Idiocy

Idiocy” was the first word I thought of when I read it. And the second. And the third. You really have to wonder what goes on in some people’s minds.

A thoroughly discredited ideology, one that has not succeeded anywhere unless you consider North Korea a success, is being used to try and close one of the few remaining major agribusinesses in the Philippines—one that has been providing jobs to more than 1,800 people and sustenance to more than 8,000 dependents.

Agrarian reform beneficiaries earn an estimated P40,000 per hectare a year on rental  and other income sources—one of the highest in the industry. On top of that, they’ve been provided with schools, scholarships, and livelihood programs. Despite this, the government under the Comprehensive Agrarian Reform Program is being petitioned to hand over Marsman Estate Plantation Inc. (Mepi) to 307 farmers so they can inefficiently, unproductively produce the same crops. They have no ability to process these crops (Mepi will of course have no incentive to stay, and shouldn’t), and no capability to sell them. Big deal: Own an asset but have no money to feed, clothe and educate your family.

CARP is a proven failure in improving the farmer’s lot. It is one of those nice-sounding ideals—and it is nice because indeed, everyone should own land—but it just doesn’t work. As UP School of Economics professor and National Scientist Raul Fabella stressed in his discussion paper, “CARP: Time to Let Go,” CARP and Carper (its extended version) only created a new class of people: the “landed poor.” Poverty incidence in CARP areas is 54 percent, while among non-CARP farmers it’s a significantly lower 35 percent. Also, the nontradability of CARP farms (a major weakness of the law) has destroyed the formal land market, prevented best use of farms, and affected the development of formal credit (you can’t borrow without tradable collateral).

Everyone in the cities should own their own land, with a house on it, too, but not everyone does. And it can’t be forced any more than rural land ownership can be forced. Encouraged, yes. Supported to occur, yes. But mandated? That never works.

For some odd reason, the Presidential Agrarian Reform Council wants to revoke the lease agreement for 800 hectares of land that Mepi used to own but was compelled by CARP to turn over to the farmers in 2000.

Because the crop—banana—needs economies of scale if it’s to be a successful export crop and was being successfully produced and exported before CARP raised its ugly head, the farmers agreed to lease the land to Mepi. They still owned the land, as CARP required, but allowed it to be farmed in a coordinated, efficient manner, with them all benefiting (they had employment on the estate).

The employees, 1,863 of them, will all lose their jobs if this revocation being pushed by a minority 307 goes through. Mepi employees are paid one of the highest wages and benefits package in the industry: They earn average annual salaries and benefits of P222,000 for rank and file, P423,000 for supervisors, P577,000 for superintendents, and P1.33 million for managers. Everyone will lose all of this.

Mepi will suffer losses of some P5.3 billion in lost contracted sales and assets. Contingent liabilities will now be due, and opportunity losses will be huge.

The government will be rescinding valid, legal contracts that President Duterte has sworn his administration will never do (unlike the preceding). The employees will lose their incomes, and their families will lose all the social benefits Mepi has provided—a school and scholarships for their children, healthcare including a hospital for families, livelihood programs, etc. The usual stuff large, responsible corporations provide in the provinces.

The unjust and contract-violating revocation of the lease, if it is allowed to occur, will produce a chilling effect on foreign investors and discourage investment in agricultural production and export of Philippine produce that this administration is keen to develop much more strongly. Mr. Duterte needs to stop this nonsense before it gets out of hand.

E-mail: [email protected]. Read my previous columns: www.wallacebusinessforum.com.