The ills of our land reform and the need to industrialize

The land reform program in the country is ineffective and is a bane to development. It is bad for all concerned, the landowner, the farmer beneficiary and the government. Under our land reform program, big tracts of private land are taken by the government, through the DAR, either voluntarily or involuntarily, and distributed to farmer beneficiaries. In turn, the landowner is paid, not in cash, but in LDP bonds given over a period of 20 years. The supposed rationale of the program is to free the farmer from the bondage of the soil by making him finally own it and farm it for himself.

While at first blush salutary, in real and practical effect the land reform program, far from achieving its stated mission, actually negates it. Indeed, the present program has many flaws.

The program punishes the landowner for endeavoring to make his land agriculturally productive by employing tenant farmers. Likewise, the landowner is placed in a distinctly disadvantaged economic position as he is paid, not in cash, but in LDP bonds payable over a long period of time. This way, the landowner is unable to turn-around and invest in other industries needing capital as he is not given the cash to do so by the government. The bond payment, spread over so many years, insures that the erstwhile landowner is unproductive after he loses the land to the farmer-beneficiaries.

Similarly, the program is not good for the farmer-beneficiary himself. For one, the land is not given to him for free. He must pay for it. Yet, experience shows that he is unable to do so unless he sells the land or his rights thereon. In the majority of cases, the Land Bank eventually forecloses on the property due to the inability of the farmer to service his obligations. So, the farmer-owner now himself loses the land.

Likewise, the farmer-beneficiary is not trained to manage the land for productive and profitable use. He knows not the marketing and financial aspects of agricultural production. His fixation at marginalized farming prevents him at embarking on a modernized agricultural method which he could not undertake in the first place as his ownership is not big enough for mechanized farming.

Endemically faulty in the agrarian reform law is the distribution of the private land to the farmer beneficiary who will eventually divide the same land to his children who must do the same to their own children. Obviously, even down to the third generation alone, the original land would have been continuously parcelized to progressively smaller lots to a point of defeating the very purpose of the program which is to transfer the farm land to the farmer. By then, due to its smallness in size, the land is not economically viable for farming. For this very reason, as well, the program is ill-advised for the government as, having cut the land into small sizes, it could not now take advantage of the benefits of modernized and mechanized farming that is only possible with vast tracts of agricultural land.

What then could be the alternative program to the present agrarian reform if we are still to pursue the noble objective of giving land to the landless? The solution is simple, if obvious.

There are so much public idle lands all over the country. They remain to this day unproductive without taxes or revenues being generated for the government’s coffers. It is these vast tracts of depressed and inutile lands of the public domain that should, instead, be given for free to our landless farmers and multitude of homeless citizens and informal settlers.

This way, the funds, committed by the government for payment to the private landowners for the taking of their property, can instead be loaned out to the farmers for the financing and development of their own lands that were formerly government holdings rather than using the government money to pay-off the landowner in the meantime. Then the farmer could very well concentrate on mechanizing and modernizing his farm and working on it with the funds loaned out to him by the government on a long-term, low-interest basis. From the support government extends him through loans, the farmer can now buy the necessary fertilizers, seeds and other inputs to increase the productivity of his land. The farmer need not then be bothered by the amortizations on his land as it is already given to him for free.

This is the true and effective land reform program. The idea, in a nutshell, is not to break down private lands into small sizes but to maintain the present landholdings of private landowners so that they can develop their own property to their highest and best use. Instead, it should be the vast and idle tracts of public land that is to be distributed to the farmers and landless for free to make them productive agriculturally and for the government to earn revenues therefrom in the form of realty taxes.

This way, government does not cause the diminution of our agricultural lands which is the eventual effect of the present land reform program but will instead enlarge our lands devoted to agriculture thereby helping immensely our food self-sufficiency program, in the process.

It should be noted with alarm that since the inception of the agrarian reform program in the country, our food sufficiency position has been diminished such that we even have to import such basic food requirements as rice, corn and sugar. This need not happen if we only enlarge our agricultural land inventory as afore-stated and modernize and mechanize our agricultural methods.

This alternative thrust to land reform together with the endeavor to modernize agriculture should go hand in hand with the twin move to industrialize the country. There is an equally urgent need to industrialize so that the children of the farmers, and their children down the line, could be absorbed into the industrial sector and away from agriculture which is to be mechanized. Comparatively, a hectare of land can only employ one farmer while the same area, when devoted as an industrial estate, could very well employ from 500 to 1,000 factory workers. The increase in population, indeed, puts pressure on the land to accommodate more workers. Industrialization is, therefore, the answer.

In this regard, government must finance the development of lands all over the country by putting the necessary infrastructure and utilities on the land. As always emphasized in this column, this can and should be done by financing the needs for present development against future taxes. Government must float long-term, low-interest bonds that the Central Bank must buy by creating new money that shall be infused into the economic system. This new money will finance the needs of the farmers, provide the wherewithal for the modernization of agriculture and deliver the capital for the industrialization of the country.

This we believe is a better way to go about in our efforts at land reform.

(You may write your comments/suggestion at 15/F Equitable Bank Tower Paseo de Roxas, Makati City or through e-mail at [email protected])

(Editor’s note Atty. Roxas is writing a limited series of articles dealing with financial matters and other important business topics.)