NO verbal scams by regular benefactors, business groups, civic organizations and chambers of commerce have had the longevity of “Investing in Agriculture”. From my adulthood in the still agrarian years of the 20th century to today’s private groups of tech moguls exploring space travel (think Space X and Blue Origin), this calling has not lost its motto and its agency. Now, during these times of Covid where planting something and raising something are just a few of the concerns that don’t require rigid masking and social distancing, the timbre of that siren call has reached soprano level.
The invitation to “Invest in Agriculture” is not directed to the few business tycoons who currently control much of corporate agriculture and Big A or Big Agriculture. These corporate giants host the growth entities; operate industrial-grade chicken and pork farms; manufacturing processed food products including animal and aqua foods; and roll out those high cholesterol hot dogs and canned meats to low income groups; or those of the second tier of the agro-rich, the food processors who have made the importation and processing of carabeef a real base of substantial wealth.
In the current context, the call to invest in the sector is addressed to young people who have not yet realized their life projects. It is the physically fit young people who urgently need to rebuild a severely gray sector – the average age of Filipino farmers is 57. Or the OFW families.
But you know what. Even with the keenest interest, a specialized graduate of an animal health or agriculture program at prestigious universities would not dare to go it alone and “invest in agriculture”. He would prefer to work as an extension agent for agricultural companies with growth programs. Or work in the animal feed sales division. Or sell drugs and veterinary supplies. Or become an account manager at these huge entities that supply bulk yellow corn and soybeans to independent pig and broiler producers. In the decades I have raised broilers and pigs, I have known remarkable graduates from the University of the Philippines Los Baños, Central Luzon State University and Gregorio Araneta University Foundation-La Salle who have opted for a business job, instead of starting their own farming business. -commercial enterprises.
The reason is as follows. The smallest agro-food business, whether it is a small broiler operation, a laying business with 2,000 pullets, a pigsty with 10 sows, a lease on a land agricultural area of 5 hectares either for the production of vegetables, or for the cultivation of rice and yellow corn, requires capital, real capital. And there is no financial institution in this country that serves as a sort of angel investor for young people keenly interested in farming businesses.
Okay, what about starting growout operations with guaranteed income, like raising broilers with guaranteed income of P12 to P17 per bird? Even young graduates in agro-health and animal health from middle-class families and with an entrepreneurial spirit will find it difficult to venture there. You need a plot of land, which would be 1 hectare for smaller farms. The ventilated building of the ordinary tunnel housing 35,000 birds now costs 15 million pesos to build (two high-power generators included). Few people have that kind of money.
Okay, this question is relevant. What about the Agri-Agra law, which has become the law of the Republic 1000? Doesn’t the law order the banking system to allocate 25% of loanable funds each year to agrarian beneficiaries (10%) and agriculture (15%) to help farmers and aspiring farmers, in particular children and beginners?
The Agri-Agra Law, as the title suggests, has been toothless and unnecessary law for the entire 46 years of its existence, from when it was a Marcos-era presidential decree in 1975. (PD 717) until today, the 21st century, under the amended RA 10000. It cannot help the beneficiaries of land reform, and it cannot help young people who want to venture into businesses related to agriculture.
The 46-year-old is useless and toothless. And these are the reasons why the law has dragged on for 46 years without helping small players in the agricultural sector.
On the one hand, the law includes numerous safeguard clauses or riders. Investments in, say, mass housing, are seen as a compliance alternative. Banks prefer to do “alternative compliance” rather than lend to land reform beneficiaries or to small-scale agricultural enterprises.
Second, the banks, having exhausted the alternative compliance quota, would rather pay heavy fines rather than meet the 25% mandate of 10,000 RA. The entire banking system pays between 2 and 3 billion pesos a year in fines – penalties for willfully violating and sneering at Agri-Agra law.
Okay, let’s rephrase the banks’ loathing for 10,000 RA this way. Banks would rather give unsecured loans worth billions of pesos to a bankrupt South Korean shipbuilder rather than lend to beneficiaries of land reform and small-scale agriculture. Do you still remember the unsecured jumbo loan given to bankrupt Hanjin? The Land Bank of the Philippines, a state bank with a specific mandate to support the Agri-Agra law, was one of the giant banks defrauded by Hanjin.
The reluctance of banks for 10,000 RA and loans to small farmers is clearly demonstrated in the level of loans to beneficiaries of land reform. It is supposed to be 10 percent per year under the law. It has never exceeded 1% of total loanable funds in recent years.
With the highest level of nonperforming loans in decades, expect banks to even more willfully and mindlessly break the law, which has been unnecessary and toothless from time immemorial.
Okay, you might want an answer to that question. Didn’t President Duterte threaten to shut down the Land Bank for its inability to lend enough to the agricultural sector? Like his promise to jet ski somewhere, consider this one of the President’s many jokes.