The author is dean and professor of the University of the Philippines School of Economics in Diliman, Quezon City.
There are many reasons for the relative backwardness of Philippine
agriculture and rural economy. Some of them are acts of God like typhoons. Some are failures of the Philippine state such as the lack of irrigation and rural infrastructure. Others are failures of well-intentioned policy, e.g. price distortions and shortcomings of the land reform law.
Borne more out of ideological ardor than of good sense, the
Comprehensive Agrarian Reform Law (CARL) – in the pursuit of a worthy
political goal that is the more equitable distribution of land assets
and an economically progressive farm sector – has sadly become one of
the roots of economic stagnation in the rural areas.
Among the reasons are:
The fruits of land reform are most abundant when land
Where it has started or been implemented, the CARL (Section 27)
CARL has also outlawed the so-called new tenancy contracts and,
There is no reason to believe that three hectares is economically viable for all crops.
Taken together, these have rendered CARL an economic liability.
A Nexus of Markets
The rural economy is a complex nexus of interlinked markets. Each one
contributes singly and collectively to the overall productivity of the
rural economy. Undermine one market and the others are degraded. Not
one contributes more than the existence of a viable, and reliable rural
credit market. Farming without credit is a subsistence and poverty
trap. The rural credit market is, however, intimately interlinked with
the rural land market. Credit flows on the river of security and land
is the most important collateral. If the land market is outlawed, land
security cannot be priced or cashed and credit flows dry up. Consider,
for example, what will happen even to urban credit market if the land
market is outlawed. The urban economy will shrivel.
CARL has effectively destroyed the formal rural credit market by
outlawing the rural land market. This absence of credit affects both
landowners before actual land reform and beneficiaries after land
reform. The former cannot get credit from banks once the farm has been
declared a land reform area. Thus, CARL – born of good intentions but
very short of wisdom – has created a new underclass of the “landowning
poor.”
Responses
The continued poverty among many beneficiaries is the result of the
various responses (or lack of responses) to the retreat of formal rural
credit.
Since land is not tradeable, if the beneficiary or his/her heir
If the three-hectare limit is not economically viable for a
The market for land fortunately did not completely expire; it
Farmers can access informal sector credit, either (a) from
Farmers also resort to porsiyentuhan where workers (in truth,
Because formal credit cannot thrive in rural areas, it flees to
Consolidation of land is happening outside the law with all sorts of subterfuges, one of which is just forced idleness.
Thus, the puristic infirmities of CARL adopted in the pursuit of
equitable asset distribution and beneficiary welfare, have resulted in
a dynamic which undermines these very goals in the long run. The
message of this essay is that those worthy political goals of equitable
asset distribution and a farm population invested with well-being and
hope should still be pursued with a CARL that is compatible with
economic efficiency. Otherwise, these goals are mere mirages and not
sustainable.
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