IN THE HANDS OF FARM WORKERSCan Banana Commercial Farms Survive?

Eddie L. Quitoriano With Dr. Buenaventura Dargantes, Lino Moleta and Paola Nartea

Development Academy of the PhilippinesLa Liga Policy Institute May 2008

IN THE HANDS OF FARM WORKERSCan Banana Commercial Farms Survive?

Eddie L. Quitoriano With Dr. Buenaventura Dargantes, Lino Moleta and Paola Nartea

Copyright © 2008 by Development Academy of the Philippines and La Liga Policy Insitute

All rights reserved. This publication may be reproduced by any method without fee or prior permission for teaching purposes, and is not for resale. For copying in any other circumstances, prior written permission must be obtained from the publisher, for a corresponding fee.

ISBN: 978-971-576-032-4

Published by

DEVELOPMENT ACADEMY OF THE PHILIPPINESDAP Bldg., San Miguel Ave., Pasig City1600 PHILIPPINEShttp://www.dap.edu.ph

and

LA LIGA POLICY INSTITUTE304 Tempus Place I Matalino St., Brgy. Central, Diliman, Quezon City1101 PHILIPPINEShttp://www.laligapilipinas.org

Publication Coordinator: Rachael Morala, La Liga Policy InstituteJoan Nuque, Development Academy of the Philippines

Content Editor:Edicio de la Torre, La Liga Policy Institute

Copy Editor: Connie J. Maraan, Development Academy of the Philippines

Cover Design and Lay-Out: Meg Sunega

3

Foreword

Partnership, social equity, and opportunities for growth are the ideals by which agrarian reform can contribute to a realized peace and quality of life for Filipinos.

This is the current vision that drives the Comprehensive Agrarian Reform Program in its efforts toward improving the country’s land tenure system through land acquisition, distribution and leasehold. Yet the history of CARP seems always to have opposed these ideals: rather than partnerships, relations between landowners and cooperatives are marred by disputes; instead of social equity, violations of human rights abound; and where it is hoped that growth is possible, the way forward becomes most tedious.

The situation becomes acute when viewed in the light of an industry that represents one of the top three exports of Mindanao. The region itself is the source of a third of the Philippines agricultural output, and over half of its exports. Today, the demand from the Middle East, Russia, China, Japan and South Korea for bananas and other fresh fruits is difficult to keep up with.

Indeed, the history of banana farming and its role in the economy are what singled it out for a specific scenario under CARP, wherein land would be distributed without tilting the balance in production. It is the opposition to the ideals of partnership and equity, however, that kept the scenario from being achieved.

In spite of these setbacks, indications continue to show that agrarian reform plays a crucial role in reducing poverty and facilitating income growth in the countryside. This study seeks to further the fulfillment of that role by informing policymaking, legislation and programming related to CARP of the situations that need to be addressed with regard to plantation cooperatives and to workers who have been displaced as a result of leasehold disputes.

As such, this volume, produced by the Development Academy of the Philippines in cooperation with the La Liga Policy Institute, will doubtless benefit not only those involved in legislation but more significantly those involved in the management of the banana farm cooperatives as well as the LGUs, NGOs and other stakeholders committed to achieving a more productive and sustainable livelihood for the Philippine farmer.

ANTONIO D. KALAW, JR.PresidentDevelopment Academy of the Philippines

4

Foreword

The La Liga Policy Institute, together with the Development Academy of the Philippines, has initiated this research as a means of assessing the financial and economic viability of banana plantation cooperatives amidst the continuing conflicts arising from, within and outside these cooperatives especially so in a time where the fate of CARP remains muddled.

This book, In the Hands of Farm Workers: Can Banana Commercial Farms Survive?, is important to me for it was during my term as Secretary of DAR when Administrative Order No. 9 was issued. While this AO recognized the rights of the retrenched banana farm workers, it also had major limitations. And unfortunately, a strong follow through of the gains attained within this AO, for various reasons, did not happen.

When we began this research initiative, La Liga saw how the CARP coverage of commercial farms has become one of the most contentious component of the agrarian reform program since its deferred implementation led to massive retrenchment of militant workers; and, at the same time how there have been many cases involving execution of onerous contracts between landowners and ARB cooperatives through leaseback arrangements.

Our intention, apart from fully appreciating this situation and critically analyzing these second generation CARP problems, is to systematically and concretely identify the issues involved in order to begin to address them. Its impact we hope is not only in terms of informing the CARP implementers, but also industry stakeholders since the banana sub-sector is among Mindanao’s top exports. More importantly, however, our concerted efforts can help realize the sector’s full potential in uplifting the lives of the thousands of banana farm workers. The inclusion of the ecological dimension of banana commercial farms in the study has also put equal concern on this very important aspect, which more often than not, has been relegated to the sidelines as we ardently struggle for our right to land.

Our research team has forwarded several measures seeking to address the lingering problems affecting the industry and its stakeholders. It is my earnest hope that this study can contribute in opening opportunities for appropriate policy alternatives, encourage the pursuit of a fairer partnership among stakeholders and stir the farmers and their cooperatives to adopt relevant social entrepreneurial skills that would strengthen their role as key players in the industry.

HORACIO “BOY” R. MORALES, JR.PresidentLa Liga Policy Institute

5

Acknowledgements

The authors extend gratitude to the Foundation for Agrarian Reform Cooperatives in Mindanao (FARMCOOP), Alternate Forum for Research in Mindanao (AFRIM), Mindanao Farm Workers Development Center (MFDC) and the Philippine Network of Rural Development Institutes (PhilNet-RDI) for sharing knowledge and information and facilitating the research team’s field visits in the banana plantations.

Special thanks is extended to Ray Abanil, Maria Ena N. Olmedo, Hernan Pagluanan, Christopher Cadiz and Christopher Anduyan for valuable insights and research data.

Finally, this research would not have been possible without the candidness of the officers and members of ARB plantation cooperatives and the ranks of retrenched farm workers, both of whom are wishing fulfillment of the agrarian reform promise.

6

Foreword.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Acknowledgements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Table of Contents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Abbreviations/Acronyms... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .List of Tables and Figures.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Executive Summary.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MethodologyDefinition of Terms

The Political Economy of Banana Commercial Farms: What Does the Literature Say?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tainted History of Banana Plantations Agrarian Reform and Economies of Scale Agrarian Reform and Economic Growth Obstacles to Agrarian Reform Domestic Production and World Markets

Cavendish Banana and the Plantation Economy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cavendish Beginnings Roots of the Mindanao Plantation Economy Key Actors in the Industry

The Economics of the Philippine Banana Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cavendish Export and Contribution to the National Economy Price Movements

Agrarian Reform in Banana Commercial Farms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .From Unionism to Agrarian Struggles Fragmentation Implosion Why Farm Workers’ Cooperatives Split Inclusions and Exclusions Legal Battles: Time and Costs

Financial and Economic Performance of ARB Plantation Cooperatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sample Cases Financial Viability The Financially Better Off and Worse Off Benefits of Control Farm Diversification Option Land Acquisition Costs Coping Strategies Retrenched Farm Workers Environmental Dimensions and the Feasibility of Shifting to Organic Production

Summary and Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reparations and Compensation Scheme for Retrenched Farm WorkersValuation of Environmental Effects

References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Annexes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35679

10

24

16

29

38

44

66

98102

106111

Table of Contents

7

Abbreviations/Acronyms

AEIAFRIMALDAALIAMSAMSKARBEMCO

AMS-MARBEMCO

AMSWPMCAOARBARBISM

ARDAVA AVA TFBARBAIBARBCOCACA CARLCARPCDHARBMPCO

CFARMBEMPCOCLOACOLACUFPDADAPCODAPECOLDARDARABDARBCODARBMUPCODFWCDLTSDOBAGADOLE- STANFILCODPSDUSGROWFARMCOOPFEDCOFIARBEMCO

FOB

Agricultural Enterprises Inc.Alternate Forum for Research in MindanaoArica-Labajo-Dayot-ArluzAgrarian Law ImplementationAlfredo M. SorianoAMS Kapalong Agrarian Reform Beneficiaries Multi-Purpose Cooperative AMS Magatos Agrarian Reform Beneficiaries Multi-Purpose CooperativeAMS Workers Multi-Purpose CooperativeAdministrative OrderAgrarian Reform BeneficiaryAgrarian Reform Beneficiaries Individual Self-Managed Multipurpose Cooperative Agrarian Reform DevelopmentAlternative Venture Agreement Alternative Venture Agreement Task ForceBanana Agrarian Reform Beneficiaries Alliance Biao Guianga ARB Cooperative Court of AppealsCompulsory AcquisitionComprehensive Agrarian Reform LawComprehensive Agrarian Reform ProgramConception Dumlan Hijo Agrarian Reform Beneficiaries Multi-purpose Cooperative Checkered Farms ARB Multi-Purpose Cooperative Certificate of Land Ownership AwardCost of Living AllowanceChiquita-Uni Frutti Philippines Department of AgricultureDavao Abaca Plantation CompanyDavao Penal ColonyDepartment of Agrarian ReformDAR Adjudication BoardDapco Agrarian Reform Beneficiaries CooperativeDiamond ARB Multi-Purpose Cooperative Dizon Farm Workers CooperativesDirect Land Transfer SchemeDole Banana Growers AssociationDOLE- Standard Philippine Fruit CorporationDirect Payment SchemeDAPCO United Small Growers Multi Purpose CooperativeFoundation for Agrarian Reform Cooperatives Federation of CooperativesFirst Individual Agrarian Reform Beneficiaries Multi-Purpose CooperativeFreight on Board

8

GESAIBCIFSLASEDECOLBPLGULOILPSLTIMARBAIMAVIMBGEAMCBCIMDSMFDCMOAMOUMTNDCNFLNGONVAOPPAHECOPARCPARCOMPBGEAPBPAPFARBAIPhilNet-RDIPOPP PPCRARPTSCSDOSEASEARBAI

STANFILCOTADECOTCBCTNCUFARBAIUFARBEMCOVLTWODIFARBA

Growership and Exclusive Sales Agreement International Banana ConferenceIndividual Farming SystemLand Settlement and Development CorporationLand Bank of the PhilippinesLocal Government UnitLetter of IntentLegal and Paralegal ServicesLand Tenure ImprovementMarsman Agrarian Reform Beneficiaries IncMaco Ventures IncMindanao Banana Growers and Exporters AssociationMampesing CARP Beneficiaries Cooperative, IncModified Farming SchemeMindanao Farm Workers Development Center Memorandum of AgreementMemorandum of UnderstandingMetric TonNational Development CorporationNational Federation of LaborNon-Government OrganizationNet Value AddedOffice of the PresidentPanabo Hemp CorporationPresidential Agrarian Reform CouncilProvincial Agrarian Reform CommittteePhilippine Banana Growers and Exporters Association Philippine Banana Producers AssociationPag-asa Farm ARB Association IncPhilippine Network of Rural Development InstitutesPeoples OrganizationPacking PlantPhilippine Packing CorporationRepublic ActReal Property TaxSupreme CourtStock Distribution OptionSoutheast AsiaStanfilco Employees Agrarian Reform Beneficiaries Association, Inc.Standard Philippine Fruit CorporationTagum Agricultural Development CorporationTagnanan CARP Beneficiaries Cooperative Transnational CorporationUnited Farmworkers Agrarian Reform Beneficiaries Association United Farm Workers Agrarian Reform Beneficiaries Cooperative Voluntary Land TransferWorkers of Diamond Farms Agrarian Reform Beneficiaries Association

9

List of Tables and Figures

TABLESTable 1 Banana Hectarage, 1999-2006, in ‘000 HectaresTable 2 Banana Production, 1999-2006, in ‘000 MTTable 3 Top Ten Philippine Agricultural Exports, 2005 and 2006 (in ‘000 MT, in USD $ Million)Table 4 Cavendish Banana, 1999-2006 Export VolumeTable 5 Cavendish Banana Exports, FOB Value in US $ MillionTable 6 Cavendish Banana Exports, by Country of Destination, 1999-2006, in MTTable 7 Inclusion-Exclusion Cases in Davao del NorteTable 8 Financial Performance of FIARBEMCOTable 9 Financial Performance of PFARBAITable 10 Financial Performance of WODIFARBATable 11 Financial Performance of UFARBEMCOTable 12 Financial Performance of CHDARBMPCTable 13 Financial Performance of DARBCOTable 14 Financial Performance of MARBEMCOTable 15 Comparative Net Value Added per Hectare, by Type of AVATable 16 Comparative Analysis of Two AVAsTable 17 Exhibit of Value Creation: Fresh and Processed Banana CombinationTable 18 Exhibit of Diversified Fruit FarmingTable 19 ARB Plantation Cooperatives Assisted by MFDCTable 20 ARB Plantation Cooperatives Assisted by FARMCOOPTable 21 Risk Matrix of an ARB

FIGURESFigure 1 Banana Hectarage, Davao del Norte and Compostela Valley (1999-2004, in ‘000 hectares)Figure 2 Cavendish Banana Exports, FOB value (in US $)Figure 3 Cavendish Banana Exports, Country of Destination, 1999-2006, in MTFigure 4 Liquidity RatiosFigure 5 Total Equity to Total AssetsFigure 6 Total Debt-to-Total AssetsFigure 7 Debt-EquityFigure 8 Net Spread RatioFigure 9 Net Income Sales RatioFigure 10 Investment Turn-Over RatioFigure 11 Operating Cost Ratio

10

EXECUTIVE SUMMARY

Agrarian reform in commercial farms has long been and remains a contentious subject. Landowners and agribusiness firms argue that it would undermine economies of scale, and that workers cannot effectively own, manage and operate commercial farms. Moreover, the 10-year deferment period offered to landowners and agribusiness firms led to massive retrenchment of militant workers in Davao del Norte and Compostela Valley, who were replaced by workers friendly to or preferred by landowners. This has produced further conflicts rather than a smoothening of the CARP environment.

CARP in commercial farms has manifested aberrations in the social justice objective of the law, such as rampant violations of human rights, execution of onerous contracts between landowners and ARB cooperatives, and displacement of legitimate claimants. Although the deferment provided a window of opportunity for CARP stakeholders to develop and modify their strategies, none converged into mutually acceptable and gainful compromises. Moreover, second and third post-LTI generation problems have surfaced. Not only are the beneficiaries claiming redress of grievances from landowners and agribusiness corporations, they are also claiming ownership rights to plantations that remain under the control of big landowners and corporations. The problem would have been less compelling or urgent if it were not situated in a sub-sector representing a top export of Mindanao, or in a historical context in which violence has occurred and the potential for future violence is evident.

The present study intends to inform agrarian reform policymaking, legislation and programming related to CARP in commercial farms, especially those that address issues, problems, concerns and needs of ARB plantation cooperatives and retrenched farm workers. Specifically, it aims to:

a) Determine the extent of banana plantation cooperatives affected by inclusion-exclusion cases and explore alternative arrangements that would mutually benefit ARBs inside and outside the cooperatives;

b) Analyze the typology of claims affecting banana plantation cooperatives and determine the level of risks they pose on the financial and economic viability of these cooperatives;

c) Assess the level and intensity of conflicts accompanying the inclusion-exclusion cases and how they contribute to the overall problems of poverty and conflict in Mindanao; and

d) Determine the impact of problems and risks to the banana export industry.

11

This study looks at data from desk research, literature review, face-to-face interviews and focus group discussions with officers and members of agrarian reform cooperatives in the banana plantations of Panabo and Kapalong (in Davao del Norte) and Mawab, Maco and Mabini (in Compostela Valley). The research focuses on the banana plantations of Davao del Norte and Compostela Valley of Southern Mindanao because these provinces produce a combined output of 2.2 million metric tons of Cavendish, representing about 80 percent of national Cavendish output in 2006.

The analysis of financial performance involves a review and assessment of the balance sheets and income statements of cooperatives over the years, their present condition and future business/sustainability potentials, their profitability, ability to meet obligations, safety of investments in the organization, and effectiveness of management in running the cooperative or business. The sample group involved ARB cooperatives in the Compostela Valley and Davao del Norte areas, while data from a non-group sample were gathered to provide a basis for comparison as to the viability of Cavendish banana farming (mono-cropping) vis-à-vis banana with other products (diversified cropping) in order to meet household requirements for basic needs and survival.

Historical conditions and market realities in the banana industry led to the crafting of an idealized scenario for CARP in commercial farms: Ownership would be transferred to farm workers without disrupting economies of scale in production. Former landowners and agribusiness investors would focus on processing and marketing through mutually beneficial arrangements with the new owners. In reality, however, this scenario has proven to be difficult to achieve, given the strong opposition of landowners and the agribusiness sector. The government thus offered a compromise—to defer implementation by 10 years in the hope of achieving a less conflictive entry-exit scenario.

Succeeding historical conditions and accompanying political, economic and social dimensions of CARP in commercial banana farms produced a totally different scenario. Although the 10-year deferment might not have significantly disrupted the supply base (except during the retrenchments and strikes of the tumultuous second half of the 1990s), that period led to massive displacement of would-be legitimate beneficiaries such that when CARP processes were finally in place in 1998, control of much of the banana plantations shifted back to the landowners and agribusiness firms.

Only a few cooperatives and associations of farm workers gained full control of production and processing and traded freely in the domestic and export markets. Such ARB cooperatives came out better off than those who entered into long term lease arrangements, voluntary land transfer (VLT) or direct payment schemes (DPS). Lacking financial capacity to immediately acquire ownership of the land, they unfairly bore the cost transfers (e.g., overpriced inputs and advances for labor) while getting less from the fruits of the land. Most lands under leaseback arrangements

12

are even worse off in terms of re-acquisition cost, where land values have escalated in proportion to the length of the lease and final acquisition has become almost impossible within the human life time of individual ARBs.

The findings of the research may be summarized as follows:

• ARB cooperatives will not be able to acquire full ownership of commercial Cavendish plantations within the life time of members. Those under onerous lease and leaseback contracts and pay-to-own arrangements are in a worse situation.

• Retrenched farm workers will no longer benefit from CARP in commercial farms unless drastic policy reforms are undertaken. Their chances are risky both to the interests of ARBs and to the industry.

• The institutional framework for CARP coverage of commercial banana farms is weak, and the DAR guidelines for land transfer and subsequent economic arrangements between farm workers and former landowners and investors are full of loopholes, which have been used by landowners and agribusiness firms to strengthen their control of farm level production.

• Big industry players have used the deferment period as an opportunity to strengthen their retention of control of the plantations, including farm level production. The government, specifically the DAR, has chosen to focus on administrative concerns and provided little input into the economic arrangements. The LBP was passive when landowners, invoking just compensation, sent land prices spiraling.

• Farm workers formed cooperatives and used the deferment period to prepare for land transfer, but got little assistance in economic and financial planning from the DAR and NGO allies, leaving them trapped in long-term onerous contracts. Only a few cooperatives benefited from effective support services related to technologies for production, processing and marketing, and to political bargaining and negotiations.

• The long-term financial and economic viability of ARB-controlled plantations is shaky due to attrition of costs for land amortization, add-on costs to inputs provided by landowners and investors, maintenance of labor standards, financial costs of legal battles and providential costs for ARB families dependent on the plantation. Still to be accounted for are costs of environmental protection such as solid waste and wastewater management and maintenance of water quality standards.

13

• The current and accumulated cost to the physical environment is still unaccounted for. There is an urgent need to study and monitor water quality (for drinking and irrigation) and formulate strategies by which the costs and benefits of research, monitoring and enforcement could be shared.

• ARB families are overly dependent on the plantations for household survival. They may have additional income apart from wages, but their income stream from ownership rights is constrained by the cost of acquiring full ownership. Their land assets represent cost burdens representing current and long term liability. Those that fall under onerous leaseback arrangements derive annual rental payments that are lower than the cost of land amortization.

• ARB families dependent on wage income and dividends from plantations have thin margins for reinvestment in other livelihoods and economic activities. The most proximate and affordable investment options are human capital formation through education and facilitation of wage income through out-migration. Most families do not have the ability to invest in land and decent housing.

• The compensatory provision of CARP and the protracted legal battles over land valuation has threatened the very essence of land reform by disturbing cost assumptions for land and affecting the quality of financial planning of ARB cooperatives. Currently, land amortization is covered by income gains from usufruct rather than the appreciation of land values or the inherent value of the land based on prevailing market prices.

• While CARP has induced dynamic engagements between ARB cooperatives and NGOs and state agencies, it has not induced positive collaboration between militant ARBs and NGOs and private agribusiness. Despite claims of standing on just grounds, landowners and agribusiness firms seek monopolistic control in exchange for capital, technology and premiums for market access, coordination and management. Civil society formations seek social justice based on the agrarian reform law and lean on government to fulfill its obligations. Very little attention has been given to changing the battle lines or shifting the theatre of war.

• The banana industry is expanding and Cavendish exports remain a major foreign currency earner in the agriculture sector. Income gains, however, favor private agribusiness, and CARP has not alleviated the poverty of farm-workers-turned-ARBs. In fact, it may have even worsened the plight of retrenched farm workers. There is a need to improve economic arrangements in commercial banana farms and for ARB cooperatives to develop coping strategies to mitigate serious constraints and threats to their survival as new owners and managers of the plantations.

14

• Important concerns are the reparations for retrenched farm workers who have been excluded from the reform process, and the need to strengthen the bargaining position of ARB cooperatives caught in onerous economic arrangements with former landowners and agribusiness firms. Positive lessons can be learned from cooperatives that successfully assumed control of production, processing and marketing, thus demonstrating that social entrepreneurship can work in the agribusiness sector.

• There is no valuation of environmental effects of chemical use in plantations or estimation of societal values for non-use of chemicals. Existing chemical-free and low-chemical Cavendish production initiatives tend to be reactions to the prime price for organic bananas in the world market rather than concern for long-term sustainability of existing plantations. There is little indication of concern for wider effects of toxic chemicals to public health. The PBGEA itself has used the financial cost of environmental protection as a key argument to oppose the Davao City Ordinance banning aerial spraying.

This study recommends the following:

• Speedy disposition of inclusion-exclusion cases to clarify legal ownership and reduce uncertainties among ARBs. This may include out-of-court settlements offering win-win solutions.

• Cancellation or modification of onerous leaseback contracts to restore social trust between rightful landowners and investors/lessees, and to remove distortions in entitlements. Correspondingly, NGOs, LGUs and other stakeholders should provide support in mediation and capacity development for negotiations.

• Conversion of rights claims of retrenched farm workers into monetary or financial values, which can be used as bases for compensation or reparations payments. Many retrenched farm workers can no longer be accommodated in existing plantations, and the inclusion-exclusion cases may not be concluded within their lifetimes. Moreover, court decisions may be difficult to implement and lead to further conflicts among ARBs (especially that some plantations have shifted to individual mode of production, and the high man-to-land ratio might usher in the economic collapse of the plantations). The amount of compensation should be pro-rated according to the imputed share of the plantation, and the compensation package legitimized through an Executive Order upon recommendation of PARC.

• Transformation of the compensation package into a combination of financial and non-financial benefits to include core housing, child education, health care or insurance, and livelihood support.

15

• Strengthening of the financial management and planning ability of ARB cooperatives, and the development of new income centers and income streams that could provide opportunities for family members.

• Succession planning and the development of new leaders and economic managers among ARB cooperatives providing platforms for future takeover of ownership and managerial rights with assistance from NGO allies.

• Conduct of a joint inventory of farm workers retrenched by landowners and agribusiness firms during the deferment period. This could be a joint effort of the NGOs, DAR and concerned LGUs. Retrenched farm workers are legitimate beneficiaries with as much right as those who already possess the land they are supposed to co-own, and those who are listed and involved in inclusion-exclusion cases.

• Gradual shift to low-chemical input production systems in order to arrest the degradation of water and soil quality and to protect public health. This should be accompanied by research and monitoring of water and soil quality to inform the enforcement of environmental laws and policies.

• Valuation of environmental effects and/or non-use of chemicals to provide insights into the economic benefits that could accrue to society and to the ecosystem. Environmental effects could include improved soil fertility and soil texture, improved water quality, and increased biological equilibrium of floral and faunal populations in, on and above the soil. Societal values for non-use could include agri-eco-tourism development, recreation and spiritual upliftment. If dividends generated by the minimization of environmental and natural resources use conflicts could be valued (e.g., the controversy of the Davao City Ordinance banning aerial spraying to control the Sigatoka disease, which is being contested by PBGEA), the financial and economic viability of organic or low chemical production could be enhanced.

• Conduct of multivariate suitability assessment for organic banana production and socio-ecological analysis of production, financial and economic performance and constraints to help point out deficiencies in current policies. In the process of data collection and analysis, there should always be an awareness of producing output for public access.

16

INTRODUCTION

This research takes off from the pioneering works of Hayami, Adriano and Quisumbing (1987), Borras (2006) and AFRIM (2004) as well as related action researches and experiences of NGOs such as AFRIM, PhilNet, FARMCOOP, Peace Foundation, MFDC and others that have given attention to agrarian reform in commercial farms and have put forward enterprise development strategies coupled with the continuing advocacy for the fulfillment of the social justice dimension of agrarian reform.

Landowners and agribusiness firms have argued and continue to argue that agrarian reform in commercial farms would undermine economies of scale; similarly, they argue that workers cannot at the same time effectively own, manage and operate commercial farms. Indeed, it is hard to show universal lessons in successful worker-owned and managed Cavendish commercial farms. In Basilan and Zamboanga provinces, big agribusiness firms chose not to avail of the 10-year deferment period for commercial farms by transferring ownership and managerial rights to the plantation workers earlier than expected. To date, however, worker-owned and managed rubber plantations are hardly able to sustain operations and much less able to replant ageing plantations and rehabilitate processing plants. Only a few have benefited from the current high world market price of rubber. In due time, the aggregate production capacity of smallholder producers might surpass the current outputs of the plantations.

The contribution of the Comprehensive Agrarian Reform Program (CARP) to poverty alleviation is still a contentious subject in Philippine economics. There are claims and counter claims. However, it cannot be denied that income poverty tends to rise and fall due to factors other than land, and much of the fall in incomes is found in rural areas where agrarian reform is supposed to work.

The latest data from the National Statistical Coordination Board (2007) show worsening poverty. The national poverty incidence (of population) in 2006 is 32.9 percent, similar to what it was in 2000. In Region 11, the 2006 poverty incidence of the population stands at 36.6 percent, which is far worse than the 31.1 percent level in 1997, on the eve of the expiry of the 10-year deferment of CARP in commercial farms.

The rising poverty level in Region 11 highlights problems of wealth distribution. It provides a contrasting picture to rising wealth creation, where the annual Gross Regional Domestic Product (GRDP) is one of the highest among the Mindanao regions and has grown from PHP 172.6 billion to PHP 263.8 billion (at current prices) between 2002 and 2006.

17

In 2006, the per capita poverty threshold for Region 11 was PHP 14,942. During the same period, the per capita GRDP was PHP 64,551. If wealth were evenly distributed, no one would be poor in the region and each person would have an annual income four times above the poverty line. But reality shows that there are 1.45 million poor people in Region 11 out of a population of 4.1 million (NSCB 2007). In Davao del Norte, the central Cavendish producing province in the region, there are 353,366 persons living below the poverty line out of a population of 847,440 (as of 2007). In Compostela Valley, there are 301,081 persons living below the poverty line out of a population of 637,366 (as of 2007). Official statistics show that the poverty incidence of the population in Davao del Norte and Compostela is 44.8 percent and 47.1 percent, respectively.

The CARP in commercial farms is by far the most contentious chapter in the country’s agrarian reform program. The deferment period offered to landowners and agribusiness firms evidently led to more conflicts and displacement of farm workers rather than a smoothening of the CARP environment and construction of new agrarian institutions. In Davao del Norte and Compostela Valley, the deferment period led to massive retrenchment of militant workers in the mid-1990s, their exclusion from CARP, and replacement by new ones friendly to the landowners. The accompanying social costs engendered conflicts among CARP beneficiaries.

CARP in commercial farms is also accompanied by major aberrations in the supposed social justice objective of the law itself. The process has been accompanied by rampant violations of human rights, execution of onerous contracts between landowners and ARB cooperatives (e.g., leaseback contracts) and displacement of legitimate claimants. Peace Foundation and Mindanao Farmers and Farm Workers Development Center (MFDC) argue that some 15,000 to 20,000 workers have been displaced in Mindanao as a result of CARP implementation. They also argue that around 10,000 hectares of commercial farms transferred to farm workers are covered by onerous contracts favoring landowners.

The deferment period provided enough of a window of opportunity for CARP stakeholders to develop and modify their strategies, but few converged into mutually acceptable and gainful compromises. The retrenchment of farm workers and their displacement as legitimate claimants has produced second and third generation problems in the post-Land Tenure Improvement (LTI) scenario. Not only are these workers claiming redress of grievances from landowners and agribusiness corporations (e.g., on profit sharing scheme due to them during the deferment period), but also ownership rights to plantations already in the hands of recognized beneficiaries.

While the government has been most active in the transfer of government-owned lands and in agrarian reform support programs in other types of agricultural lands and resettlement areas, it has tended to allow market forces to operate in banana commercial farms.

18

In 2004, the government vowed to fully complete CARP by 2008 with funding from the Agrarian Reform Fund and the Coconut Levy Fund (Chapter 12, MTPDP 2004-2010). In January 2005, the Office of the President announced that in line with the MTPDP and the President’s 10-Point Agenda, the government would spend PHP 249.8 billion to develop two million hectares of land for agribusiness and another PHP 63.1 billion for MSME development, all designed to create 10 million jobs by 2010. The government also promised to spend PHP 140.9 billion for education for all, and PHP 643 billion for water and energy for all barangays and peace with rebel groups.

The problem would have been less urgent if it were not situated in a sub-sector that represents one of the top three exports of Mindanao. Similarly, it would have been less compelling if it were not situated in a historical and geographical context in which the Maoist insurgency and Muslim rebellion have marked Mindanao as a conflict zone in the eyes of the international community.

MethodologyThe arguments presented in this study are supported by data from desk research, literature review, face-to-face interviews and focus group discussions. The research team generated primary data from 51 informants through unstructured interviews, focus group discussions and ocular visits to workplaces and homes. These informants represent 13 farm worker households and five organizations. The final report is also informed by feedback from two validation workshops: the April 11, 2008 Validation Workshop in Tagum City with 23 participants from government agencies, NGOs, agrarian reform beneficiaries and retrenched farm workers; and the May 21, 2008 presentation/validation workshop with five officers of the Development Academy of the Philippines (DAP) and the La Liga Policy Institute (LLPI) in Pasig City.

The team also took on board a team of specialists such as Dr. Buenaventura Dargantes (on agri-ecology), Lino Moleta (finance) and Hernan Pagluanan (on legal and paralegal issues). Together they focused on the banana plantations of Davao del Norte and Compostela Valley in Region 11. The region’s banana producing provinces had a combined output of 2.2 million metric tons of Cavendish that represented 80 percent of the national output in 2006.1 For the period covering January to March 2008, the research team conducted ocular visits, interviews and focus group discussions with officers and members of agrarian reform cooperatives in the banana plantations of Panabo and Kapalong (in Davao del Norte) and Mawab, Maco and Mabini (in Compostela Valley).

1 Maghirang, Rodel. Banana: Strategic Plan 2005-2010. Paper presented to the 3rd National Banana Marketing Conference, Cagayan de Oro City, August 22-23, 2007.

19

The financial review aspect of the research involved a review, study and assessment of the cooperatives’ performances over the years, present condition and future business/sustainability potentials. The information gathered was processed to specifically look into the following: profitability, ability to meet obligations, safety of investment in the organization, and effectiveness of management in running the cooperative and the business enterprise. The review and assessment of ARB cooperatives’ performances are limited to financial statements – namely, balance sheets and income statements – with complementary data from ocular visits and field interviews.

The sample group is composed of ARB cooperatives in the Compostela Valley and Davao del Norte areas. At the same time, a non-group sample was also gathered and assessed. This was done to provide information in comparison to viability of Cavendish banana farming (mono-cropping) vis-à-vis banana with other products (diversified cropping) in order to meet household requirements for basic needs and subsistence.

Definition of Terms The term agrarian reform in commercial farms refers to the provisions of RA 6657 providing for the 10-year deferment of agrarian reform in commercial farms and succeeding provisions of RA 7905 and corresponding DAR administrative orders pertaining to specific guidelines and procedures for coverage.

As stated in DAR Administrative Order Number 9 (AO No. 9) Series of 1998, Joint Venture Agreements or Agribusiness Venture Agreements are agreements between a company co-owned by an investor and the agrarian reform beneficiaries through their cooperatives or associations. The investor may provide management and marketing skills, technology infrastructure, and capital, while ARBs’ contribution/participation in the joint venture includes labor, the usufructuary rights to the land, and capital infusion, if available.2

The balance sheet is an accountant’s snapshot of the firm’s accounting value on a particular date, as though the firm stood momentarily still (Ross, Westerfield and Jaffe 2008).

The term banana commercial farm used in this paper refers primarily to the large Cavendish banana plantations or farm estates where the production of the crop is geared primarily for commercial purposes. Such estates employ a sizable number of workers and other employees organized under a central management. The term excludes traditional plantations where the ownership of the estate is

2 Rules and Regulations on the Acquisition, Valuation, Compensation and Distribution of Deferred Commercial Farms. DAR Administrative Order No. 9, Series of 1998.

20

generally geared towards ownership of and its association with political power and social prestige rather than the generation of profits. The traditional and modern plantation differs in form of management. The former is more paternalistic and employs political coercion in organizing workers; the latter is more sophisticated and well structured and the relationship is based on economic and financial incentives.

This study focuses on Cavendish, a banana variety developed in the 1950s as a replacement to Gros Michel. Presently, Cavendish is a major export crop of banana producing countries in Africa, Latin America and Asia. Its thick skin is prone to bruises therefore needs more care in packaging, transport and processing. Recently, a fungus was identified by scientist that has been killing Cavendish bananas in Southeast Asia. To rescue the Cavendish bananas, scientists are now thinking of ways for Cavendish to resist the fungus. They are also looking for an alternative banana variety that can replace the Cavendish in case fungus will spread and destroy the fruit.

The term Economic Analysis in this research is defined as a tool for determining the maximum use of resources and to allocate these effectively.3 In the long run, all costs are variable. In financial accounting, costs usually fit into a classification that distinguishes product costs from period costs. Product costs are the total production cost incurred during a period – raw materials, direct labor, and manufacturing overhead – and are reported on the income statement as cost of goods sold. Both variable and fixed costs are included in product costs. Period costs are costs that are allocated to a time period; they are called selling, general and administrative expenses. One period cost would be the company president’s salary (Ross, Westerfield and Jaffe 2008).

The term Financial analysis is a form of assessment using data and ratio from financial statements. This is done by financial analysts, for assessment and determining trends in a business institution.4

It is often useful to think of all future time as having two distinct parts, the short run and the long run. The short run is that period of time in which certain equipment, resources, and commitments of the firm are fixed; but it is long enough for the firm to vary its output by using more labor and raw materials. The short run is not a precise period of time that will be the same for all industries. However, all firms making decisions in the short run have some fixed costs, that is, costs that will not change because of the fixed commitments. In real business activity, examples of fixed costs are bond interest, overhead, and property taxes. Costs that are not fixed are variable. Variable costs change as the output of the firm changes; some examples are raw materials and wages for laborers on the production line (Ross, Westerfield and Jaffe 2008).

3 Guidelines for the Economic Analysis of Projects. www.adb.org/Documents/Guidelines/Eco_Analysis/ Scope.asp

4 Financial Analysis. http://en.wikipedia.org/wiki/Financial_analysis

21

Gros Michel or Musa acuminata dominated the US market from 1890s to 1960s. It was the major export crop of banana producing countries during the 20th century. The popular banana variety was attacked by Panama disease, a fungus that easily spread in soil and water. The susceptibility of Gros Michel to diseases caused its decline in the world market during the first half of the 1900s. By the 1960s, traders of Gros Michel suffered bankruptcy. The discovery of the Cavendish banana as alternative or replacement to Gros Michel eased the financial and environmental crisis resulting from the latter’s decline.

Horizontal Analysis involves comparing the figures shown in the financial statements of two or more consecutive periods. The difference between the figures of the two periods is calculated, and the percentage change from one period to the next is computed, using the earlier period as the base (Roque 1990).

Inclusion and Exclusion cases in this study can be seen in two perspectives; one is inclusion-exclusion cases on farmer beneficiaries and the other is on landholdings. The study focuses on exclusion-inclusion cases pertaining to farm workers in banana commercial farms.

The Inclusion-Exclusion of farmer-beneficiaries occurred during the 10-year deferment period after the passage of the Comprehensive Agrarian Reform Program. Some farmers were excluded from the list of beneficiaries, while plantation owners included new staff/employees of the plantation in the list of beneficiaries. During the 10-year deferment period, many plantation workers were retrenched for various reasons (such as reorganization of the plantation, illegal dismissal or harassment from land owners), thus disqualifying them as agrarian reform beneficiaries. Plantation owners employed new workers and staff, who in turn became qualified ARBs. The exclusion of some landholdings or portions thereof was a product of the legal loopholes in the agrarian reform law. The common scheme was for landowners to partition large landholdings into smaller lots using dummies and to argue for the retention of the same. In some plantations, farm workers allowed themselves to be used as dummies in exchange for security of employment, cash or other benefits.

The income statement measures performance over a specific period of time—say, a year. The income statement usually includes several sections. The operating section reports the firm’s revenues and expenses from principal operations. The non-operating section of the income statement includes all financing costs, such as interest expense. Usually a second section reports as a separate item the amount of taxes levied on income. The last item is the bottom line, or net income. This is frequently expressed per share of common stock—that is, earnings per share (Ross, Westerfield and Jaffe 2008).

According to DAR AO No. 9, Series of 1998, lease back arrangement is an agribusiness scheme whereby ARBs through their cooperative or farm worker’s association, enter into a contract of lease with the landowner/investor.

22

Liabilities are debt obligations to be paid; if not paid, the firm can be sued and this may lead the firm to declare bankruptcy (Ross, Westerfield and Jaffe 2008).

Liquidity refers to the company’s ability to pay its short term liabilities as they fall due (Roque 1990).

• Solvency: refers to the company’s ability to pay all its debts, whether such liabilities are current or non-current. It is therefore somewhat similar to liquidity, except that solvency involves a longer time horizon (Roque 1990).

• Total Equity-to- Total Asset Ratio: indicates the percentage of total assets provided by owners or stockholders (Roque 1990).

• Total Debt-to-Total Asset Ratio: indicates the percentage of total assets provided by creditors. (Roque 1990)

• Debt-Equity Ratio: is computed by expressing liabilities as a percentage of total owners’ or stockholders equity. As the ratio increases, i.e., above 1, the amount of risk assumed by creditors increases. This means a decreasing solvency because the creditors’ contribution to the company’s total assets is greater than the amount provided by the owners (Roque 1990).

• Net Spread Ratio: computes the rate of return on average total assets. The return on assets shows operating efficiency and indicates how well the firm’s management has used the assets under its control to generate income (Roque 1990).

• Profit Margin: return on sales, or profit margin, measures the amount of income provided by the average peso sales. It is computed as net income divided by sales (Roque 1990).

• Investment Turn-over: shows the number of times invested capital is able to earn. Invested capital includes non-current liabilities and owners’ equity. It is computed as sales divided by invested capital.

• Operating Cost Ratio: indicates the cost of operations as against the income. It shows the percentage of operating expenses to the total income generated. It is computed as operating expenses divided by net income.

Operating costs consist of costs of goods sold; selling, general and administrative costs; and depreciation; these are the costs of operating activities. Operating activities refer to the sequence of events and decisions that create the firm’s cash inflows and outflows. These activities include buying and paying for raw materials, manufacturing and selling a product, and collecting cash (Ross, Westerfield and Jaffe 2008).

23

Ratio Analysis: is the most widely known and most commonly used tool for financial statement analysis. A ratio is a mathematical relationship between two numbers. It may be expressed as a proportion, a fraction, a percentage or a decimal (Roque 1990).

Stockholders’ equity or owners’ equity is the residual difference between assets and liabilities. The accounting value of stockholders’ equity increases when retained earnings are added, instead of paying out everything as dividends (Ross, Westerfield and Jaffe 2008).

Spread Analysis: is the fundamental technique for analyzing the earnings of a firm. Spread analysis converts the amount of income and expenses from the income statement into percentage rates in average total assets (Ross, Westerfield and Jaffe 2008).

Vertical Analysis: is the process of comparing figures in the financial statements of a single period. Vertical analysis involves converting the figures in the statements to a common base. This is accomplished by expressing all the figures in the statements as percentage of an important item, such as total assets (in the balance sheet) and total net sales (in the income statement). As a result, all the figures in the statements would be expressed not in peso but in percentage terms (Roque 1990).

24

THE POLITICAL ECONOMY OF BANANA COMMERCIAL FARMS: What Does the Literature Say?

The concept of the plantation economy in the Philippines arrived with colonialism. At the onset, it was not designed to address poverty and underdevelopment in the colony. Neither was it designed to modernize local economies. When modern plantations emerged in the late 1960s, their primary objective was to seize export market opportunities, leaving behind the issues of rural poverty and underdevelopment and the visions of the landless workers and their families. Transnational corporations (TNCs) operated like merchant capitalists that invested capital and technology for export gains but without concern for long term economic and environmental sustainability.

When agrarian reform in commercial farms was included in the debates preceding the enactment of the Agrarian Reform Law and EO 229 creating the Comprehensive Agrarian Reform Program (CARP), the immediate reaction of plantation owners was to reject and oppose the proposition as detrimental to the economy. Foremost among these were the sugar barons of Negros Island who threatened to create an independent republic to shield their haciendas from the new law.

The intense debates led to a compromise. The CARP in commercial farms would be deferred for 10 years to allow adequate time for plantation owners to prepare their exit and to prepare workers for the takeover. However, the tail end of the deferment period coincided with the increasing momentum of neoliberal globalization. The politics of ownership and asset reform and the economics of plantations in the context of liberalized global trade re-ignited the debate and triggered a reformulation of strategies among the protagonists. On the one hand, plantation owners used the deferment period as an opportunity to gain control rather than prepare for a mutually beneficial exit. On the other, farm workers and their NGO allies focused on the ownership issue, overlooked the economic domain and the value chain system, and prioritized engagement with government for the ownership transfer and provision of support services.

25

Tainted History of Banana PlantationsCentral America and the Caribbean have a far longer history of banana commercial farms controlled by Transnational Corporations (TNCs) than that of the Philippines, which only encountered TNCs after World War II. As early as the first part of the 20th century, the world market for bananas was dominated by supplies coming from Honduras, Costa Rica, Guatemala, Colombia and Panama. There is no dearth of literature on the subject of banana commercial farms being associated with puppet regimes, human rights violations and environmental destruction. Josling and Taylor (2003) cite the phenomenon of “banana republics,” referring to Latin American countries mainly reliant on banana exports for revenues and the so-called “Black Legend” or exploitation of farm workers by the United Fruit Company in Honduras.

The mirror image of the Black Legend has been cited by agrarian reform scholars such as Borras and Franco (2005) and De la Rosa (2005) in their studies on the behavior of big landowners and agribusiness firms in Mindanao. Philippine NGOs in the agriculture, agrarian reform and human rights arenas have documented compelling cases of human rights violations perpetrated against farm workers especially during the Martial Law period and the implementation of CARP.

Agrarian Reform and Economies of Scale Challenging the argument that CARP would create diseconomies of scale and would be detrimental to economic growth, Hayami, Adriano and Quisumbing (1987) argued that:

• The inclusion of the agribusiness sector in agrarian reform must not only promote growth and equity but must also be designed not to suppress agribusiness activities. They further argue that agribusiness should continue to increase income and provide employment to the rural sectors, especially the landless.

• The economies of scale of banana plantations operate within the framework of production and marketing within the value chain. However, they appear mainly on the level of coordination of production and marketing, not necessarily at the farm level. Hence, it is argued that farm level production in the hands of farm workers will not unduly disrupt economies of scale.

• The proposal of plantation owners that ARBs should be given access to public lands elsewhere (or that CARP should not touch existing plantations) is not feasible because the size of public lands is not significantly large. The opening up of more public lands for agrarian reform might unduly disturb the country’s ecological balance.

26

• The banana (and pineapple) export industry has provided income to regular employees at a level higher than those of ordinary agricultural workers.

• Conflict is inherent in the hierarchical structure of plantations and its co-existence with the peasant mode of production.

• Corporate stock sharing is not feasible in banana commercial farms. However, contract farming or contract growing is feasible, as has already been shown in contract-growing schemes prior to CARP.

In the same study, Hayami, Adriano and Quisumbing also recommended the following:

• A 24-hectare retention limit for Mindanao (lower in Visayas and Luzon) because Mindanao is newly settled and most agribusiness plantations are in Mindanao.

• Implementation of progressive land rent for public land leases to induce agribusiness enterprises to reorganize their system to accommodate contract farming with small growers.

• An economic structure that facilitates the emergence of a middle class as the dominant class and as a way of bridging the gap between the landed elite and landless workers. Failure to do so would result in unimodal rural poverty.

Agrarian Reform and Economic GrowthIn a related study, Opena and Pahm (1987) argue that while banana commercial plantations generate substantial foreign exchange revenues, they also engender the growth of a mass of labor force who are virtually landless and are largely dependent on wage earnings. Accompanying this problem is the growth of inequity in access to land as plantations were granted special concessions to land resources in the public domain.

Both Opena and Pahm (1987) and Hayami, Adriano and Quisumbing (1987) recommended that the land component of commercial plantations should be subjected to agrarian reform and transferred to Filipinos while allowing TNCs to maintain control of processing and marketing in partnership with the farm workers/agrarian reform beneficiaries. This view argues that Filipinos could benefit from foreign capital and technology while foreign companies could, in exchange, benefit from continuous supply of export commodities.

27

Obstacles to Agrarian Reform After almost 20 years of CARP and almost 10 years after coverage of commercial farms, Borras and Franco (2005) cite the bleak prospects of land reform as a whole (and much more so in contentious areas such as commercial farms and private agricultural lands) due to major roadblocks such as:

• The government’s neo-liberal agenda amidst a growing trend of neo-liberalists taking power from the state and transferring to the free market forces, especially land resources;

• The evaporation of reformist enclaves within the state bureaucracy charged with land reform;

• The strengthening of the anti-land reform alliances across the state-society boundary; and,

• The rise in violent retribution against claim-making peasants by both landlords and the armed left.

In a related study, De la Rosa (2005) cites the imperviousness of the power of the banana elites, like the Floirendos of Davao del Norte, against the tide of political and economic democratization after the demise of the Marcos regime in 1986. De la Rosa’s NGO base, AFRIM, has conducted a series of studies in the banana commercial farm sector commonly citing the unfairness of agribusiness ventures and the ways by which these are perpetrated despite blatant disregard for rules and social justice.

Domestic Production and World MarketsOne of the ironies in banana commercial farms is that despite the complexity of the agrarian reform processes and the accompanying conflicts, Cavendish production has expanded within and outside the Davao provinces. In Davao del Norte and Compostela Valley alone, the expanse of banana commercial farms has grown from 32,000 hectares in 1999 to 44,000 hectares by 2004. Correspondingly, production volume in the two provinces has increased from 1.2 million MT to 1.5 million MT during the same period.

The Philippines exports half of its national banana production. In 2006, this meant 2.3 million MT of fresh bananas out of 5.6 million MT in total produce and earning around US $ 405 million (FOB) in export revenues. Historically and presently, however, the Philippines relies on Japan as the main export market, although there have been increases in demand from South Korea, Taiwan, United Arab Emirates and others. There are indications that the rate of market expansion does not correspond with expansion in production.

28

The world demand for fresh banana is currently estimated at US $ 6.1 billion. The Philippines currently gets a 6 percent share of this value despite its being the fourth largest exporter in the world. Historically, it has not penetrated the European Union (EU) market, the world’s second largest consumer. Vanzetti, de Cordoba and Chau (2005) cite that the EU is a four-million MT lucrative market where the trade regime is based on preferred quotas for ACP countries. Preville (1999) outlines the EU history of preference such as free access of bananas (and sugar) from the Caribbean based on the 1974 Lome Convention and the 1998 New Banana Regime (EEC Regulation 404/93) which provides for a quota for bananas in EU territories and duty free entry of quotas from ACP countries while imposing tariff quotas for third countries.

The EU banana policy is already a subject of legal action within the World Trade Organization (WTO) because of its implications to the global trade system (Josling and Taylor 2003). It has also involved the United States (US) as a key player in the dispute despite its being a non-producer and exporter of banana. The US has a deep-seated distrust of the EU based on several disputes that have festered for years (Josling and Taylor 2003).

The outcome of the policy dispute at the WTO level will have wider implications for the global banana trading system and specific implications for the future of the Philippine banana industry.

29

CAVENDISH BANANA AND THE PLANTATION ECONOMY

The introduction of the plantation economy has followed a clear pattern worldwide, the case of the Philippines being no exception. It does not occur in built up areas or where local populations have established permanent agricultural structures. Thus, in the Philippines it is rare to find plantations in old settled areas like Luzon and Visayas and, conversely, it is common to find plantations in new settled areas like Mindanao. The introduction of the plantation economy in Mindanao almost coincided with the colonial and post-colonial settlement programs, the earliest being the sugar plantations on Negros Island during the Spanish colonial period and the coconut and rubber plantations in Zamboanga and Basilan during the American colonial period. The introduction of Cavendish banana plantations in Mindanao came after World War II, in response to Japanese demand for the fruit.

Cavendish BeginningsThe world’s demand for banana came in stages and chunks of the global market. It did not emerge during the early years of colonialism when European colonizers fought over gold, silver and spices. Global demand for banana became more prominent after the Second World War.

In the beginning was Gros Michel, a banana cultivar brought by the French to the Caribbean—it became the byword of commercially traded banana.5 But Gros Michel was vulnerable to two diseases: the yellow Sigatoka virus and the soil borne Panama disease. Gros Michel disappeared in the 1950s.

Then came the Cavendish cultivar. It was found in Southern China, though some say it was in a Saigon botanical garden. From the 1960s it became a global name in the banana world trade. But scientists claim that it may soon follow the fate of Gros Michel. For now, it is the Philippines top fruit export. But this, too, had its beginnings after World War II. The Japanese used to get their supply from Taiwan. But land reform followed Taiwan in World War II. The country proceeded to pursue agro-industrial development. The Japanese were no longer getting bananas from Taiwan.

5 Helffrich, C. Battling for Bananas, Alaska Science Forum, May 9, 1990. www.gi.alaska.edu/Science Forum/ASF9/977.html

30

Thus, the Philippines entered the picture. But the Japanese were still unwelcome after the atrocities they had committed during World War II. This environment created a gap that was immediately filled in by U.S. transnational corporations which then dominated world trade for fruits.

Roots of the Mindanao Plantation Economy Large-scale agricultural production was introduced in the country during the latter part of the Spanish colonial era through the encomienda and, later, the hacienda system.6 The scale of production, however, was defined by the size of land allotted by the King to favored officers of the colonial army and the religious orders. The owners were like stewards of land owned by the Spanish monarchy under the so-called Regalian Doctrine.7

The American colonial government introduced the generalized system of private ownership of land to the Philippines through the Land Registration Act of 1902 and the Public Land Act of 1903 by American Colonial Administration. The first was aimed at legitimizing private ownership of those that possessed lands and were familiar with the land registration system. This, in effect, was a mechanism for segregating private and public lands and assuming that anything un-registered was considered public land. Indeed, in 1903, the American colonial government proclaimed that all lands not registered under the Land Registration Act of 1902 would be deemed public lands.

The Philippine Organic Act of 1902 (the colony’s Constitution until 1916) had already limited private possession to 16 hectares. The foremost beneficiaries of the land registration act were those that already benefited from the Spanish colonial administration and those that had access to the education system and civil structure of governance. The colonial government would later re-apportion public lands through a series of land laws.

The Public Lands Act of 1902 (also known as Public Land Act No. 718) promoted settlements by issuing 16-hectare homesteads. The same law emphasized state ownership of land against primordial ownership rights and claims of indigenous communities. In fact, this law nullified land grants issued by Muslim Sultans and Datus and chieftains of non-Christian tribes, even as it lent legitimacy to friar and other lands granted by the Spanish colonizers to private entities prior to the 1898

6 Dela Rosa, Romulo, Borras, Saturnino and Franco, Jennifer (editors). On Just Grounds: Struggling for Agrarian Justice and Citizenship Rights in the Rural Philippines. Institute for Popular Democracy, Quezon City: 2005. p. 45.

7 Many advocates argue that the Regalian Doctrine is a legal fiction. Its supposed institutional formality was based on transfer of ownership by virtue of sale by Spain to the United States during the Treaty of Paris in 1898. In the early 1900’s, the succeeding American colonial government introduced private property ownership through a series of land laws that initially disaggregated what could be privately and publicly owned.

31

Treaty of Paris. The segregation of private lands paved the way for the colonial government to map out utilization of land resources. The Mining Law of 1905 opened up all public lands for mining exploration, occupation and purchase.

Side by side with the management of land and other natural resources under colonial domain, the colonial government aimed to manage populations within the colony. In 1913, Act No. 2254 mandated the creation of agricultural colonies right in the heart of Muslim lands. The sociological argument (based on the assimilation theory) was to integrate Muslims and Christians but the law also created disparity in access to land. While Christian settlers could own 16 hectares, Muslims were allowed only eight hectares.

American political tutelage post-1916 was shaped as a move toward self-governance beginning with the Jones Law, which provided for the establishment of a bicameral Senate and House of Representatives to replace the US-based Philippine Commission. During this period, the House of Representatives exercised control over government corporations charged with land acquisition using government funds.

In 1919, the colonial government enacted Public Land Act No. 2874, increasing individual ownership of lands to 24 hectares; however, it also introduced corporate ownership of up to 1,024 hectares.8 This law paved the way for the creation of the National Development Corporation (NDC), a semi-government agency in charge of land acquisition and promotion of investments.

The Commonwealth government was formed in 1935, purportedly a mechanism for shared governance and preparation for independence by virtue of the Tydings McDuffie Law of 1934. By then, socialism had been introduced into the country as a radiation of the Russian October Revolution in 1913. This was followed by peasant unrest in Central Luzon ,which induced the Commonwealth government to engineer population dispersion or what may be described as internal colonization.

American trained Filipino politicians then mimicked the American colonial policy of state sponsored resettlement as a way of responding to peasant unrest. Accompanying this policy was the blatant de-recognition of ancestral land rights with the issuance of Commonwealth Act No. 141 in 1936. This law nullified all ancestral rights and ancestral domains not recognized previously by the Spanish and American colonial governments. Hence, all ancestral lands became public lands under the domain of the state. This allowed the NDC to map out acquisition strategies on broader scale.

In 1938, the NDC acquired 10,000 hectares in Bukidnon at a cost of PHP 1 per hectare. It leased the same to the Philippine Packing Corporation (PPC), otherwise known as Del Monte.9 The PPC would later use this land for its pineapple plantation.

8 However, Muslim individuals were allowed to own only up to 10 hectares. 9 See Putzel 1992.

32

After World War II, the Quirino Administration (1949-1953) created the Land Settlement and Development Corporation (LASEDECO), an agency mandated to acquire lands for resettlement and private investments. LASEDECO engineered the dismemberment of the government-owned Davao Penal Colony (DAPECOL) into 1,024-hectare plantations under lease by the Davao Abaca Plantation Company (DAPCO), Panabo Hemp Corporation (PAHECO) and Tagum Agricultural Development Corporation (TADECO). These plantations shifted to Cavendish in the 1960s.

The rapid growth of plantation agriculture in Davao del Norte started in the mid-1960s when two transnational corporations (TNCs), Castle and Cooke (also known as Chiquita) and Del Monte started banana production operations in South Cotabato and Davao provinces through local subsidiaries.10 This started with Castle and Cooke’s negotiation for large- scale utilization of the 8,000-hectare DAPECOL for Cavendish production.11 In 1966, Castle and Cooke acquired 55 percent ownership of Standard Fruit and set up a subsidiary known as STANFILCO.12

In the 1920s, Del Monte introduced large scale tropical fruit production for export in the central highlands of Bukidnon, in Mindanao. Being a foreign-owned company, it controlled big tracts of land through a lease contract with the government. Large-scale production of Cavendish banana was introduced by Chiquita in Davao province in 1964. Then, Chiquita was the dominant player in the global banana markets, having been in the tropical fruits business since the late 19th century.

Chiquita, then renamed as the United Brands Company, has gained notoriety since the 1970s. In 1975, it was accused of bribing the Honduran dictator Oswaldo Lopez Arellano and some Italian officials in what was known as the “Bananagate” scandal. In the 1980s, the European Commission cited it for unfair competition. In the late 1990s, a US newspaper, the Cincinnati Enquirer, published a report regarding Chiquita’s maltreatment of farm workers in Central America plantations and evasion of national land laws.

The notoriety hounded the company until the turn of the century, contemporaneous with the expansion of the Cavendish global market. In 2007, it was fined by the U.S. Justice Department for colluding with Colombian paramilitary organizations in exchange for local protection resulting in human rights abuses. During the same year, a French NGO, Peuples Solidaires, accused the company of violating workers basic rights and threat to health and life due to exposure to toxic pesticides. Such notoriety has even been fictionalized in the works of Gabriel Garcia Marquez and Pablo Neruda.

10 Ibid., p. 48.11 Ibid., p. 53.12 Ibid., p. 53.

33

As of 1985, 58 of 125 TNCs in Mindanao were directly engaged in the cultivation of cash crops using the plantation system.13

Key Actors in the Industry The export orientation of Cavendish practically defines the nature of the value chain dynamics in this sub-sector. The relationship is represented by narrow channels linking producers, processors and exporters to end consumers. Very little intermediation, if any, is evident, except in Class B that has no demand in Japan. Figuratively, the narrow channels are evident in the direct presence of refrigerated containers owned by foreign shipping lines right inside the plantations.

Transnational Corporations

Global banana trading is dominated by three TNCs, namely, Dole Food Company, Chiquita Brands International and Del Monte Fresh Produce.14 In the Philippines, the banana export industry is focused on the Cavendish cultivar and is an offshoot of the rising competition of American TNCs for leadership in the fruit trade in general and, in particular, demand for Cavendish in world markets, especially Japan and Europe.15

The export of Philippine Cavendish is highly concentrated and is dominated by four TNCs - Dole, Del Monte, Uni Frutti and Sumitomo – and a domestic company, Lapanday Foods Corporation, a company owned by the Lorenzo family whose member was the former Secretary of the Department of Agriculture.

The ability of TNCs to dominate this industry was facilitated by existing land policy and arrangements that allowed corporations to control vast tracts of public land in partnership with government. The first response to the Japanese demand for Cavendish was initiated in 1960 when United Fruit Corporation (renamed United Brands in 1970, then Chiquita Brands International in 1990) met with several large Japanese trading firms to look into prospects of collaboration in responding to the demand.16 In 1966, Castle and Cooke set up a second subsidiary in the Philippines – Standard Philippine Fruit Corporation (STANFILCO) - which operated a pineapple plantation in South Cotabato and banana plantations in Davao del Norte. From 1968 to 1981, 26 banana

13 Hayami, Y. Adriano, L. and Quisumbing, A. 1988. Agribusiness and Agrarian Reform: A View from Banana and Pineapple Plantations. Working paper 88-61. Laguna: Center for Policy and Development Studies, University of the Philippines. Los Banos, p. 10.

14 De Leon, T. & Escobido, G. 2004. The Banana Export Industry and Agrarian Reform. Davao City: Alternate Forum for Research in Mindanao, Inc. p 2.

15 Ibid., p. 11.16 De Leon, T. & Escobido, G., op. cit. p. 11.

34

corporate growers had been established, 18 of which concentrated on Cavendish while eight others were into various other agricultural crops.17

The opening of new markets (such as China, South Korea and the Middle East) for Philippine Cavendish has brought new players into the trading arena. In fact, “price wars” have been currently observed through a local phenomenon called “warik-warik” or supply raiders offering abnormally high prices at twice the prevailing FOB prices. The “warik’warik” players offer prices as high as US $ 4.50-5.00 per box against the prevailing US $ 2.50 per box.

Conflicts among transnational companies have also recently arisen, affecting supply and domestic prices. A price war between Unifrutti and Abbar and Zainy (ANZ), former business partners under Unifrutti Philippines, disturbed the banana plantations in Davao del Norte. ANZ, a Jeddah-based company established in 1956, is engaged in marine transport, petroleum products, agriculture, shipping, catering and meat processing, and aviation service.18 Unifrutti, on the other hand, started in Chile, under De Nadai International Group. This was founded by Guido De Nadai, an Italian businessman, and is now the largest producer and exporter of fruits in Chile.

Unifrutti used to be ANZ’s main supplier of Cavendish for the Middle East market. The 13-year partnership went sour when ANZ was made aware of allegations regarding the establishment of La Frutera, a Maguindanao based plantation, led by Unifrutti using money from their business partnership. ANZ is not included in La Frutera’s stockholders. Another allegation that caused the total break-up of the partnership involved Unifrutti’s secretly selling its bananas to Sharbatly, a competitor of ANZ.19 ANZ, on the other hand, decided to engage in direct buying through a Davao City-based subsidiary called Aztropex. ANZ poured in an initial capital of US $ 30 million for Aztropex and aims to buy 10 to 12 million boxes per year (approximately 130,000 to 150,000 MT).20

The entry of ANZ has created jitters even within the Philippine Banana Growers and Exporters Association (PBGEA) due to the sudden distortion in farm-gate prices and movement of supply. The demand for Class B in export markets such as China and South Korea has also induced the emergence of traders-exporters outside of PBGEA and the TNC network. The new environment has provided opportunities for ARB plantation cooperatives to formulate effective strategies to make optimum gains from production.

17 De Leon, op. cit., p. 15.18 http://www.abbar-and-zainy-coldstores.com19 http://www.freshplaza.com, culled from www.sunsat.com.ph20 Quiroz, Judy, “Saudi banana trading firm sets up Philippine arm,” http:business.inquirer.net, April 19, 2008.

35

Big Landowners

The power of the TNCs emanates from their control of global markets inclusive of capacity for coordination in production, processing and export. In Mindanao, they coordinate closely with big landowners whose families also represent political families that are prominent in the local and national political scene. In most cases, the symbiosis of big landownership and politics defines the ability of these families to maintain control of big landholdings against every conceivable rule that should prove otherwise.

These landowners have banded together under the powerful PBGEA, which consists of the following members: AMS Group of Companies (Soriano family), Sumifru Philippines Incorporated, ANFLO Group of Companies (Floirendo and Garcia families), Alip River Development and Export Corporation, Del Monte Fresh Produce Philippines, Incorporated, La Frutera Incorporated (Paglas family), Lapanday Foods Corporation (Lorenzo family), Hijo Resources Corporation, Diamond Farms, Incorporated, Dizon Group of Companies (Dizon family), Marsman-Drysdale Group of Companies (Sebastian family), Nader and Ebrahim S/O Hassan Philippines, Incorporated, Saranggani Agricultural Company Incorporated (Dominguez and Alcantara families), Nova Vista Management and Development Corporation, Stanfilco, and Tristar Group of Banana Companies.

The PBGEA acts as the critical link between production, processing and export, often assuming full control of coordination that maintains the stability of supply. It also acts as a political lobby group that has effectively influenced the CARP deferment for 10 years, thus benefiting its members and subsequent agribusiness arrangements in their favor. More recently, it acted as a judicial lobby group opposing a Davao City Ordinance banning the use of aerial spraying.21

The PBGEA and its TNC partners exercise effective control of the key nodes in the value chain, including support elements such as research and development, provision of agricultural inputs and planting materials, refrigeration and logistics, and access to export markets. With the entry of ANZ, the supply and price environments have changed. While the traditional monopoly of PBGEA and the TNCs has been threatened, banana growers perceive this as a positive development that provides opportunities for higher gains.

21 Source: www.bayanihan.org. The Regional Trial Court Branch 17 affirmed the constitutionally of the city ordinance and the value of testimonies affirming that aerial spraying against the Sigatoka diseases uses Dithane, a chemical which has been found to be harmful to human health and has caused cancer to animals tested in laboratories.

36

Farm Workers and NGO Allies

The CARP has highlighted the potential role of farm workers as new owners and managers of plantations. However, the big chunk of land-reformed plantations are still caught under onerous long-term leaseback contracts and pay-to-own arrangements (direct payment schemes) in which agrarian reform beneficiaries bear the add-on cost of production inputs, spiraling land prices, and unfair pricing.

The CARP in commercial farms is intended to enhance the role of farm workers at the supply side of the value chain system. After 10 years, however, they remain almost insignificant in the eyes of the big industry players. The CARP has generally maintained their status as farm workers since their status as new landowners is mired in uncertainty. However, there are inspiring cases where ARB plantation cooperatives have stood up to claim their right as bonafide players in the industry. In the late 1990s, ARB cooperatives that struggled to assume control of plantations in Davao del Norte established the Philippine Banana Producers Association (PBPA) in partnership with independent growers. They succeeded in assuming full control of production and executing FOB contracts with exporters. Currently, the same cooperatives are organized under the Federation of Cooperatives (FEDCO) in partnership with FARMCOOP. FEDCO has assumed the role formerly controlled by TNCs and landowners – to provide agricultural inputs and technical and marketing services (for Class B). FARMCOOP also provides technical support as well as legal and marketing services.

In early 2000, the Mindanao Farm Workers Development Center (MFDC) helped establish the Mindanao Banana Growers and Exporters Association (MBGEA) in partnership with agrarian reform cooperatives and organizations of retrenched farm workers. However, the majority of MBGEA members are farm workers that have been excluded from the reform process and are, therefore, not in control of the production base.

Government Agencies

The Department of Agrarian Reform (DAR), being the lead agency for CARP implementation; the Presidential Agrarian Reform Council (PARC), being the highest policy making body for agrarian reform; and the Provincial Agrarian Reform Coordinating Committee (PARCCOM) could have been decisive actors in the banana industry. The DAR is mandated to issue guidelines for CARP coverage of commercial farms, while the PARCCOM is mandated to process applications for alternative venture agreements (AVA) between landowners and farm worker-beneficiaries. Under RA 7905 (amending the Comprehensive Agrarian Reform Law of 1987), the PARC is the final approving body for all AVA applications.

37

At the end of the deferment period in 1998, the DAR issued AO No. 9, Series of 1998, providing for the guidelines of CARP coverage in commercial farms. These guidelines provided parameters for acquisition, valuation, compensation and distribution of commercial farms and limited leaseback arrangements to a maximum of 10 years. The then Estrada Administration promoted the “big brother, small brother” concept of post-CARP schemes in commercial farms in order to attract external investors.22 Apparently under pressure from agribusiness interests, the Estrada Administration further liberalized would-be alternative venture arrangements by abolishing the 10-year limitation for leaseback.23

The DAR AO No. 9 itself became a focal point for contention as it liberalized and broadened the scope for determination of legitimate claimants to commercial farms. Worse, the DAR left a big gap in guiding subsequent alternative venture arrangements. The work of the PARCCOM and the subsequent approval or disapproval of the PARC for AVA applications should have been informed by the work of the Alternative Venture Agreements Task Force (AVA Task Force). However, the AVA Task Force was created only in 2003, and started functioning much later in 2005.24 By then, most AVAs in commercial farms under the control of the 16-member PBGEA had entered into un-guided and onerous AVAs. In fact, only two of 20 AVA applications submitted to the PARC have been approved.25 Effectively, the DAR, PARC and PARCCOMs have left the ARBs at the mercy of agribusiness firms and big landowners.

22 See Flores-Obanil and Manahan 2006. 23 DAR Administrative Order No. 2, Series of 1999, abolished the 10-year limitation of leaseback

arrangements. 24 See Flores-Obanil and Manahan 2006.25 Ibid.

38

THE ECONOMICS OF THE PHILIPPINE BANANA INDUSTRY

The Philippines’ major fruit exports are bananas, pineapples, mangoes and papayas. In 2002, the total fruit export value reached US $ 371 million, of which banana exports account for 83 percent. It is estimated that the banana industry provides livelihood to some six million households.

The Philippines is the world’s fourth largest exporter to an estimated US $ 6.1 billion worth of demand in global markets. It ranks next to Ecuador, Costa Rica and Colombia. While the three dominate the European and American markets, the Philippines dominates the Japanese market and has penetrated the South Korean, Chinese and Middle East markets. In fact, exports to the Middle East, China and South Korea increased by 49 percent, 28 percent and 17 percent, respectively in 2006.26

National banana production area (all types) increased from 372,000 hectares in 1999 to 428,000 hectares by 2006, or a 15 percent increase during the period. Cavendish production areas have increased at an even faster rate. In Davao del Norte and Compostela Valley alone, hectarage has increased by 37 percent, from 32,000 hectares to 44,000 hectares during the same period. The Davao del Norte production area shows an even faster rate of increase at 44 percent (see Table 1).

Banana Hectarage, 1999-2006, in ‘00027

1999 2000 2001 2002 2003 2004 2005 2006

Philippines 372 382 387 398 408 415 417 428

Davao Del Norte 18 20 21 22 23 26 - -

Compostela Valley 14 15 15 15 17 18 - -

26 Gaylican, Christine, “Banana exports up by 15% in first half,” Philippine Daily Inquirer, August 30, 2006, p. B12.

27 Sources: Banana: Trends in Production, Trade and Prices, 2000-2004, Bureau of Agricultural Statistics; Situationer on Banana, 1999-2003, Bureau of Agricultural Statistics; Banana: Strategic Plan 2005-2010; Rodel Maghirang, 3rd National Banana Marketing Conference, Cagayan de Oro City, August 22-23, 2007.

TABL

E 1

39

Banana Hectarage, Davao del Norte and Compostela Valley (1999-2004, in ‘000 hectares)28

National banana production (all types) volume likewise increased from 4.5 million MT in 1999 to 5.6 million MT by 2004. On average, 30 percent of production comes from Davao del Norte and Compostela Valley (see Table 2).

Banana Production, 1999-2006, in ‘000 MT29

1999 2000 2001 2002 2003 2004

Philippines (National Total) 4,570 4,930 5,059 5, 275 5,369 5,631

Davao Del Norte (Cavendish) 717 770 783 797 812 841

Compostela Valley (Cavendish) 475 535 547 566 601 698

National Cavendish banana production volume reached 2.8 million MT in 2006, of which almost 80 percent (2.2 million MT) came from Region 11 (mainly Compostela Valley and Davao del Norte) (see Table 2). Around 82 percent of national production is exported.

28 Ibid.29 Source: Banana: Trends in Production, Trade and Prices, 2000-2004, Bureau of Agricultural Statistics;

Situationer on Banana, 1999-2003, Bureau of Agricultural Statistics.

FIGU

RE 1

Banana Hectarage, Davao del Norte and Compostela Valley (1999-2004, in '000 hectares

050

100150200250300350400450

1999 2000 2001 2002 2003 2004 2005 2006

year

hea

ctar

age

Philippines

Davao Del Norte

Compostela Valley

TABL

E 2

40

Cavendish Export and Contribution to the National Economy Data from 2004 to 2006 shows an erratic and declining share of agricultural exports to total national exports, up from 6.32 percent in 2004 to 6.52 percent in 2005 but down again to 5.87 percent in 2006. In 2005 and 2006, fresh banana exports ranked first in volume among the top 10 agricultural exports, contributing an average of 14 percent to total agricultural export earnings.30 However, it ranked only second to coconut oil in terms of FOB value (in US $). Nevertheless, Cavendish export value reached the US $ 405 million mark by 2006.

Top Ten Philippine Agricultural Exports, 2005 and 2006 (in ‘000 MT, in US $ Million)

ITEM2006 2005 GROWTH RATE

(Percent)

Quantity Value %Share Quantity Value %

Share Quantity Value

Coconut Oil (crudeand refined)

1,066.83 578.77 20.81 1,152.32 657.22 24.42 -7.42 -11.94

Banana Fresh 2,311.54 405.44 14.58 2,024,32 362.58 13.47 14.19 11.82

Pineapple andPineapple Products

566.36 221.66 7.97 536 72 204.28 7.59 5.52 8.51

Tuna 59.49 143.33 5.15 45.05 102.01 3.79 32.05 40.51

DesiccatedCoconut

136.08 138:55 4.98 125.54 127.14 4.72 8.40 8.97

TobaccoManufactured

18.87 102.06 3.67 21.06 112.81 4.19 -10.40 -9.53

Shrimps andPrawns

13.09 98.54 3.54 12.67 93.51 3.47 3.31 5.38

Milk and Creamand Products

33.87 93.14 3.35 37.55 79.94 2.97 -9.80 16.51

FertilizerManufactured

356.43 83.51 3.00 410.21 92.27 3.43 -13.11 -9.49

Sugar Centrifugal

214.64 82.33 2.96 30.81 71.90 2.67 596.66 14.51.

Total of Top 10AgriculturalExports

4,777.20 1,947.33 70.01 4,396.25 1,903.66 70.74 8.67 2.29

Other AgriculturalExports

834.03 29.99 787.53 29.26 5.90

Total AgriculturalExports

2,781.36 2,691.19 3.35

Source: 2006 Annual Report, Agricultural Foreign Trade Development, Bureau of Agricultural Statistics

30 Banana: Trends in Production, Trade and Prices 2000-2004. Volume 2, No. 2. Department of Agriculture, Bureau of Agricultural Statistics, p. 2.

TABL

E 3

41

However, Cavendish export volume consistently increased from 1.3 million MT in 1999 to 2.3 million MT in 2006 (see Table 4). This indicates an export growth rate of 75 percent during the period. Given the fact that Cavendish hectarage increased by only 37 percent (in Davao del Norte and Compostela Valley), export growth data suggests that agrarian reform processes in banana commercial farms have not disrupted production. It also suggests growing productivity per unit of land.

Cavendish Banana, 1999-2006 Export Volume

1999 2000 2001 2002 2003 2004 2005 2006

1,319.62 1,599.35 1,596.00 1,684.94 1,829.00 1,797.34 2,024.32 2,311.54

Correspondingly, export earnings from Cavendish increased from US $ 241 million in 1999 to US $ 405 million by 2006 (see Figure 2 and Table 3). This represents a value growth rate of 68 percent during the period, or an annual average of 8.5 percent.

Cavendish Banana Exports, FOB Value in US $ Million

Year 1999 2000 2001 2002 2003 2004 2005 2006

FOB Value (in Million

US $)241 291.65 297.33 308.87 333 326.42 362.58 405.44

Cavendish Banana Exports, FOB value (in US $)

TABL

E 4

TABL

E 5

Cavendish Banana- FOB Value in US $

0

50

100

150

200

250

300

350

400

450

1999 2000 2001 2002 2003 2004 2005 2006

Cavendish Banana-FOB Value in US $

FIGU

RE 2

42

Japan tops the export market for Cavendish, with consumption increasing from 820 MT in 1999 to 909 MT by 2006. However, Japan’s market share of annual Cavendish export declined from 62.1 percent in 1999 to 42.6 percent by 2006. The average consumption growth rate during the period was only 10.8 percent. While Japan’s share remains the most significant, the growth rate indicates a plateau compared to the rapid growth in consumption observed in the case of Taiwan (84.9%) or Iran (3,318%) which was penetrated only beginning 2001. South Korea and the United Arab Emirates are also markets to watch, with consumption growing at an average of 13 percent since 1999.

Cavendish Banana Exports, by Country of Destination, 1999-2006, in MT

1999 2000 2001 2002 2003 2004 2005 2006 %

Increase

Taiwan 73.68 87.35 130.49 146.06 161.42 157.51 144.23 208.40 84.9

Japan 820.73 950.64 863.96 847.67 884.00 915.19 918.23 909.54 10.8

Korea 124 140.79 147.24 151.94 158.81 138.63 234.08 264.95 12.9

UAE 97.73 98.02 125.86 209.18 200.24 157.61 179.87 207.50 13.4

Iran 0 0 11.87 9.35 30.46 169.86 223.36 372.68 3,318*

Others 42.87 39.25 66.68 88.05 138.32 85.12 324.48 348.49 828.5

*From 2001 to 2006 only.

Cavendish Banana Exports, Country of Destination, 1999-2006, in MT

TABL

E 6

FIGU

RE 3 cavendish banana - export data-country of destination

0100200300400500600700800900

1000

1999 2000 2001 2002 2003 2004 2005 2006

year

quan

tity

in M

T

Taiwan

Japan

Korea

UAE

Iran

Others

43

Price Movements

Changes in farm gate prices may not be necessarily and directly influenced by prevailing prices in world markets. They can be disturbed by local externalities such as distortions in the behavior of players at the supply base, or distortions in the behavior of buying agents and exporters.

The farm workers’ strikes launched in 1996-1997 and the corresponding support from abroad created pressure that induced DOLE-STANFILCO to set a precedent in FOB contracts with farm workers cooperatives and cooperatives of small growers. As a result, farm workers were able to secure the prevailing FOB price of US $ 2.50 per box. This price has become the standard price that binds the big players and cooperatives that have assumed full control of production and processing. Correspondingly, this price level has bound the ARB cooperatives into long-term supply contracts. Apparently, no one hedged on the expansion of markets abroad or the emergence of demand from South Korea, China and the Middle East. Even the big players could not predict the entry of new players in the export arena and changes in buying prices at the supply base.

The first signs of price-disturbing characteristics in the market emerged when there was a demand for Class B in foreign markets. While ARB cooperatives under FOB contracts are not allowed to sell Class B in foreign markets, independent traders come into play to pose as a third party player to break the prohibition. More recently, the entry of ANZ with a farm gate price offer of twice the prevailing rates has threatened the monopoly pricing of PBGEA and its TNC partners. ANZ has also induced the emergence of small independent buyers locally known as “warik-warik” ready to engage in price wars. It is not yet clearly known whether this distortion becomes the norm in prices or whether this is merely intended to carve niches in the supply bases. Certainly, ARB cooperatives are the least to benefit from the spike due to their long-term FOB contracts.

44

AGRARIAN REFORM IN BANANA COMMERCIAL FARMS

The institutional framework for CARP in banana plantations was weakened during the 10-year deferment period. Clear guidelines for land transfer and reconfiguration of the terms of relationship between ARBs and former landowners were issued only in 1998 and 1999 and the DAR mechanism for facilitating AVAs – the Alternative Venture Agreement Task Force or AVA Task Force – became functional only in 2003. In the intervening period, so-called AVAs have been forged without clear guidance and regulation from the DAR.

The mandate of the Land Bank to set the acquisition price collapsed against stiff opposition from landowners. Landowners use every available legal means to dictate land prices. Invoking the just compensation clause of CARP, they seek legitimacy of high prices either from the regular courts or through direct bilateral arrangements with ARBs. Pushed into low bargaining positions, ARBs enter into unfair arrangements, often absorbing costs that are added on to the cost of land acquisition.

Despite the weakened institutional framework in regard to land transfer, the banana industry grew, owing to foreign market demand for Cavendish. This is seen in the continuing investments made in contested plantations and expansion of production areas within Davao del Norte and Compostela Valley and other provinces. Even the government’s effort to limit banana hectarage and to prevent oversupply (21,000 hectares under LOI 58 in 1973 and 25,483 hectares under LOI 790 in 1979) was breached before LOI 790 could be deliberated for lifting. At the end of the deferment period in 1998, there were already more than 30,000 hectares of Cavendish plantations in Davao del Norte and Compostela Valley.

Outside of plantations under long-term leaseback contracts, a number of plantation cooperatives have succeeded in getting FOB contracts from which they can support the full assumption of production and processing. In a number of cases, cooperatives have internally modified production arrangements by re-dividing the land into individually “owned” and managed farms. Correspondingly, individual members bring in their families to work on the land, often generating additional short-term employment to community members.

The process of cementing cooperative management of plantations has gone through a series of internal conflicts and permutations. In the early stages, this process was overshadowed by the main conflict between ARBs and landowners, involving the form and substance of land transfer, which has caused painful divisions among ARBs.

45

The weakening of the institutional framework of CARP in banana commercial farms induced farm workers to cope and adapt independent strategies for claiming their rights and for survival. Although they perceived the DAR to be an ally, the agency was an object of suspicion and a constant target for advocacy and pressure. On the other hand, the farm workers found a formidable foe in the agribusiness sector and landlords, especially in the absence of consistent support from the DAR.

From Unionism to Agrarian StrugglesTwo tendencies emerged during and after the deferment period: one, the almost amoebic mutation of ARB cooperatives, more popularly known as “banana splits” in NGO and PO circles; and, two, political-economic aggrupation in order to create political muscle in claiming their rights. Both tendencies were a product of a crisis born from the shift from unionist struggles to struggles for land. Traditionally, the farm workers’ unions fought for better wages, benefits and working conditions. Under CARP, the farm workers not only had to reframe their strategies according to agrarian law, but also to conform with the prescribed mode of organization – the formation of ARB cooperatives under the rules of the Cooperative Development Authority (CDA).

In the decades prior to CARP, workers’ unions in the Mindanao plantations were led by the National Federation of Labor (NFL).31 In 1993, anticipating CARP coverage of commercial farms, the NFL established agrarian reform desks for banana plantations in Davao and rubber plantations in Basilan and Zamboanga. In the latter, the agrarian reform desk (NFL-ARD) spun off the NFL-ARD into a full-fledged program and later into a full-fledged NGO to provide support to rubber plantation cooperatives.

In the banana plantations, the NFL-ARD initiative converged with the initiative of the Peace Foundation in the early 1990s. In due time, this convergence resulted in a split that led to the formation of FARMCOOP, on the one hand, and the Mindanao Farmers Development Center (MFDC) on the other. MFDC worked with Peace Foundation while FARMCOOP took an independent stance and chose to combine political muscle flexing with peaceful negotiations. The independent strategies of the two NGOs also led to parallel relationships with European funding partners.32

On the FARMCOOP side, the idea of pooling political strength was precipitated by DOLE-STANFILCO’s move to pre-empt CARP coverage by entering into an alliance with SEARBAI in 1995. In 1997, after the split of SEARBAI into various groups, FARMCOOP organized the opposing cooperatives, CFARBEMCO, DARBCO and

31 In Negros, the workers’ unions in the sugar plantations were led by the National Federation of Sugar Workers (NFSW).

32 MFDC and Peace was funded by ICCO while FARMCOOP was funded by Bread for the World.

46

DARBMUPCO, into an alliance called the Philippine Banana Producers Association (PBPA) to pressure DOLE into abrogating the onerous contracts and renegotiate.

The PBPA then launched a two-month strike causing a disruption in production and decrease in supply. This move was combined with international advocacy that brought in the support of the International Union of Food Workers, an international federation of trade unions representing workers in agriculture, plantations, food, beverages and hotels. The international support included an invitation for the PBPA to participate in the International Banana Conference in Brussels in May 1998.

The political muscle flexing and international pressure induced DOLE to renegotiate. In 1998, DOLE signed an FOB contract with PBPA. This success soon snowballed into further negotiations that improved the negotiating positions of other plantation cooperatives and growers’ associations. Small growers in 13 packing plants under contract with DOLE organized themselves into the DOLE Banana Growers Association (DOBAGA) to pressure DOLE not to violate contract provisions. In 1999, DOBAGA achieved an extra-judicial rescission of contract and modification of the same into an FOB contract. DOLE would later renege on some provisions of the contract but got back in line after a three-month strike and the intercession of then President Joseph Estrada and the Provincial Governor.

By 1999, the PBPA lost its reason-for-being with the emergence of the Federation of Cooperatives (FEDCO) that brought together ARB cooperatives under PBPA and other new ARB cooperatives assisted by FARMCOOP. FEDCO members, such as DARBCO and CFARMBEMPCO, would later shine as outstanding cooperatives in Davao del Norte.

In 2000, six more growers’ cooperatives entered into FOB contracts with DOLE. During the same year, the three-way split of the AMS cooperatives in Kapalong was altered with a unification agenda and submission of a unified interim proposal to AMS Farms and centralization of the marketing of Class B bananas under FEDCO.

Since the early 1990s, MFDC focused on advocacy for the legitimate rights of farm workers, especially the retrenched farm workers. In the course of its work, it initiated partnerships with farm workers organizations that were either excluded from the plantations or not in full control of their newly acquired lands.

In early 2000, MFDC charted a post-CARP enterprise agenda on the proposition for vertical integration in the value chain system. Politically, it challenges the continuing monopoly of the Philippine Banana Growers and Exporters Association (PBGEA). Within this advocacy agenda, it proposed the creation of the Mindanao Banana Growers Association (MBGEA) as a political and economic counter-pole. This idea takes its roots from the Banana Agrarian Reform Beneficiaries Alliance (BARBAI) that failed to take off in the late 1990s.

47

The MBGEA has an expansive PO base in tandem with the Mindanao UNORKA. However, its four core banana cooperatives – PFARBAI, WODIFARBA, UFARBEMCO and FIARBEMCO – only have 59.6 hectares of Cavendish plantations under effective control. The supply capacity is inadequate to use as an instrument for influencing the banana market. However, these cooperatives are able to benefit from FOB contracts.

Fragmentation The transition from unionist struggles to agrarian reform struggles formed part of the critical juncture of CARP in commercial farms. It was during this transition that the integrity of the once-autonomous farm workers’ unions were breached by landowners using divide-and-rule tactics that eventually led to the fragmentation of the unions. What later emerged as farm workers’ cooperatives were already fragments of the once-united plantation-based unions and their national federations.One example is the case of the Viscaya Plantation Inc (VPI) in Maco, Compostela Valley. The agrarian reform struggle in VPI was intertwined with the story the farm workers’ struggle for labor rights. The 242-hectare plantation was acquired by Jesus V. Ayala from Isazi Zuluaga in 1985. During the acquisition, the plantation area was covered under six land titles. As a pre-emptive move to CARP, Ayala further subdivided the land into 35 titles, of which 34 consisted of seven-hectare farm lots and one consisted of a 1.8 –hectare farm lot. The titles were made in the names of Ayala’s loyal employees as dummies. During CARP coverage, the dummy owners purportedly acquired the land from Ayala at seven hectares each for a cost of PHP 60,000. In exchange for loyalty, the dummy owners were given PHP 16,000 as “pabuya” (gratuity) for two consecutive Christmases.33

Grievances against VPI’s labor practices led to the formation of a progressive labor union called PAMANSAG in 1991. During the first election that same year, two factions had already emerged: the PAMANSAG under the National Federation of Labor (NFL) and the company-sponsored Viscaya Labor Union (VLU). This was preceded by pressure from the landowner on the eve of the election, when 23 PAMANSAG members were harassed and/or enticed to join the VLU. VLU won by 16 votes.

Immediately, the landowner undertook punitive action against PAMANSAG. Forty-one (41) leaders and members were retrenched in the guise of excess manpower. The organization weakened and had to lay low for a time. That same year, PAMANSAG members established the Viscaya Plantation Agrarian Reform Beneficiaries Association, Inc. (VPARBAI) and then petitioned for CARP coverage of VPI. However, it took six years before the association could move forward. In 1997, the Philippine Network of Rural Development Institutes (PhilNet-RDI), a network of NGOs involved in agrarian reform and rural development, helped reactivate the

33 FGD, February 8, 2008, Hijo, Maco, Compostella Valley.

48

association. They petitioned for the acquisition of VPI plantation under CARP. But the landowner sustained its resistance. In May 2002, VPI filed for bankruptcy, issued separation pay to its employees, and then rehired only those affiliated with VLU.

When the plantation was finally covered under CARP, only 81 hectares were subjected to redistribution, as VPI had “legitimately” retained 173 hectares covered by 35 separate titles. VPI changed its name to Maco Agri-Ventures Inc. (MAVI). VLU meanwhile transformed itself into an ARB cooperative called Vizcaya Plantation Employees Agrarian Reform Beneficiaries Cooperative (VPEARBCO) to claim a portion of the 69 hectares, and VPARBAI renamed itself as the Concepcion Dumlan Hijo Agrarian Reform Beneficiaries Cooperative (CDHRBMPCO) to claim another portion.

The once-united 161-member farm workers union split up, with 81 members joining VPEARBCO and 80 joining CDHARBMPCO. The former was awarded 35 hectares and opted to lease back its share to MAVI. The latter was awarded 34 hectares, then opted for a growership contract known as the Growership and Exclusive Sales Agreement (GESA) in March 2005.

Had the workers remained united, they could have jointly and strongly struggled to claim ownership of the whole 242-hectare plantation, and each member would have been entitled to 1.3 hectares. The fragmentation resulted in a huge foregone asset worth 173 hectares in favor of the landowner with meager benefits to the farm workers. VPEARBCO members have 0.4 hectares each and have forfeited control by leasing back their land. CDHARBMPCO members, on the other hand, are entitled to only 0.3 hectares each, since 9.7 hectares of their 34-hectare share comprises a river and its banks.

CDHARBMPCO has fallen into a bigger disadvantage by entering into a Direct Land Transfer Scheme (DLTS) in which the land is to be paid for 15 to 20 years in the form of Class A produce valued at US $ 0.1578 per kilogram. This amounts to only US $ 2.05 per box compared to the prevailing farm gate price of US $ 2.50 per box and is far lower than the Abbar Zainy price of US $ 4.50 per box. The land is valued at PHP 587,500 per hectare to include PHP 237,500 as value of the land and PHP 350,000 as value of standing crops. The 9.7-hectare river portion is valued at PHP 84,000 per hectare. Currently, the cooperative has to allocate PHP 47,600 for monthly amortization.

In Kapalong, Davao del Norte, the AMS Kapalong Agrarian Reform Beneficiaries Multi-Purpose Cooperative (AMSKARBEMCO) formed part of the AMS Workers Multi-Purpose Cooperative (AMSWPMC) struggling to gain access and control of the 515-hectare banana plantation of AMS Farms in 1995. Union-busting activities of the AMS management induced a split within AMSWMPC, thus leading to the emergence of two groups: AMSKARBEMCO and AMSEPCO. The former demanded a growership contract while the latter acceded to the management’s demand for a leaseback

49

contract. In 2000, with the assistance of FARMCOOP, the three cooperatives would unify under FEDCO and submit a unified proposal to AMS Farms.

In Panabo, Davao del Norte, the DAPCO Agrarian Reform Beneficiaries Cooperative (DARBCO), a 421-member workers’ cooperative formed part of the STANFILCO Employees Agrarian Reform Beneficiaries Association Inc (SEARBAI), an association of workers who claimed access and control of the 1,004-hectare DAPCO Estate owned by the Javellana family. The estate was then leased to DOLE-STANFILCO. The land was put under Compulsory Acquisition (CA) in the early 1990s. The first Certificate of Land Ownership Award was issued in 1993 and the second CLOA was issued in 1994, both in favor of SEARBAI. The split came when SEARBAI entered into a Memorandum of Agreement (MOA) with DOLE-STANFILCO for a 25-year growership agreement, renewable at DOLE-STANFILCO’s option, plus a transitory period of four years (January 1995 to December 1998) during which DOLE-STANFILCO would operate and manage the plantation. The MOA specified a buying price of PHP 22.50 per box (US $ 1.95 per box at the current exchange rate) on the fifth year, while the ARBs would receive wages and higher separation pay. In exchange, SEARBAI would purge militant members and allow the entry of DOLE-preferred ARBs.

During the transition period, DOLE-STANFILCO reduced daily wages from PHP 162 to PHP 92. The SEARBAI-DOLE MOU and the reduction of daily wages created tensions within SEARBAI, leading to a three-way split: DARBCO (421 ARBs), SEARBEMCO (330 ARBs) and ALDA (145 ARBs). In 1996, the three groups conducted a series of mass actions including a crippling strike that, by 1998, forced DOLE to renegotiate with the various groups and agree to a buying price of US $ 2.60 per box. In 1999, ALDA won the struggle for individual titling but would then split into three smaller groups before the individual titles could be issued: Agrarian Reform Beneficiaries Individual Self-Managed Multipurpose Cooperative (ARBISM), DAPCO United Small Growers Multi Purpose Cooperative (DUSGROW), and First Individual Agrarian Reform Beneficiaries Multi Purpose Cooperative (FIARBEMCO).34 The latter opted to produce Lacatan, a local cultivar, for the local market. However, it reverted back to Cavendish by 2004.

In early 2000, DARBCO split into two groups over the issue of farming system and ownership of the fruits of the land. One group opted to adopt the individual farming system; hence, the group is known as the IFS group. The other group retained collective production with some modifications, hence known as the Modified Farming Scheme group. Each group has a separate governing body while maintaining a mother Board of Directors. After seeing the production efficiency of the IFS group in 2003, the MDS group later adopted the IFS scheme.

34 Pacaba-Deriquito, Tess, The AVA-mode of CARP in Banana Commercial Farms: Business as Usual. Mindanao Focus, No. 4, Series of 2004, p. 19.

50

ImplosionSome agrarian struggles are easily dealt with during the early stages but later lead to a collapse due to the confluence of extreme external pressure and internal weaknesses. Size is no guarantee of power, as can be seen in the experience of the Mampesing CARP Beneficiaries Inc (MCBCI) in Mabini, Compostela Valley, a 252-member cooperative of ARBs that acquired a 757.6 hectare coconut plantation from Agricultural Enterprises Inc. (AEI) in 1991, seven years before the end of the deferment period.

Agricultural Enterprises, Inc. (AEI) is a coconut plantation owned by the Montelibano family of Negros. The plantation has a total area of 854 hectares that include a mainland area of 757 hectares and an island (Kupiat Island) consisting of 97 hectares. The company hired “sacadas” or farm workers who were also allowed to use fringes of the land for non-permanent food crops and backyard livestock.

Montelibano was an absentee landowner. In 1987 he rented out his property to PATI San Corporation and in 1989 to a local resident. Some enterprising tenants also rented small portions based on a 65-35 sharing arrangement in favor of the tenant. During those years, the Montelibano family was taxed by armed rebels of the New People’s Army (NPA) and the Bangsa Moro Army (BAMA). Already an absentee landowner, the external pressure from the rebels induced Montelibano to give up his land under CARP.

MCBCI did not face a difficult struggle in acquiring the land. In addition, most members were either relatives or town mates of the landowner back in Negros. In 1991, MCBCI acquired 707.6 hectares under the Voluntary Offer to Sell (VOS) scheme and an additional 50 hectares of the retention area valued at PHP 1.75 million.35 All in all, MCBCI acquired 757.6 hectares. With 252 members, MCBCI would have gained the ideal 3 hectares per member under CARP.

MCBCI’s readiness to acquire the land was not accompanied by readiness to utilize the land to create new economic values. Instead, it immediately felt the weight of a new obligation – how to pay for the land. At the time of transfer, the annual land amortization obligation was estimated at PHP 19,369 per hectare, or a total of PHP 13.7 million (and an amortization schedule of PHP 986,101 per annum). However, upon the petition of the heirs of Montelibano, the land value was adjusted to PHP 54,000 per hectare or a total of PHP 38.2 million (and an amortization schedule of PHP 3.9 million per annum).

The financial obligation was perceived as too heavy for the tenants who, in the past, merely focused on the struggle for daily wages, free use of the fringes and sharing arrangements for tenanted portions. To come up with PHP 3.9 million per year in

35 Only the mainland portion. The island is still owned by Montelibano.

51

amortization payment was beyond their imagination, especially without a clear development and enterprise plan for the huge property. Neither did the cooperative benefit from legal and economic advice from the DAR or other development actors.

In 1992, upon combined pressure of the district’s Congressman, Provincial Governor and Municipal Mayor, and scare tactics of the local police, MCBCI entered into an onerous AVA with the Lapanday Agricultural Development Corporation (LADECO). Presently, the leaders of MCBCI argue that they were never part of the agreement or that they vehemently rejected the agreement, putting full blame on the old leaders of the cooperative. They also put the blame on themselves for collapsing under pressure: Over a period of two months in 1992, they submitted to five agreements with LADECO upon being “fetched” by the police for the signing ceremonies.

Prior to the signing of the lease agreement, the MCBCI incurred a debt of gratitude to LADECO. The latter offered a Financial Assistance Agreement (in March 1992) through which it would provide a PHP 252,000 interest-free loan (PHP 1,000 per member) to MCBCI. This loan was intended to cover the education needs of the children, and would be paid back with proceeds from the un-leased coconut areas or cash advances from the AVA.

The AVA with LADECO stipulates a 30-year lease agreement for 500 hectares, of which 355 hectares are to be used for the Cavendish plantation and the rest for facilities. The rental price is pegged at PHP 4,000/hectare for the first five years, PHP 5,000/hectare for the second five years, PHP 6,250/hectare for the 11th to 15th year and PHP 7,800/hectare for the 16th to 20th year. The rental price for the remaining years is to be based on the price of copra, rice or corn at the time of the adjustment period or 25 percent of the rental price of the preceding year, whichever is greater. The rental agreement is renewable for another 10 years.

The lease is now on its twelfth year and the rental income is PHP 3.1 million per year. However, MCBCI’s amortization obligation is PHP 3.9 million per year. In short, the rental payment is not sufficient to cover land amortization. This excludes obligations for a PHP 4.9 million outstanding loan from the Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP) and PHP 1.2 million in unpaid real property taxes (RPT).

MCBCI members now rely on wage income, being employed at the leased plantation. Those unemployed are allocated parcels in the 250-hectare un-leased portion of the property on the condition that they contribute 25 percent of their earnings to the cooperative. However, most members are unable to comply with the agreement.

One other aberration of the lease agreement with LADECO is that the latter is allowed to occupy two seats in the MCBCI Board of Directors. Although LADECO has not actively used this facility to intervene in the affairs of the organization, the arrangement is highly irregular. In 2006, the DAR Arbitration Board

52

(DARAB) nullified the MCBCI-LADECO agreement, but not with finality. Instead, it recommended that the two parties renegotiate the agreement.

MCBCI has already conducted land occupations to express their disgust over the onerous contract and their desire to retake control of the property. These exercises resulted in legal counter-actions and harassment from LADECO. A number of members and leaders are now facing cases of Resistance and Disobedience, Grave Coercion, Direct Assault and Serious Physical Injuries. The tension has also led to an internal conflict within MCBCI. In 2003, a group of 83 members led by an MCBCI Board Member bolted from the organization to form the Mampesing Agrarian Reform Beneficiaries Association, Inc. (MARBAI) with the alleged support of LADECO. The latter also allegedly provided PHP 1,000 in monthly subsidies to the members of the breakaway group.

However, conditions have changed. LADECO sold its rights to Chiquita Unifrutti Philippines (CUP) on December 28, 2007. The plantation is now managed by CUP through its subsidiary Tortuga Valey Plantation Inc. (TVPI). In 2008, around 36 MARBAI members returned to MCBCI. Nevertheless, the reconciliation may not change the configuration of the onerous contract. In fact, the DARAB order for MCBCI to renegotiate may have been spoiled by the exit of LADECO. With the upswing in banana prices, TVPI may not be in the mood to change the existing arrangement. The turnover from LADECO to CUP/TVPI may have changed the configuration of the capital stock, whereby the renegotiation of the lease agreement would become more difficult. According to MCBCI officers, wresting back control of the leased portion would also require payment for standing crops and other development costs which are estimated at PHP 300 million – a staggering amount that is beyond their capacity and imagination. Meanwhile, MCBCI is planning to conduct another land occupation – an exercise that will be saddled with higher risks than before.

Why Farm Workers’ Cooperatives SplitUncertainties regarding ownership and control of land-reformed plantations hounded farm workers cooperatives even before the end of the deferment period. While splits also indicate democratic preferences of ARBs, they also tend to weaken bargaining positions, especially when the action is ill-informed or is mainly based on political decisions rather than economic fundamentals. Varying Anticipation and Interpretation of Opportunities

In some cases, the collapse of the unity of farm workers’ unions is triggered by the promise of CARP itself, especially when the interpretation of opportunities vary or when a section of the union spearheads the claim while others prefer to wait and see for fear of losing employment. This is illustrated by the experience

53

of the workers of the Davao Fruits Corporation (DFC), a company owned by Jose V. Ayala in Compostela, Compostela Valley. The workers’ union used to be affiliated with the United Lumber and General Workers of the Philippines (ULGWP).

DFC controlled a total area of 351 hectares. This consists of lands owned by the company and those leased from other landowners in the vicinity. Initially, Ayala rented and then subsequently bought the lands from various families of the Mandaya tribe in the area. The CARP covers 149 hectares consisting of 14 titles, 10 of which are under the name of dummy owners each holding properties ranging from 8 to 20 hectares.

DFC used the deferment period to pre-empt agrarian reform coverage and secure control of the plantation and its workers. On the other hand, the ULGWP was not prepared for the shift from workers’ rights advocacy to agrarian reform advocacy. In 1994, DFC made the first move by retrenching the farm workers. In response, a core group of 45 farm workers organized themselves to form the Davao Fruits Corporation Employees Agrarian Reform Beneficiaries Association Inc. (DFCEARBAI) and move for the coverage of the plantation under CARP. However, DFCEARBAI could not rally the ranks of workers to follow the agrarian reform advocacy track. It could not even show any indication of success, especially since the plantation was temporarily shielded by the deferment period.

The long struggle began to take its toll on the members of the association. Financially, it was dependent on membership fees and contributions. Its main activity and platform for unity was a consumer store that eventually closed shop due to unpaid debts. While some officers tried to save the enterprise by investing personal funds, these were not enough to keep the store running.

In the absence of a strong claimant organization, CARP coverage of the plantation began only in 2002, during which time DFC had already diluted the ranks of claimants, thus raising the number from 168 to 207.36 The inclusion of new beneficiaries shrank the potential per capita share of ARBs from 0.89 to 0.72 hectare.

DFC also influenced the mode of land transfer by offering redistribution through the Voluntary Offer to Sell (VOS) scheme in November 2002, covering 120 hectares with an asking price of PHP 909,280 per hectare. As of 2008, five titles covering 100.8 hectares had been covered by VOS with a land valuation of PHP 56.2 million or an average price of PHP 559,792 per hectare. This scheme, however, has not been consummated, and the plantation land is still being controlled by DFC except for various portions that it has rented out to growers including the farm workers claiming ownership of the land.

36 Interview with Rolando Torentera, DFCEARBAI Chairperson.

54

The whole process is complex. While the land transfer (under VOS) is not yet consummated, DFC has allowed the farm workers to grow Cavendish under contract but it also exacts rental income from the farm workers, except for one group of re-hired workers who signed a leaseback agreement even before land transfer and now work as company hands for wages.

While DFCEARBAI exists in name, its officers and members are scattered into various smaller groups. The retrenchment and resulting uncertainties induced the farm workers to seek various modes of survival. This resulted in the formation of three groups: (a) the Retrenched Group, consisting of 100 members, some of whom have leased back their lands; (b) the Active Workers Group, consisting of 30 members who were rehired by DFC after the 1994 retrenchment and who signed a leaseback agreement even before the land transfer process is consummated 37; and (c) the Farm Management Contract Group (FMC) whose members have leased their lands back to DFC for a rental price of PHP 4,000 per hectare.

The FMC group, on the other hand, consists of 41 members who are further divided into four groups, namely: (1) the Liberty Farm Cooperative Inc. (LFCI), consisting of 12 ARBs and their wives who have acquired 36 hectares; (2) Selecta Farm Cooperative Inc. (SFCI), consisting of 14 ARBs and their wives who have acquired 36 hectares; (3) the Everlasting group, which initially consisted of 15 ARBs who have acquired 42 hectares but later split into two; and (4) the seven-member United Banana Farms (UBF) group which broke away from Everlasting with a share of 21 hectares, thus, leaving Everlasting with 21 hectares. One of the incorporators of UBF is the founding Chair of the defunct DFCEARBAI.

The FMC group pertains to the group of workers who opted to assume control of the land but pay rental fee for a portion that is claimed by DFC as a retention area. Among them, the UBF group turned out to be better off than the rest. Already with 3 hectares each, the group is able to expand by leasing another 8 hectares outside of the DFC area for Cavendish plantation at a rental price of PHP 15,000 per hectare for 15 years.

While UBF controls 21 hectares of DFC land, only 8 hectares are covered under CARP. Therefore it has to pay rent (at PHP 4,000 per hectare) for the remaining portion claimed by DFC as retention area. To increase productivity, UBF divided the 21 hectares into two (UBF 1 and UBF 2) and implemented the individual farming scheme. The 8-hectare expansion area is collectively managed by the group.

37 The Active Group workers are working for DFC as quality assurance checkers, office clerks and as staff in other operations.

55

Productivity has recently peaked, thus improving individual incomes. In fact, they are able to generate employment. UBF 1 and 2 currently employ 38 workers and the expansion area employs 14 workers. This labor generation, however, has jacked up production costs, resulting in an accumulation of unpaid loans. UBF has an outstanding PHP 5 million loan from DFC for the rehabilitation and maintenance costs of UBF 1 and 2, and another PHP 1.9 million loan from a rural bank for the development of the expansion area. This loan has since ballooned to PHP 3.5 million due to penalties on unpaid interest and principal.

Induced Conflicts

The first generation of conflicts pertained to induced conflicts as a result of landowner resistance, where the manifest strategy was to secure a client base within the ranks of farm workers, insert preferred beneficiaries from the outside or include management personnel in the ranks of claimants.

In the former 69-hectare Vizcaya Plantation in Maco (Compostela Valley), the first generation of conflict occurred between two sets of claimants, one representing management and the other representing the farm workers. After CARP coverage, the two groups further split into four groups, resulting in the re-division of the property into smaller portions and corresponding re-division of claimants into smaller groups.

The Concepcion Dumlan Hijo Agrarian Reform Beneficiaries Multi-purpose Cooperative (CDHARBMPCO) is one of the four groups that acquired 34 hectares including a nine-hectare portion within which is a creek and its banks. The acquisition is based on a Direct Land Transfer Scheme (DLT) at a valuation of PHP 235,000 per hectare. This valuation includes the nine-hectare creek portion that is usable for cultivation. The estimated amortization period is 15 to 20 years.

Originally consisting of 100 members, the further split reduced the group to 80 members. With only 21.7 hectares of cultivable area, each ARB is entitled to only 0.3 hectare. Due to the small size of the land share and lack of capital, the cooperative entered into a growership arrangement with Maco Ventures Inc. (MAVI) in order to pay the amortization.

The growership contract is based on FOB US $ 2.13 per box which is within range of the prevailing FOB contracts in the region. However, the cooperative absorbs add-on costs to borrowed capital and inputs for production that effectively lengthened the amortization period. The uncertainty regarding full ownership of the plantation and the current low wages (at PHP 150 per day) have led to a decrease in participation among some members. Of the 80 members, only 51 are on payroll as the rest opted to find wage work elsewhere. With the reduction of the workforce, the cooperative has to hire 23 other

56

workers from the outside. The overall result is an inefficient man-to-land ratio of 3:1 and depressed wages per worker.

In Mawab (Davao del Norte), the 36-member Marsman Agrarian Reform Beneficiaries Inc. (MARBAI) split from its mother organization – the Dizon Farm Workers Cooperative (DFWC) – over two major issues: (a) the DFWC’s decision to lease the plantation to Marsman at PHP 5,000 per hectare per year when the annual land amortization cost is PHP 22,000 per hectare; and (b) unfair hiring practices as well as malpractices where ARBs hired by Marsman sell their right to work for PHP 10,000 to PHP 15,000.38

The DFWC was awarded the 135-hectare plantation of Dizon Farms in 1998 (excluding the 20-hectare retention area) at PHP 400,000 per hectare. In due time, the cooperative accumulated unpaid amortization payments and land taxes. This created conditions for Marsman to come in and offer to assume payment for amortization and taxes in exchange for a long term lease at PHP 5,000 per hectare. DFWC members were given the right to work (as main source of income) based on the mandated wage rate at PHP 218 per day plus PHP 20 cost of living allowance (COLA). Wage labor being the prime source of income also became the cooperatives’ center of power, resulting in issues regarding selection of workers. In fact, the wage rate is attractive even to non-ARBs in the surrounding community such that some ARBs sell off or waive their rights for one-off payments in the range of PHP 10,000 to PHP 15,000 in coordination with the DFWC.

By splitting from DFWC, MARBAI members lost their right to work and encountered difficulties in claiming land rights. In 1998, each member was given 1.56 hectare. At the time of the split, MARBAI was able to secure only 12 hectares against a 56-hectare claim; moreover, the 12 hectares are mainly underdeveloped areas.

MARBAI aims to benefit from high prices offered by “warik-warik”39 buyers at US $ 5 per box. However, they lack capital for land development and production. Recently, they were able to avail of financing from a local financier, enabling them to develop five hectares. But the prospects do not look good: production is under-capitalized and more than half of the land is undeveloped. Moreover, the financier demands a 15-year contract plus an estimated 70 percent share of gross income.

MARBAI members currently survive through farm labor on other commercial farms like TADECO, Marsman and Dizon Farms. Others send family members to work in urban areas.

38 Panel interview with MARBAI Officers: Cerilo Cerbio, Chairman; Daniel Nombrado, Vice-Chairman; and Maximiano Anora, Board Member, March 7, 2008.

39 “Warik-warik” is a term used to describe agents of non-traditional buyers who offer prices higher than the prevailing rates. Their actions tend to distort supply chains and encourage pole-vaulting.

57

Divergence of Strategies

The experience of the Dapco Agrarian Reform Beneficiaries Cooperative (DARBCO) in Panabo, Davao del Norte, is probably the most unique because the split did not originate from a conflict between ARBs and the former landowner. Rather, it was induced by the mutual desire to improve productivity and maximum gains for each member. However, one group aims to create a farming system that provides direct incentives to the individual member.

Established in 1997 with 420 members acquiring 456 hectares formerly leased by the Javellana family to STANFILCO, the cooperative decided to split in 2000, owing to the desire of one group to create a better incentive structure for its members. The split was not difficult because the plantation was already physically divided into two sections known as Packing Plant (PP) 31 and PP 21. One group adopted the Individual Farming System (IFS), allotting 1.6 hectares per member of its 286-hectare share, while the other group maintained a so-called Modified Farming Scheme (DFS) allotting 1.02 hectares per member from its 150-hectare share.

Under the IFS scheme, each ARB is assigned a 1.02 farm lot. The assignation is done through a raffle. Each ARB is no longer a worker; rather, he/she becomes an employer taking charge of production. The full value of the produce, less cost of production and contributions to collective expenditures, is given to the individual ARB and his/her family. The application of the IFS scheme has resulted in lower labor costs from 2.5 workers/hectare to 1.5 workers/hectare and improved productivity per hectare.

Later, PP 91 ARBs would gravitate towards the IFS model but retained some form of collectivity by clusters of ARBs. This group has since been identified as the modified scheme group (otherwise known as the MDS group). The MDS group was originally skeptical about the IFS scheme. Upon witnessing the surge in productivity and incomes in the IFS scheme, the MDS group gravitated towards the IFS but in a modified form. Although farm lots have been assigned to each ARB, they are formed into clusters of 10 ARBs operating as mini-collectives. Cluster members pool their resources to take charge of production. They also become collective employers in their own cluster.

Internal Wear and Tear

In Panabo, Davao del Norte, the 30-member First Individual Agrarian Reform Beneficiaries Cooperative (FIARBEMCO) is a product of multiple and successive splits. Established in 1999, the cooperative operates a 14-hectare banana plantation acquired in the same year. The plantation has been informally subdivided among all members.

58

The cooperative is an offshoot of the ALDA (Arica-Labajo-Dayot-Arluz), a 123-member group of workers disenfranchised by STANFILCO in the early 1990s. Earlier on, the group was excluded from the agrarian reform process because it challenged the onerous contract between the company and its mother organization, the Stanfilco Employees Agrarian Reform Beneficiaries Association Inc. (SEARBAI). After a five-year (beginning 1993) arduous struggle through strikes, land occupation and pickets at the DAR, ALDA achieved an unprecedented victory on two significant grounds: individual ownership of land, and freedom to independently negotiate banana supply contracts based on the prevailing Freight on Board (FOB) price. ALDA later split into three groups, namely: FIARBEMCO (30 ARBs), ARBISM MPC (78 ARBs) and DUSGRO (15 ARBs). FIARBEMCO initially shifted to the Lacatan variety for domestic markets but later reverted to Cavendish production in cooperation with ARBISM MPC.

In the case of the United Farm Workers Agrarian Reform Beneficiaries Cooperative (UFARBEMCO), the split occurred after a long arduous struggle. Established in 1997 as the United Farmworkers Agrarian Reform Beneficiaries Association (UFARBAI), the organization was transformed into a cooperative in 2003. It is a 41-member cooperative managing an 18-hectare banana (Cavendish) plantation. UFARBAI laid claim to the 127-hectare plantation owned by JK Mercado in 1997, a year before the expiration of the deferment period. It started with 50 members, nine of whom retracted for fear of being dismissed by the landowner.

Against grave threats, harassment, non-payment of separation pay and threat of exclusion, the association launched a series of collective action with the assistance of MFDC and UNORKA beginning 2002. The decisive mode of action was land occupation, as a result of which the association succeeded in seizing control of 33 hectares. However, the modest success (in terms of land size) gave way to conflicting choices, which resulted in the re-division of the acquired land into two parts, one part being given to a group of ARBs loyal to the landowner.

Divide and Rule

Divide and rule is an age-old strategy for power and control and seems to always work in favor of those who are already in power. It also proved workable in favor of landowners who resisted CARP in commercial farms, if only to succeed in retaining landownership or retaining control of redistributed lands. One example is the case of the Dizon Farms and its workers in Mawab, Compostela Valley.

Dizon Farms (F.S. Dizon and Sons Inc.) is a 463-hectare multi-crop plantation that used to be planted to abaca, durian, coffee and rami and, later, papaya. Currently, the plantation includes a citrus farm, mango farm and a bamboo plantation. The land has been cultivated by the Dizon family since 1965 and the area includes an ancestral domain area owned by the Mansaka tribe.

59

Before the expiry of the deferment period, F.S. Dizon, patriarch of the family, helped organize the Dizon Farm Workers Cooperative (DFWC) in 1995 as a pre-emptive move prior to CARP coverage and as counterweight to a group of farm workers – the Dizon Mawab Employees Multipurpose Cooperative’s (DMEMCO) – that aimed for CARP coverage of the plantation as early as 1992. To gain the loyalty of the DFWC, he provided PHP 20,000 in capital for a food enterprise and a “pay-when-able” loan of PHP 50,000 for purchase of chemicals and fertilizers for the citrus farm.

When the first CLOA for 95 and 259 hectares was awarded in 1997 and 1998 under the Voluntary Land Transfer (VLT) scheme, the certificate of ownership was in the name of DFWC, with the DMEMCO only as part of the et al. While DMEMCO originally aimed to acquire the whole of the 108-hectare banana portion, it later settled for equally sharing the land with DFWC. Both organizations also shared an 18-hectare easement area, 10 hectares of which was given to DFWC and eight hectares to DMEMCO. During the acquisition period, 13 farm workers had been excluded from the list of beneficiaries.

All in all, 304 hectares were distributed to the farm workers, with 96 hectares in favor of DMEMCO and 276 hectares in favor of DFWC. The land valuation formula includes PHP 400,000/hectare for the bamboo area, PHP 280,000/hectare for the papaya area, and PHP 320,000/hectare for the citrus farm.

Through the use of dummies and other maneuvers, the Dizon family retained control of 159 hectares that include 43 hectares of newly titled land believed to be owned by the Mansaka tribe, a 15-hectare guest house, an 8.2-hectare airstrip, and another 22 hectares in surrounding areas. Some of the dummy owners include children and relatives below 18 years old.

In 1998, Marsman-Drysdale offered to rent 135 hectares for banana cultivation from DFWC for 25 years at a rental fee of PHP 5,000/hectare for the first five years and PHP 6,000 for the second five years. The rental offer gave rise to a conflict within the DFWC. Thirty-six members questioned the low rental price, considering that the estimated annual amortization obligation is already PHP 50,000 per hectare.

On the first year of the lease period, DFWC earned PHP 15 million in combined revenues from the citrus farm, bamboo produce and rental from Marsman- Drysdale. By 2000, however, DFWC suffered sustained losses, coupled with questionable purchases and lack of transparency. It was unable to pay its amortization obligations and tax payments and was thus served two notices of foreclosure.

Dizon’s divide-and-rule tactic was less optimum in the sense that while it was able to retain a large portion of the plantation, it lost the loyalty of DFWC which opted to turn over control of the redistributed land to Marsman Drysdale.

60

Faced with a serious financial crisis, the 36 members of DFWC resigned to form the Mawab Agrarian Reform Beneficiaries Association (MARBAI) and to segregate their share from the DFWC property based on a per capita share of 1.56 hectares.40 To date, MARBAI has assumed control of only 12.5 hectares, representing the first batch on individual CLOAs for eight members.

Inclusions and ExclusionsThe issue of inclusion and exclusion takes its roots from the diverging historical circumstances and agendas of the protagonists in commercial farms, in addition to the inherent flaws and loopholes of CARP implementing guidelines for coverage of commercial farms. Even at the inception of CARP, plantation owners had already declared resistance to land reform. The potency of this resistance resulted in the 10-year deferment of CARP in commercial farms. On the other hand, up until the early 1990s, the politics influencing the intentions of plantation workers was shaped by the national democratic agenda of the Maoist left - the struggle for better wages, benefits and working conditions and the call for the nationalization of commercial farms (De la Rosa 2005).

While the CARP deferment period was aimed at cushioning the effects of landowner and agribusiness sector resistance and preparing former trade unions of farm workers to become the new landowners, the temporal breather led to independent reformulation of strategies. On the eve of the expiry of the deferment period, commercial farm owners had already retrenched militant farm workers and executed what Borras and Franco (2005) describe as “pre-nuptial” deals with preferred beneficiaries. A case in point is the Davao Abaca Plantation Company (DAPCO), a 1,024-hectare banana plantation leased to the banana division of DOLE-STANFILCO.41 At the time of CARP coverage in 1994, the plantation had already conducted a series of retrenchments, thus reducing the number of farm workers and office employees from 1,300 to 850 (De la Rosa 2005). Of this number, only 482 names were included in the CLOA (De la Rosa 2005).

According to the Peace Foundation and the Mindanao Farmworkers Development Center (MFDC), around 15,000 to 20,000 farm workers had been disenfranchised in Southern Mindanao and, therefore, had been excluded from the agrarian reform program.42 Although it is difficult to verify the plantation origin and current location of these workers, several cases stand out in DAR and NGO records.

40 Computed at 276 hectares divided by 178 members. 41 Originally, this property formed part of the Davao Penal Reservation area in Carmen, Davao del Norte. In

1953, the land became a private possession of Don Antonio Arroyo and Don Manuel Javellana. Later, it was leased by DOLE-STANFILCO.

42 This statistic is prominent in project and organizational documents of both organizations. The exact origin and location of each disenfranchised farm worker is not easily verifiable.

61

There are two dimensions to exclusion. First is the exclusion of land resources from agrarian reform. This is more popularly known by mode of exclusion such as exemption, expansion of retention areas through the use of dummies, land conversion, or dubious and superficial transfer such as the stock distribution option or SDO, the most controversial of which the Hacienda Luisita SDO scheme. Borras (2003) estimates that some 2.5 million hectares of land, mostly private lands, have been excluded from the agrarian reform program. The second dimension is the inclusion-exclusion of beneficiaries. The first pertains to the legal attempt of an alleged legitimate beneficiary to form part of the list of the CLOA based on the argument that he or she has been previously excluded. The latter pertains to the legal continuum of inclusion claimants who argue that some already existing beneficiaries or would be beneficiaries should be excluded for supposed lack of legitimacy.

The declaration of state principles in agrarian reform implementation clearly emphasizes the power of the state to lease public lands to attract investments but subject to the prior rights of agrarian reform beneficiaries. RA 7905 (amending CARL) suggests various schemes such as leaseback, joint venture, and other arrangements in commercial farms, but noted that leaseback should be a last resort. Principles are not necessarily followed in practice, however. The first implementing guideline for agrarian reform in commercial farms was DAR AO No. 6, Series of 1998, which effectively excluded retrenched farm workers from land reform. This AO was rescinded in the same year and was superseded by AO No. 9. This AO was a product of sustained advocacy by NGOs and farm worker organizations during the Morales administration of the DAR. Its significant corrective measure was the determination of qualified beneficiaries to include all farm workers 18 years old and above employed in the commercial farm between June 15, 1988 and June 15, 1998 or upon the expiration or termination of the deferment.43 This provision explicitly recognizes the legitimate claims of farm workers who had been retrenched during the deferment period.

However, what was deemed a corrective measure could also prove disastrous. Firstly, the term “farm worker” is ambiguous. Section 3 (h) of AO No. 9 provides an all encompassing definition of farm worker as “…a natural person who renders service for value as an employee or laborer in an agricultural enterprise or farm regardless of whether his compensation is paid on a daily, weekly, monthly or ‘pakyaw’ (i.e., piece rate) basis.” This provision gives a mantle of legitimacy to the claims of supervisors, managers and other company officials that they are qualified ARBs.

Secondly, AO No. 9 reinforces the pre-emptive provision of the agrarian reform law that maintains the relationship of ARBs to the former owners through AVAs. Section 30 (d) reiterates the provision of RA 7905 that compels cooperatives or associations of farm worker beneficiaries to enter into AVAs “…to optimize the operating size for agricultural production and also to promote agricultural security of tenure and

43 DAR AO No. 9, Series of 1998, Article II, Section 4 (a) and (c).

62

security of income to beneficiaries.” Section 29 outlines the type of AVAs that could be entered into: joint venture agreement, lease arrangement, contract growing or growership arrangement, management contract or build-operate-transfer scheme.

Thirdly, AO No. 2, Series of 1999, effectively abolished the 10-year limitation for leaseback arrangements prescribed under AO No. 9.

All the above muddle the issue of economies of scale and fail to recognize the positive value chain dynamics in commercial farms. In fact, they reinforce the earlier argument of big landowners and agribusiness interests that agrarian reform would destroy economies of scale despite contrary evidence. Based on analysis of contract growing schemes prior to CARP, Hayami, Adriano and Quisumbing (1987) argued that land transfer to beneficiaries of commercial farms would not destroy economies of scale at the farm level given appropriate level of coordination. Correspondingly, they suggested a rational approach to post-agrarian reform arrangements: for agribusiness firms to focus on processing and marketing and for ARBs to focus on production.

By the time commercial farms were actually covered by CARP in 1998, the Hayami, Adriano and Quisumbing proposition had been disregarded in practice. Landowners and agribusiness firms strengthened their stranglehold on the production base and reinforced the same using the flaws and loopholes of DAR AO No. 9. The main instruments used are the so-called pre-nuptial agreements with preferred beneficiaries (that include former supervisors and managers) and leaseback arrangements. Currently, more than 10,000 hectares of banana plantations are covered by leaseback arrangements and thousands of retrenched farm workers are still waiting for formal recognition.

Legal Battles: Time and CostsInclusion-exclusion cases only form part of the various typologies and volumes of cases hindering the pace of land reform. Embedded in the DAR’s mandate is the provision of agrarian legal assistance and adjudication services for agrarian cases. Agrarian cases fall under three types: judicial or court cases (heard by regular courts), quasi-judicial cases (heard by the DAR Adjudication Board or DARAB), and administrative cases known as agrarian law implementation (ALI) cases heard and decided upon by the DAR Secretary or the concerned DAR Regional Director. The ALI cases pertain to petitions for exemption/retention, and for coverage and conflicting claims. Inclusion-exclusion cases tend to crisscross between the quasi-judicial bodies at the DAR and the regular courts.

As of 2005, ALI cases topped the list at 33,854 cases followed by mediation cases (26,330 cases), quasi-judicial cases (19,212 cases) and judicial cases (3,782).44

44 Annual Report CY 2005, Planning Service, Department of Agrarian Reform, March 2006.

63

In 2005, the DAR had a case load of 25,785 cases (13,270 new cases plus 12,515 carried over from the previous year), of which 14,716 or 57 percent of the case load were settled.45 The DAR would normally claim high efficiency in resolving cases despite lack of resources. In its 2006 year-end report, the DAR Planning Service claimed that the agency had resolved 95.3 percent of the 293,643 cases received between 1988 and 2006. The biggest (and most astonishing) accomplishment was during the Estrada period when the agency resolved more cases (102 percent) than it received. During the Aquino period, only 53.4 percent of the 15,298 cases received were resolved. The Ramos period received the most number of cases at 125,050 but the DAR claimed to have resolved 94.2 percent. Up till 2006, the Macapagal-Arroyo government received 97,925 cases and the DAR claimed to have resolved 99 percent.

Inclusion-Exclusion Cases in Davao del Norte

Name of landholding

Nature/ IssueCase started

on

Decision promulgated

on

Age(In

Years)

Farmer Beneficiaries

Remarks

WADECORExclusion/inclusion of FBs

Jan. 1998 Dec. 2003 5 200Appeal pending at Court of Appeals

Diamond farms Inc.

Exclusion/inclusion of FBs

April 1997 Apr. 2003 6 142Pending Bureau of Agrarian Legal Assistance

FARBEMPCOExclusion/ inclusion of FBs

June 2000 Apr.2004 4 78

CHECKERED Farms

Exclusion/ inclusion of FBs

Sept. 1998 Aug. 2004 6 301 Under MR

DAPCOExclusion/ inclusion of FBs

April 1999 May 2004 5 230 Under review by DAR

Rebaja Rodrigo

Exclusion/ inclusion of FBs

June 1999 Aug. 2004 5 123 Pending

TADECO Central

Exclusion/ inclusion of FBs

April 2000 Apr. 2003 3 881 Pending

TADECO Exclusion/ inclusion of FBs

Oct. 1998 Apr. 2003 5 259 Pending at DAR

MARSMAN Corp.

Exclusion/ inclusion of FBs

Sept. 1999 Aug. 2004 6 928Pending at DAR Region 11

WADECORExclusion/ inclusion of FBs

Oct. 2000 Sept. 2004 4 215 Pending; on appeal

DARMUPCOExclusion/ inclusion of FBs

Mar. 1999 Oct. 2003 5 712 Under MR; pending

Total number of farm workers affected 4,069

Average Age of cases (in years) 4.9

Source: Legal and Paralegal Support Services, Peace Foundation, 2008

In reality, the batting average of the legal system is very low. In fact, there is a general shortage of judges and courts, not to mention the need for special courts, to attend to the cases. With regard to agrarian cases, what may appear resolved in the statistics may only refer to interim resolutions that do not reflect the length of succeeding contestations and processes such as motions for reconsiderations and appeals.

45 Ibid., pp. 9-10.

TABL

E 7

64

Legal battles behave in seemingly indeterminate ways – either horizontally between special agrarian courts and regular courts, or up and down the vertical layers of the judicial and quasi-judicial bodies. Case resolutions are supposed to be time-bound and finite, but the actual temporal dimension is indeterminate. In private claims of public lands, there are instances in which the petitioners are already deceased and the new petitioners are not entertained because the preceding cases have not been resolved and closed.

The resolution or non-resolution of agrarian reform cases is influenced by the politics behind quasi-judicial and judicial actions. The DAR is an implementing agency of CARP but it also functions as a quasi-judicial body. Being an alter ego of the President, DAR decisions are inherently infected with the political attitude of the office they represent. The Office of the President itself is a quasi-judicial body that decides on politically contentious cases. The landmark Sumilao case is a typical example of judicial actions infected with political intervention. For over a decade, the case has moved up and down the vertical layers without a final resolution.

It takes months or years for a case to move up to the vertical layer and may take longer if one case moves up and down between the DAR Regional Office, DAR Central Office, Office of the President (OP) and the Supreme Court (SC). Recently, the legal route has been made even longer by a SC ruling that cases moving from the OP to the SC should first pass through the Court of Appeals (CA).

In Davao del Norte, there are 11 banana commercial farms involved in inclusion-exclusion cases (see Table 7) affecting 4,069 farm workers who have not benefited from land reform. None of the cases has reached the Supreme Court. Already the average age is five years and all are still in various intermediate layers. A five-year old case has implications for the survival or survival strategies of those affected. Five years can represent a temporal opportunity by which the child of a farm worker could have finished high school or college. It could also represent foregone income on the part of a farm worker who could be a legitimate beneficiary and co-owner of a plantation.

Juridical entities like agribusiness corporations have greater capacity for withstanding legal stresses. The life of a corporation is easily 50 years renewable by another 50, while that of an individual farm worker is limited by a non-renewable life span and his or her claim is non-transferable unless he or she is already a beneficiary. While the cooperatives representing the claims of farm workers can continue claim-making, the effectiveness of such claims will be ultimately determined by the cooperative’s ability to complete the amortization payment and assume full legal ownership of the plantation.

Correspondingly, there are cost implications that represent opportunity costs to well-being or investments in production. While big firms can easily pay PHP 100,000 in costs for court pleadings, farm workers fighting for inclusion or against exclusion rely mainly on limited NGO assistance. Big landowners and corporations can also

65

muster the strength of law firms with a complete set of lawyers, factual researchers and legal researchers. Farm workers, on the other hand, rely mainly on NGO lawyers who are usually volunteers without support staff. The two lawyers working with the Legal and Paralegal Services (LPS) Unit of Peace Foundation, for example, handle more than 700 cases in a year without staff support for legal and factual research.

Inclusion-exclusion cases also create tension between groups of cooperatives. In the case of DARBCO, 100 formerly retrenched farm workers lay claim (as co-owners) to the 436-hectare property now owned and managed by 420 ARBs with a man-to-land ratio of 1:1. The inclusion of 100 more ARBs would reduce the man-to-land ratio to 0.8:1. The inclusion would also mean increasing the labor cost per hectare and reduction of per capita net revenue.

66

FINANCIAL AND ECONOMIC PERFORMANCE OF ARB PLANTATION COOPERATIVES

Financial statements (balance sheet and income statement) provide a snapshot of the financial performance of ARB plantation cooperatives. Specifically, they provide an indication of financial health through such variables as profitability, ability to meet obligations, safety of investments in the organization, and effectiveness of management in running the cooperative and its main enterprise.

In 2007, the DAR and Land Bank of the Philippines (LBP) established guidelines for the determination and valuation of production inputs related to costs of field labor, material inputs, irrigation costs and indirect costs. The guidelines suggest PHP 200,000 and PHP 300,000 in costs of production for small and large plantations, respectively.46

In practice, actual costs are influenced by various factors such as fluctuations in costs of material inputs, augmentation of labor costs due to above-normal man-to-land ratio, and cost of overall operating capital especially among cooperatives that have entered into some kind of “pay-to-own” arrangements combined with growership contracts where payment for land amortization would be generated from revenues in the growership contract and where production capital and advances for labor costs are shouldered by the former landowner. The landowner then becomes the financing agent-cum-buyer that has the monopoly of determining cost of capital and inputs and farm gate price.

The cases below provide examples on how ARB plantation cooperatives perform and cope with the demands of improving productivity in order to meet their amortization obligations and employment for their members.

46 Guidelines in the Determination of Valuation Inputs for landholdings Planted to Cavendish Banana (Joint DAR-LBP MC No. 6 series of 2007), pp. 8-18.

67

Sample Cases

First Individual Agrarian Reform Beneficiaries Cooperative (FIARBEMCO)

The cooperative has been exerting efforts to improve its operational performance. In 2005, it managed to reduce administrative costs by 86 percent to PHP 100,078 (from PHP 735,456 in 2004). The profit margin has risen to 35 percent compared to 9 percent in 2004 or a significant positive variance of 270 percent. Membership equity has also been strengthened. As of 2005, total membership equity was PHP 231,705, a 1,030 percent jump from its PHP 20,500 level during the previous year.

There is, however, a need to look into the causes of the reduction in revenues. Moreover, there are indications of an internal organizational problem that might emanate from divisions within the governing body. Overall, the cooperative is liquid despite a decline in revenues. Most of the financial risks related to land (e.g., related to land amortization) are absorbed by the members.

Financial Performance

Data shows a decreasing asset base from 2004 to 2006 compared to its highest recorded asset base of PHP 730,463.45 in 2003. But on the other hand, its liquidity shows a steady increase from 2000, attaining the highest in 2006, at a 5.87 current asset to current liabilities ratio. This shows that with its current assets, the cooperative can meet its current obligations.

Financial Performance of FIARBEMCORatios 2006 20051. Liquidity: Current Assets/ Current Liabilities 5.87 3.692. Long Term Solvency: Debt to Equity Percentage2.1: Total Equity/ Total Assets 0.85 0.762.2: Total Debt/ Total Assets 0.15 0.243. Debt to Equity: Total Debt/ Total Equity 0.18 0.314. Net Spread Ratio: Net Surplus/ Average Total Assets 0.1 0.12

Average Total Assets PHP 449,729 PHP 454,836Ratio: Income Statement Accounts 2006 20051. Profit Margin: Net Income/ Sales 0.67 0.352. Investment Turn-Over: Sales/ Invested Capital 0.19 0.453. Operating Cost Ratio: Operating Expenses/ Total Income 0.33 0.65

TABL

E 8

68

Liabilities and members’ equity show that the cooperative is able to strengthen its internal capital with progressing members’ equity from 2002 to 2006 at 37 percent, 42 percent, 51 percent, 52 percent and 56 percent, respectively. Total equity vis-à-vis total assets show 0.85:1 ratio in 2006. Correspondingly, liabilities or external funds decreased from 56 percent in 2000 to 15 percent in 2006. This presents 0.15 of total debt for every peso of total asset.

The operating performance of the cooperative shows that it has reached its highest profit margin since 2000 in 2006 at 67 percent, although the record shows that its total revenues is decreasing. It was able to control its operating expenses, thereby resulting in a low operating cost ratio, showing 0.33 spent for every peso earned. This is the lowest operating cost ratio of the cooperative since 2000.

Pag-asa Farm ARB Association Inc. (PFARBAI)

PFARBAI is a 30-member association cultivating a 15-hectare banana (Cavendish) plantation. Its total assets (as of 2005) are PHP 1.19 million (this excludes the PHP 4.05 million value of land which is still being amortized). The asset base has increased by 65 percent, from PHP 0.72 million during the previous year. Also in 2005, it earned a total revenue of PHP 6.54 million, up by 78 percent from the PHP 3.68 million revenue it earned in 2004. However, maximum financial gains have been constrained by a 53 percent increase in direct costs (from PHP 2.34 million to PHP 2.88 million) and a 289 percent increase in administration costs (from PHP 300,000 to PHP 1.2 million). The overall operating expense increased from PHP 3.19 million in 2004 to PHP 5.6 million in 2005. During the year, the net surplus was PHP 948,079 representing a profit margin of 14 percent. The net surplus represents a 92 percent increase from its 2004 level of PHP 494,626.

The higher profit margin in 2005 is attributable to the association’s access to FOB free contracts and its own handling of packing. The association is liquid with limited liabilities amounting to PHP 205,865. The ownership structure is also strong with members’ equity reaching PHP 992,959 in 2005 or a 100 percent increase from PHP 0.49 million in 2004. However, this is mainly due to undistributed net income. Per capita members’ contributions are actually very low at PHP 3,000 overall and have remained stagnant.

69

Financial Performance

Financial Performance of PFARBAIRatios: Balance Sheet Accounts 2005 20041. Liquidity: Current Assets/ Current Liabilities 3.01 1.01 2. Long Term Solvency: Debt to Equity Percentage2.1: Total Equity/ Total Assets 0.83 0.68 2.2: Total Debt/ Total Assets 0.17 0.32 3. Debt to Equity: Total Debt/ Total Equity 0.21 0.46 4. Net Spread Ratio: Net Surplus/ Average Total Assets 0.98 0.68

Total Assets 962,853.70 726,881.88 Ratios: Income Statement Accounts 2005 20041. Profit Margin: Net Income/ Sales 0.14 0.13 2. Investment Turn-Over: Sales/ Invested Capital 6.60 7.41 3. Operating Cost Ratio: Operating Expenses/ Total Income 0.86 0.87

The PFARBAI financial statements show that the cooperative’s financial conditions, particularly its total assets, increased by 65 percent from 2004 to 2005. A breakdown of assets shows a 32:62 percent distribution of current assets to non-current assets in 2004, with a reverse cut-up of 52:48 percent in 2005 in favor of current assets. The cooperative decreased its dependence on external sources by 10 percent during the 2004-2005 period. It is noticeable, however, that the members’ equity portion has significantly increased by 100 percent from PHP 494,625.24 to PHP 989,959.53. The increase in members’ equity is attributable to the increase in undistributed net income, as the members’ contribution did not change from 2004 to 2005.

The cooperative has also increased its ability to meet current obligations with the increase in its current asset ratio from 1.01 in 2004 to 3.01 in 2005. With regard to its solvency and ability to meet long term debt, 2005 data show that for every PHP 0.21 debt, it has a peso of equity to match. The debt to equity ratio in 2005 is better than 2004 recorded at PHP 0.46 debt for every peso of equity. The improvement in the debt to equity ratio is due to the decrease in liabilities and increase in members’ equity.

The profitability performance of the cooperative shows that there is a 78 percent increase in revenues – from PHP 3,685,833.11 to PHP 6,549,389.68 – in the 2004 to 2005 period. A 76 percent increase in operating expenses was also observed from 2004 to 2005, from PHP 3.2 million to PHP 5.6 million. The bottom lines for 2004 and 2005 showed an increase of 92 percent. However, the net profit margin did not show any significant increase from 2004 (13 percent) to 2005 (14 percent).

TABL

E 9

70

Workers of Diamond Farms Agrarian Reform Beneficiaries Association (WODIFARBA)

WODIFARBA is a 31-member association established by former retrenched supervisors of Diamond Farms. It used to have 62 members, then 59 until it was reduced to 31 when 28 other members broke away. It also used to operate a 23-hectare banana (Cavendish) plantation but when the other members broke away, its effective cultivation area was reduced to 12.6 hectares. The rest of the land is cultivated by the breakaway group.

The association benefits from an FOB contract with an attractive price of USD 2.70 per box and a net price of USD 2.24 per box. The price structure is also attractive to the members. Of the USD 2.24 net price, USD 2.0 goes to the member-farm worker and only USD 0.24 cents accrues to the organization. In 2005, its sales increased to PHP 5.94 million from PHP 3.57 million during the previous year, representing a 59 percent increase for the period. However, operating expenses (PHP 4.57 million) increased by 79 percent during the same period. Nevertheless, the group earned a net surplus of PHP 184,077 compared to the PHP 1.81 million net loss incurred in 2004.

The present asset base is PHP 0.7 million, down by 43 percent from PHP 1.33 million in 2004. The association is not liquid as it has a standing debt of PHP 2.47 million of which the 23-hectare plantation has been used as mortgage. Member contribution is meager at PHP 5,040 with no change between 2004 and 2005. This represents a per capita share capital of only PHP 162. While the profit structure is liberal and member-oriented, there is a threat that the association may lose control of revenues while shouldering the collective financial risks.

Financial Performance

Financial Performance of WODIFARBARatios: Balance Sheet Accounts 2005 20041. Liquidity: Current Assets/ Current Liabilities 0.42 0.762. Long Term Solvency: Debt to Equity Percentage2.1: Total Equity/ Total Assets (2.15) (1.36)2.2: Total Debt/ Total Assets 3.15 2.363. Debt to Equity: Total Debt/ Total Equity (1.46) (1.74)4. Net Spread Ratio: Net Surplus/ Average Total Assets 0.18 (1.36)

Average Total Assets 1,045,297.84 1,334,974.00Ratios: Income Statement Accounts 2005 20041. Profit Margin: Net Income/ Sales 0.03 (0.49)2. Investment Turn-Over: Sales/ Invested Capital (6.39) (11.22)3. Operating Cost Ratio: Operating Expenses/ Total Income 0.16 0.14

TABL

E 10

71

The financial condition of WODIFARBA has slackened from 2004 to 2005. Its total assets dropped by 43 percent, significantly affecting current assets which correspondingly decreased by 45 percent. This is affected by the payment of liabilities in 2005 that significantly decreased total liabilities by 53 percent. The decrease in members’ equity in 2004 is attributed to the negative balance reached by the retained earnings at PHP 1,814,839.20 as a result of net loss for operations.

The decrease in assets, liabilities and equity of WODIFARBA resulted in a lower current asset ratio from 0.76 in 2004 to 0.46 in 2005. This means that the cooperative decreased its capacity to meet current obligations. Correspondingly, the deficit in operations affecting equity also decreased the cooperative’s long term solvency. Total equity vis-à-vis total assets show a drop to 2.15 in 2005, much worse than it was in 2004 when it was recorded at 1.46. On the brighter side, there was a slight improvement from 2004 to 2005 particularly for the debt to equity percentage, from 1.74 to 1.46, which is attributable to the payment of liabilities in 2005.

On the other hand, the organization’s operational performance showed a better position in 2005, as sales increased by 59 percent. It was also able to control its production costs, decreasing the same by 7 percent, although operating expenses showed a 79 percent increase in 2005. Net surplus in 2005 showed improvement as it reached PHP 184,077.51 representing a 3 percent profit margin compared to the negative 49 percent profit margin in 2004.

United Farm Workers Agrarian Reform Beneficiaries Cooperative (UFARBEMCO)

UFARBEMCO acquired its property through land occupation, successfully gaining control of 33 hectares although its original claim was 127 hectares. The modest success was further diminished when the group split into two and re-divided the property, leaving UFARBEMCO with 41 members and an 18-hectare share of the property.

The cooperative’s land-to-ARB ratio is very small at 0.43 hectare per member. In 2004 it earned a gross income of PHP 4.58 million, up by 183 percent from 2003. However, its total operating expenses also increased by 157 percent to PHP 3.1 million from PHP 1.23 million. The increase in operating expenses is mainly attributed to the 264 percent increase in administration costs.

The structure of ownership of the organization is weak. Members’ equity is stagnant at PHP 20,500 representing per capita share capital of only PHP 500. However, it has substantial assets amounting to PHP 7.04 million due to its ownership of a packing plant. Currently, it is disputing ownership and valuation of another 69 hectares.

72

Financial Performance

Financial Performance of UFARBEMCORatios: Balance Sheet Accounts 2004 20031. Liquidity: Current Assets/ Current Liabilities 0.20 0.602. Long Term Solvency: Debt to Equity Percentage2.1: Total Equity/ Total Assets 0.07 0.022.2: Total Debt/ Total Assets 0.93 0.983. Debt to Equity: Total Debt/ Total Equity 14.06 51.144. Net Spread Ratio: Net Surplus/ Average Total Assets 0.21 0.06

Average Total Assets 6,556,090.32 6,071,484.39Ratios: Income Statement Accounts 2004 20031. Profit Margin: Net Income/ Sales 0.31 0.242. Investment Turn-Over: Sales/ Invested Capital 0.90 0.343. Operating Cost Ratio: Operating Expenses/ Total Income 0.69 0.76

The cooperative’s financial data for 2003-2004 shows a 16 percent increase in total assets, although such increase is concentrated in non-current assets. The increase in non-current assets pulled down the current ratio of the cooperative from 0.60 in 2003 to 0.20 in 2004. Now, the cooperative has lesser ability to meet its current liabilities.

The decrease in current assets is due to payment of total liabilities, decreasing the account by 10 percent. However, current liabilities increased by 54 percent, resulting in an increase in non-current assets by 54 percent. Increase in liabilities may be attributed to the acquisition of assets. Reserves and statutory funds, on the other hand, increased from PHP 95,951 to PHP 447,086.53, representing 366 percent growth.

The operations of the cooperative seem to be better off in 2004 with the increase in gross income by 183 percent compared to 2003. Moreover, total expenses in 2004 decreased vis-à-vis income since the cooperative did not incur any financing costs during the year (compared to 2003 when it incurred PHP 362,540 in financing costs). Net surplus in 2004 reached 31 percent compared to 24 percent in 2003, signifying a 267 percent increment.

TABL

E 11

73

Concepcion-Hijo-Dumlan Agrarian Reform Beneficiaries Multi-Purpose Cooperative (CHDARBMPC)

The CHDARBMPC is a product of a split owing to conflicting preferences. Its break-away from the mother cooperative resulted in the acquisition of a smaller 34-hectare portion of which only 21.7 hectares are cultivable.47 The cooperative has 80 members, thus the effective per capita share of land is only 0.3 hectare. Owing to lack of capital for production and bearing the burden of amortizing the cost of land at PHP 235,000 per hectare, the cooperative relies on the former landowner for operating capital to cover production inputs and cost of labor. Of the 80 members, only 51 work on-site while the rest seek wage labor elsewhere. To offset the absence of other members, the cooperative hires an additional 23 workers, thus increasing the man-to-land ratio and labor costs.

Financial Performance

Financial Performance of CHDARBMPCRatios: Balance Sheet Accounts 2006 20051. Liquidity: Current Assets/ Current Liabilities 0.29 0.172. Long Term Solvency: Debt to Equity Percentage2.1: Total Equity/ Total Assets (0.47) (0.52)2.2: Total Debt/ Total Assets 1.47 1.523. Debt to Equity: Total Debt/ Total Equity (3.14) (2.93)4. Net Spread Ratio: Net Surplus/ Average Total Assets (0.17) (0.61)

Average Total Assets 837,189.29 701,595.29

Ratios: Income Statement Accounts 2006 20051. Profit Margin: Net Income/ Sales (0.05) (0.43)2. Investment Turn-Over: Sales/ Invested Capital (5.97) (2.72)3. Operating Cost Ratio: Operating Expenses/ Total Income 1.05 1.43

The 2005-2006 financial conditions of the cooperative shows an increase in total assets by 128 percent brought about by both increases in non-current liabilities (39 percent) and paid-up capital (91 percent) during the period. Increase in total assets affected both current and non-current accounts. The cooperative has fully paid its accounts payable in 2006 particularly for the vehicle. However, the debt-to-equity ratio remains over-extended at 2.93 in 2005 and 3.14 in 2006. Members’ equity account is decreased brought about by losses incurred in 2005 and 2006 totaling PHP 572,360.

While the 2005-2006 revenue increased by 174 percent, the cooperative continued to incur losses due to uncontrolled operating expenses. In 2005, it spent PHP 1.43 for every peso of revenue. There was a slight improvement in the PHP 1.05:1.00 cost-to-revenue ratio in 2006, but operating expenses still exceeded revenues.

47 Nine (9) hectares consist of a creek and its banks that cannot be planted.

TABL

E 12

74

DAPCO Agrarian Reform Beneficiaries Cooperative (DARBCO)

DARBCO got its name from the Davao Abaca Plantation Co. (DAPCO), a banana estate in Panabo (Davao del Norte) formerly owned by the Javellana family. Its members were co-owners of two CLOAs distributed in November 1993 and July 1994 covering 1,004 hectares of leased plantation land that was once known as the DAPCO Estate. Dapco has since been adopted by the local government of Panabo as the name of the village where the plantation is located. Consisting of 420 members, it acquired a 436-hectare share of the estate divided into two areas known as Packing Plant (PP) 91 and PP 310. In 2000, the cooperative decided to partially split into two groups, one opting to adopt the individual farming system (IFS) and the other opting to maintain the collective farming scheme. Upon the success of the IFS scheme, the other group adopted a modified farming scheme (MDS) by unpacking the collective farming system into clusters of 10-member collectives.

Each group established its own governing body but retained the governing body of the mother organization as the apex policy-making body. The mother organization also maintains control of processing and marketing. Currently, the cooperative is one of the top performing ARB plantation cooperatives in the region.

Financial Performance

Financial Performance of DAPCORatios: Balance Sheet Accounts 2006 2005 20041. Liquidity: Current Assets/ Current Liabilities 1.26 1.23 1.442. Long Term Solvency: Debt toEquity Percentage2.1: Total Equity/ Total Assets 0.25 0.23 0.272.2: Total Debt/ Total Assets 0.75 0.77 0.733. Debt to Equity: Total Debt/ Total Equity 2.97 3.28 2.754. Net Spread Ratio: Net Surplus/ Average Total Assets

0.05 0.05 0.08

Average Total AssetsPHP 118.2 million

PHP 109.2 million

PHP 100 million

Ratios: Income Statement Accounts 2006 2005 20041. Profit Margin: Net Income/ Sales 0.02 0.02 0.032. Investment Turn-Over: Sales/ Invested Capital

5.40 5.78 5.91

3. Operating Cost Ratio: Operating Expenses/ Total Income

0.98 0.98 0.97

The financial performance of the cooperative shows a rather stable financial condition for years 2004 to 2006. From 2004 to 2005, it showed an 18 percent increase in total assets, distributed between current assets (11 percent increase) and non-current assets (36 percent increase). Correspondingly, total liabilities increased by 24 percent with current liabilities increasing by 31 percent and non-

TABL

E 13

75

current liabilities increasing by 9 percent. Members’ equity increased slightly with a 4 percent increment.

From 2005 to 2006, the financial condition of the cooperative dropped by less than 5 percent since there are payments made for current and non-current obligations. Current liabilities decreased by 3.2 percent, amounting to PHP 2,061,078. Non-current liabilities decreased by 1.4 percent with an absolute equivalent of PHP 356,208. This was balanced off by a slight 7.4 percent increase in members’ equity amounting to PHP 2,054,703.

The debt-to-equity ratio improved in 2006 versus 2005, but was still higher than 2004 when it was computed at PHP 2.75 debt for every peso of equity. The ability of the cooperative to meet its current liabilities is relatively steady showing 1.44 (2004), 1.23 (2005) and 1.26 (2006).

It is noteworthy that members’ equity had steadily increased from 2004 to 2006. This means there is increasing contribution from membership and positive operational performance.

Revenues consistently declined by 4 percent between 2004 and 2005 and between 2005 and 2006 while operating expenses were maintained at 98 percent of revenues. The revenues for the past three years proved to meet the operating expenses resulting in a minimum of 2 percent profit margin for 2006 and 2005. In 2004, a 3 percent profit margin was obtained.

AMS Magatos Agrarian Reform Beneficiaries Multi-Purpose Cooperative (AMS-MARBEMCO)

The AMS-MARBEMCO was established in 1993 with a current membership base of 144 (136 males and 8 females). It was awarded 97 hectares with an initial land valuation of PHP 166,000 per hectare. The landowner has increased the land price to PHP 1.1 million per hectare. As of 2003, the cooperative had to allocate PHP 3.5 million a year for land amortization.

The cooperative adopted the Individual Farming Scheme (IFS) in 2006 with a man-to-land ratio of 2:1 or each member being allocated half a hectare for individual farming. To increase production, the cooperative acquired an additional 25-hectare property from outside the plantation.

76

Financial Performance

Financial Performance of MARBEMCORatios: Balance Sheet Accounts 2006 20051. Liquidity: Current Assets/ Current Liabilities 0.96 1.282. Long Term Solvency: Debt to Equity Percentage2.1: Total Equity/ Total Assets 0.09 0.082.2: Total Debt/ Total Assets 0.91 0.923. Debt to Equity: Total Debt/ Total Equity 10.04 11.844. Net Spread Ratio: Net Surplus/ Average Total Assets (0.02) 0.03

Average Total Assets 38,544,918.80 37,844,224.47

Ratios: Income Statement Accounts 2006 20051. Profit Margin: Net Income/ Sales (0.08) 0.042. Investment Turn-Over: Sales/ Invested Capital 0.40 1.123. Operating Cost Ratio: Operating Expenses/ Total Income 1.08 0.96

The financial condition of the cooperative in 2005 and 2006 shows an increase in total assets of 4 percent with a balancing off between current and non-assets. The decrease in current assets by 22 percent balanced the increase in non-current assets that also increased by 22 percent in 2006. Correspondingly, the liabilities of the cooperative increased by 2 percent in 2006, with the current assets increasing by 5 percent and non-current liabilities by 1 percent only.

However, such conditions did not improve liquidity, which decreased to 0.96 in 2006 versus 1.28 in 2005. Likewise, its long-term solvency in terms of equity to assets showed a decrease. The total equity to total assets ratio in 2005 was 0.08:1 and 0.09:1 in 2006. The debt to equity ratio improved from 11.84 in 2005 to 10.04 in 2006 due to the increase in members’ equity by 21 percent. However, while the debt-to-equity ratio seems to improve, it still shows that the cooperative has over-stretched its equity by acquiring external credit 10 times over the internal capital generated.

The total revenues of the cooperative slumped from PHP 29.5 million in 2005 to PHP 10.8 million in 2006, representing a 63 percent downfall. The operating expenses may have decreased by 59 percent between 2005 and 2006 but the bottom line shows a net loss in 2006. The profit margin computed at 4 percent in 2005 has fallen to 8 percent in 2006. This indicates that the cooperative is not operating efficiently.

TABL

E 14

77

Financial ViabilityA summation of cases described in the preceding section indicate the following state of financial health and viability of the ARB plantation cooperatives:

Declining Liquidity

Data shows that as the cooperatives stay in banana production, their liquidity level decreases. There are no sufficient current assets to meet current liabilities. This is due to the fact that the assets acquired by cooperatives are non-current. Mostly, the assets of the cooperatives are property, plant and equipment which are non-earning assets or related to banana production and oftentimes provided as long-term liabilities. Such long-term liabilities also tie the cooperatives to financing institutions or corporations they have contracts with. The land acquired through CARP has become the ARB cooperative’s biggest liability. The annual amortization payment represents a major current liability that still cannot be compensated from the appreciating value of the land. This is even more so in leased back plantations where the annual rental payment is lower than the annual amortization payment.

Liquidity Ratios

Increasing Equity to Total Assets

The total equity of the cooperatives generally increases due to member’s contributions. A few cases are due to increasing surplus displaying sound operational performance. In most, this is due to undistributed annual dividends that are converted to equity. This suggests that the growth of assets is likely to be subsidized by the members rather than an offshoot of value creation from its main economic activity. This also suggests that instead of benefiting from land transfer and the fruits of the land thereof, ARBs mainly rely on wages for income, while on the other hand the land becomes a burden.

LIQUIDITY

(0.60)

(0.40)

(0.20)

-

0.20

0.40

0.60

0.80

YEAR

RA

TIO

S

AMS Magatos MPC Pag-Asa ARBMPC Workers of Diamond CDH ARBMPC

United Farmworkers FIARBEMCO DAPCO

AMS Magatos MPC (0.08) 0.04

Pag-Asa ARBMPC 0.14 0.13

Workers of Diamond 0.03 (0.49)

CDH ARBMPC (0.05) (0.43)

United Farmworkers 0.31 0.24

FIARBEMCO 0.67 0.35 0.09 0.39 0.28 0.37 0.49

DAPCO 0.02 0.02 0.03

2006 2005 2004 2003 2002 2001 2000

FIGU

RE 4

78

Total Equity to Total Assets

Decreasing Debt to Total Assets Ratio

Total Debt to Total Asset ratio is decreasing due to increasing members’ equity.

Total Debt-to-Total Assets

Increasing Debt to Equity Ratio

The Debt to Equity ratio of most cooperatives is increasing. This indicates growing indebtedness. The cooperatives tend to seek out capital from external sources. Added to this debt burden is the land amortization cost which represents a long-term debt from the Land Bank.

FIGU

RE 5 EQUITY TO ASSETS

(2.50)

(2.00)

(1.50)

(1.00)

(0.50)

-

0.50

1.00

YEAR

RATI

OS

AMS Magatos MPC Pag-Asa ARBMPC Workers of Diamond CDH ARBMPC

United Farmw orkers FIARBEMCO DAPCO

AMS Magatos MPC 0.09 0.08

Pag-Asa ARBMPC 0.83 0.68

Workers of Diamond (2.15) (1.36)

CDH ARBMPC (0.47) (0.52)

United Farmw orkers 0.07 0.02

FIARBEMCO 0.85 0.76 0.73 0.56 0.45 0.45 0.44

DAPCO 0.25 0.23 0.27

2006 2005 2004 2003 2002 2001 2000

FIGU

RE 6 TOTAL DEBT TO TOTAL ASSETS

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

YEAR

RATIO

S

AMS Magatos MPC Pag-Asa ARBMPC Workers of Diamond CDH ARBMPC

United Farmw orkers FIARBEMCO DAPCO

AMS Magatos MPC 0.91 0.92

Pag-Asa ARBMPC 0.17 0.32

Workers of Diamond 3.15 2.36

CDH ARBMPC 1.47 1.52

United Farmw orkers 0.93 0.98

FIARBEMCO 0.15 0.24 0.27 0.44 0.55 0.82 0.83

DAPCO 0.75 0.77 0.73

2006 2005 2004 2003 2002 2001 2000

79

Debt-Equity

Decreasing Net Spread Ratio

The Net Spread Ratio is decreasing. It indicates the ratio of net surplus against average total assets of the cooperative. This is so because there is no operational efficiency at the cooperative level brought about by different factors (e.g., weaknesses in management structure, capacities, instability of prices, increasing capitalization that is externally sourced to continue operations; higher input prices, etc). Moreover, there is an increasing asset base for cooperatives primarily due to the externally sourced capital and/or asset financing. In sum, the decreasing net spread ratio is a result of operational inefficiency (lower surplus) and increasing asset base.

Net Spread Ratio

FIGU

RE 7 DEBT TO EQUITY

(10.00)(5.00)

-5.00

10.0015.0020.0025.0030.0035.0040.0045.0050.0055.00

YEAR

RATIO

S

AMS Magatos MPC Pag-Asa ARBMPC Workers of Diamond CDH ARBMPC

United Farmw orkers FIARBEMCO DAPCO

AMS Magatos MPC 10.04 11.84

Pag-Asa ARBMPC 0.21 0.46

Workers of Diamond (1.46) (1.74)

CDH ARBMPC (3.14) (2.93)

United Farmw orkers 14.06 51.14

FIARBEMCO 0.18 0.31 0.36 0.78 1.2 1.24 1.25

DAPCO 2.97 3.28 2.75

2006 2005 2004 2003 2002 2001 2000

FIGU

RE 8 NET SPREAD RATIO

(1.50)

(1.00)

(0.50)

-

0.50

1.00

1.50

YEAR

RATI

OS

AMS Magatos MPC Pag-Asa ARBMPC Workers of Diamond CDH ARBMPCUnited Farmw orkers FIARBEMCO DAPCO

AMS Magatos MPC (0.12) 0.03

Pag-Asa ARBMPC 0.98 0.68

Workers of Diamond 0.18 (1.36)

CDH ARBMPC (0.17) (0.61)

United Farmw orkers 0.21 0.06

FIARBEMCO 0.11 0.12 0.33 0.25 0.32 0.22 0.26

DAPCO 0.05 0.05 0.08

2006 2005 2004 2003 2002 2001 2000

80

Increasing Net Income to Sales Ratio

The net income to sales ratio is increasing basically due to improvement in the operating cost ratio.

Net Income Sales Ratio

Declining Investment Turn Over Ratio

Investment turnover shows the performance in terms of sales over invested capital. Data from the sample cooperatives indicate that the investment turnover is declining This also shows that although there is capital infusion (both equity and liabilities), sales figures during the period are not proportionately improving relative to the rate of investment poured into the operations.

Investment Turnover Ratio

FIGU

RE 9

PROFIT MARGIN

(0.60)

(0.40)

(0.20)

-

0.20

0.40

0.60

0.80

YEAR

RATI

OS

AMS Magatos MPC Pag-Asa ARBMPC Workers of Diamond CDH ARBMPC

United Farmw orkers FIARBEMCO DAPCO

AMS Magatos MPC (0.08) 0.04

Pag-Asa ARBMPC 0.14 0.13

Workers of Diamond 0.03 (0.49)

CDH ARBMPC (0.05) (0.43)

United Farmw orkers 0.31 0.24

FIARBEMCO 0.67 0.35 0.09 0.39 0.28 0.37 0.49

DAPCO 0.02 0.02 0.03

2006 2005 2004 2003 2002 2001 2000

FIGU

RE 1

0 INVESTMENT TURN-OVER

(14.00)

(12.00)

(10.00)

(8.00)

(6.00)

(4.00)

(2.00)

-

2.00

4.00

6.00

8.00

10.00

YEAR

RATIO

S

AMS Magatos MPC Pag-Asa ARBMPC Workers of Diamond CDH ARBMPCUnited Farmw orkers FIARBEMCO DAPCO

AMS Magatos MPC 0.40 1.12

Pag-Asa ARBMPC 6.6 7.41

Workers of Diamond (6.39) (11.22)

CDH ARBMPC (5.97) (2.72)

United Farmw orkers 0.90 0.34

FIARBEMCO 0.19 0.45 1.74 0.56 1.25 0.67 0.61

DAPCO 5.40 5.78 5.91

2006 2005 2004 2003 2002 2001 2000

81

Decreasing Operating Cost Ratio

The Operating Cost Ratio is decreasing. This is due to lowering of operating expenses (either by improvement in managing operations or cutting down of operations/areas or lesser expenses due to lesser coverage). Correspondingly, the decrease in the operating cost ratio brings about improvement in the net income- to- sales ratio.

Operating Cost Ratio

The overall economic environment around the banana industry provides plenty of opportunities. However, ARB plantation cooperatives are not able to maximize these due to immediate constraints compared to private plantations that are less encumbered. The problem lies in the historical context and environment in which ARB cooperatives have inherited a mono-cropping system and unfair arrangements in the CARP transition.

The Financially Better Off and Worse Off Leaseback arrangements exhibit the worst type of arrangement in terms of net value adding in favor of ARB cooperatives. While growership contracts allow plantation cooperatives which have full control of land to have a Net Value Added (NVA) of PHP 50,919 to PHP 68,383 per hectare, leased plantations allow a minuscule NVA of PHP 409 per hectare (in the case of DFWC-Marsman) or utmost PHP 14,169 per hectare (in the case of SEARBAI-STANFILCO) (see Table 15).

FIGU

RE 1

1 OPERATING COST RATIO

-

0.50

1.00

1.50

2.00

YEAR

RATI

OS

AMS Magatos MPC Pag-Asa ARBMPC Workers of Diamond CDH ARBMPC

United Farmw orkers FIARBEMCO DAPCO

AMS Magatos MPC 1.08 0.96

Pag-Asa ARBMPC 0.86 0.87

Workers of Diamond 0.16 0.14

CDH ARBMPC 1.05 1.43

United Farmw orkers 0.69 0.76

FIARBEMCO 0.33 0.65 0.91 0.61 0.72 0.63 0.51

DAPCO 0.98 0.98 0.97

2006 2005 2004 2003 2002 2001 2000

82

Comparative Net Value Added per Hectare, by Type of AVA

Coop/ Company Type of AVAsCoop Gross Value/ Ha/ year

(Less) Direct Labor

(Less) Land Amortization

Net Value Added/ ha/ annum

DARBCO/ StanfilcoGrowership/ FOB $2.6/box

167,214 78,000 20,831 68,383

BALMAR/ StanfilcoGrowership/ FOB P26/box

149,750 78,000 20,831 50,919

SEARBAI/ Stanfilco Lease: P35,000/ha 113,000 78,000 20,831 14,169

MAPARBEMCO/ Marsman

Lease/land “donation scheme”

110,611 78,000 23,333 9,278

WEARBEMCO/ WADECOR

Lease 85,666 78,000 3,067 4,599

DFWC/ Marsman Lease 99,241 78,000 20,831 409

The NVA levels in leased plantations also indicate the consequences of lack of control over cost of production, or lessees being able to artificially jack up the cost of production and pass this on to the ARBs. An example would be the Concepcion-Dumlan-Hijo ARB Multipurpose Cooperative. The cooperative entered into a direct payment scheme (DPS) where the landowner is paid back in the form of banana produce through an exclusive sales contract, and where the latter advances the capital for labor and farm inputs without transparency on costing and dictates the farm gate price. The cooperative, on the other hand, exhibits weakness in management of labor costs by allowing a 4:1 man-to-land ratio in order to satisfy demand for employment.

In this case, the average monthly income of an ARB household is PHP 6,055 where PHP 3,800 consists of wage income from the cooperative and the rest is derived from hog raising. This income level barely supports food and other basic needs with little margins for the education of children.

Compared to other schemes, the individual farming systems implemented by DARBCO and some other cooperatives allows the ARB to have greater control over the land, while the cooperative handles the marketing and also provides for fertilizer requirements as loans. The net benefits would be in the form of cooperative dividends at the end of the year, while the farmer exacts optimum value from sales as his/her family strives to increase output in terms of boxes per year. In the case of DARBCO, the benchmark productivity performance has reached 4,500 boxes per hectare.

TABL

E 15

83

Benefits of ControlThe industry-focused function of the AVAs promoted by the CARP in commercial farms and the social-justice function of land transfer represent a clash of interests that ultimately defines who gains and who loses in the arrangement. Land reform is supposed to provide incentives for farmers and farm workers to increase productivity and thereby improve their quality of life. As argued by Hayami, Adriano and Quisumbing (1987), agrarian reform would not undermine economies of scale in banana commercial farms even if ARBs were to assume control of farm level production. They cite the viability and mutually beneficial effects of contract-growing schemes. However, big landowners and agribusiness firms never gave up the intention of assuming full control of the plantations, including the farm level. With the evident ill-preparedness of ARBs to negotiate fairer terms and the apparent lack of positive interventions from government, the banana industry has grown without equity. This assessment is supported by the poverty-amidst-plenty scenario in the Cavendish-growing provinces of Davao del Norte and Compostela Valley.

Among the various types of AVAs prevailing in the two provinces, the contract-growing scheme seems to offer the best benefits to the farmer/grower. Table 16 illustrates the differential effects of two schemes: farm management contract and lease of an ARB plantation and a contract growing scheme between a private landowner and a private corporation.

The Model A presented in Table 16 represents the experience of the United Banana Farm (UBF) which, in practice, is not as united as the name suggests. The ARBs under UBF are claiming portions of land from the Davao Fruits Corporation (DFC) in the Municipality of Compostela, Compostela Valley. The UBF has been split into three groups with UBF 1 and UBF 2, consisting of seven ARBs who have assumed control of 21 hectares (with only 8 hectares under CARP), having entered into a contract growing scheme with DFC since 1994. UBF 3, on the other hand, consists of 12 farm workers, of whom only 8 are recognized as ARBs. Three members of the group have entered into an AVA arrangement called Farm Management Contract (FMC) involving 8 hectares of land.

Under this scheme, DFC would assume control of the farm through a 15-year lease at a progressive rental price of PHP 15,000/hectare for the first five years, PHP 17,000/hectare for the sixth to 10th year and PHP 19,000 for the 11th and 15th year. In addition to the contract, the landowner executes a Special Power of Attorney that would transfer absolute power on the land within the prescribed lease period. These instruments are accompanied by the surrender of the Land Title (or certificate of ownership) that is deposited with the bank that provides the financing for production.

84

After relinquishing control of the land, UBF 3 is left with two income streams: rental payment for the land and wage income that is limited to one (1) worker per hectare for a period of five months per year.

The Model B presented in the Table (16) is a contract growing arrangement between Vicente Nisnisan, a private landowner from Brgy. La Filipina in Tagum City (Davao del Norte) and Sumitomo Fruits.

Comparative Analysis of Two Agribusiness Venture Arrangements

SPECIFICS Model AAVA: Farm Management Contract

Model BAVA: Contract Growing

Contact Person / Owner ROLANDO TORINTERA, United Banana Farm 3

VICENTE NISNISAN, Private Farmer

AVA Farm Management Contract Contract Growing

Partner DFC Sumitomo Fruits

Contract Term 15 years 5 years

Area Compostela Valley Davao Del Norte

Price (Gross) $ 3.5/box $ 3.3/box

Price (Net) $ 3.09/box $ 3/box

Requirement/Quota 3800 boxes per year 3500 boxes per year

In case of shortage No penalty No penalty

Production (2006) 4200 boxes 120-130 boxes/week – 6,240 to 6,760 per year

Hills per Hectare 2200 2200

Harvesting Cost PHP 5/BOX PHP 4/box

Labor PHP 162.50/day x 24 days/month PHP 192/day x 26 days/month

Packing House $ 0.41/box PHP 5/box

Land Ownership Land Transfer Stage Privately Owned

Inputs c/o company c/o company

Income (landowner) PHP 50,000/month

Retention (company) PHP 117,000/month

A cursory review of the two models suggest the following advantages of the contract growing scheme:

• The landowner has greater control of farm level production.• The contract is based on the FOB price of banana (compared to the FMC scheme

where the contract is based on the rental price of the land). This means that increases in productivity will directly benefit the landowner based on the agreed price during the contract period.

• The contract is shorter (five years) and allows the landowner to benefit from short term upward swings in prices (compared to the FMC scheme where only the corporate partner benefits from the same).

• The landowner shares the risks (by inducing the corporate partner to provide the inputs) but still retains control of the fruits of the land (compared to the FMC scheme where the corporate partner provides the inputs but also assumes full ownership of the fruits of the land).

TABL

E 16

85

• The contract grower provides higher wages (PHP 192 per day compared to the FMC at PHP 162.50/day) and longer working periods (26 days per month compared to 24 days per month under FMC).

The critical factor determining the flow of financial benefits in any AVA is farm level control of production and ownership of the fruits of the land. In both cases, only the contract-growing scheme seems to provide fairer terms for landowners. Conversely, other schemes result in significant foregone incomes that should have accrued to ARBs.

The more successful contract growers show the following attributes:

• Adequate farm management capacity and dedication;• Sound financial management (productivity versus costs);• Good leadership and working relations with farm workers; and, • Ability to motivate farm workers to conform to desired farming practices.

Farm Diversification OptionIn monocrop farms, the tendency is to allow the farmer to optimize production by implementing appropriate technologies and allowing for maximum input application. These adjustments are seen in banana plantations where box-per-hectare performance is the benchmark unit. According to FARMCOOP, the standard break-even volume would be around 2000 to 2500 boxes per hectare. The expandability of the banana plantation can allow the farmers to target up to 4,000 boxes per hectare. Although this would depend on the type of soil and area, the information from the communities and agriculture technicians suggest that the best suitable area is Davao Norte, as compared to Compostela Valley due to the Sigatoka virus. The decision to enter into Cavendish banana production should also consider the risks presented by the location.

In addition to the search for suitable partners willing to enter into AVA arrangements, agribusiness firms also anchor measures of profitability to certain basic criteria such as soil suitability for Cavendish. In this regard, they invest on soil sampling and tests where the potential Cavendish zone would reach around 500 hectares.

One of the best ways to reduce the risks attendant to banana production is to diversify crop production. Compared to mono-cropping practices, the diversification of crop improves farm productivity by 169 percent (see Table 18). This refers to the desired crop mix where most recommendations would suggest a favorable mix of short-term, medium-term, and also long-term or permanent crops such as fruit trees.

86

Exhibit of Value Creation: Fresh and Processed Banana CombinationFRESH Particulars

Income from Banana 250kls x PHP 5/kl x 4 weeks

= P 1250 x 4 weeks PHP 5,000.00

Expenses per month: MaintenanceVermi (P150 x 5 sacks)

= PHP 3,000.00= 750.00 PHP 3,750.00

Net, Fresh Banana PHP 1, 250.00

PROCESSED Particulars

Income from Banana Output: 84 kls @ PHP150/kilo Net, Banana Chips

= 12600.00= PHP 7,484.93 PHP 12, 600.00

Expenses per Month:Fresh Banana: 250kls x P5/kl Labor:3 pax x P120 Oil (2 containers @ P780) Muscovado (6 kls @ P38) Salt Fuel Packaging Total Overhead (30%) Total Production Cost

= 1,250.00

= 360.00= 1,560.00

= 228.00= 10.00

= 360.00= 166.67

= 3,934.67= 1,180.41

= PHP 5,115.07 PHP 5,115.07

Net, Processed Banana PHP 7,484.93

The experience of Victoria Mortril, a six-hectare smallholder in Tupi (South Cotabato) and member of the Tupi Balangon48 Growers’ Association, illustrates how crop diversification and value adding processes can augment net value creation (NVA) that is even higher than the best performing contract-growing scheme in Davao del Norte. Tables 18 and 19 show an NVA of PHP 79,900 per hectare compared to the highest NVA attained by DARBCO (Cavendish contract growing) at PHP 68,383 per hectare (see Table 15).

48 Balangon is a native cultivar that is similar in appearance to Cavendish but is sweeter due to longer gestation. The fruit is also known sa Bongolan in other Cebuano-speaking provinces of Mindanao. Alter-Trade Corporation, a fair trade enterprise based in Bacolod City (Negros Occidental) exports organically-grown Balangon to Japan.

TABL

E 17

87

Exhibit of Diversified Fruit Farming

Crops Computation for Income

Income(in PHP)

Computation for Costs

Costs(in PHP)

Net Income(in PHP)

Banana (Balangon)

250 kls x 4 weeks x 12months @ P 5/kl

60,000.00 P 3750 x 12 months

45,000.00 15,000.00

Mangosteen 150 kls x 80 trees @ P 30/kl (lowest price); once every year

360,000.00 Harvesting: 3 pax/P100/30 daysMaintenance: c/o banana costs

9,000.00 351,000.00

Rambutan “Pakyaw” 15 trees @P6000 (once every year)

90,000.00 Pruning: P 100 x 2 daysMaintenance: c/o banana costs

200.00 89,800.00

Ampalaya Harvest (3mos): 600kls/ cropping @ P20 (FG)=P12000.00

(50kls; 2x a week)

48,000.00 Planting seeds P3600.00

Labor Cost 1500.00

Kawayan/Twine (trellis)1000.00

Expenses: 6,100.00 (every 3 months)

24,400.00 23,600.00

Total 558,000.00 78,600.00 479,400.00

The trick lies in maintaining farm level control of production, spreading the risks and multiplying income streams. She organizes the six-hectare farm lot into a multi-storey arrangement where 2 hectares is dedicated to fruit trees (Mangosteen, Rambutan, Durian, Guavapple and Lanzones) inter-cropped with banana (Balangon); 2 hectares for corn production; 1 hectare for Lakatan (another banana cultivar); and 1 hectare for Cardava (another banana cultivar). Within the orchard she also allocates areas for high value vegetable production.

The diversification option, however, is currently non-workable for ARB cooperatives that have relinquished control of farm level production through AVAs such as leaseback or farm management contracts or a combination thereof.

TABL

E 18

88

Land Acquisition CostsThe research encountered three types of scenarios in CARP coverage of banana plantations: (a) Those acquired by ARBs through Compulsory Acquisition (CA) and transferred to existing farm workers at the time of acquisition; (b) smaller areas that have been segregated from the original CA area (above) due to break up of the cooperative; and (c) those that are covered by voluntary land transfer and/or direct payment schemes where ARBs enter into AVAs committing to surrender all rights to the fruits of the land as payment for the land.

Land values have increased due to the mutation of land pricing formula in leaseback and other rental arrangements. Whereas DAR AO No. 9, Series of 1998 (Section 3) provides that the initial lease shall not exceed 10 years, actual lease agreements tie the rental price to the amortization period. In cases where the produce (Class A bananas) serves as the payment in kind, the imputed value is lower-than-market rates and ARBs no longer benefit from competitive prices offered by other buyers.

The appreciation of land values is hidden in the various dimensions of the so-called AVAs. In leaseback arrangements, land values appreciate through lengthening of the lease period against low rental prices per hectare per year. This is exacerbated by cost of improvements that are imputed on the land value. In the case of MCBCI (Compostela Valley), the original value of the 353-hectare leased plantation was PHP 95 million. Now on its 12th year (of the 30-year lease period), the original leaseholder – Lapanday Foods Corporation – sold its rights to Chiquita-Uni Frutti Philippines (CUFP), which now demands a price of PHP 300 million.

Lapanday’s lease of the MCBCI property was onerous from the start. The former officers of the cooperative entered into a lease agreement with Lapanday without legal advice and guidance from the DAR. The land used to be a coconut plantation from which the cooperative could have benefited given the current high price of copra and coconut oil. This property formed part of the 707-hectare land originally valued at PHP 54,000 per hectare. The original intention was to lease a portion, the earnings of which they could use to develop the un-rented 424 portion and a 50-hectare retention area which they acquired for PHP 1.7 million (at PHP 35,000 per hectare). This area also includes a beach property that does not earn any income. Overall, the un-leased areas are underdeveloped for lack of capital. With 14 more years to go in the lease arrangement with Chiquita-Uni Frutti Philippines and PHP 300 million cost of acquisition MCBCI members are losing hope. Already 30 members have died of old age and disease and 33 more are facing various criminal charges.

In the case of CDHARBMPCO, the cost burden of land acquisition is hidden through under-pricing of Class A bananas (in growership contracts where Class A is used as proxy for amortization payment) and overpricing of farm inputs and other operating capital inputs.

89

AMSKARBEMCO is composed of former workers of the 515-hectare AMS Farms in Kapalong (Davao del Norte) and former members of the AMS Workers Multi-Purpose Cooperative (AMSWMPC) before it split due to conflicts over how to engage the landowner. When the land was put under CARP, the AMSWMPC was awarded 278 hectares. After the split, AMSKARBEMCO received 206 hectares while the pro-management AMSEPCO got 72 hectares.

The land was transferred in three CLOAs in three different periods: 1997, 1998, 1999, 2000 and 2002. The land was originally valued at PHP 165,000 per hectare. Invoking the just compensation clause, the landowner petitioned for and was granted a higher valuation of PHP 1.1 million per hectare or 6.6 times the original value.49 Based on the new valuation, every ARB has to allocate PHP 46,000 per year (or the cooperative has to allocate PHP 9.6 million per year) for amortization.

In the case of DARBCO, land prices have increased from PHP 66,000/hectare in one area and PHP 17,000 in another to the current PHP 370,000 per hectare.

ARB Plantation Cooperatives Assisted by MFDC

Name of PO and Year of

Establishment

# of Mem-bers

Land Area

Claimed(in has.)

Area occu-pied

Land Value(PHP

million)*

Crop

2005 Revenues (in PHP million)

Member’s Equity 2005

(in PHP)

1FIARBEMCO(DN, 1999)

30 143 14 --- Cavendish banana 0.44 231,705.00

2UFARBAI/ UFARBEMCO (DN,2003)

41 127 18 4.86 Cavendish banana4.58

(2004)20,500.00

(2004)

3 MCBCI/ 1991 252 707 269.3 38.01Banana, coconut, papaya, mango, rice

- spurious data-

- spurious data-

4 WODIFARBA 31† 277 12.6 ‡ 2.85 Cavendish banana 5.94 5,450.00

5PFARBAI (DN, 2004)

30 109 15 4.05 Cavendish banana 6.54 992,959.00

*The land value refers to the occupied area.†It started with 62 members.‡It used to control 23 hectares until the land was fragmented when 28 members broke away.Source: Mindanao Farmers and Farm Workers Development Center (MFDC)

49 The land valuation includes all standing crops and infrastructure, except the packing plant.

TABL

E 19

90

ARB Plantations Assisted by FARMCOOP50

Name and Category of Cooperative

Membership Landholding(hectares)

Land Value andAmortization

M F Total

1 Diamond ARB Multi-Purpose Cooperative (DARBMUPCO)

651 • Claimed: 981• Awarded: 689• Price: PHP 253,000/ha.

• Coop has paid PHP 7.7 million since 1996

2 DAPCO ARB Cooperative (DARBCO)

324 104 427 • Awarded: 456 has.• Claim: 1,004 (jointly with SEARBAI)• Price: PHP 65,000/ha

• Faithfully complying with amortization payment but land price may be jacked up depending on the outcome of litigation

3 Checkered Farms ARB Multi-Purpose Cooperative (CFARBEMPCO)

144 26 170 • Awarded: 280 (220 banana, 59 mango)• Price: PHP 153,000/ha. For banana = PHP 33.6 M; PHP 26,000/ha for mango = PHP 1.5 M)

• Amortization paid: P15 million

4 Tagnanan CARP Beneficiaries Cooperative (TCBC)

287 49 336• Awarded: 1,005 has.• Price: PHP 60 million • 609 hectares under 30-year lease by Marsman• 396 hectares of coconut lands under the control of the cooperative

• Amortization: fully paid (from rental under leaseback)• Marsman lease at PHP 4,000/year for 30 years; renewable for another 30 years at option of Marsman

5 AMS Kapalong ARB Multi-Purpose Cooperative (AMSKARBEMCO)

249 28 277 • Claimed: 515 has.• Awarded: 206 has.• Price: PHP 250,000/ha.• New price: PHP 1.1 million/ha.

• Amortization paid: none yet

6 AMS Magatos Agrarian Reform Beneficiaries Multi-Purpose Cooperative (MARBEMCO)

124 19 143 • Awarded 97 hectares• Price: P166,000/he.• New price: PHP 1.1 million/ha.

• PHP 4.2 million/year• 2003 allocation for amortization: PHP 3.5 million

7 Biao Guianga ARB Cooperative (BARBCO)

18 4 22• Claimed: 75 hectares• Awarded: 11 hectares• Price: PHP 472,000/ha.

• Amortization paid: none

Source: FARMCOOP

There are indications that most ARB plantation cooperatives may not be able to complete their amortization obligations within the prescribed period due to the confluence of financial stresses related to cost of production inputs and labor, land tax and demands for benefits from members. Worse off are those that have entered into growership arrangements with borrowed capital from the former landowner and where add-on costs are transferred to the ARBs.

50 Data as of December 2003; partial list of cooperatives assisted by FARMCOOP.

TABL

E 20

91

Coping StrategiesThe biggest irony of CARP in banana commercial farms is the inability of land reform to secure full entitlements to the land and appropriate share of net values created by the enterprise. Where cooperatives struggle to cope with the demand for Class A from exporters and internal demand for labor opportunities, the immediate recourse is to bring in more workers than necessary (including rotational arrangements where family members of ARBs are given short term jobs on rotation basis). In some others where cooperatives are forced to offer lower-than-minimum wage rates, ARBs temporarily abandon their own plantation to seek jobs in plantations managed by agribusiness firms that they used to fight against.

Even ARBs who have acquired land find it hard to survive, especially when they are unable to assume full control of the land. This is illustrated in the case of Hernani Santander, 68, a member of MCBCI and his wife, Mercedita, 64. Mercedita is a close relative of the wife of Fernando Montelibano, owner of AEI from which MCBCI acquired the 757-hectare coconut plantation, of which 500 hectares were later leased to LADECO. The couple was able to send their children to college from farm income as tenants and, on the part of Santander, wage income as the driver of Montelibano. With MCBCI, the couple earns only PHP 5,000 a month against expenditures averaging PHP 8,000 per month, 70 percent of which is for food needs. They hardly get anything from the lease rental of LADECO because the annual revenue is not even enough to cover the land amortization. The major source of income is the PHP 3,300 salary as an employee of LADECO.

Rizalina Diano, 41, is another MCBCI member whose family has three children in high school. Her family relies on her husband’s PHP 5,000 monthly wage from LADECO and a PHP 3,000 allotment from her sister who works as an Overseas Filipino Worker (OFW). While Rizalina’s family is better off than the rest, earning a total of PHP 12,000 a month against monthly expenditure of PHP 10,000, she claims that her family was better off when the land was still owned by AEI and where she could raise livestock and grow vegetables while working as a laborer in the coconut plantation. Their financial woes emerged when the MCBCI land was leased back to LADECO. The lease arrangement created a crisis within the organization such that it has been unable to map out effective strategies for developing the un-leased portion. The organization has focused on the struggle to claim back the leased portion and left individual members alone to develop the un-leased portion.

Worst off among the ranks of farm workers are those who were retrenched for claiming land under CARP or militantly expressing such desire during the deferment period. Bienvenido Hibaya, 53, was a farm worker at DFC and a member of the DFEARBAI group that struggled to put the DFC plantation under CARP. He was never re-hired by DFC for being a union leader. He also belongs to the Retrenched Group that has been denied participation in the subsequent rearrangements in the plantation. With two children, his family relies on income from a small sari-sari store that doubles as a carenderia with a billiard table for additional income. His

92

eldest son has to pay for his college education in order to work in a department store in Davao City. Luckily, Bienvenido has a small family that spends only PHP 6,000 per month on an income of PHP 9,000 per month. Fifty percent of family expenditures are for food needs.

There are former farm workers-turned-ARBs who are caught in limbo after a protracted struggle for agrarian reform. These are workers who are practically penalized for claiming their rights. This is illustrated in the case of Benjamin Abrencia, 67, father of five who, in the past, has been able to send his children to high school and college. He was an employee of Dizon Farms in Mawab from 1965 to 1969 and in 1994 to 1995. In between he worked for neighboring plantations and tilled open access areas in the uplands to supplement wage income.

He formed part of the Dizon Farm Workers Cooperative (DFWC) that claimed ownership of the 463-hectare plantation under CARP and hoped to get his three-hectare share at the end of the process. In the internal conflict at DFWC, he joined the breakaway 36-member MARBAI group that got only 12.5 hectares and was allowed to allocate the same to only eight members of their group.

MARBAI is still claiming additional lands in order to get the desired 1.56-hectare share per member. In the interim, the Abrencia couple is assigned to the Dizon citrus farm that the group is claiming. They receive irregular wage income from the association that allows them to buy rice. They stay in a one-room bamboo hut with nothing but a firewood stove and a wooden bench. They fetch water from a nearby spring. Their other needs are provided for by the children who have taken work elsewhere. The couple earns PHP 3,000 a month (irregularly) from the association and spends half for food.

The Abrencia couple’s dream is to own a piece of land to which they can grow Cavendish for cash. But this dream is closely tied to and dependent on the ability of MARBAI to acquire additional land under CARP. They are already in the middle of the farm they claim under CARP but they can hardly map out a future due to uncertainty in ownership.

Although the fate of retrenched farm workers are worst cases of ARBs who are not only excluded from CARP but also lost wage income, some are able to cope by seeking jobs elsewhere or investing on livelihoods for income. Samson Nillasco, 55, is a former worker of Dizon Farms and a member of MARBAI. He has two children who could have completed college were he not retrenched from the plantation and were he able to acquire land under CARP. He used to work at Dizon for 11 years (1984 – 1995) as backhoe operator until he was retrenched for claiming land under CARP. In the ensuring CARP coverage, he was excluded from the master list of ARBs. Although his mother organization, the DFWC, later included him in the list, he was later de-listed after joining the breakaway group, MARBAI. The latter has included him in the list of ARBs but the group does not have the land to share.

93

Samson now supports his family by working as farmhand of Marsman Drysdale, the company they fought against for leasing their acquired land for a low rental price. Marsman offers a daily wage of PHP 197 per day compared to the irregular wage income from MARBAI, his own organization. With wage income, he was able to buy a motorcycle (on installment) that he uses as passenger vehicle on a part-time basis. Since the children are already married, he and his wife spend only PHP 5,000 a month on food, medicine and installments for the motorcycle from a monthly income of around PHP 10,000.

The coping strategies of ARB families have to take into account key risks that impose barriers against their desire to assume full ownership and control of land under CARP and freedom to choose best options for survival. In the pre-CARP life of an ARB, the single biggest risk is the ability to translate wage income in basic family survival (food, medicine, water, power) and development (housing, education). After CARP, land acquisition entails additional risks such as land amortization, tax obligations and corresponding interest payments.

Risk Matrix of an ARB

Family ExpensesThese are composed of expenses within the family including food, medical payments, education, housing, water, power, etc.

Land Amortization PaymentsAs the CLOA is individualized, this forms part of the periodic expenses that the farmer undertakes with LBP

Land Tax LiabilityInvolves tax liability based on local real estate tax valuation on the property

Interest PaymentsInvolves payments for loans incurred, especially production loans used for farm inputs and penalties on delinquent loan payments

Retrenched Farm Workers: Do They Have a Chance to Own the Land?There were an estimated 15,000 to 20,000 farm workers who were retrenched during the June 1988 to June 1998 deferment period. Although this research has not been able to validate this number, the phenomenon can be inferred from ongoing inclusion and exclusion cases. In the inclusion-exclusion cases assisted by the Peace Foundation involving 11 plantations in Davao del Norte, 4,069 retrenched farm workers already face uncertainty with regard to land benefits from the CARP. The uncertainty emanates from the lengthy judicial and quasi-judicial processes, taking stock of the fact that the cases are already about five years old with no certainty of conclusion.

The magnitude of retrenchment varies from plantation to plantation. Currently, there is no single repository of such information and most of the employment records are in the hands of big landowners and corporate firms. In Mawab, Dizon

TABL

E 21

94

Farms retrenched 13 workers. In Compostela, Davao Fruits Corporation retrenched most of its workers in 1994, re-hired some, brought in new workers, and left more than a hundred out of work and out of the CARP process. In the Vizcaya Plantation in Maco (Compostela Valley), 41 workers were retrenched in the early 1990s for joining an association that petitioned for CARP coverage of the plantation. In Davao del Norte, the most significant number of retrenched workers would likely be in the case of STANFILCO in Panabo, where 100 retrenched workers are now claiming co-ownership of 456 hectares currently cultivated by 427 DARBCO members. The tensions are perceived to be higher in cooperatives that have adopted the individual farming scheme where members and their families have strengthened individual ownership of assigned farm lots and where the internal stakes have expanded within each family.

Still, there is no denying the fact that retrenched farm workers who have been excluded from the reform process are worse off than their counterparts who are inside the plantations. While the magnitude is not yet fully and exactly known, it is safe to assume that most are into various modes of survival while waiting for recognition.

The lengthy and protracted judicial and quasi-judicial processes exact a toll on both sides. The financial conditions of cooperatives managing the plantations already indicate internal stresses regarding the chances of acquiring full ownership of the land and the need to provide wages to their members.

Waiting for the conclusion of the judicial and quasi-judicial processes is not the best option for all, especially for inclusion-exclusion cases involving plantations with above-normal man-to-land ratios or when the effective per capita share is already below one hectare. There must be drastic solutions if agrarian reform is to fulfill its social justice and anti-poverty objectives. The retrenched farm workers are ageing in human-life terms. Behind them are huge opportunity costs that have exacted a toll on the education, food, shelter and other basic needs of their children.

Environmental Dimensions and the Feasibility of Shifting to Organic Production

Despite the serious threats posed by the various pests and diseases of bananas, conversion into organic farming can be technically feasible. A case in point involves the prevalence of nematodes that attack bananas. A study by Generalao (2002), however, pointed out promising options for the biological control of a burrowing nematode species, a root-knot nematode species and a spiral nematode species. It identified, for example, one bacterial antagonist, Serratia marcescens Bizio, which, under laboratory conditions, led to a 44 to 91 percent mortality for the three species. S. marcescens was found to reduce root-knot nematode populations in the roots from 61 to 71 percent, root gall formations by 68 percent, and egg and larval

95

counts. Moreover, the data indicated that antagonist microbes were more abundant in samples obtained from farmers’ fields (215x106 colonies per gram of soil; 127x106 colonies per gram of roots) than those obtained from commercial farms (9.6x106 colonies per gram of soil; 108x106 colonies per gram of roots).

Another bacterial antagonist identified in the study, Bacillus cereus by Frankland and Frankland, was reported to have led to a 14 to 65 percent mortality rate for the three nematode species depending on the concentration of the treatment. The bacterium was further noted to have reduced nematode populations in the soil and in the roots by 20 to 82 percent six weeks after the application of treatment. It also reduced the sizes of the lesions caused by the spiral and burrowing nematodes by 13 to 71 percent.

Aside from the bacterial antagonists, the study of Generalao (2002) also identified fungal antagonists, the most prominent of which were Trichoderma harzianum Rifal, Paecilomyces lilacinus and another unidentified Paecilomyces sp., to combat the three nematode species. The two Paecilomyces species were found to lead to 11 to 64 percent mortality rates for the three nematode species. Application of the fungus to the banana plants resulted in height growth of 3.34 to 6.61 centimeters over a period of six weeks. T. harzianum, aside from being a control agent for nematodes, was also found to enhance composting leading to the formation and enrichment of the humus horizon.

Considering that not a few agribusiness corporations have gone into the production of organically grown bananas, apparently there is a demand for this product category. Reportedly, a shift into organic banana production means a reduction of the yield by an average of 50 percent. The yield loss is, however, offset by the price differential that could be as high as three times the prevailing market price for bananas that have been produced using high levels of chemical inputs.

As more plantations get transformed into producers of organically grown bananas, the volume of supply of this product category would increase and approach the quantity demanded by the banana market. Such mechanism implies a drop in the price of organically grown bananas, and eventually a decrease in the profitability of banana production. Currently, organic bananas form a special category with a corresponding price level. As organic production becomes a mainstream system, the price differential accorded to such a specialty product could be eroded and brought down to the level of the average banana. Lower prices occurring in tandem with yield losses brought about by the shift to organic production would eventually lead to lower profits among the various players in the banana export industry. The most significant impact of this would be on the income levels of the banana producers.

A good understanding of the economic potential of shifting to organic production, therefore, necessitates an adequate appreciation of the demand characteristics for organically grown bananas, and their relationships to the parameters of overall demand for bananas. Such demand characteristics might include, but not be

96

limited to, international standards on physical dimensions (size, weight, color, taste), environmental impact (forest loss, bio-diversity and species endangerment, water quality, air quality), and social welfare (health, child labor and core labor standards, gender). As banana consumers become more discriminating, the system of production for bananas may be made to respond to these specific parameters of demand. This is currently exemplified by the demand for bananas grown under a “nature farming system” which is being addressed by an increasing number of corporate plantations. Under such a demand-driven production system, small-scale plantations (e.g., those operated by ARBs and their cooperatives) may be able to circumvent the “yield-loss-plus-lower-prices” double whammy that could come about from a bandwagon shift to organic production.

Small-scale producers of organic bananas, being the sub-sector that would be greatly affected by a decline in the price differential for specialty bananas, would need special skills and support services to remain competitive. Firstly, organic production rests on the agro-ecological principle of site-species compatibility. Knowledge about the level of compatibility between bananas and the plantation site would be helpful in identifying strategic interventions for the successful implementation of options, or for the minimization of negative impacts. The identified interventions could then be factored into projections of land use transformations (including timing of land amelioration measures), and used for scenario building and modeling for yield optimization. Unfortunately, land suitability assessments specific for banana are not publicly available. This information is apparently available to many corporate banana producers, but ARBs and their cooperatives seemed unaware of this. Possible public sector sources of such information also seemed unable to access such assessments—even those based only on biophysical parameters.

From a financial (and eventually economic perspective), knowledge provided by results of land suitability assessments could be translated into savings in nutrient management and water management. A preliminary examination of the records of the Mampesing CARP Beneficiaries Cooperative, Inc. (MCBCI), for example, showed that expenditures for chemical inputs for plant care activities could reach 14 percent of total production cost. Considering that 74 percent of these expenditures are on chemical fertilizers, improving nutrient management could increase the share of expenditures on organic fertilizers, which based on records reached 26 percent of plant care costs. The transformation to organic production systems, therefore, could proceed on a cost reduction strategy for chemical inputs while increasing expenditures for organic inputs.

Another aspect in which an improved knowledge base of the producers could enhance the financial viability of organic production would be crop protection. MCBCI data would again show that a high-chemical-input crop protection strategy could entail up to 23 percent of the total production cost. A specific application would be looking at the cost implications of nematode control. Considering the potentials for the deployment of naturally occurring organisms to combat the burrowing, the root knot and the spiral nematodes, there is a need to determine the

97

cost of biologically controlling these pests of Cavendish bananas. By deducting the cost of applying the biological control alternative from the level of expenditure of chemical control measures, which could reach up to 18 percent of total plant care expenditures, the savings generated for nematode control could then be determined. This information would then provide a glimpse into a significant component of the financial feasibility of converting existing plantations into organic production.

98

SUMMARY AND CONCLUSIONS

Based on historical conditions and market realities in the value chain system of the banana industry, an ideal scenario for CARP in commercial farms was crafted in the years preceding program implementation: the ownership of the plantations would be transferred to the farm workers, as the same would not disrupt economies of scale in production, and former landowners and agribusiness investors would focus on processing and marketing through mutually beneficial arrangements with the new owners.

Putting the scenario into reality was already perceived difficult given the strong resistance from landowners and the agribusiness sector. The government offered a compromise, to defer implementation by 10 years. Ideally, the 10-year deferment would lead to a less conflictive entry-exit scenario during which the farm workers would assume control and the former landowners and investors would step back and focus on what they do best.

But the succeeding historical conditions and accompanying political, economic and social dimensions surrounding CARP in banana commercial farms produced a different scenario. Although it may be argued that the 10-year deferment period has not significantly disrupted the supply base (except during the tumultuous middle period of the mid-1990s when retrenchment, on one hand, and strikes, on the other, threatened the stability of supply), it has caused massive displacement of would-be legitimate beneficiaries. Post 1998, when CARP processes were finally in place, control of much of the banana plantations has shifted back to the landowners and agribusiness firms. Only a few cooperatives and associations of farm workers have assumed full control including freedom to process and freely trade in the export markets.

ARB cooperatives that have assumed full control (of production, processing and marketing) and smallholder-planters engaged in contract growing schemes are better off than those that have entered into long term lease and leaseback arrangements and those that have entered into voluntary land transfer (VLT) or direct payment schemes (DPS). Due to lack of financial capacity in immediately acquiring ownership of land, they unfairly shoulder cost transfers (overpriced inputs and cost of advances for labor) while getting less or none at all from the FOB values of the fruits of the land.

Most lands under leaseback arrangements are even worse off in terms of re-acquisition cost where land values have escalated proportionally to the length of the lease, and where the final acquisition almost becomes impossible within the human life term of the individual ARBs.

99

The evidence gathered during this research suggests the following:

• ARB cooperatives in Cavendish commercial farms will not be able to acquire full ownership of the plantations within the life term of the members unless onerous AVA contracts are modified. Worse off are cooperatives that are caught under onerous lease arrangements, pay-to-own and leaseback contracts.

• There are stronger indications that retrenched farm workers will no longer benefit from CARP in commercial farms unless drastic policy reforms in the CARP are undertaken. Their chances are risky both to the interests of ARBs and to the industry.

• The institutional framework for CARP coverage of banana commercial farms is weak. Although the DAR provided guidelines for land transfer and subsequent economic arrangements between farm workers and former landowners and investors, these were laden with loopholes. Such loopholes were, or still are, used by landowners and agribusiness firms to strengthen their direct control of farm level production despite evidence that they could still benefit from allowing farm workers to control the supply base.

• Big industry players used the deferment period as an opportunity to strengthen their strategies for retaining control of the plantations including farm level production. The government, specifically the DAR, became a reluctant, almost passive, player that chose to focus on administrative concerns in land transfer but provided little input on subsequent economic arrangements. Likewise, the LBP became a passive player when landowners invoked the just compensation provision of CARP, thus leading to an unbridled spiraling of land prices.

• The farm workers formed cooperatives and used the deferment period to prepare for land transfer but had little assistance in economic and financial planning from the DAR and NGO allies. In most cases, they were trapped in long-term onerous contracts that, in turn, caused conflicts and fragmentation. Only a few cooperatives were able to benefit from effective support services related to technologies for production, processing and marketing, and political bargaining and negotiations.

• There is no valuation of the environmental effects of chemical use in the plantations or estimation of societal values for non-use of chemicals. Existing chemical-free and low-chemical Cavendish production initiatives tend to be a reaction to the prime price for organic bananas in the world market rather than concern for long-term sustainability of the existing plantations. Finally, there is little indication of concern for wider effects of toxic chemicals to public health. The PBGEA itself has used the financial cost of environmental

100

protection as key argument for opposing the Davao City Ordinance against aerial spraying.

• The long-term financial and economic viability of ARB controlled plantations is shaky relative to the viability of plantations controlled by agribusiness firms and private landowners. The former has to bear the attrition of costs for land amortization, add-on costs to inputs provided by landowners and investors, maintenance of labor standards, financial costs of legal battles and providential costs for ARB families dependent on the plantation. This is not to mention the still-unaccounted cost of environmental protection such as solid waste, wastewater management and maintenance of water quality standards.

• The current and accumulated cost to the physical environment is still unaccounted for. There is an urgent need to study and monitor water quality (for potable water and irrigation water) and formulate strategies by which the cost of research, monitoring and enforcement could be shared.

• ARB families are overly dependent on the plantations for household survival. Whereas they now have additional income streams apart from wages, the income stream from ownership rights (in the form of dividends) is negated by the cost of acquiring full ownership. The land asset that they have is a current and long-term liability and those that have entered into leaseback arrangements bear the most in foregone income.

• ARB families dependent on wage income and dividends from the plantations have thin margins for reinvestments in other livelihoods and economic activities. The most proximate and affordable reinvestment is human capital formation through spending for education and facilitation of wage income generated elsewhere (through out-migration). Most families do not have the ability to acquire new physical assets, especially land and decent housing.

• The compensatory provision of CARP, on the one hand, and the protracted legal battles over land valuation on the other, has threatened the very essence of land reform in commercial farms. This has also disturbed cost assumptions for land, thus affecting the quality of financial planning of ARB cooperatives. Currently, land amortization is covered by income gains from usufruct rather than appreciation of land values or the inherent value of the land itself based on prevailing prices in land markets.

• While the CARP has induced dynamic state-society engagements between ARB cooperatives and NGOs and state agencies, it has not induced positive collaboration between militant ARBs and NGOs and the private sector. Each claims standing on just grounds. The former seeks monopoly of control in exchange for capital, technology and premiums for market access and coordination and management. The latter seeks social justice on the basis

101

of the agrarian reform law and leans on government to fulfill its obligations. Very little attention has been given to changing the battle lines or shifting the theatre of war.

• The worker-to-land ratio in ARB plantations has increased. This has resulted in a weakened incentive structure where the expected dividend from the values created corresponds to the value created in less than one hectare. This suggests challenges in improving productivity on small-sized farm shares and increasing production efficiency at the cooperative level. Moreover, this suggests looking into risk escalation that may come from the resolution of inclusion-exclusion cases.

102

RECOMMENDATIONS

The banana industry is expanding and the export of Cavendish remains a major earner of foreign revenues in the agriculture sector. However, income gains remain skewed in favor of the private agribusiness sector. The CARP in banana commercial farms has not alleviated the poverty of farm workers turned ARBs and the deeper poverty of retrenched farm workers who have been excluded from the land transfer process. There is a need to improve the overall economic arrangements in banana commercial farms and for ARB cooperatives to develop coping strategies to mitigate serious constraints and threats to their survival as new owners and managers of the plantations.

Of utmost concern is the mode of reparations for retrenched farm workers who have been excluded. Equally important is the need to strengthen the bargaining position and ability of ARB cooperatives that are caught in onerous economic arrangements with former landowners and agribusiness firms. Positive lessons can be learned from a few cooperatives that have successfully assumed control of production, processing and marketing and have shown initial indications that social entrepreneurship can work in the agribusiness sector.

Urgent MeasuresThis study recommends the following urgent measures:

• Speedy disposition of inclusion-exclusion cases to clarify legal ownership and reduce uncertainties among ARBs. These may include out-of-court settlements that offer win-win solutions. One policy track is the rights-conversion approach whereby the land claims of retrenched farm workers are converted to monetary values and translated to targeted programs related to housing, education and livelihood.

• Rescind or modify onerous leaseback contracts to restore social trust between rightful owners of the land and investors/lessees; more importantly, to remove distortions in entitlements and arrest imperfections in existing arrangements. The DAR should take a proactive lead in the corrective measures and should mobilize independent organizations to provide services in mediation and provision of the necessary information in a transparent manner.

103

• Conduct inventory of retrenched workers-claimants to distributed plantations outside of those already listed and involved in inclusion-exclusion cases.

• ARB cooperatives should strengthen their financial management and planning capacity and should develop new income centers and income streams that could provide opportunities for the family members. Capacity development interventions should focus on the following key results areas: (a) sound financial management; (b) institutionalized technology management and sustained research and development; (c) equity development; and (d) fulfillment of contract obligations, in terms of volume and quality of products.

• ARB cooperatives should undertake succession planning, develop new leaders and economic managers and provide platforms for future takeover of ownership and managerial rights. NGO allies should assist ARB cooperatives in succession planning.

• Arrest degradation of water and soil quality and protect public health by gradually shifting to low-chemical inputs. Correspondingly, serious monitoring of water and soil quality should be conducted to inform enforcement of environmental laws and policies.

• Promote diversification and value adding processes as instrument for mitigating financial risks and to guard against uncertainties in the global market for Cavendish.

• Induce stronger LGU and NGO involvement in monitoring the AVAs and mediating conflicts.

• LGUs, NGOs and other environment stakeholders should conduct joint studies and monitoring of the environmental impacts of commercial farms especially on soil and water contamination and their effects on public health.

Reparations and Compensation Scheme for Retrenched Farm Workers There were an estimated 15,000 to 20,000 farm workers retrenched from commercial farms in Mindanao during the deferment period. Although there is no accurate figure on the extent of retrenchment in Cavendish banana commercial farms, there are indications that the numbers are significant. Doubly significant is the phenomenon of substitution during the deferment period, where the land

104

rights of retrenched farm workers have been effectively taken over by managerial personnel and preferred beneficiaries of landowners and investors.

Realistically, many of these farm workers could no longer be accommodated in existing plantations. Secondly, the legal processes around inclusion-exclusion cases may not be completed within the life term of the farm workers and, if concluded in due time, the court decisions may be difficult to implement. In some cases, such decisions might lead to further conflicts among ARBs, especially on ARB plantations that have shifted to the individual mode of production. Correspondingly, the stress on the man-to-land ration might lead to the financial and economic collapse of ARB plantations. However, the retrenched farm workers are legitimate beneficiaries and have as much right as those who are already in possession of the land they are supposed to co-own.

In view the above dilemmas, this study recommends the following:

• Conduct an inventory of farm workers retrenched by banana commercial farm owners during the deferment period. This can be jointly conducted by NGOs, DAR and concerned LGUs in cooperation with TNCs and domestic agribusiness firms covered by CARP in banana commercial farms.

• Convert rights claims to monetary or financial values. Provide compensation or reparations payments to the retrenched farm workers, the amount of which should be equivalent or pro-rated according to the imputed share of the plantation land. This compensation package can be legitimized through an Executive Order upon the recommendation of the Presidential Agrarian Reform Council (PARC). The compensation can be a combination of financial and non-financial benefits to include core housing, child education, health care or insurance and livelihood support.

• Urgently address the deprivation of retrenched farm workers and those excluded from CARP by other means (such as those resulting from exemptions of land through the use of dummies). NGOs, LGUs and private sector organizations or corporate foundations can enter into collaborative endeavors to undertake targeted social programs, especially for retrenched farm workers and their families.

105

Valuation of Environmental EffectsThe application of benefit transfer methodologies for the valuation of environmental effects and/or non-use values for not using nematicidal chemicals would provide insights into the economic benefits that would accrue to society and to the ecosystem. Environmental effects could include improved soil fertility and soil texture, improved water quality, increased biological equilibrium of floral and faunal populations in the soil, on the soil and above the soil. If dividends generated by the minimization of environmental and natural resources use conflicts could be valued (or better still, paid for especially by direct stakeholders), the financial and economic viability of organic or low chemical production could be enhanced.

Societal values for non-use could include agri-eco-tourism development, recreation and spiritual upliftment. These have been brought to the forefront by the controversy of the Davao City Ordinance banning the aerial spraying to control the Sigatoka disease. Whereas members of the PBGEA look at the ordinance from a constitutional perspective, its corporate members would be greatly affected in terms of the financial profitability implications of the ban. As long as societal values that are generated for the non-use of aerial spraying do not get included in the estimation of economic benefits, the financial and social costs for conflict management and resolution could increase and further muddle the search for alternative production systems.

Future research would greatly benefit from a multivariate suitability assessment and data collection should always keep an eye on producing such an output for public access. Attempts can be made to undertake a socio-ecological analysis of production, financial and economic performance and constraints. Results of such analysis, when juxtaposed in the context of existing statutes, could point out to deficiencies in current policies.

106

References

Books and Journals

Borras, Saturnino M. 1998. The Bibingka Strategy in Land Reform Implementation: Autonomous Peasant Movements and State Reformists in the Philippines. Quezon City: Institute for Popular Democracy.

________________. 2004. Rethinking Redistributive Land Reform: Struggles for Land and Power in the Philippines . The Hague.

________________. 2006. The Philippine Land Reform in Comparative Perspective: Some Conceptual and Methodological Implications. Journal of Agrarian Change 6(1):69-101.

__________________ and Jennifer Franco. 2005. On Just Grounds: Struggling for Agrarian Justice and Citizenship Rights in the Rural Philippines. Quezon City: Institute for Popular Democracy.

Corpuz, O.D., 1997. An Economic History of the Philippines. Quezon City: UP Press.

De Leon, Teresita and Gema Maria O. Escobido. 2004. The Banana Export Industry and Agrarian Reform. Davao City: Alternate Forum for Research in Mindanao, Inc.

Deriquito, Tes-Pacaba. 2004. The AVA-mode of CARP in Banana Commercial Farms: Business as Usual. Mindanao Focus 4. 2004.

Escobido, Gema O. 2004. Production and Profit Scam? Mindanao Focus Journal.

_______________. 2000. Banana Split: The Stanfilco Banana Expansion in Tawantawan. Bantaaw: Economic and Social Indicators of Mindanao 13:9-10.

Hayami, Yujiro, L. S. Adriano, L.S. and M. A. R. Quisumbing. 1988. Agribusiness and Agrarian Reform: A View from Banana and Pineapple Plantations. Laguna: UPLB Center for Policy and Development Studies.

Homeres, Geiah. 2000. The Struggle of Small Banana Growers: Hard Won Gains. Quezon City: Philippine Peasant Institute.

107

Josling, T. E. and T. G. Taylor. 2003. Banana Wars: The Anatomy of Trade Dispute. Oxford: CABI Pub.

Opena, Camilo L. and Enrique A. Pahm.1987. Directions of Agrarian Reform in Agribusiness Plantations. Institute of Agrarian Studies. Laguna: UPLB College of Economics and Management.

Pioncio, Gilmore and Editha Eco. 2000. Agrarian Reform and Corporate Farms: Case Studies on Selected Corporate Farms in Mindanao. Mindanao Focus 1:11-30.

Preville, Claudius. 1999. How Will Free Trade Impact on Net Global Economic Welfare? An Analysis of the EU’s Banana Market Structure. Institute of Social Studies: Working Paper Series No. 290.

Roque, Rogelio S. 1990. Management Advisory Services.

Ross, Stephen A., Randolph W. Westerfield and Jeffrey Jaffe. 2008. Corporate Finance. California: McGraw-Hill.

Salvador, Feranil. 1998. The Philippine Banana Industry: Confronting the Challenge of Agrarian Reform. Quezon City: Philippine Peasant Institute.

Sarceno, Felix B. 2005. Working with Agribusiness Giants: A Tale of Two ARB Coops. Bantaaw: Economic and Social Indicators of Mindanao 18: 7-8.

Vanzetti, David et al. 2005. Banana Split: How EU Policies Divide Global Producers. United Nations Conference on Trade and Development: Policy Issues in International Trade and Commodities Study Series No. 31.

Primers and Legal Documents

Department of Agrarian Reform, Philippines. 1998. Payment by Beneficiary. Primer Series of 1998. Quezon City: Bureau of Agrarian Reform Information and Education, Department of Agrarian Reform. ____________________________________. 1998. Commercial farms. Primer Series of 1998. Quezon City: Bureau of Agrarian Reform Information and Education, Department of Agrarian Reform.

____________________________________. 1998. Agricultural Leasehold. Primer Series of 1998. Quezon City: Bureau of Agrarian Reform Information and Education, Department of Agrarian Reform. _____________________________________. 2006. Annual Report CY 2005. Quezon City: Department of Agrarian Reform, Planning Service.

108

Department of Agriculture, Bureau of Agricultural Statistics. 2007. 2006 Annual Report. Agricultural Foreign Trade Development. Quezon City: Bureau of Agricultural Statistics.

Guidelines in the Determination of Valuation Inputs for Landholdings Planted to Cavendish Banana. Joint DAR-LBP Memorandum Circular No. 6, Series of 2007.

Morales, Horacio Jr. 1998. Rules and Regulations on the Acquisition, Valuation, Compensation and Distribution of Deferred Commercial Farms. DAR Administrative Order No. 9 Series of 1998.

News Articles and Features

Cayon, Manuel T. 2008. Mideast Food Supplier Seeks New Farms in the South. Business Mirror, March 5, 2008. Retrieved March 24, 2008 from http://www.businessmirror.com.ph/03052008/economy02.html.

Gaylican, Christine. 2006. Banana exports up by 15% in first half. Philippine Daily Inquirer, August 30. p. B12.

Quiros, Judy, 2008. Arab Firm to Export Philippine Bananas. Philippine Daily Inquirer, March 18. Retrieved March 24, 2008 from http://business.inquirer.net/money/breakingnews/view/20080318-125501/Arab-firm-to-export-Philippine-bananas.

___________. 2008. Saudi banana trading firm sets up Philippine arm. Philippine Daily Inquirer April 19.

Online articles

Astorga, Yamileth. The Environmental Aspect of the Banana Industry. Retrieved February 28, 2008 from http://www.bananalink.org.uk/documents/Current_Environmental_Impact_by_Y_Astorga.doc.

Dela Rosa, Billy. 2004. Hunger Stalks the Country’s Food Basket [Electronic version]. Focus on the Philippines (42). Retrieved February 22, 2008 from http://www.focusweb.org/philippines/content/view/84/6/.

Financial Analysis. http://en.wikipedia.org/wiki/Financial_analysis

Gonsalves, Ralph E. The Banana Industry and the Way Forward. Retrieved February 19, 2008 from http://www.crnm.org/documents/press_releases_2004/The%20Banana%20Industry%20and%20the%20way%20

109

Forward%20by%20Hon.%20Dr.%20Ralph%20Gonsalves.pdf

Guidelines for the Economic Analysis of Projects. http://www.adb.org/Documents/Guidelines/Eco_Analysis/Scope.asp

Halloy, Stephen and Jeff Reid. Growing Banana. Retrieved February 19, 2008 from http://www.castlecooke.net/article.asp?id=1783.

Kopetski, Eric, et al. 2002. The Ecological Footprint of Dole Banana. Retrieved February 19, 2008 from http://www.islandnet.com/~vipirg/publications/pubs/student_papers/02_ecofootprint_bananas.pdf.

Ofreneo, Rene E., 2000. The Leaseback Mode of Agrarian Reform: Strengths, Weaknesses and Options. Retrieved February 22, 2008 from http://www.aer.ph/index.php?option=com_content&task=view&id=128&Itemid=50.

Shreck, Aimee. Just Bananas? Fair Trade Banana Production in the Dominican Republic. Retrieved February 23, 2008 from http://www.csafe.org.nz/ijsaf/archive/vol10(2)/Shreck1.pdf

Chiquita History: One Hundred Years and Counting. Retrieved March 19, 2008 from http://www.chiquita.com/.

Chiquita-Unifrutti Philippines. Retrieved March 19, 2008 from http://fil.wikipilipinas.org/index.php?title=Chiquita-Unifrutti_Philippines.

Department of Agriculture-Agribusiness and Marketing Assistance Service. Banana Industry Situationer Report. Retrieved January 23, 2008 from http://www.philonline.com.ph/~webdev/da-amas/banana.html.

<http://www.abbarandzainy.com/> Retrieved March 24, 2008.

Marsman Estate Plantation, Inc. Retrieved March 24, 2008 from http://www.marsmandrysdale.com/agrimepi.html

Castle and Cooke. Retrieved March 24, 2008 from http://www.castlecooke.net/article.asp?id=1783.

Banana Commodity Profile. Retrieved February 18, 2008 from http://www.castlecooke.net/article.asp?id=1783.

CORPEI-CBI PROJECT. Expansion of Ecuador’s Export Commodities. 2001. Organic Banana. Retrieved February 19, 2008 from http://www.sica.gov.ec/agronegocios/productos%20para%20invertir/CORPEI/banano_organico.pdf.

110

Other Documents

Banana: Trends in Production, Trade and Prices, 2000-2004. 2(2). Bureau of Agricultural Statistics. Department of Agriculture.

Philippine Banana Growers and Exporters Association Annual Shipment Report. For the period of January-December 2005.

Philippine Banana Growers and Exporters Association Annual Shipment Report. For the Period of January-December 2004.

Philippine Banana Growers and Exporters Association Annual Shipment Report. For the Period of January-December 2003.

Philippine Banana Growers and Exporters Association Annual Shipment Report. For the Period of January-December 2002.

Philippine Banana Growers and Exporters Association Annual Shipment Report. For the Period of January-December 2001.

Situationer on Banana, 1999-2003, Bureau of Agricultural Statistics. Department of Agriculture.

111

ANNEX 1. List of Interview Informants

NAME OF INFORMANT WORK/PROFESSION ORGANIZATION DATE LOCATION

Josefina Mancao OFWConcepcion Dumlan Hijo Agrarian Reform Beneficiaries Multi-Purpose Cooperative

February 8, 2008Brgy. Hijo, Maco, Compostella Valley

Mr. Adolfo dela Vega DAR Support Services

Department of Agrarian Reform XI February 7, 2008 DAR Region XI office

Maximiano Amora

60, Widower, Association Farm Workers, Member of the Board

Mawab Agrarian Reform Beneficiaries Association, Inc.

2/11-12/08Prk. 7, Brgy. Nueva Visayas, Mawab, Compostela Valley

Rolando Torentera14, bunch receiver for Davao Fruits Corporation

Davao Fruits Corporation March 2008Paraiso Village, Tagum City

Bienvenido L. Hibaya53, store/carinderia/billiards hall owner

Davao Fruits Corporation March 2008Prk 1, Brgy. Osmeña, Compostela, Compostela Valley

Victoria Tomas48,Cooperative Secretary

Dapco Agrarian Reform Beneficiaries Cooperative

April 3, 2008Farm2, Dapco, Davao del Norte

Vicky Motril Smallholder Farmerinterviewed re: farm diversification and value adding

February 4, 2008 Tupi, South Cotabato

Joemil Montebon interviewed re: Stanfilco February 8, 2008 Davao City

Vicente Nisnisanindividual banana farmer

February 9, 2008 Tagum City

Atty. Dexter Pascua lawyer interviewed re: FARMCOOP (legal) February 12, 2008 Davao CIty

Lando TorinteraBanana farmer-ARB

March 13, 2008Mawab,Compostella Valley

112

ANNEX 2. List of Focus Group Discussions and Participants

NAME OF ORGANIZATION / HOUSEHOLD DESIGNATION / ORGANIZATION DATE LOCATION

Concepcion Dumlan Hijo Agrarian Reform Beneficiaries Multi-Purpose Cooperative

02/14/08Prk. Tagsawa, Concepcion, Maco, Compostela Valley

Noel Nacario Chairperson

Usman Capitan Vice-Chairperson

Romeo Mancao Sr. BOD - Member

Joventino Sanico Finance Officer

Marciano Delagracia Member

Pacita Bansil Treasurer

Nida Rodores Secretary/ Bookkeeper

Total Number of Participants: 7

Nacario Household 02/08/08Purok 2, Brgy. Hijo, Maco, Compostela Valley

Fe Nacario housewife

Noel Nacario

cooperative plantation employee, Chairperson of the Board, Concepcion Dumlan Hijo Agrarian Reform Beneficiaries Multi-Purpose Cooperative

02/12/08

Total Number of Participants: 2

Mawab Agrarian Reform Beneficiaries Cooperative Association, Inc.

Prk.7, Nueva Visayas, Mawab,Compostela Valley

Daniel Rinticado Vice - Chairperson

Benjamin Abrencia BOD - Member

Maximiamo Amora BOD - Member

Total Number of Participants: 3

Abrencia Household 2/11-12/08Brgy. Nueva Visayas, Mawab, Compostela Valley

Lilian Abrencia common law wife, 67

Benjamin Abrencia

cooperative plantation employee, Member of the Board, Mawab Agrarian Reform Beneficiaries Cooperative Association, Inc.

Total Number of Participants: 2

Mampesing CARP Beneficiaries Association

02/09/08Mampesing, Mabini, Compostela Valley

Efrin Cagumbay BOD Member

Lito Madrid Chairperson

Albert Cosal BOD Member

113

Antonio Ureta BOD Member

Wilfredo Boiser BOD Member

Susan Tabar Member

Evmar Bergado Member

Wenefreda Amad BOD Member

Monina Siason Secretary

Total Number of Participants: 9

Davao Fruits Corporation 3/2008

Rolando Torentera

Chairperson of Davao Fruits Corporation Employees Agrarian Beneficiaries Association Inc. (DFCEARBAI); United Banana Farms (UBF) Incorporator

Bienvenido L. HibayaVice Chairperson of DFCEARBAI; retrenched group

Total Number of Participants: 2

Nillasco Household 02/09/08Prk. 7, Brgy. Nueva Visayas, Mawab, Compostela Valley

Samson Nillasco

55, Member of the Association, Mawab Agrarian Reform Beneficiaries Cooperative Association, Inc.

Alma Nillasco 48, wife

Total Number of Participants: 2

Diano Household 2/9-10/08Mampesing, Mabini, Compostela Valley

Rizalina DianoMember, Mampesing CARP Beneficiaries Association

Cosme Diano Husband

Total Number of Participants: 2

Santander Household 2/9-10/08Mampesing, Mabini, Compostela Valley

Hernani Santander68, Member of the Association, Mampesing CARP Beneficiaries Association

Mercedita Santander 64, wife

Maria Lourdes Santander 35, daughter

Total Number of Participants: 3

Sedil Household 2/9-10/08Mampesing, Mabini, Compostela Valley

Editha Javellona Sedil58, Member of the Association, Mampesing CARP Beneficiaries Association

Guillermo Sedil 56, husband

Total Number of Participants: 2

114

Laspona Household 2/9-10/08Mampesing, Mabini, Compostela Valley

Romeo Laspona 45, Fisherman

Luzvisminda Laspona 45, Cooperative Treasurer

Total Number of Participants: 2

Campomanes Household 2/7 and 2/21/2008

Lot 23,Block 3, Country Homes Subdivision

Sencia Campomanes

43, posting clerk/canteen-in-charge, AMS-Magatos Agrarian Reform Beneficiaries Multi-Purpose Cooperative

Edgar Campmanes47, field labor, AMS-Magatos Agrarian Reform Beneficiaries Multi-Purpose Cooperative

Total Number of Participants: 2

Dapco Agrarian Reform Beneficiaries Cooperative

February 2008 Dapco, Panabo Davao del Norte

Wenceslao Cajulao Coop Manager

Ronald Velencio BOD Chairperson

Victoria Tomas Coop Secretary

Total Number of Participants: 3

115

ANNEX 3. Profile of ARB CooperativesChristopher Cadiz and Christopher Anduyan

1. Concepcion Dumlan Hijo Agrarian Reform Beneficiries Multi-Purpose Cooperative

Organized: April 27, 2005

Membership

Membership: 80 (70 males, 10 females)Average age: 40s (6 are already in their 60s)

Land and Tenure

In November 1985, Jesus V. Ayala bought the 242-hectare coconut plantation Viscaya Plantation Inc. from Isazi Zuluaga. There are six titles for the Viscaya Plantation and when acquired by J.V. Ayala, these were further subdivided into 35 titles, 34 titles at 7.0 hectares and a 1.80 hectare lot. These were named under Ayala’s loyal employees. These employees stood as dummies for Ayala.

These dummy-owners were said to have acquired 7 hectares each of land from J.V. Ayala for PHP 60,000. A trusted employee of the Ayalas told the cooperative leaders that they were given PHP 16,000 for two consecutive Decembers as “pabuya”.1

In the 60s to the 70s, other crops such as durian, baluno, banana (saba, cardaba and tundan variety), lanzones and corn were planted at the boundaries of the coconut plantation. The latter covers 99 percent of the area. A 4-hectare rami plantation was earmarked from the total area in the 80s. At present, cavendish banana (gramine variety) covers 99 percent of the area with almost two hectares for the binangay banana.

There are presently 161 Agrarian Reform Beneficiaries (ARBs) divided into two cooperatives, the CDHARBMPCo with 80 members and VPEARBCo with 81. The CARP covered area is estimated to be 69 hectares out of the 242-hectare plantation. This is the excess of the retention areas for each land owner. It should be noted that JVA’s scheme of subdividing the 242 hectare property into 35 smaller titles worked in his favor. This gave him a larger retention area (around 173 hectares).

1 FGD, February 8, 2008, Hijo, Maco, Compostella Valley.

116

The DAR regional office unsuccessfully tried to pursue the case of these lands under dummy-owners.• Plantation area of the cooperative is 34.264 hectares out of the 242 hectare

plantation of Viscaya Plantation Incorporated (VPI).The CARP covered area is 81 hectares. This is divided between the two ARB cooperatives – the CDHARBMPCo with 34.264 hectares and the 81 members of Viscaya Plantation Employees Agrarian Reform Beneficiaries Cooperative (VPEARBCo) with 35 hectares.

• The CARP covered area was under the Direct Land Transfer Scheme of the VPI.• The Technical Description was acquired from DAR on February 14, 2008.• There is still no CLOA or any form of tenurial instrument.• From the 34.264 hectares, the possible individual allocation is around 0.4283

hectares. However, based on calculations, due to the inclusion of the 9.7 hectare river in the allocated area for the Cooperative, the area is only 24.564 with an individual allocation of 0.30705 hectares.

• Amortization is PHP 47,600 per month paid at PHP 23,800/15 days (cycle is based on payday) – this is directly deducted by the company (VPI) from the billing of the Cooperative. This amount is payable in 15-20 years, depending upon the rate of payment of the amortization. In 2005, the amortization was at PHP 20,800 per 15 days. The amortization is computed against the actual land planted with bananas. In 2005, only 16.78 hectares were used for production. The amortization increase is due to the opening up of additional five hectares which used to be considered as an unproductive area (i.e., unplanted with banana).

• Land Valuation is at PHP 587,500/hectare (PHP 237,500/hectare of land plus PHP 350,000/ hectare for standing crops). Land Valuation for non-productive areas is at PHP 84,000/hectare.

History of Struggle

The history of Agrarian Reform in the Viscaya Plantation is tied with the story of the farmworkers’ struggle for labor rights. Grievances against the company’s labor practices brought about the formation of the progressive labor union PAMANSAG in 1991. During the 1991 Union election, two factions were at odds. These were the PAMANSAG under the National Free Labor (NFL) group and the company-sponsored Viscaya Labor Union (VLU). Forty-one leader-members of PAMANSAG were retrenched in the guise of over-manpower. On the other hand, a day before the election, 23 members were also persuaded and/or harassed to transfer membership to VLU. VLU won by 16 votes.

After the election, leaders of PAMANSAG were retrenched one by one. The organization became weak and lain low for a time. The Viscaya Plantation Agrarian Reform Beneficiaries Association, Inc. (VPARBAI) was formed and registered by the same PAMANSAG members in 1991. It was these members who petitioned for the coverage of VPI in CARP.

117

In 1997, with the help of PhilNet, the Association was reactivated. They petitioned for the acquisition of VPI. At the end of May 2002, the VPI filed for bankruptcy and paid all its employers. However, this was only a ploy to weed its laborers of the progressives. VLU members were rehired the following day while those with the VPARBAI who tried to apply were not hired.

In April 27, 2005, the land was awarded to the ARBs pending the CLOA. The VLU members who formed the Viscaya Plantation Employees Agrarian Reform Beneficiaries Cooperative (VPEARBCO) leased their land to VPI, then known as Maco Agri-Ventures Inc. (MAVI).

On the other hand, VPARBAI—now CDHARBMPCO—opted for growership. After a year and four months of negotiations, the cooperative signed their Growership and Exclusive Sales Agreement (GESA) on March 30, 2005.

2. Mawab Agrarian Reform Beneficiaries Association, Inc. (MARBAI)Organized: September 21, 2006

Membership

Membership: 36 (31 males, 5 females); of these, three are non-CLOA holdersAverage age: 40s (four are already in their 60s)

Land and Tenure

F.S. Dizon Farms is a multi-crop plantation. It had been planted with abaca, durian, coffee and rami in the past. Prior to Cavendish plantation, the 135 hectares used to be planted with papaya. At present, binangay and other varieties of banana are also planted in some of its unused areas. The citrus farm is planted with Pomelo, Valencia orange and Mandarin. A bamboo and mango plantation are also found inside the farm.

The F.S. Dizon and Sons Inc. plantation area covers 463 hectares, 43 hectares of which were recently titled by F.S. Dizon after learning that it had not been included in the landholdings of the family. However, F.S. Dizon has been utilizing the land since 1965. It is said to be owned by the Mansaka Tribe.

Some 304 hectares were distributed to the ARBs through the VLT Scheme in 1998. These were divided between the Dizon Mawab Employees Multipurpose Cooperative (DMEMCO) with 96 hectares and the Dizon Farms Worker Cooperative (DFWC), the mother cooperative of MARBAI, with 276 hectares,

118

F.S. Dizon, through various dummy owners and maneuvers, was able to retain control over 159 hectares of formerly-owned land. These include the 43-hectare recently titled land, a 15-hectare guesthouse, an 8.2-hectare airstrip and its surroundings, and 22 hectares in Nueva Visayas. Some of the landholdings were titled to his children and relatives below 18 years old.• The plantation area under the legal and actual control of MARBAI is 12.48

hectares for the eight CLOA holders. However, the association is still claiming the 1.56 hectare-allocation per ARB of its 25 CLOA holders. The three non-CLOA holders are also petitioning their areas agreed upon as their allocation when they were still with the DFWC.

• The CARP covered area was under the VLT scheme of F.S. Dizon and Sons Inc.• If the allocated 1.56 hectares will be given even to the non-CLOA holders, the

total amount of land that will be under MARBAI’s control should be 56.16 hectares. Otherwise, the association is entitled to 51.48 hectares only.

• Of the latter, calculation for land shared equally with non-CLOA holders is 1.43 hectares per ARB.

• The association plans to have the land registered under individual titles.• Presently, the association is not paying its amortization. The association

members do not have the technical description of their actual area except for the 12.48 hectares surveyed.

• Land Valuation is at PHP 400,000/hectare for the bamboo area, PHP 280,000/hectare for the papaya area, and PHP 320,000/hectare for the citrus farm.

History of Struggle2

MARBAI is a new ARB organization stemming from the DFWC. As a result of discontentment with the management and policies of the latter. A review of the DFWC and MARBAI history would help understand the CARP area and dynamics of the three ARB organizations in the Nueva Visayas, Mawab.

DFWC was organized in 1995 through the help of Francisco S. Dizon, owner of F.S. Dizon and Sons Inc. It was established to counter the Dizon Mawab Employees Multipurpose Cooperative’s (DMEMCO) petition for the inclusion of the farm in the CARP. The owner also realized that CARP would eventually cover the farm. The 43 DMEMCO members first petitioned for CARP inclusion the Dizon Farms in 1992.

During the early stages of DFWC, Mr. Dizon assisted the cooperative. He gave PHP 20,000 as capital for DFWC’s canteen operations and loaned PHP 50,000 for chemicals and fertilizers used in the Citrus Farm at a pay-when-able scheme.

When the first CLOA for 95 and 259 hectares was awarded in 1997 and 1998, respectively, the title was in the name of DFWC, with the DMEMCO appearing only as

2 Data from Profile of MARBAI and FGD.

119

part of the et al. The land was acquired through VLT. DMEMCO was claiming the old banana plantation with an area of 108 hectares and an allocation of three hectares per ARB member. However, after negotiations, both parties agreed to share the CARP covered areas equally. DMEMCO also applied for the inclusion of the 18-hectare easement area under CARP. When it was acquired, DFWC was allocated 10 hectares while DMEMCO got eight hectares.

During this time, there were already 13 excluded ARBs. They were, however, included by the DFWC in their membership and allocated areas equal to those of other CLOA holders. DFWC has 178 ARB-members. According to Samson Nillasco,3 DFWC was not able to include his name in the master list they were preparing at that time.

After the awarding of the CLOAs, the Marsman Drysdale Agricultural Group of Companies offered to rent 135 hectares of its landholdings. In 1998, DFWC approved the rental scheme in its partnership with Marsman Drysdale over the growership option. The provision on rental agreement has the following conditions:• 25 years rental• rental cost is per hectare per year• first five years, PHP 5,000; second five years, PHP 6,000

During the 1998-99 period, income from the citrus farm, bamboo, rentals and development cost payments by Marsman Drysdale were posted at PHP 15,000,000. They were able to pay off the loan from F.S. Dizon. It was from 2000-2004 that income losses, questionable purchases and lack of financial transparency were noted by many members of DFWC. Payments for amortization and taxes were reneged on; the citrus farm was also eventually abandoned. It was further learned that DFWC had already given two notices to the group for foreclosure.

In March 2006, with these issues, 36 members of DFWC resigned from the cooperative to form MARBAI. In May 15, 2006, a MOA was forged, giving MARBAI five hectares as goodwill area to be developed as a Cavendish banana farm. It was only on September 21, 2006 that the association registered under the SEC.

At present, only 12.48 hectares are under the full control of the association. This is the five-hectare goodwill area and 7.48 hectares taken from lot 164-B. They are surveyed and certified areas for the first batch of eight individual CLOAs.

Even with the MOA, the two organizations are still not on good terms. Cases and counter-cases have been filed by both parties for offenses ranging from theft to corruption. The land dispute case is still with the Municipal Trial Court.

3 Key Informant Interview, February 11, 2008, Prk. 7, Brgy Nueva Visayas, Mawab, Compostela Valley.

120

External Support

The cooperative is able to generate external support from the DAR, LBP, LGU and NGO.

Agency/ Institutions Support Extended Expected Support

Department of Agrarian Reform (DAR)

• Mediated land conflict between MARBAI and DFWC• Facilitated the survey and certificate of delineation of land areas for eight ARB-members

• Support on input in the form of soft loans and marketing• Faster resolution of inclusion issue

Land Bank of the Philippines • Mediation during dialogues with DFWC

Local Government • Support through loan of vehicle to be used in dialogues

Non-Government Organizations • Training, workshops and seminars on agrarian reformTechnical assistance in legal and land issues

3. Mampesing CARP Beneficiaries Inc. (MCBCI)Organized: November 4, 1991Registered: November 4, 1991

Membership

Membership: 252 (43 females, 209 males)Average age: 50s Land and Tenure

The Agricultural Enterprises, Inc. (AEI) is a coconut plantation owned by the Montelibano Family. The plantation has a total area of 854 hectares. The mainland has an area of 757 hectares while Kupiat Island covers 97 hectares.

The plantation was also planted by the sacadas in the fringes and inter-cropped with cardaba, balanghoy, bamboo, gabi and other vegetables, proceeds accrue directly to them. Aside from these, the families raise chickens, goats and pigs.

Prior to its turnover to the tenants, the plantation was rented out in 1987 to PATI San Corporation and a local resident in 1989. Some enterprising tenants also rented six hectares of the land with the agreement that 35 percent of the produce would be used to pay for rent. During this time, the Montelibanos were already absentee landlords. They returned to Negros Island because of the deteriorating peace and

121

order situation in the locality. The New People’s Army (NPA) and the Bangsa Moro Army (BAMA) were also collecting revolutionary taxes.

MCBCI was able to acquire the mainland landholding of 707.623 hectares on December 19, 1991 through VOS. An additional 50 hectares was bought by MCBCI from the retention area of the Montelibanos. The CLOA for the CARP covered area is collective.

• The total area of MCBCI is 757.623 hectares, 707.623 hectares of which were acquired through the VOS under the CARP. Individual allocation is at 3.0064 hectares per ARB.

• The 50 hectares were bought in cash and used for the crop damage payment of Lapanday Development Corporation (LADECO).

• The price of the 50 hectare area is PHP 1,750,000• 500 hectares is rented by LADECO. Actual area planted with Cavendish banana is

355 hectares while the remaining 70 hectares is for facilities.• Lease is for 30 years with provisions on rental being:

• PHP 4,000/hectare/year for the first five years;• PHP 5,000/hectare/year for the next five years • at PHP 6,250/hectare/year from 11th to 15th years• at PHP 7,800/hectare/year from 16th to 20th years• The rental fee from the 21st to 30th year shall be adjusted once every five

years based on the following:- Average price of copra, palay and corn at the time of adjustment, or- 25 percent of the preceding year, whichever is greater.

• Initially, land amortization was set at PhP19,269.80 per hectare per year (PHP 986,101.17 for the 704.3932 hectares/year) or a total value of PHP 13,573,516.09. However, the land was re-evaluated and revalued upon the petition of the Montelibano heirs. The land amortization was raised to PHP 54,000 per hectare per year. The Cooperative has to pay PHP 3,962,613.40 for the whole area every year.

History of Struggle

MCBCI did not have to struggle for land acquisition. The land was voluntarily offered to the cooperative after the passage of CARP. As gleaned from interviews, the sacadas looked up to Fernando Montelibano as a godfather. This can be attributed to the fact that most of those interviewed were town mates and/or distant relatives of the landlord.

122

However, the cooperative is currently embroiled in a struggle for the annulment of their AVA with LADECO. This was brought about when the cooperative arrived at the realization that the AVA, which is a Joint Production Agreement (JPA), is biased against them. The rental received for their land is not enough to pay the yearly amortization requirement. The DARAB decided upon the case in 2006, noting that the agreement is null and void but with a recommendation for renegotiations.

MCBCI has already conducted land occupation to stage its disgust with this arrangement. The mobilization resulted in cases filed against the members of the cooperative and its assisting NGO, the Mindanao Farmers Development Center. Offenses in the cases filed against them range from resistance and disobedience (Case 2702), grave coercion (2771), direct assault (3028) to serious physical injury (2807).

Internal conflicts also resulted from the legal battles the organization has been involved in. In 2003, a group of 83 members led by MCBCI Board Member Amador Anque, Jr. bolted from the organization to form the Mampesing Agrarian Reform Beneficiaries Association, Inc. (MARBAI), which is allegedly supported by LADECO. The members were given PHP 1,000 per month as subsidy, but this practice stopped after the contract take-over of Chikita Unifrutti Philippines (CUP) on December 28, 2007. The plantation is managed by CUP through its subsidiary Tortuga Valey Plantation Inc. (TVPI). In 2008, around 36 MARBAI members returned to MCBCI, as they were not yet de-listed from the cooperative’s roster.

External Support

MCBCI has not been given support by the DAR. However, it has generated support from the LBP, DBP, LGU, NGO and Akbayan (Party List).

Agency/ Institutions Support Extended Expected Support

Department of Agrarian Reform (DAR)

None • Support on input in the form of soft loans and marketing• Final resolution of AVA annulment issue

Land Bank of the Philippines • Loan for truck (PHP 900,000)

Development Bank of the Philippines

• Loan for bamboo project (PHP 4,000,000)

Akbayan Party List • Infrastructure (Covered area in the beach)

Local Government • Financial assistance for the rehabilitation of the beach

Non-Government Organizations • Training, workshops and seminars on agrarian reform• Technical assistance in legal and land issues

123

4. AMS-Magatos Agrarian Reform Beneficiaries Multi-Purpose Cooperative (MARBEMCO)

Organized: September 2002

Membership

Membership: 154 Average age: 40s

Alberto M. Soriano (AMS) Farms has 406 hectares of banana plantations in the municipalities of Asuncion and Kapalong, Davao del Norte subjected for distribution to landless employees. Most of the commercial farms, including AMS, filed deferment from land distribution for 10 years. In 1998, after the 10-year deferment period allowed for the commercial farms, AMS Management opted for a VOS scheme to DAR and, at the same time, offered a leaseback scheme to the ARBs. The negotiations lasted for four years without reaching an agreement. DAR mediated the negotiations with frequent postponements of schedules. Within the four years of negotiation, ARBs were still with AMS management, receiving their Productivity Profit Sharing (PPS) from the company and their salaries as employees. During the negotiation, the company offered a leaseback rent of PHP 10,000 pesos per hectare per year, but the ARBs refused the offer. The offered amount was raised to PHP 20,000 per hectare per year, but again ARBs did not take the offer as they opted for a growership scheme. The ARBs initiated efforts to look for a banana buyer with DAR when the negotiation closed on a deadlock and the land was submitted to Compulsory Acquisition (CA). Accordingly, AMS had the right to decide on the scheme of land distribution and wanted VOS since they had not given up on their “right of first refusal.” Simultaneously, land valuation was executed through the LBP at PHP 166,000 per hectare, with an amortization of 36,000 per hectare per year. During the MARBMCO General Assembly held on March 29, 2008, the LBP advised a new average price of PHP 275,000 per hectare, depending on the land classification.

Following the development on the deadlock negotiation, some of the cooperative members who are friendly to the company opted to separate and established a new cooperative with the support of AMS management. The new cooperative is now popularly known as Coop B with 71 members. It claimed 65 hectares cropped from the original claim of all ARBs totalling 225 hectares. Coop B decided to market its produce to AMS management and was paid their separation pay immediately. The remaining group with 154 members (to date, it has 143 active and 11 inactive members) who are hardliners on growership and complete independence from the company has 98 hectares and is popularly known as Coop A (it assumed the name AMS-MARBEMCO). Coop A also claimed additional 46 hectares that are not included in the released CLOA, allegedly due to the influence of the landowner who withheld the land because Coop A refused the offer of the management on leaseback scheme. The issue of separation pay for Coop A ARBs is still being deliberated in court as of

124

this study. Those employees excluded from the ARB’s list, allegedly because they had agricultural lands, were left working in AMS Management and opted not to be part of the land claims dispute. These employees formed Coop C; in February 2008 during its general assembly, a CLOA was released for 16 out of Coop C’s 33 members. The excluded 17 members are now clamoring to be included in deliberations for this claim and filed a one month leave from the company. Allegedly, DAR personnel advised the excluded 17 members to file a petition for inclusion.

TABLE 1. Comparative features of three cooperatives formed in AMS Company

COOP Number of members Claimed Hectare Characteristics

AMS-MARBEMCO(Coop A)

154 members 98 hectares +46 hectares(offered to Coop C)

.60 hectares eachHave option on AVAs

MAGARBEMCO (COOP–B)

71 members 65 hectares .915 hectares eachContracted banana to AMS

COOP-C 16 membersfrom 33 members

17 hectares(from 46 hectares offered)

Alleged bogus coop

TOTAL 258 180 hectares

Agribusiness Venture Agreement Options

Part of AMS Management’s maneuver in favor of its preferred AVA scheme is the offering of different agreements to the ARBs.

A. Leaseback Scheme - ARBs land will be rented at a fixed price for an agreed duration; they are not part of the production and profit.

B. Partnership/ Joint Management - ARBs will share 50 percent of the production cost

Cooperative Management

Capital Base and Assets

MARBMCO’s capital requirement for the production operation of their 98 hectares land amounts to more than one million per year. The cooperative’s capital depends largely on its assets of more than Php 2 million, but these are mostly receivables from the consumers and lending ventures of its members prior to their take-over of the plantation. To cover their production cost while the finance unit boosts their collection system, the coop deducted PhP10 per week per ARB as contribution of members to form part of their CBU. This is a very slow internal generation initiative to expand their capital base. Fortunately, their first buyer, Wisdom Philippines, offered a capitalization for the construction of their packing plant at PHP 600,000 and TADECO on their chemical inputs.

125

TABLE 2: AssetsASSETS VALUE

Land PHP 26,950.000.00

Packing Plant 600,000.00

Office building and fixtures 300,000.00

CBU (6 years) 443,520.00

Carry-over receivables 2,000,000.00

Production Cost

Aerial spraying is done on an eight-day cycle with 36 cycles per year, costing them a package rate of PHP 104,000 per spray per week (for plane and pilot service fee) that would total PHP 3,744,000 per year. The chemical costs the cooperative PHP 170,000 per cycle per week for 36 cycles, amounting to PHP 6,120,000 per year. To date, MARBEMCO has a standing amount payable to the chemical supplier of PHP 5 million. The expenses on aerial spraying is divided among members billed weekly, ranging from PHP 600-1,200 depending on the maturity and prevalence of diseases.

Ground work and labor expenses were the responsibility of the land owner when they shifted to individual farming in 2005 for their .60 hectare each, but the ground chemicals and other expenses are still being financed by the cooperative and will be individually deducted from their proceeds. The average cost per land owner on their farm per month is shown below:

TABLE 3: MARBMCO Monthly Cavendish Production Costs (.6 hectare) FARM ACTIVITIES MATERIALS AMOUNT

PRODUCTION

Aerial Spraying Package Php 4,000.00

Ground Chemicals Insecticides: Confidor, Topsin, Diazul Sticker: AgrimikFungicide: DiazulFertilizers: Urea, Potash, AmmosulHerbicides: clear-out, round-up

400.00

c/o land owner

Organic inputs Rice hull, lime, chicken dung c/o land owner

Materials Polybags, Ribbon, Polytwine, Poles, sharpening stone, flat straw

2,400.00

Labor Deleafing, etc. (c/o land owner) 2,500.00

PACKAGING Labor 800.00

Hauling Box hauling 600.00

Formaline, soap, fixed caliper 44

TOTAL 10,700.00

126

Only the PHP 2,500 production labor expense is not included in the billing, as most of the ARBs do the farming and manage their areas personally.

The table above shows that the cooperative would appropriate a budget of PHP 8,000 to PHP 9,000 per ARB member, which would translate to an average of Php 1.3 million per month or PHP 327,000 per week for the entire plantation.

Use of Chemicals

Banana commercial farm inputs still depend on chemicals until now. Chicken dung and rice hull inputs are very minimally applied without a mandatory and obligatory policy from the management to do so. The chemical inputs are supported by the cooperative to ensure volume of yield. Aerial and ground spraying of other chemicals such as decis, diazul, chemical-laced poly bags, formaline, confidor, mycospec, topsin, soap, urea, potash, ammosul, clear-out, round-up, and agrimik is conducted for systemic and contact applications. Obviously, as land becomes too acidic for the banana to reach its production potential, rice hull, lime and chicken dung are used to balance the pH of the soil. The research unit of the cooperative is more inclined to recommend chemical sprays to mitigate damages on the banana plants. One of the reasons for the minimal or absence of application of organic insecticides and fungicides is the lack of availability of these inputs to treat banana perennial diseases such as Sigatoka, Muco and bunchy top. If ever these are available, they are needed in large volumes per hectare, compared to readily available chemical inputs.

Aerial spraying is still done despite protests on the use of the chemical Calexin, a systemic anti-virus, banana oil as sticker, and Utensol as spreader.

Personnel

From 2002 to 2006, office personnel of MARBMCO enjoyed a PHP 220 per day salary. As the operation reached a crisis when the need to review the overhead cost was acknowledged, the cooperative reduced the number of its personnel and staff to 26 individuals and gradually reduced their compensation to:

7 BOD 6 office staff1 field supervisor19 packing house workers

PHP 1,000 per month135 per day145 per day125 per day

127

Benefits and Services for the Members

From the loaded benefits of AMS Company, MARBEMCO continued to give the same benefits to its members, but they eventually dwindled because the cooperative could not cover the incurred expenses of its members once it prioritized the production budget from their meager capital. The ARB members who have no other source of income than what they earned as employees of AMS, and who enjoyed hospitalization and other forms of loan assistance, are having a hard time coping with the transition period of cooperative management since such assistance has been withdrawn under the new management. Farming Strategy

The cooperative started with communal farming right after the takeover in 2002. In 2005, they opted for individual farming mainly because they believed that individual farming encourages higher productivity. This was attributed to the sense of stakeholdership of the ARB member-owner modeled on other cooperatives assisted by FARMCOOP. The strategy also unloaded the cooperative budget allotment for production labor and other farm incidental expenses at 23 percent.

Income

To date, minimum produce is 1000 boxes per day at 13.5 kilos per box. During peak season, maximum production reaches up to 2000 boxes per day at 13.5 kilos per box. The price per box is $ 2.75 (exchange rate early 2008 is PHP 40). Currently, there is a price war at $4.50 per box attributed to the emergence of non-contracted bananas. Individually, 85 out of 154 members (55 percent) are already enjoying a bigger income at an average of PHP 6,000 per week because they already paid their previous loans on hospitalization, emergency and other loans. The lowest income member ARB receives an average of PHP 1,500 per week. Most of these low income members depend on the cooperative for the capitalization and inputs for their farms.

128

ANNEX 4. Profile of ARB Household Income

and Expenditure Christopher Cadiz and Christopher Anduyan

1. Nacario Household

ChildrenName of Children Age/ Grade level/ Highest Education

Jean 19, 3rd Year CollegeJanine 16, 4th Year High SchoolJohn 6, Kinder 2

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 1,800.00Electricity 150.00Water 60.00Education Tuition and School Fees 675.00 (8,100.00/ year) Fare and allowance 3,000Medicine* 50.00Livestock Feeds† 320.00Total 6,055.00

*Noel has tuberculosis; TB medical maintenance is provided by the barangay health center, free of charge. This figure covers the common medical remedies for colds, etc.†Fe raises chickens and pigs to augment the family income.

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Employment in Banana Farm (Noel)*

3,800.00(PhP150/ day @ 26 days) - PhP100 for

CBU @ 50.00/ 15 days

Backyard Hog Raising(Sales of Piglets)

2,275.00(7 piglets x PhP1,300/ piglet x 3 births/

year) / 12 months

Aluma† (Piglet raising) 750.00(6 piglets/ year x PhP1,500)/ 12 months

Copra share (Fe) 166.00 - 266.00(share of PhP500 - 800 every 3 months)

Total 6,991.00 - 7,091.00

*As of interview, there is still no SSS, PhilHealth benefit from the cooperative. Thus, there are no deductions for employee counterpart.†In Aluma, a piglet is being raised by neighbors for the owner. The owner is entitled to a percentage of the sale of the hog.

129

2. Mancao Household

ChildrenName of Children Age/ Grade level/ Highest Education

Romeo, Jr. DeceasedRommel 26, MarriedRonnie 25, MarriedRoel 23, MarriedJane 21, College GraduateJennifer 19, College GraduateRey DeceasedJessa 14, High SchoolJoyce 12, High SchoolJosephine Marie 10, Elementary

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 2,000.00Electricity 300.00Water -Education Tuition and School Fees 195.08 (2,341/ year) Fare and allowance 2,310.00

(PhP35/day x 22 days x 3 children)Medicine 100.00Fare (Romeo) 300.00Miscellaneous (Appliance Amortization)

1,000.00

Total 6,205.08

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Employment in Banana Farm (Romeo, Sr.)*

3,800.00(PhP150/ day @ 26 days) - PhP100 for

CBU @ 50.00/ 15 days

Overseas Employment (Josefina)

4,500.00

Copra share 1,933.33 (PhP5,800 quarterly)

Total 10,233.33

*As of interview, there is still no SSS, PhilHealth benefit from the cooperative. Thus, there are no deductions for employee counterpart.

3. Abrencia Household

ChildrenName of Children Age/ Grade level/ Highest Education

Allan 30, High School GraduateAbraham 29, High School GraduateAdam 27, High School GraduateLilien 24, AgriculturistAram 21, High School Graduate

130

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food(Note: they have a backyard garden, raise chickens and Abraham provides 5-10 kg of rice per month)

1,420.00

Electricity -Water -Education Tuition and School Fees - Fare and allowance -Medicine Herbal Total 1,420.00

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Cutting of Bamboo for frapping and other jobs for the Association (irregular)

3,000.00

Total 3,000.00

4. Amora Household

ChildrenName of Children Age/ Grade level/ Highest Education

Belen 34, First Year High School, MarriedJessie 32, Second Year High School, MarriedMichael 30, Elementary Graduate, MarriedMary Jane 28, High School Graduate, MarriedMaricel 26, High School Graduate, MarriedMaritess 24, College Graduate, Stays with MaximianoJulie 22, High School Graduate, Stays with MaximianoJana (granddaughter) 2 years old, daughter of Julie

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 3,750.00 Rent (House) 500.00Electricity -Water -Education Tuition and School Fees - Fare and allowance -Medicine Free from brgy. center Total 4,250.00

131

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Employment on Banana Farm (Maximiano)

6,000.00

Employment in the cooperative as bookkeeper and maintenance worker (Maritess)

6,000.00

Total 12,000.00

5. Niliasco Household

ChildrenName of Children Age/ Grade level/ Highest Education

Hannah 26, Second Year College, Stopped schooling, MarriedNikki Bee 25, Second Year College, Stopped schooling, Married

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 2,500.00 Electricity 400.00Installment(payment for motorcycle)

1,735.00

Gasoline Paid for from motorcycle incomeMedicine 105.00 Total 4,740.00

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Employment in Banana Farm (Marsman)

4,728.00 (PhP197/day x 24 days)

Copra 5,000.00 (PhP15,000 quarterly)Motorcycle (as habal-habal) Just enough to pay for its fuel need Total 9,728.00

6. Diano Household

ChildrenName of Children Age/ Grade level/ Highest Education

Mark Anthony 19, High School GraduateMay Rachel 18, First Year CollegeMae Mariza 14, Third Year High School

132

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 6,000.00Electricity 600.00Water 250.00Education Tuition and School Fees 1,390.00 Fare and allowance 1,550.00Medicine 400.00Total 10,190.00

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Employment in Banana Farm (LADECO)

5,000.00

Banana (Cardaba) 1,000.00Hog Raising 3,333.00 (PhP10,000 quarterly)Sister’s Allotment (OFW) 2,000.00 - 3,000.00Sale of Cow (2 cows for 3 years)*

(PhP34,000)

Total 11,333.00 - 12,333.00

*This is used by the household for other projects.

7. Santander Household

ChildrenName of Children Age/ Grade level/ Highest Education

Maria Lourdes 35Julie Ann 34Jocelyn 32

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 6,000.00Electricity 400.00Water 154.00Education (Grandchildren) Tuition and School Fees 50.00 Fare and allowance 500.00Fare to Work (Maria Lourdes) 1,222.00Medicine 540.00Total 8,866.00

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Pension (Hernani) 1,400.00Banana (Cardaba) 300.00Salary (Maria Lourdes) 3,300.00Total 5,000.00

133

8. Sedil Household

ChildrenName of Children Age/ Grade level/ Highest Education

Sheila Mae 35, Second Year College Level, MarriedLloyd 25, Elementary LevelEdmund 19, High School LevelMae Amor 18, High School Level

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 3,600.00Electricity 100.00Total 3,700.00

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Income from Laundry (Editha) 1,000.00Banana (Cardaba) 500.00

(PhP1,500.00 per 3 months)Income from Fishing (Lloyd) 500.00Total 2,000.00

9. Laspona Household

ChildrenName of Children Age/ Grade level

Alvie 16, Fourth Year High School (In school)Boybits 8, Grade 2

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 3,000.00Electricity 300.00Water -Education (grandchildren) Tuition and School Fees 75.00

(PHP 905.00/ year) Fare and allowance 900.00Starting Capital for Fishing (Gas and other needs)

4,000.00

Medicine -Total 8,275.00

134

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Copra 1,333.00 (Php 4,000.00/3 months)Banana (Cardaba) 200.00Income from Fishing (Panamban)

6,000.00 - 12,000.00 (PHP 30.00/kg of Tamban x 10-20 kilos/

day x 20 fishing days)Rental of boat to Kupiat Island (Every weekend)

800.00

Total 8,333.00 - 14,333.00

10. Torrentera Household

ChildrenName of Children Age/ Grade level

Maria Theresa 15, 3rd Year High School

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 10,000.00Electricity 1,400.00Water 600.00Education Tuition and School Fees 400.00 Fare and allowance 1,500.00Medicine 100.00Gasoline 2,000.00Fare (Marcelina) 880.00Total 16,880.00

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Salary (Marcelina) 12,000.00Banana Plantation share on income -FMC holder (Rolando)

15,000.00 - 20,000.00

Total 27,000.00 - 32,000.00

11. Hibaya Household

ChildrenName of Children Age/ Grade level

Cris Benjielou 21, 3rd year Criminology StudentWilvenson 16, High School

135

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 3,000.00Electricity 400.00Water -Education Tuition and School Fees 300.00 Fare and allowance 2,000.00Medicine 50.00Total 5,750.00

Source and Average Monthly IncomeSource of Income Average Monthly Income (PHP)

Store, carenderia and billiards hall sales/ Income

7,000.00

Rental of Room 1,000.00Honorarium of Wilma as BHW 700.00Total 8,700.00

12. Campomanes Household

ChildrenName of Children Age/ Grade level

Eden Joy 14, 2nd yr. High SchoolEdmund John 11, Grade 5

Actual Household ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food 4,000.00Electricity 500.00Water 200.00House Amortization 1,300.00Education Tuition and School Fees 120.00 Fare and allowance 1,500.00Medicine Total 7,620.00

13. Tomas Household

2006 Monthly Production Expenses of 1.0 hectareCategory Details Amount

Production Chemicals: No dataFertilizers 3,000.00Aerial Spraying 4,500.00Canal (once a year 2,800) 233.00 Labor 4,800.00Other Materials (twine, poles, etc) No data

Packing Hauling (X-wharf) No dataLabor per box No data

136

Household Monthly ExpenditureExpenditure Item Average Monthly Expenses (PHP)

Food PhP4,000.00Electricity 1,000.00Water NoneHouse Amortization NoneEducation - College allowance and transportation

4,800.00

- Boarding House 1,000.00- High School allowance and transportation 1,200.00School Tuition No dataTotal Php12,000.00

137

DAT

E

FILE

D

NA

ME

OF

AR

B/ A

RB

C

OO

PE

RAT

IVE

OR

A

SS

OC

IATI

ON

NA

ME

OF

INVE

STO

RTY

PE

O

F AV

ALO

CAT

ION

OF

LAN

DH

OLD

ING

LAN

D

AR

EA

(H

as.)

STA

TUS

O

F AV

A

AP

PLI

CAT

ION

(a

ppro

ved/

D

isap

prov

ed/

Und

er

Pro

cess

)

DAT

E O

F PA

RC

/ PA

RC

E

XEC

OM

D

EC

ISIO

N

OR

PA

RO

’S

SIG

NAT

UR

E

ON

TH

E

CO

NTR

AC

T (I

f ap

plic

able

)

CO

NTR

AC

T D

UR

ATIO

N(S

peci

fy Y

ear

___

to Y

ear

____

)

Dav

ao C

ity

22

D

ecem

ber

19

98

Dav

ao A

gric

ultu

ral

Vent

ures

Cor

p.

Em

ploy

ees

Coo

pera

tive

(D

AVE

CO

)

Dav

ao

Agr

icul

tura

l Ve

ntur

es C

orp.

(D

AVC

O)

Con

trac

t of

Lea

seC

away

an,

Cal

inan

Dis

tric

t,

Dav

ao C

ity

85

.87

89

Dec

. 2

2,

19

98

-

Dec

. 2

1,

20

13

22

D

ecem

ber

19

98

Dav

ao A

gric

ultu

ral

Vent

ures

Cor

p.

Em

ploy

ees

Coo

pera

tive

(D

AVE

CO

)

Dav

ao

Agr

icul

tura

l Ve

ntur

es C

orp.

(D

AVC

O)

Con

trac

t of

Lea

seC

away

an,

Cal

inan

Dis

tric

t,

Dav

ao C

ity

18

.13

42

Dec

. 2

2,

19

98

-

Dec

. 2

1,

20

27

22

D

ecem

ber

19

98

Dav

ao A

gric

ultu

ral

Vent

ures

Cor

p.

Em

ploy

ees

Coo

pera

tive

(D

AVE

CO

)

Dav

ao

Agr

icul

tura

l Ve

ntur

es C

orp.

(D

AVC

O)

Con

trac

t of

Lea

seW

anga

n,

Cal

inan

Dis

tric

t,

Dav

ao C

ity

29

.42

96

Dec

. 2

2,

19

98

-D

ec.

21

, 2

01

3

28

D

ecem

ber

19

99

Dav

ao A

gric

ultu

ral

Vent

ures

Cor

p.

Em

ploy

ees

Coo

pera

tive

(D

AVE

CO

)

Dav

ao

Agr

icul

tura

l Ve

ntur

es C

orp.

(D

AVC

O)

Con

trac

t of

Lea

seS

irib

, C

alin

an

Dis

tric

t, D

avao

C

ity

27

.40

65

Dec

. 2

8,

19

99

-D

ec.

27

, 2

02

9

28

D

ecem

ber

19

99

Dav

ao A

gric

ultu

ral

Vent

ures

Cor

p.

Em

ploy

ees

Coo

pera

tive

(D

AVE

CO

)

Dav

ao

Agr

icul

tura

l Ve

ntur

es C

orp.

(D

AVC

O)

Con

trac

t of

Lea

seC

away

an,

Cal

inan

Dis

tric

t,

Dav

ao C

ity

12

.13

25

Dec

. 2

8,

19

99

-D

ec.

28

, 2

00

8

21

Fe

brua

ry

20

02

Dav

ao A

gric

ultu

ral

Vent

ures

Cor

p.

Em

ploy

ees

Coo

pera

tive

(D

AVE

CO

)

Dav

ao

Agr

icul

tura

l Ve

ntur

es C

orp.

(D

AVC

O)

Con

trac

t of

Lea

seW

anga

n,

Cal

inan

Dis

tric

t,

Dav

ao C

ity

34

.68

96

Feb.

21

, 2

00

2 -

Fe

b. 2

0,

20

17

ANNEX 5. Master List of AVA Applications

138

DAT

E

FILE

D

NA

ME

OF

AR

B/ A

RB

C

OO

PE

RAT

IVE

OR

A

SS

OC

IATI

ON

NA

ME

OF

INVE

STO

RTY

PE

OF

AVA

LOC

ATIO

N O

F LA

ND

HO

LDIN

G

LAN

D

AR

EA

(H

as.)

STA

TUS

OF

AVA

A

PP

LIC

ATIO

N

(app

rove

d/

Dis

appr

oved

/ U

nder

Pro

cess

)

DAT

E O

F PA

RC

/ PA

RC

E

XEC

OM

D

EC

ISIO

N

OR

PA

RO

’S

SIG

NAT

UR

E

ON

TH

E

CO

NTR

AC

T (I

f ap

plic

able

)

CO

NTR

AC

T D

UR

ATIO

N(S

peci

fy Y

ear

___

to

Year

___

_)

21

May

2

00

4D

avao

Agr

icul

tura

l Ve

ntur

es C

orp.

E

mpl

oyee

s C

oope

rati

ve (

DAV

EC

O)

Dav

ao A

gric

ultu

ral

Vent

ures

Cor

p.

(DAV

CO

)

Con

trac

t of

Le

ase

Wan

gan,

C

alin

an

Dis

tric

t, D

avao

C

ity

10

.18

38

May

21

, 2

00

4 -

M

ay 2

0.

20

19

28

Ja

nuar

y 2

00

3

Sub

asta

Agr

aria

n R

efor

m B

enefi

ciar

ies

Em

ploy

ees

Agr

icul

tura

l C

oope

rati

ve

(SA

RB

AC

)

Sub

asta

Agr

icul

tura

l C

orp.

(S

AC

) fo

rmer

ly

Dav

ao F

ruit

s C

orp.

(D

FC)

Con

trac

t of

Le

ase

Sub

asta

, C

alin

an

Dis

tric

t, D

avao

C

ity

87

.38

25

20

03

-20

18

Nag

kahi

usan

g K

ataw

han

sa T

amug

an

(NA

KAT

A)

Dol

e-S

tanfi

lco

Con

trac

t of

Le

ase

Tam

ugan

, M

arilo

g D

istr

ict,

Dav

ao

Cit

y

37

.19

85

20

04

-20

14

Bia

o M

ulti

-pur

pose

C

oope

rati

ve (

BM

C)

and

PC

EC

Bia

o E

mpl

oyee

s R

B

Ass

ocia

tion

, In

c.

(PB

EA

RB

AI)

Dol

e-S

tanfi

lco

Con

trac

t of

Le

ase

Ban

arao

, Ta

land

ang,

Tu

gbok

Dis

tric

t,

Dav

ao C

ity

78

.82

27

20

05

-20

20

Bia

o A

RB

Coo

pera

tive

(B

AR

BC

O)

Farm

Coo

pera

tive

Con

trac

t of

Le

ase

Bia

o E

scue

la,

Tugb

ok D

istr

ict,

D

avao

Cit

y

11

.10

33

20

03

-20

18

Pro

gres

sive

Hig

hlan

d D

evel

opm

ent

Coo

pera

tive

(P

HD

C)

SU

MIF

RU

Con

trac

t of

Le

ase

Bar

acay

o,

Dal

iaon

P

lant

atio

n, T

oril

Dis

tric

t, D

avao

C

ity

33

.90

00

20

02

-20

17

139

Pro

gres

sive

Hig

hlan

d D

evel

opm

ent

Coo

pera

tive

(P

HD

C)

SU

MIF

RU

Gro

wer

ship

Bar

acay

o,

Dal

iaon

P

lant

atio

n, T

oril

Dis

tric

t, D

avao

C

ity

23

1.3

30

02

00

2-2

01

7

Cal

law

a- B

ongg

an

Em

ploy

ees

AR

B C

oop

(CA

BE

AR

CO

)

Lapa

nday

D

evel

opm

ent

Com

pany

(LA

DE

CO

)

Con

trac

t of

Le

ase

Cal

law

a,

Buh

angi

n D

istr

ict,

Dav

ao

Cit

y

42

.18

83

Dav

ao A

gric

ultu

ral

Vent

ures

Cor

p.

Em

ploy

ees

Coo

pera

tive

(D

AVE

CO

)

Dav

ao A

gric

ultu

ral

Vent

ures

Cor

p.

(DAV

CO

)

Con

trac

t of

Le

ase

Taw

anta

wan

, B

agui

o D

istr

ict,

D

avao

Cit

y

Lapa

nday

Em

ploy

ees

AR

B C

oope

rati

ve

(LA

PE

AR

BC

O)

Lapa

nday

D

evel

opm

ent

Com

pany

(LA

DE

CO

)

Con

trac

t of

Le

ase

Tiga

tto

&

Man

dug,

B

uhan

gin

Dis

tric

t, D

avao

C

ity

TAM

-IS

(In

divi

dual

Fa

rmer

Ben

efici

arie

s)H

ighl

and

Ban

ana

Cor

pora

tion

(H

BC

)G

row

ersh

ipTa

may

ong,

C

alin

an

Dis

tric

t, D

avao

C

ity

No

cont

ract

is

furn

ishe

d to

MA

RO

des

pite

the

re

ques

t

Dav

ao d

el N

orte DA

MA

RB

DE

VCO

ME

PI

Con

trac

t of

Le

ase

Tiba

l-og

, S

to.

Tom

as7

99

.56

44

App

rove

d2

4 A

ugus

t 2

00

23

0 y

ears

WA

DE

CO

R

Em

ploy

ees

AR

B M

PC

(W

EA

RB

EM

PC

O)

Wor

ldw

ide

Agr

icul

tura

l D

evel

opm

ent

Cor

pora

tion

(W

AD

EC

OR

)

Leas

ebac

kM

inda

, C

arm

en4

85

.64

13

Und

er p

roce

ss

(PA

RC

Exe

com

)3

0 y

ears

PAH

EC

O E

mpl

oyee

s M

PC

(PA

HE

MP

CO

)P

anab

o H

emp

Cor

p.

(PA

HE

CO

)Le

aseb

ack

Sin

dato

n,

Pan

abo

Cit

y1

60

.88

01

Und

er p

roce

ss

(AVA

-TW

G S

ec)

30

yea

rs

Nes

tFar

ms

Em

ploy

ees

MP

C (

NE

MP

CO

)N

enit

a S

tock

Far

ms

(NE

STF

AR

MS

)Le

aseb

ack

Tibu

ngol

, P

anab

o C

ity

14

6.0

42

4U

nder

pro

cess

(A

VA-T

WG

Sec

)3

0 y

ears

140

Cen

tral

TA

DE

CO

E

mpl

oyee

s M

PC

(C

TEM

PC

O)

Tagu

m A

gric

ultu

ral

Dev

elop

men

t C

orp.

(T

AD

EC

O)

Leas

ebac

kB

o. A

.O.

Floi

rend

o,

Pan

abo

Cit

y

71

6.6

99

0U

nder

pro

cess

(A

VA-T

WG

Sec

)3

0 y

ears

Eve

rgre

en A

RB

D

evel

opm

ent

Coo

pera

tive

(E

AR

BD

EC

O)

Eve

rgre

en F

arm

s In

c.Le

aseb

ack

Dat

u A

bdul

, P

anab

o C

ity

21

.58

90

Und

er p

roce

ss

(AVA

-TW

G S

ec)

30

yea

rs

Che

cker

ed

Farm

s A

RB

MP

C

(CFA

RB

EM

PC

O)

Che

cker

ed F

arm

s In

c. (

CFI

)G

row

ersh

ip

(FO

B)

Indi

vidu

al

Farm

ing

Tibu

ngol

, P

anab

o C

ity

22

0.9

06

9Im

plem

ente

d by

th

e pa

rtie

s bu

t no

t re

view

ed b

y PA

RC

CO

M

SE

AR

BE

MP

CO

D

ole

Phi

ls.

Gro

wer

ship

(F

OB

) In

divi

dual

Fa

rmin

g

Dap

co,

Pan

abo

Cit

y3

51

.64

00

Impl

emen

ted

by

the

part

ies

but

not

revi

ewed

by

PAR

CC

OM

DA

PC

O A

RB

C

oope

rati

ve

(DA

RB

CO

)

Dol

e P

hils

.G

row

ersh

ip

(FO

B)

Indi

vidu

al

Farm

ing

Dap

co,

Pan

abo

Cit

y4

97

.28

37

Impl

emen

ted

by

the

part

ies

but

not

revi

ewed

by

PAR

CC

OM

Cel

esti

no Y

angs

on,

et a

l.S

tanfi

lco

Gro

wer

ship

Sam

pao,

K

apal

ong

14

.99

99

Impl

emen

ted

by

the

part

ies

but

not

revi

ewed

by

PAR

CC

OM

AM

S E

mpl

oyee

s Fr

esh

Frui

ts

Pro

duce

rs C

oope

rati

ve

(AM

SE

FFP

CO

)

AM

SFC

Gro

wer

ship

Sam

pao,

K

apal

ong

72

.81

00

Impl

emen

ted

by

the

part

ies

but

not

revi

ewed

by

PAR

CC

OM

AM

S K

apal

ong

AR

B

Em

ploy

ees

MP

CU

NIF

RU

TIG

row

ersh

ipS

ampa

o,

Kap

alon

g2

08

.00

00

Impl

emen

ted

by

the

part

ies

but

not

revi

ewed

by

PAR

CC

OM

Com

post

ella

Val

ley

28

D

ecem

ber

19

99

Diz

on F

arm

Wor

kers

C

oope

rati

ve (

DFW

C)

Mar

sman

Dry

sdal

e O

rgan

ic F

arm

s, I

nc.

Con

trac

t of

Le

ase

Pur

ok 7

, N

ueva

Vi

saya

s, M

awab

28

7.0

00

0A

ppro

ved

Did

not

pas

s PA

RC

leve

l2

5 y

ears

141

17

Jun

e 1

99

9Ta

gdan

gua

CA

RP

B

enefi

ciar

ies

Coo

pera

tive

(TC

BC

–

Tagd

angu

a)

Tagd

angu

a D

evel

opm

ent

Coo

pera

tive

or

Tim

ber

Land

asan

Inc

. un

der

Mr.

Josu

e Ti

sado

Join

t Ve

ntur

eTa

gdan

gua,

P

antu

kan

App

rove

dD

id n

ot p

ass

PAR

C le

vel

15

yea

rs e

xpir

ed

on S

ept.

28

, 2

00

7,

to e

nter

into

ne

w jo

int

vent

ure

ar

rang

emen

t w

ith

Ice

Kim

po F

oods

an

d A

gric

ultu

ral

Cor

pora

tion

m

anag

ed b

y M

r. R

ecul

ia o

f G

ener

al

San

tos

Cit

y

26

Ju

ne

19

92

(1

st M

OA

)

Tagn

anan

CA

RP

B

enefi

ciar

ies

Coo

pera

tive

, In

c.

(TC

BC

– T

agna

nan)

Nov

a Vi

sta

Dev

elop

men

t C

orpo

rati

on

Leas

ebac

kTa

gnan

an,

Mab

ini

10

05

.00

00

App

rove

dD

id n

ot p

ass

PAR

C le

vel

30

yrs

, re

new

able

for

an

othe

r 3

0 y

rs.

at

the

opti

on o

f th

e in

vest

or

21

Janu

ary

19

99

(2

nd M

OA

)

Tagn

anan

CA

RP

B

enefi

ciar

ies

Coo

pera

tive

, In

c.

(TC

BC

– T

agna

nan)

Nov

a Vi

sta

Dev

elop

men

t C

orpo

rati

on

Leas

ebac

kTa

gnan

an,

Mab

ini

60

9.0

00

0M

AR

O a

ffixe

d si

gnat

ure

for

2nd

M

OA

, st

ill d

id n

ot

pass

PA

RC

CO

M

TCB

C o

pted

to

can

cel p

revi

ous

cont

ract

and

st

and

for

grow

ersh

ip,

2 s

erie

s of

dia

logu

es

wer

e co

nduc

ted

wit

h th

e in

vest

ors

and

prep

arat

ion

of d

ocs

is o

n-go

ing

7 M

ay

19

92

MC

BC

ILa

pand

ay G

roup

s of

C

ompa

nies

Leas

ebac

kTa

gnan

an,

Mab

ini

42

5.0

00

0

of

75

7.0

00

0

(tot

al a

rea)

un

der

leas

ebac

k

App

rove

d

co

ntra

ct

canc

elle

d D

AR

AB

C

ase

No.

11

94

4

19

92

Apr

il 2

0,

20

05

no

sign

atur

e fr

om

PAR

C E

xeco

m

and

PAR

O

142

16

Jun

e 2

00

6D

izon

Maw

ab

Em

ploy

ees

Mul

ti-

Pur

pose

Coo

pera

tive

(D

ME

MC

O)

AR

GA

R E

nter

pris

es

(ow

ned

by R

olan

do

del F

ierr

o)

Nue

va V

isay

as,

Maw

ab2

0.8

58

8A

ppro

ved

PAR

O’s

si

gnat

ure

– de

liber

ated

in

the

PAR

CC

OM

PA

RC

de

cisi

on –

PA

RC

CO

M

Cha

irm

an

affix

ed

sign

atur

e

5 y

ears

Con

cepc

ion-

Dum

lan-

Hijo

AR

B M

ulti

-pu

rpos

e C

oope

rati

ve

(CB

HA

RB

EM

CO

)

Mac

o A

gri V

entu

res,

In

c. (

MAV

I) s

peci

al

sett

lem

ent

for

80

A

RB

s w

ith

Aya

la

Gro

up o

f C

ompa

nies

. C

LOA

not

yet

di

stri

bute

d bu

t A

RB

s w

ere

inst

alle

d an

d ar

ea u

tiliz

ed t

hru

DLT

sc

hem

e

Gro

wer

ship

Con

cepc

ion,

M

aco

34

.00

00

Con

trac

t di

d no

t pa

ss P

AR

CC

OM

fo

r de

liber

atio

n

15

-20

yea

rs

A

pril

4,

20

05

–

Apr

il 4

, 2

01

5 –

A

pril

4,

20

20

Visc

aya

Pla

ntat

ion

Inc.

AR

B C

oope

rati

ve

(VP

IAR

BC

O)

Mac

o A

gri V

entu

res,

In

c. (

MAV

I)

Aya

la G

roup

of

Com

pani

es

Leas

ebac

k

(18

CLO

As

invo

lved

)

Hijo

, M

aco

29

.16

00

Con

trac

t di

d no

t pa

ss P

AR

CC

OM

fo

r de

liber

atio

n

30

yrs

Nov

28

, 2

00

1 –

N

ov 2

8,

20

31

Brg

y. H

ijo A

RB

C

oope

rtiv

e (B

HA

RB

CO

)

AR

R A

gri-

vent

ures

E

nter

pris

e (C

onso

lidat

or)

Gro

wer

ship

Hijo

, M

aco

29

.90

00

Con

trac

t di

d no

t pa

ss P

AR

CC

OM

fo

r de

liber

atio

n

5 y

rs

May

25

, 2

00

6 –

M

ay 2

5,

20

09

Gol

den

Ban

ana

Coo

pera

tive

Fres

h B

anan

a A

gri-

Vent

ure

Cor

pora

tion

(C

onso

lidat

or)

Gro

wer

ship

Kat

ipun

an,

New

Bat

aan

40

.93

00

Con

trac

t di

d no

t pa

ss P

AR

CC

OM

fo

r de

liber

atio

n

25

yrs

Ju

ne 1

4,

19

92

–

June

14

, 2

01

7

Pag

-asa

Far

mer

s M

PC

Fres

h B

anan

a A

gri-

Vent

ure

Cor

pora

tion

(C

onso

lidat

or)

Gro

wer

ship

Kat

ipun

an,

New

Bat

aan

42

.00

00

Con

trac

t di

d no

t pa

ss P

AR

CC

OM

fo

r de

liber

atio

n

25

yrs

Ju

ne 1

4,

19

92

–

June

14

, 2

01

7

143

Doe

s no

t ha

ve a

ny A

VA**

Hijo

AR

B C

oop

A

M

adau

m,

Tagu

m C

ity

10

00

.00

00

(T

otal

for

3

Coo

ps)

Not

e: T

his

is a

“f

ull t

ake

over

”.

Pro

duct

ion

Man

agem

ent

and

Cap

ital

izat

ion

is b

y th

e C

oops

. H

as a

mar

keti

ng

agre

emen

t w

ith

Lapa

nday

.

Hijo

AR

B C

oop

B

Hijo

AR

B C

oop

C