Monday, April 3, 2017

Land Conversion Leads to Rural Poverty

The Philippines is reliant on its agricultural sector even if it has a vibrant BPO industry and Services sector. The Agricultural sector accounts for 11% of the country’s GDP and employs 30% of the workforce.

The country is the No. 8 producer of rice in the world, the top coconut producer in the world, the No. 1 pineapple producer and one of the largest sugar producers in the world.

But the reality is that the Philippines is the No. 1 importer of rice globally. 60% of its population lives in the rural areas where agriculture is the main industry. Also, the rural areas account for60% of national poverty incidence.

One of the reasons for shrinking agricultural productivity and its inability to generate jobs in the rural sector is conversion of agricultural lands to other uses. This is brought about by population pressure for more residential areas but also a skewed economic policy that works to the detriment of the agricultural sector.

According to the Department of Agrarian Reform (DAR), between 1988, when the Comprehensive Agrarian Reform Law (CARL) took effect, and 2016, a total of 97,592.5 hectares of agricultural land were approved for conversion to nonagricultural purposes. This is comparable to the combined size of the National Capital Region (NCR) and Metro Cebu.

There are also pending applications for further land conversions. It should be noted that the CARL has failed to alleviate the plight of farmers. The law has a poor support structure to the farmer beneficiaries of the law so that in order to be able to plant their crops, the farmers would then get financing with their land as collateral for the farm inputs. But the economies of scale militated towards the farmers losing money I the transaction and their lands will be forfeited by the lending institutions. 

This led to the lending institutions being awash with real estate assets but the rules of the Bangko Sentral ng Pilipinas (BSP) has strict liquidity level requirements for these institutions. In order to meet those requirements, the institutions had to liquidate the assets and a big portion of these lands were then converted for other uses.

The DAR is now contemplating a two-year ban on land conversions. This will arrest the shrinking of lands devoted to agriculture and together with a comprehensive agricultural policy from the Department of Agriculture, it is hope that the agricultural industry will be revived and will be able to be competitive. This will result in the “inclusion” of the rural poor I the economic development of the country.

(To be continued…) 

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The Mail Man

Author & Editor - The Philippines' Web Magazine on Agriculture.

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