Folders will be sent to the Land Bank who will have to decide if the
previous valuation stands or if the valuation will be revised. New LADIS will be made. Old
CLOAs may have to be cancelled if needed and new ones generated and registered.
Activities Conducted
Information Drive
One important activity that was done by DARPO is the information drive that explained the
contents of the Supreme Court Decision. The information drive aimed to inform of what the
DAR will do the implement the SC decision and to solicit support from the stakeholders. The
information drive was conducted in all the barangays where the three Roxas haciendas are
located. A total of 1,019 farmers in 8 batches attended the info drive.
Farmer Beneficiaries Interview
Before the start of the interview proper, consultations were done in order to come-up with a
tool that could effectively and efficiently extract the necessary information for this
undertaking.
For the conduct of actual interviews, the personnel from the Regional Office and other
Region 4-A provinces were tapped to augment the personnel of DARPO Batangas. An
interview tool was installed in laptops in order to facilitate conduct of the said activity.
Actual interviews were conducted in Barangays Aga, Kaylaway, Banilad, Tumalim, Bilaran
and Reparo on February 4, 5, 6, & 13; February 18, 19 & 20; February 24; March 3 & 6, 2016,
respectively. Based on CLOA records, the total number of ARBs targeted for interview was
1,494 - from Brgys. Aga and Kaylaway: 692; Brgy. Banilad: 158; Brgy. Tumalim; 92; Brgys.
Bilaran, Catandaan, Cogunan, Lumbangan, Reparo: 552. Of the subject ARBs, only 68% or an
equivalent of 1,023 farmer beneficiaries came interview.
Data Processing
Data Processing Center was established at DAR Provincial Office-Batangas on March 2015
which housed the Data Processing Team. The team was composed of 4 Administrative
Supervisors, 2 Technical Supervisors, 15 Data Validators (4 of them are from DARPO Cavite
and DARPO Laguna) and 2 hired Data Processors. Six units of Desktop Servers from DARCO
MIS were installed and networked for the data processing proper.
A windows-based program was created by the Data Processor linking the database of the
CLOAs to the result of the interview. This program was used by the Data Validators in
verifying the ARB Folders, identifying the lacking requirements and affixing the pictures of
the ARBs to the interview form.
After the scheduled initial interview, all ARB folders were kept at the Data Processing Center.
ARB folders and soft copy of the interview forms of those interviewed at DARMO Nasugbu
were forwarded to DARPO for linking on the database and inclusion on the data
processing/validation. Prior to the conduct of the data processing, ARB folders were
classified into 4 major classifications with sub-classifications and CLOAs were inventoried by

End of Term Report by Secretary Virgilio de los Reyes Page | 174


the Data Processors cross referencing all available Databases (MIS, DARRO and DARPO). Out
of 1,378 CLOAs, 90.4% are on the database and with physical copy at DARPO, 6.2% are on
the database but without physical copy, 2.8% are not on the database but with physical copy
and 0.6% are not on the database and without physical copy. CLOAs found on the database
but with no physical copy were requested at the Register of Deed. These CLOAS were used as
an additional document on the validation process to determine the validity of the
information given by the ARBs.
A letter addressed to the ARBs were generated upon identification, informing the addressee
to submit the lacking documents. ARBs qualification for 2nd round of interview will be based
on the completeness of the required documents per classification.
As of March 15, 2016, 98.35 % (due to some interview that lacks information) of the ARB
Folders were validated and 100% of the generated letters were sent to the ARBs thru
personal service.
Actual Ground Validation
After having concluded the interview of the farmer-beneficiaries and other farmworkers
that was conducted on different dates and venues within the barangays covering the three
(3) haciendas of Roxas & Co. and after completion of the data validation of interview folders
classified as CLOA Holders; actual ground validation is necessary, as part of the LAD process
to confirm all information gathered from the interview of ARBs awarded with individual and
collective CLOAs within the three (3) haciendas of Roxas.
On October 21, 2015, Regional Special Order No. 76, Series of 2015 was issued creating three
(3) teams, composed of 3 members from selected staff of DARPO-Batangas and DARMO
Cluster 1 & 4, to execute actual ground validation of ARBs and their respective actual tillage.
After the orientation in the operation of the handheld Global Positioning System (GPS), initial
ground validation was executed on the following day in Hacienda Kaylaway in Bgys. Aga &
Kaylaway based on the Priority List involving landholdings of ARBs categorized as Individual
CLOA Holders-Alive-Tilling the land, -Alive-Heirs Tilling the land and -Deceased-Heirs Tilling
the land.
As part of the strategy to facilitate the conduct of validation, Block Maps containing parceled
lots (derived from the approved subdivision plans) were provided by DARCO-BLTI as
reference and guide in the conduct of the actual ground validation.
The 3 teams were able to validate all lots contained in the Priority List of ARBs for Hacienda
Kaylaway involving 334 lots with an area of 235.2772 hectares.
Below is the summary of validation accomplishment:

No. of Lots Validated


No. of Lots for
Hacienda Area (has.) Other Area
Lots Priority Area (has.) Area Validation
Categories

Kaylaway 943 575.7747 334 235.2772 0 0 609 340.4975

Banilad 901 941.7730 254 316.2765 286 195.4451 361 430.0514

Palico 453 421.4912 0 0 0 0 453 421.4912


TOTAL 2297 1939.0389 588 551.5537 286 195.4451 1423 1192.0401

End of Term Report by Secretary Virgilio de los Reyes Page | 175


Based on the above data, 25.6% of lots under the Priority List was validated while 12.4% was
validated under other categories. Remaining lots for validation in Hdas. Kaylaway and
Banilad and the whole of Hda. Palico represents 62% of unvalidated lots as of March 16,
2016.
Generally, the three haciendas remain to be agricultural in its land use; no significant change
except for those portions of plantation areas and farm lots of ARBs that were utilized by
other occupants and the heirs and relatives of ARBs and the 6-ha. area that was converted
into a memorial park. The park is part of one of the plantation area of Hacienda Roxas.
Next Steps
DARPO Batangas had charted the activities it intends to undertake for the remaining three
quarters of 2016 and they are listed as follows:

ACTIVITIES TIME FRAME


1. Completion of ground validation of ARBs May to July
2. Screening of ARBs for the preliminary list (data gathering, July to September
processing, evaluation, posting)
3. Resolution of protest on ARB preliminary list July to September
4. Preparation of Final Masterlist October to December
5. Resolution of protests on Final list of ARBs October to December
6. CF documentation (signing of APFU and Form 18, evaluation, October to December
Joint Field Investigation)

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ANNEX C:
Stabilizing ARBs Property Rights in the CARP-Awarded
NDC Lands in Tupi and Polomolok, South Cotabato
Background
The distribution of the National Development Corporation (NDC) lands at Tupi and
Polomolok in 1988 to farm workers of Dole Phil. Inc. was a milestone in agrarian history in
the Philippines for several reasons First, it was the first title ever awarded under the
Comprehensive Agrarian Reform Program (CARP), particularly Transfer Certificates of Title
Nos. T-00000001 and T-00000002, fondly called as T1 and T2. Second, it was the first time
that lands were given to farm workers of a multi-national company. And third, it was
awarded to Dolefil Agrarian Reform Beneficiaries Cooperative Inc. (DARBCI) with a great
number of Agrarian Reform Beneficiaries, 7,534 members, whose names were annexed to
the aforesaid titles.
NDC, as the governments investment arm acquired lands from settlers of the municipalities
of Polomolok and Tupi in South Cotabato and leased them to Dole Phils. Inc. (DPI) in the
1960s. On July 5, 1961, President Carlos P. Garcia signed Presidential Proclamation No. 762
reserving for settlement purposes of the non-christians about 2,700 hectares, situated in
Tupi and Polomolok. This became the basis of the Indigenous People (IP) claim.
On June 10, 1988, President Corazon C. Aquino approved RA 6657 known as the
Comprehensive Agrarian Reform Law (CARL). After the law took effect, the DAR proceeded
with Lista Saka and one of those covered was the vast tracts of NDC lands in Tupi and
Polomolok, which were leased to Dole Phils. Inc. On September 27, 1988, NDC turned over
these lands comprising of 8,963.7802 hectares, more or less, located in the Municipalities of
Tupi and Polomolok to the DAR through the Execution of a Deed of Sale (DOS) pursuant to
EO 407 as amended by EO 448 and 449 in line with the mandate of RA 6657.
DARPO then conducted FB Registration of all Dole Philippines employees and on December 6,
1988 distributed these lands to 7,534 ARBs through the DARBC, the cooperative formed by
these farmworkers. In 2013, the names of ARBs were annotated in the back of T1 and T2.
As in the case with firstborn, there were a lot of lapses in the coverage which resulted to a lot
of cases not only at DAR and DARAB but also in regional trial courts. These cases boil down
to just one issue, INCLUSION as ARB in the CARP covered NDC lands. The department must
take appropriate action and determine and validate the Farmer Beneficiaries covered by the
first two land titles issued under the Comprehensive Agrarian Reform Program.
On July 16, 2015, DAR Secretary issued an Interlocutory Order consolidating several cases
filed with the DAR and DARAB and ordering the conduct of a census of farmworkers and
other claimant in the former NDC lands to aid in the resolution of the cases.
The goals of the DAR Census are two-folds:
1. To provide the Secretary of the DAR complete information to assess and decide on
abovementioned ALI cases.
2. To stabilize the property rights in the CARP-awarded lands leased by DOLE Philippines.

End of Term Report by Secretary Virgilio de los Reyes Page | 177


Preparation Phase
To prepare for the DAR Census, the created Taskforce through Provincial Special Order No.
28 dated March 31, 2014 began researching and gathering data from DARBC, DPI, NDC and
the DAR itself. To facilitate the smoother implementation of the Census, a Working
Committee was created. Immersion, meetings and trainings were also conducted. This
phase took more than a year to complete because of the tasks involved: gathering of lists,
case briefs involving DAR, NDC, DPI and DARBC as well as locating each lot/landholding in
the map of NDC covered lands.
The Info Dissemination Campaign
Prior to the actual interview of intended respondents, a massive information drive was
conducted to inform the ARB and other stakeholders of the upcoming census. The campaign
informed the participants on the rationale of the census and the requirements they have to
bring during the Census to prove their claims. The IDC also sought to inform the would-be
respondents of the mechanisms and processes established to facilitate the implementation of
the Census. The ten-day successive, simultaneous IDC was scheduled in 40 barangays
clustered in 30 sites. It started from August 5 19, 2015.
All in all, the Census has covered 40 barangays of Tupi, Polomolok and General Santos City in
30 sites to about 2,463 participants (based on the attendance sheet 1,048 participants in
the barangay and 1,415 at DPI Gym). As the output was low, the team conducted two
additional sessions at DARBC for two Saturdays with a total of 172 attendees as well as
house-to-house campaign.
The Interview
The most critical part of the Census is the Interview. From September 7, 2015 March 31,
2016, in almost seven months of interview, the total respondents were tallied at 6,679, ARBs
and non-ARBs alike.
Considering that the targeted respondents are 7,534 ARBs whose names were annotated in
T1 and T2, only 89.8% was accomplished or 6,435 ARBs subjected themselves for interview.
The remaining 1,099 ARBs are still unaccounted for despite the efforts to inform them of the
Census.
In the following months of October and November, efforts were made to reach out to ARBs
by coordinating with sector leaders through DARBC officials. Support staff also called the
contact numbers of those who registered during the IDC. The Taskforce also interviewed
ARBs/Representatives even without schedule.
The DAR management extended the Census up to December 2015 when the members of
DARBC will be receiving their farm rental shares. The PARO and MARO of Polomolok
verbally arranged with DPI the early release of farm rental (December 11, 2015) to take
advantage of the coming of ARBs to receive their farm rental share. A list of those who were
interviewed was given to DARBC. Prior agreement with the coop was also done to require
DARBC members to show that they have been interviewed as a requirement for the release
of their farm rental. However, the DARBC Board of Directors (BOD) backtracked on this
agreement because they fear that this will lead to outburst of the members. Instead, the
Taskforce was given space in the DARBC office to conduct the interview and DARBC
personnel directed members who wanted to be interviewed at the DAR Taskforce.
On a January 21, 2016 meeting in DARPO Sarangani, Secretary delos Reyes advised to extend
the conduct of the interview up to March 31, 2016 when ARBs will be attending the annual

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General Assembly. Another verbal agreement was made by the DAR with the DARBC BOD
not to release the members profit shares during the General Assembly without the interview.
Last ditch efforts were made from February March which include the following activities:
delivery of personal mail, posting of notices and tarps, publication of names in a local
newspaper, TV and radio announcements, recorida and word of mouth.
What Remains To Be Done
Data Cleansing
The hiring of an IT personnel and two support staff on a project basis/66 days (May 16, 2016
August 16, 2016) is a must to cleanse the entries in the 6,679 folders. The support staff will
be in-charged of sorting and filing in an alphabetical basis, the hard copies of the interview
and their attachments of these folders.
Consolidation and Processing
Consolidation of all data into one data base was done by DARCO. Afterwards, these will be
saved to a central server and will be given to the DARPO for processing from May 16
August 16, 2016. After the provision of the server, the IT personnel will now begin to
process the data and submit to DARCO.
Upon consolidation of the 6,679 data into one file, these can now be processed into different
groups and sub-groups.
Two weeks after processing, a separate report on the content of the data gathered could
already be submitted to DARPO, DARRO and DARCO on August 31, 2016.
Publication of Notice for Un-Interviewed ARBs in a newspaper of national circulation
The list of 1,099 ARBs who have not been interviewed will be published by the DAR Central
Office in a newspaper of national circulation. The content of this publication shall be
determined by DARCO. After a given time, the DARCO shall decide on the plight of these
ARBs.
Interview of ARBs after the deadline
The fifty (50) ARBs, who came forward after March 31, 2016, and wished to be interviewed
after the deadline is subject to the approval of the DARCO.

End of Term Report by Secretary Virgilio de los Reyes Page | 179


ANNEX D:
Other Special Projects Aimed at Stabilizing ARBs
Property Rights in their CARP-Awarded Lands
1. NDCC-GUTHRIE
The National Development Corporation turned over to DAR about 40,000 hectares by way of
a Deed of Sale on September 27, 1988 by virtue of the provisions under RA 6657, which
provided that government-owned lands leased by multi-national corporations shall
immediately be turned-over to DAR for distribution to agrarian reform beneficiaries.
This NDC land is located in the municipalities of Rosario and San Francisco in Agusan del Sur.
It covers 7,927 hectares. This was leased to two Guthrie corporations:
The NDC Guthrie Estate Inc. (NGEI) in which 4,042 hectares was leased; and
The NDC Plantation, Inc. (NGPI) 3,884 hectares leased
As part of the process of distributing these NDC land, in October 1988, 2,090 ARBs were
identified: 987 in NGEI, and 1,153 in NGPI. Immediately, they were organized into two multi-
purpose cooperatives, the NGEI Multi-Purpose Cooperative and the NGPI Multi-Purpose
Cooperative.
On December 2, 1988, Pres. Cory Aquino awarded the lands to the two multi-purpose
cooperatives. Only the names of the two cooperatives were inscribed in the collective CLOAs.
The names of the individual beneficiaries were not. Both cooperatives entered into a
leaseback agreement with Guthrie, which is now named Filipinas Palm Oil Plantation, Inc.
In the course of time, intra-coop conflicts ensued. Now, there are six cooperatives in the two
landholdings, each wanting to have their own CLOAs. Before the collective CLOAs can,
however, be parcelized, there is a need to determine who the qualified beneficiaries were in
1988. This entails the conduct of re-validation. There is also a need to screen additional
ARBs since the average area per ARB exceeds the award ceiling of 3 hectares. Aside from the
issue of FB validation, and identification, there is also a need to conduct ground validation
and to segregate non-distributable portions of the lands covered by the collective CLOAs.
There are portions that were included in the collective CLOAs but have already been titled by
the DENR. There are EPs within the CLOAs, and portions with adverse claims.
All these issues have to be addressed before the shares of each cooperative can be
determined and subdivision of the collective CLOAs effected. At the same time, the issue of
revocation of lease back agreement, negotiation for more favorable terms of the leaseback
agreement will have to be addressed by the coops, with the assistance of the DAR and the
CDA.
2. Famy-Real Settlement Project in Quezon I
This DAR Resettlement Project is covered by Presidential Proclamation No. 196, which
declared portions of seven (7) barangays that are part of Proclamations 582 and 1626 issued
by Pres. Quezon as Forest Reserved, and by Pres. Marcos as National Park, Wildlife Sanctuary
and Game Reserve, respectively. Those that were taken out of Proclamation 582 and

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Proclamation 1626 were those portions that were below 18% slope. These were declared as
alienable and disposable under Proc. 196, for the resettlement program of DAR.
These two Proclamations were amended by Proclamation 196 which excluded portions of
seven (7) Barangays, namely, Kiloloran, Tanauan, Tignoan, Capalong, Tagumpay, Lavac and
Bagong Silang from the operations of Proclamations 582 and 1626. Specifically,
Proclamation 196 declared those portions in the seven (7) barangays which were below
18% in slope as alienable and disposable for the resettlement program of DAR. Covered are
lands whose aggregate area was initially estimated to be 11,629 hectares subject to future
surveys. Of this total area, 10,193 hectares were distributed to 4,930 agrarian reform
beneficiaries. A total of 731.0074 hectares were up for distribution but remained unallocated.
The balance of 758.2318 hectares were determined to be non-CARPable.
The following issues need to be addressed:
Unallocated lots. As mentioned above, there are still 731.0074 hectares unallocated
portion.
Unclaimed or Undistributed CLOAs. A total of 166 CLOAs with total area of
318.3561 hectares which were registered from 1991 to 2004 remain unclaimed or
undistributed
Collective CLOAs. As mentioned above, 373 CLOAs covering 1,624 hectares remain as
collective.
CLOAs with Cancellation Cases. A total of 148 CLOAs with area of 255.4 hectares
have cancellation cases of which 142 CLOAs covering 235 hectares are cancellation
cases due to alleged abandonment.
CLOAs Overlapping Titled Properties. 110 CLOAs seem to overlap with the titled
property of Natures Valley while another 29 CLOAs seem to overlap with the titled
property of Ignacio Gimenez.
CLOAs not on File at the Register of Deeds. When validated with the records of the
ROD, only 3,862 CLOAs for 4,310 agrarian reform beneficiaries with total area of
8,976.0746 hectares are on file with the ROD. Some 553 CLOAs of 620 agrarian
reform beneficiaries covering 1,220.2501 hectares are not on ROD file.
Ground validation, mapping and plotting of the A&D lands, and re-validation and
identification of new ARBs are being conducted with the end in view of awarding individual
CLOAs to the qualified beneficiaries.
3. Bukidnon Farms, Inc.
This 2,697 hectare property was previously owned by the Cojuangcos. However in 1986, a
sequestration order was issued by the PCGG. From the time of the sequestration, the BFI
ceased their operation/management over the coconut and cacao plantation. The company
was placed under the management of Mr. Victoriano Sola having 256 workers under his
supervision. A sizeable portion was cultivated then by around 138 military men of the 425th
Local PC command. There were retrenched farmworkers working on the other portion of the
land upon the consent of Mr. Sola.
On 27 January 1989, a Memorandum of Agreement was executed by and between the DAR
and PCGG, which provided that all agricultural lands surrendered to the PCGG which are
within the scope and coverage of RA 6657, shall immediately be ceded, transferred, conveyed
and turned-over to the DAR.

End of Term Report by Secretary Virgilio de los Reyes Page | 181


Following this MOA, DARPO Bukidnon started the documentation of the property. In 1990,
three claim folders were submitted to the Land Bank of the Philippines and in 1995 LBP
issued Memorandum of Valuation, and subsequently, Certificates of Deposit. There were no
subdivision surveys conducted yet and collective CLOAs were issued on the entire area
reflected in each of the titles, without delineating the unacquired portions. The beneficiaries
were categorized as follows:
Regular farmworkers of BFI
Retrenched farmworkers
Landless residents
There were numerous protests on the identification of FBs filed by various groups such that
in 1998, revalidation was made and a new list of qualified FBs, known as the Borra List was
generated. In order to correct the error in the inclusion of the unacquired portion in the
CLOAs, the CLOAs were cancelled and new collective titles were issued. Subdivision survey
was conducted to subdivide the CARPable area into one-hectare lots.
Allocation of the lots however, is problematic since there are still around a thousand of those
in the Borra List who have not yet been awarded CLOAs. Other problems are:
It seems that almost all of the CLOA holders are not actual tillers. In most cases, upon
issuance of the CLOA, they leased their awarded land to DAVCO, transactions which have no
DAR participation. A big portion of the undistributed area are occupied by big investors or
non-ARBs. Most of the ARBs are not paying land amortization.
Revalidation of the qualified ARBs will be conducted.

End of Term Report by Secretary Virgilio de los Reyes Page | 182


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