ava cfc bukidnon

DAR-Policy and Strategic Research Service (PSRS), February 2006 1

CASE STUDY ON THE DEVELOPMENT CONTRACT (PINEAPPLE)

AND LAND USE MANAGEMENT (BANANA) AGREEMENT: ARB-MEMBERS OF THE CARABAO FARMERS COOPERATIVE

(CFC) AND DEL MONTE PHILIPPINES, INC. (DMPI) AND SKYLAND,

DOLE PHILIPPINES, INC. IN BARANGAY CAWAYAN, IMPASUG-ONG, BUKIDNON

DEPARTMENT OF AGRARIAN REFORM

Policy and Strategic Research Service Economic and Socio-Cultural Research Division

February 2006


TABLE OF CONTENTS

Page I. Profile of the Study Site

A. Province of Bukidnon 1 B. Municipality of Impasug-ong 2 C. Barangay Cawayan 2

II. Profile of Pineapple and Banana Industries in the Philippines 1. The Pineapple Industry 3 2. The Banana Industry 4

III. Background of the Plantation Case Study 5 IV. The Investors 6 V. The CARABAO Farmers Cooperative 7 VI. Process and Dynamics of the Agribusiness Venture 8 Arrangements VII. Socio-Economic Benefits Derived by the ARBs from 14 Agribusiness Venture Arrangements VIII. Capability of the Cooperative Officers in Managing the 16 Cooperative and Undertaking the Agribusiness Venture Arrangement IX. Perceptions of ARBs and Investors on Agribusiness 16 Venture Arrangement X. Lessons Learned 18 XI. Recommendations 19


Case Study on the Development Contract (Pineapple) and Land Use Management (Banana) Agreements:

ARB-Members of the CARABAO Farmers Cooperative (CFC) and Del Monte Philippines, Inc. (DMPI) and Skyland, Dole

Philippines, Inc. in Barangay Cawayan, Impasug-ong, Bukidnon

I. Profile of the Study Site A. Province of Bukidnon

Location. The province of Bukidnon is a land locked plateau in Northern Central Mindanao. It is bounded on the north by Misamis Oriental; on the south by North Cotabato and Davao del Sur; on the east by Agusan del Sur and Davao del Norte; and on the west by Lanao del Sur. Bukidnon has a total road network of at least 5,000 kms. long. The Sayre Highway cuts across the center of the province from Cagayan de Oro City in the north to Carmen, South Cotabato in the south. Secondary national roads lead to Davao City, Lanao del Sur, Agusan del Sur, Misamis Oriental, Cotabato province and two other points in Cagayan de Oro. The provincial capital, that is Malaybalay City, is approximately 800 kilometers by air from Manila, about 99 kms. and 310 kms. by land from Cagayan de Oro City (northern Mindanao) and Davao City, (southern Mindanao) respectively. Land Area and Population. As the second largest province of Mindanao, Bukidnon has a total land area of 829,378 hectares. Based on 2000 provincial profile, it has a total population of 1,060,265 with an annual growth rate (1999-2000) of 2.31 percent. This comprises 201,753 total households with an average household size of 5.

Major Establishments. The province has four (4) Colleges and Universities: the Central Mindanao University (CMU), Bukidnon State College (BSC), Mountain View College (MVC) and San Isidro College. It has 36 banks operating in the province and 40 hospitals (33 privately owned; 7 government-owned) which serve the health needs of the population. Agriculture. The province hosts the Del Monte Philippines, Inc. (DMPI) Pineapple Plantation and the Dole Banana plantation. The DMPI's 30,000 hectare plantation is located in the municipalities of Manolo Fortich, Libona, Impasug-ong, Sumilao and Malaybalay. It is considered to be the largest pineapple plantation in the Far East. The Dole Philippines, Inc. banana plantation covers 3,000 hectares spread in seven (7) municipalities in Bukidnon and employs around 6,000 farmworkers. Land Tenure Improvement Status. As of July 2004, the Department of Agrarian Reform (DAR) in Bukidnon has already distributed 129,922 hectares of


agricultural lands to farmer-beneficiaries covering 22 municipalities. This accomplishment covers 93.4 percent of its working scope. However, it still has 5,633 hectares of problematic areas which need to be settled.

B. Municipality of Impasug-ong Location. Impasug-ong is one of the oldest towns of the province of Bukidnon. It is strategically located in the northeastern portion of the land locked province. It is one of the six municipalities of Central Bukidnon, which is bounded on the north by the municipality of Claveria, province of Misamis Oriental. On the northeast, it is bounded by the province of Agusan del Sur, on the southeast by the city of Malaybalay and on the west by the municipalities of Sumilao, Manolo Fortich and Malitbog. The municipality of Impasug-ong is approximately 75 kilometers or one and a half (1 ) hour ride from Cagayan de Oro City and 30 kilometers or 45 minutes ride from Malaybalay City by public utility vehicle. Topography. Impasugong is characterized by mountains, deep canyons and gorges and is shaped like the head of a diving eagle with its beak pointed downward towards the south. Its highest crests are Mt. Kitanglad, Mt. Saldab, Mt. Kimangkil, Mt. Kibuwa and Mt. Pangalak-akan. Almost 60 percent of the municipality is within 501 to 1,000 meter elevation with an average elevation of 647 meters. Agriculture. The municipality of Impasug-ong although located in the high lands, is basically an agricultural area. Of the total land area of 107,167 hectares, about 16 percent or 17,053.2599 hectares are classified as agricultural land within alienable and disposable. However, only 12 percent or 12,888 hectares are actually devoted for agricultural production and 0.5 percent or 540 hectares are utilized for livestock production. The remaining areas are still uncultivated. C. Barangay Cawayan

Location. Barangay Cawayan is one of the 13 barangays of the municipality of Impasug-ong. It is nestled in the vicinity of four barangays, namely: Brgy. Capitan Bayong on the north; Brgy. Kibenton on the south; Brgy. Impalutao on the east; and Brgy. La Fortuna on the west. The place is accessible from the national highway with an 8-kilometers all weather road. It is also 13 kilometers away from the Poblacion of Impasug-ong and 30 kms. drive from the provincial capital, Malaybalay.

Land Area and Population. The barangay has total land area of 1,282.9395 hectares. As of August 2004, its total population reached 1,112 which comprises 225 households with an average household size of five members.

Agricultural Area and Major Crops. Barangay Cawayan is mainly an agricultural area because of its topography, which is generally plain. Its main source of livelihood is farming. Forty-seven percent (47%) or 604.718 hectares of its total land area is devoted to agriculture. Corn and sugarcane are the major crops grown in the area.


Other crops grown are pineapple, banana, rice, tomato and sweet pepper. Aside from farming, residents also derive income from logging and weaving. Health and Nutrition. Basically, there is a health center in the barangay with only one midwife who takes charge. Based on the 2004 barangay profile, there were 11 live births while the reported number of malnourished children were 40. Education and Literacy. The Cawayan Primary School is the only elementary school available in the barangay. As of 2004 barangay profile, a total of 231 pupils were enrolled in this school. Land Tenure Improvement. As of 2004, the total CARP scope in Barangay Cawayan in terms of land acquisition and distribution is 370.9198 hectares. These comprise around 29 percent of the total land area of the barangay and roughly 61 percent of its total agricultural lands. Of the total CARP scope of 370.9198 hectares, a total of 360.1497 hectares or 97 percent had already been acquired and distributed to 245 beneficiaries.

II. Profile of Pineapple and Banana Industries in the Philippines

1. The Pineapple Industry The Philippines is the second major producer of fresh and canned pineapple in the world, with Thailand as the lead. It produces 17 percent of the total world production of pineapple. The pineapple industry contributes about 1.4 percent of the total value of agricultural production of the Philippines that is at PhP2.6 billion annually. The area planted to pineapple in the country decreased by around eight percent over the period of five years from 43,663 hectares in 1994 to 40,233 hectares in 1998. Production, on the other hand, increased by 23 percent around the same period, from 1,331,453 metric tons (mt) in 1994 to 1,638,002 mt. in 1997. The El Nio phenomenon brought down the production to 1,495,122 mt. in 1998. The leading regions in the production of pineapple in 1998 by area include the following: Northern Mindanao, 15,884 hectares; Southern Mindanao, 11,160 hectares; Southern Tagalog, 5,584 hectares; Bicol, 3,250 hectares; and Cagayan Valley, 1,495 hectares. The leading producers in 1997 by region include the following: Northern Mindanao, 867,998 mt; Southern Mindanao, 603,996 mt; Southern Tagalog, 62,057 mt; Bicol, 61,285 mt and Cagayan Valley, 12,733 mt. Pineapple is consumed domestically as fresh fruits. It is also prepared into various processed products such as canned juice, vinegar and concentrates. A large portion of pineapple produced in the country is exported. The volume of pineapple exported in all forms decreased by an average of 5.2 percent annually, from 459,711 mt. in 1994 to 371,116 mt. in 1998. It is significant to note that during this period, the export of


pineapple in Thailand increased markedly. The situation in pineapple production in the Philippines differs in Thailand as 85 percent of the pineapple area is managed by small landholders. In the Philippines, 85 percent of the pineapple farms is managed by multinational companies. Among the problems affecting the pineapple industry in the country particularly among the small landholders are the seasonality of production resulting to fluctuation in prices, low level of production technologies, inadequate transfer of technologies, and inadequate pre and postharvest facilities. B. The Banana Industry Banana is the leading fruit grown in the Philippines. It is also one of the most important crops in the country being a consistent top dollar earner. The prospect of Philippine bananas in the domestic and foreign market is still promising. With a growing population rate, local requirement is expected to increase since banana constitutes 73 percent of consumers fruit intake. Banana planting in the Philippines is also favored by existing agro-climatic conditions. World production of banana in 1999 reached 58.4 million metric tons in 1999 down by 0.2 percent from a total production of 58.6 million metric tons in 1998. India was the top producer with a total volume of 11 million metric tons in 1999 or a share of 19 percent of the world's total production. The Latin American countries which include Ecuador, Brazil, Colombia, Costa Rica and Venezuela had a cumulative production of 16.7 million metric tons had a share of 30 percent of the world's total. Asian countries like the Philippines, China, Indonesia and Thailand have a total production of 21.9 million metric tons contributing 37 percent to the world's total production. The Philippines ranks fifth among the world's major producers of banana. It is the only Asian country included in the world's top exporters of banana, ranking 5th with 1.1 million metric tons of export valued at US$217 million or a share of 7 percent of the European Union banana imports. The average yield of Philippine banana production in 1999 was 11.0 metric tons per hectare, which is 26 percent lower than the world's average yield of 15.0 metric ton per hectare. Production of banana is mainly concentrated in Mindanao where the biggest banana producing provinces are located, which include Davao del Norte (45%); Lanao del Norte (12%); Davao del Sur (11%); Maguindanao (7%); Davao City (7%); and Misamis Oriental (4%). Outside of Mindanao, the biggest producing provinces are Cagayan (4%); Isabela (4%); Agusan del Sur (3%); and Iloilo (3%). Philippine Banana Exports are mostly sold in the Asia (Japan, Korea and Hongkong), EU and US markets. The Philippines ranked 1st in the fresh banana imports of Japan during the period 1993-1997 contributing 74 percent of the total Japan importation. In terms of dried banana it ranked 4th with a share of one percent. Ecuador dominates Japan market for dried banana with 90 percent share.


In the US and European market, the Philippines lagged behind other major exporters of banana in the world. In the US market, Philippines ranked 32nd in the top banana fresh/dried supplier with less than one percent share. Top suppliers of banana to US are the Latin American countries like Costa Rica with 25 percent share, Ecuador with 23 percent share and Colombia with 15 percent share. Likewise in the United Kingdom, the Philippines' share of banana fresh/dried exports is less than one percent, ranking 31st. The country's per capita consumption for banana is about 22 kg/person/year. Demand for local varieties is expected to increase as shown by expansion of production areas and the number of companies formed for this purpose. The more popular varieties grown in the country are Cavendish, Saba, Lakatan, Latundan and Bungulan. Cavendish is cultivated mainly for export as fresh while Saba is also known as the "cooking banana". III. Background of the Plantation Case Study The case farm was formerly a coffee plantation operated in the early seventies by Kitanglad Development Corporation, a company owned by a Belgian national who married a Filipina. When the Belgian national bought 81.5 hectares of agricultural lands in Brgy. Cawayan , Impasug-ong, he hired farmworkers to clear the area and planted it to coffee. The farmworkers worked in the area until the coffee bore fruits. They did the harvesting of coffee fruits and other farm activities, and were paid PhP6.00 a day. When the area was no longer productive as a coffee plantation, the farm operation was stopped and the farm was left idle by the owner for four years. In 1989, the owner voluntarily offered the farm for CARP coverage and 42 farmworkers of the plantation were identified as ARBs. Simultaneous with the land documentation activities was the organization of the ARBs into a cooperative, the Carabao Farmers Cooperative, spearheaded by the KAANIB, an NGO operating in the area. Eventually, the land was distributed to the ARBs through a co-ownership type of collective CLOA. The land was valued at PhP30,000 per hectare. Although a collective CLOA was issued, the ARBs decided to operationally subdivide the land among themselves. Since coffee production was no longer profitable, they planted corn, cassava and vegetables in their lands. Since the ARBs had difficulty of paying their land amortizations with the Land Bank of the Philippines (LBP), they entered into lease arrangements with the two multi-national companies, the Del Monte Philippines, Inc. and Skyland, Dole Philippines, Inc. which promised them to pay their land amortization arrearages with the LBP.


IV. The Investors

A. Del Monte Philippines, Inc. (DMPI) Del Monte Philippines, Inc (DMPI) is an international corporation established in 1926 and employs 7,000 people in the country. Its local operations cover the processing, manufacturing, and packing of pineapple and tomato products. The major stockholders are the Lorenzos with Mr. Marco Lorenzo as the Senior Manager, and the office of which is located in Bugo, Cagayan de Oro City. The DMPIs pineapple plantation in Bukidnon is a 30,000-hectare farm covering the municipalities of Manolo Fortich, Libona, Impasug-ong, Sumilao and Malaybalay. It is considered as the largest pineapple plantation in the Far East and also maintains a world-class 18-hole golf course which is only a 30-minute ride from Cagayan de Oro City. The DMPIs office in Bukidnon is located in Camp Philipps, Manolo Fortich. It is also where the housing units of its employees are situated.

In an interview with the DMPIs Labor Legal Officer and the Technical Manager on Land Matters, they disclosed that they send land canvassers in the field to identify areas which could be leased by the company for pineapple production. In selecting the area, they consider rainfall, elevation and soil suitability of the area for growing of pineapple. On the average, around 50 hectares of land can be planted daily with pineapple. Immediately after each harvest of a portion of the lands, they are cleared for the next planting.

The company established a foundation, the Del Monte Foundation, which provides technical skills training and scholarships to deserving children of poor families in the municipalities from grade school to college.

The development agreement executed by the company with the CARABAO Farmers Cooperative (CFC) covers 32 hectares, but only 23.5 hectares are arable due to their elevation. Under the agreement, the DMPI shall develop the leased area of the ARBs for commercial pineapple plantation in exchange for a certain amount of lease rental.

B. Skyland, Dole Philippines, Inc.

The main office of Skyland, a division of Dole Philippines, Inc. is located in Malaybalay, Bukidnon. It employs 12 personnel who man and operate the office. In 1997, during its initial operation in Bukidnon, it started operating on specific areas found suitable for banana production. In 2002, after it determined the suitability of bigger areas for banana plantation, it expanded to other areas covering two zones covered by STANFILCO, a division of Dole in Bukidnon. Dole Skyland call those areas which are below 1,000 hectares as farms, while those areas 1,000 hectares and above in size are called zones. The major market outlet for the banana product is Japan, which buys 80% of the total production.


The companys banana plantation in Bukidnon has 6,000 farmworkers. The plantation covers 3,000 hectares spread out over seven (7) municipalities. All the farmworkers in the 500-hectare banana plantation in Impasug-ong were ARBs who individually leased their farms to Dole Skyland for a term of 15 years. During peak season, the company employs three to four persons per hectare. It accepts 18 to 60 year old farmworkers. A regular employee is paid a minimum of PhP163 a day plus PhP12 cost of living allowance (COLA) a day. ARBs are evaluated based on their performance. The other benefits and privileges provided by Dole Skyland to the farmworkers and employees are specified in the collective bargaining agreement (CBA), executed between the company and the said farmworkers and employees. During its preliminary operation, the company penetrated Barangay Cawayan. Dole representatives/land canvassers visited the houses of the target ARBs and made an offer to rent the farms awarded to them for an average of PhP15,000 per hectare per year. The rent was paid in advance for two years and yearly thereafter for 15 years. Because the farmers lands are already mortgaged and about to be foreclosed by LBP, the ARBs did not have a second thought, hence they entered into individual contracts with Dole Skyland. V. The CARABAO Farmers Cooperative The CARABAO Farmers Cooperative (CFC) is the only farmers organization in Barangay Cawayan. It was organized in 1991 by KAANIB, an NGO under the umbrella of PHILDRRA, which operates as development partner of the ARBs in the rural areas. The cooperative was registered with the Cooperative Development Authority (CDA) on January 22, 1992. Of the original 42 ARB-members, only 37 remain in the area, the rest abandoned the area a year after the award. As of date of the interviews, CFC membership had increased to 108 as other ARBs outside the plantation joined them. Based on its 2003 organizational profile, the cooperatives total Capital Build-Up (CBU) was PhP108,000, with total assets of PhP661,148 and liabilities of PhP551,000. Each member has a fixed deposit of PhP400 and a membership fee of PhP25. However, the cooperative has not extended any loan assistance to its members and there have been no cooperative activities undertaken. In fact, they only conduct meetings whenever called by DAR and/or other agencies. The cooperative does not have its own office and utilizes the barangay hall whenever its members conduct meetings or other cooperative-related activities. Although the cooperative has not undertaken cooperative-related activities, it was able to obtain support services in the form of loans and grants through the KAANIB from various funding institutions like the Land Bank of the Philippines (LBP), Department of Agriculture, provincial government of Bukidnon, Kitanglad Integrated Area Development, Xavier Science Foundation, and the Lutheran World, a funding institution based in Baltimore, USA.


When the cooperative was organized in 1991, several forms of assistance were extended to the members from 1991 to 2004 such as production loans and other non-cash assistance. In 1991, the Kitanglad Integrated Area Development provided a combination of loans in the amount of PhP500,000, and grants to cooperative members through DAR SPO amounting to PhP1,343,660. In 1993 to 1995, LBP provided loans for corn and cassava production. However, the loan extended to the cooperative remained unpaid as of the date of interview. Likewise, the provincial government of Bukidnon provided production loan assistance to some individual members which was also still unpaid. Some 15 cooperative members were also granted membership in PHILHEALTH. Aside from production loan, the members through their cooperative, were also provided farm inputs, post harvest facilities for corn production, and livestock dispersal by DA and the local government units. Trainings and seminars were also conducted for the members by some government agencies and NGO. VI. Process and Dynamics of the Agribusiness Venture

Arrangements When the Kitanglad Development Corporation voluntary offered its idle landholdings for CARP coverage in 1989, the farmworkers who became ARBs organized themselves into a cooperative but decided to operationally subdivide the awarded lands among themselves and individually engaged in the production of corn, cassava and vegetables. There were no cooperative-related activities undertaken except for meetings which were usually called by some government agencies and NGO. Despite the inactive operation of the cooperative, they were able to obtain some support services from various institutions such as post-harvest facilities, production loans and livestock dispersal. In 2000, about a decade after the awarding of the lands, they failed to make their lands productive, thus hardly making their both ends meet. Moreover, the ARBs were beset with problem on payment of their land amortizations with the LBP. When DMPI and Dole offered them lease agreement, they took them as an opportunity to pay their land amortization arrearages with the LBP. Since they are individually cultivating their landholdings, the ARBs individually decided on the companies offer which they thought would be best for them. Thus, the ARBs were divided into two groups: one group composed mostly of the officers and some members entered into contract with DMPI, while the other group individually decided for Dole. The ARBs who entered into contract with DMPI are mostly officers of the cooperative, thus the contract was executed between the cooperative and DMPI. Primarily, these ARBs entered into contract with DMPI because of the promised outright full payment


of their land with the LBP which will be deducted from their lease rental payments without interest charges. On the other hand, other ARBs opted for Dole because it offered higher lease rental, employment opportunity and short duration of lease contract. Although the company also offered full payment of the ARBs land, this will be in staggered basis, that is, their total land amortization obligations to be paid within eleven years starting from the first year Dole and the cooperative signed the contract. A. The Establishment of the Development Contract Between Individual

ARB-Members of the CFC and DMPI As part of the DMPIs program to expand their area for pineapple production, they assigned field representatives to identify landholdings which could be leased by the company. Thus, these field representatives or land canvassers negotiated with the officers and members of the CARABAO Farmers Cooperative of Cawayan to whom they offered a possible lease arrangement. They set up meetings and discussed the terms and conditions of the proposed contract with the ARBs. During that time, the members of the cooperative had difficulty paying their land amortizations with the LBP in the amount of PhP1,650 per hectare per year. Because of accumulated arrearages on their land amortizations, the LBP had notified them of the possible foreclosure of their landholdings. Hence, when the DMPI offered the contract to the ARBs, they found it as a solution to their long standing land amortization problem at the time. The offer of DMPI assured the ARBs of a guaranteed minimum profit or lease rental of PhP5,150 per hectare per annum. The cooperative officers bargained for a higher lease rental, however the company was firm on their offer. As the DMPI was aware of the ARBs problem on land amortization, they verbally offered the full payment of the ARBs land amortization arrearages with the LBP, which would be deducted from their annual lease rental payment without interest. The company also offered a three-year cash advance based on lease rental rate and the promise to pay cost of improvements incurred by the ARBs on the standing crops planted on their lands. The MARO of Impasug-ong recalls that the contract prepared by DMPI was reviewed by different institutions like DAR, PARCCOM, LGU, LBP and an NGO. The LGU even conducted a public hearing and explained the contents of the contract to the ARBs in local dialect. The DAR officials advised the ARBs not to enter into the contract, for reasons that the guaranteed minimum profit or lease rental was very low, that the ARBs landholdings would be tied up for 25 years, and the lack of employment opportunity. Even the PARCCOM was not amenable to the DMPIs offer. Since the ARBs perceived that the MARO was against the contract, they petitioned the DAR Central Office for the transfer of the MARO to other area.


Despite the advice of DAR and other people in the area, the ARBs accepted the offer of the DMPI because of the verbal provision on the full payment of their land amortization with the LBP. The ARBs considered DMPIs offer as the only solution to their problem on payment of land amortization thus, the opportunity to have their lands fully paid as they were pressured by the LBP personnel to pay their land amortization arrearages. They became worried of losing their farms and argued that their farm produce was not sufficient to pay their land amortizations because of high cost of farm inputs for crop production. Although most of the officers of the cooperative were agreeable to the offer, not all the members approved of it because of its long duration and the lack of employment offer by the company. Thus, only 15 of the cooperative members, mostly officers, entered into what they called a development contract with DMPI. On the other hand, other members entered into individual contract with Dole because the lease rental offer was higher and employment opportunity was provided. The development contract entered into by the ARBs with DMPI was consummated through the decisions of the cooperative officers and some members. They succumbed to signing the contract as their last resort to pay their land amortizations. Although DAR personnel reviewed the contracts, they only acted as advisers and as witness when the contracts were signed. The following are the salient features of the Development Contract: The Development Contract entered into between the CARABAO Farmers

Cooperative and Del Monte Philippines, Inc. covers an area of 25.4727 hectares which is a portion of the entire area granted to 15 members of the CARABAO Farmers Cooperative. The term of the contract is for 25 years starting 2001.

The investor shall develop the area offered by the beneficiaries into a

commercial pineapple plantation. It shall also provide the necessary technical and financial resources, labor, materials, and equipment necessary for the development of the area into a pineapple plantation.

The beneficiaries and the investor shall share on a 50-50 basis, the profits of

the operation after deducting all the expenses of production based on the agreed farm gate price of the harvested pineapples at the rate of PhP775 per ton, based on 198 tons per cycle per hectare. The tons shall mean short tons or 2,000 pounds per ton, or its equivalent in the metric system, provided however, that the investor shall pay the beneficiaries a guaranteed minimum profit of PhP5,150.00 per hectare per annum regardless of a loss in profit which shall be solely be borne by the investor.

The investor shall also grant each beneficiary the following benefits:

a) goodwill bonus at PhP200.00 hectare per hectare per number of years

contracted;


b) annual Christmas boxes at one box;

c) medical assistance at PhP200.00 per year per contracted hectare;

d) death assistance at PhP10,000.00 of beneficiary-claimant and his/her

spouse; provided, that if beneficiary-claimant of the contracted area or his/her spouse is already 60 years old or over, at the time of the signing of this contract, the said beneficiary-claimant of the contracted area of his/her spouse shall assign this privilege to another person. In case of death of the assignee, the investor shall give the death assistance of P10,000.00; and

e) improvement cost shall be paid, based on the assessment negotiated

between the beneficiary-owner and the investor, after the conduct of an actual survey of the area concerned.

It took the cooperative officers and the ARBs almost one year before they signed the contract. The PARO, although not agreeable with the provisions of the contract, signed as witness so that the ARBs would not lose the farms awarded to them because of the promise of full payment by DMPI of the land with the LBP. The ARBs who entered into contract with DMPI are actually receiving lease rental payment from the company in exchange for the latters use of the land and not guaranteed profit as stipulated in the contract. Notably, the agreement between the two parties is governed by a development contract instead of lease contract. The development contract mainly stipulates that the beneficiaries and the investor shall share on a on a 50-50 basis, the profits of the operation after deducting all the expenses of production based on the agreed farm gate price of the harvested pineapples at the rate of PhP775 per ton, based on 198 tons per cycle per hectare. The tons shall mean short tons or 2,000 pounds per ton, or its equivalent in the metric system, provided however, that the investor shall pay the beneficiaries a guaranteed minimum profit of PhP5,150.00 per hectare per annum regardless of a loss in profit which shall be solely borne by the investor. The ARBs do not really understand the stipulations in the development contract. All they know is that what they are receiving is lease rental payments for the use of their lands. Although the lease rental payment they are receiving escalates every year, they are not also aware of the details. When the representatives of the DMPI were asked about the development contract, they said that it was a standard contract offered to all farmers in the area. As regards offer of employment, the ARBs were not given employment in the area because pineapple is not labor intensive unlike bananas. Only one farmworker could be assigned for every three hectares and the company hires farmworkers with ages ranging from 18 to 35 years old only.


During the interview, there are ARBs who admitted getting cash advances from DMPI which is equivalent to two to seven years of their lease rental payment. One of them received as much as PhP200,000 cash advance but expressed regret as he unwisely spent the money he received from the company. He also laments not choosing Dole because it assures employment to ARBs and family members. However, he consoled himself with the full payment of their land.

B. The Establishment of Land Use Management Agreement Between

Individual ARB-members of the CFC and Dole Philippines, Inc. The Dole Philippines, Inc. sends land canvassers to the field to identify farmlands which could be leased by the company to expand their banana production. In 2000, representatives from Dole approached individual ARBs of the CARABAO Farmers Cooperative and offered to lease their lands for growing banana. The MARO of Impasug-ong said that Dole representatives did not consider DAR when it offered the contract with the ARBs. The Dole representatives were also unaware that the ARBs are members of an existing cooperative in the area, so that they approached them individually. As the ARBs had land amortization problems with the LBP, they thought that the offer was an opportunity for them to pay their land amortization arrearages. The company offered the ARBs an annual guaranteed profit or lease rental of PhP12,000 per arable hectare per year which escalates every five years. Another aspect which enticed the ARBs was the employment offer in the plantation. After a series of negotiation with the individual ARB, individual contracts were drafted by the company. Later, when Dole land canvassers learned that there is an existing cooperative in Barangay Cawayan, they had a meeting with the cooperative officers and explained to them the contents of the contract, although individual contracts were already drafted. When DAR personnel at the PARO learned about the Doles expansion project, they advised the company that it can pursue with its expansion plan provided the offer is within the scope of DAR Administrative Order No. 2, Series of 1999. The company heeded with the DARs directive. Although individual contracts with the ARBs were already drafted, series of dialogues were conducted and attended by representatives from DAR, PARCCOM, and LGU. Since some of the provisions of the contracts were not within the scope of DAR A.O. No. 2, Series of 1999, the PARO called for a conference and requested the company to revise the contracts based on the provisions of the aforementioned Administrative Order. The PARO primarily raised the issue of employment by the ARBs in the plantation as he does not want the ARBs to be idle and dependent mainly on the lease rental payment. The company agreed with DAR suggestions of giving employment


opportunities to the ARBs in the plantation. Hence, a public hearing was held which was attended by DAR, LBP and NGO explaining further to the ARBs the provisions of the contract which eventually led to the signing of individual contracts between parties concerned. The ARBs were employed by Dole as farmworkers, as well as some of their family members. The salient features of the Land Use Management Agreement are as follow: The agreement entered into between the CARABAO Farmers Cooperative

(Owner) and Skyland Division of Dole Philippines, Inc. (Manager) is for a period of 15 years, renewable for another 15 year-period at the option of the manager, based on the terms and conditions agreed upon by both parties.

The company shall provide the necessary technological, financial, and managerial assistance in developing the land and planting and cultivating agricultural crops on it.

The company will remit and/or pay the ARB a guaranteed profit within fifteen

(15) working days at the start of every contract year in the amount equivalent to the following: a) first 5 years (2004-2009) PhP12,000/hectare per year; b) 2nd 5 years (2010-2014) PhP13,800/hectare per year; and c) 3rd 5 years (2015-2019) PhP15,870/hectare per year.

The guaranteed profit for the first year shall be paid in advance within 15 days

from the signing of this Agreement and after verification of the title and warranties of the Owner. In the event the land is not suitable for the production of bananas, the guaranteed profit shall be withheld until the defect is cured by the Owner or by the Manager for the account of the Owner or within one year from the exercise of this option, the Manager may at any time cancel and terminate the Agreement if the subject land is found to be unsuitable for the development for the purpose contemplated. In case o f defective title, the Manager may opt to terminate this agreement in which event, all payment made to the Owner shall be returned to the Manager. Guaranteed profits after the first year shall be paid in advance within 30 days after every year thereafter.

The Manager will give priority employment in the land to ARBs or any of their

immediate family members who, in the Managers judgment, is qualified for the services required by the development program of the company. The ARBs who become employees of the company shall be bound by the rules, regulations and policies imposed by the company to its employees.

According to the ARB respondents, they are pleased and contented with the lease arrangement with Dole. The lease rental payment of PhP12,000 per hectare per year, which increases every five years, is a guaranteed income for them. The employment opportunities provided by the company also mean a lot to them as it allows an employment of one farmworker for every hectare allocated to each ARB. Because of


this provision, other family members have the opportunity to be employed in the banana plantation. To pay their land amortization arrearages with the LBP, a repayment scheme was prepared by the company wherein the total land amortization obligations of the ARBs are being paid within eleven years starting from the first year Dole and the cooperative signed the contract. Dole also paid LBP a cash advance which is equivalent to two and half years lease rental of the ARBs. This is being deducted from the lease rental proceeds due the ARBs annually. On the other hand, the duration of the contract is much shorter (15 years) than the DMPI contract. VII. Socio-Economic Benefits Derived by the ARBs from Agribusiness

Venture Arrangements A. Under Development Contract with Del Monte Philippines, Inc. Generally, there was no improvement on the socio-economic conditions of the ARBs because the profit share or the lease rentals they are receiving could not sustain their daily basic needs. However, the AVA had helped solve the land amortization problems of the ARBs as the company paid their arrearages with the LBP. Based on the interview with five (5) selected ARBs and officers of the cooperative, the socio-economic condition of the ARBs has not changed even with the implementation of the lease arrangement they have entered into with DMPI. Under the lease arrangement, the ARBs receive only PhP5,150 per arable hectare per annum thus, hardly provides for the immediate needs of the family like food and other daily basic necessities. Before the AVA, the household income of the five (5) ARB-respondents ranged from PhP16,200 to PhP37,000. Under the AVA in 2003, their household income ranged from PhP10,725 to PhP54,800. Although their income has improved a little, those respondents which reflect higher income are actually engaged in other livelihood activities, have employed family members, and/or have planted corn and vegetables in a portion of the plantation outside the arable area leased by the company. In terms of housing conditions and household assets, there is no improvement which could be attributed to the benefits derived from lease arrangement they have entered into. Of note however, some ARB-respondents had opportunities to attend different types of trainings before and under the AVA. Before the AVA, three of the ARB-respondents attended trainings/seminars on Basic Leadership Training, Pre-Membership and Education Seminar and Seminar on Value Formation. One of them attended other types of trainings like Financial Management Seminar, Training on Diversified Farming and Training on Transfer of Technology. Under the AVA, the trainings/seminars attended by four ARB-respondents are on Value Formation, Reproductive Health, Livestock Raising and Basic Exposure to other cooperatives.


Before the AVA, the ARB-respondents availed of loans for production purposes from private money lenders and LBP, through a Non-Government Organization (NGO). Under the AVA, half of the ARB-respondents availed of loans from private banks and private money lenders. Before and under the AVA, the ARBs associated themselves with existing organizations in the locality and one ARB was a member of the Barangay Council while another was a member of the Board of Directors of the Catholic Womens League, a religious organization in the area. Under the AVA, all ARB-respondents joined the CARABAO Farmers Cooperative: two of whom are plain members; one is a member of the Board of Directors; and the other one is the Chairman. B. Under the Land Use Management Contract with Skyland, Dole

Philippines, Inc. Generally, ARBs who individually entered into contract with Dole are better off than those who joined DMPI. Aside from having their land amortizations paid by the company, the lease rentals they are receiving are higher and they, as well as their family members, were provided employment in the plantation.

Under the contract, the ARBs are given a guaranteed profit or lease rental payment of PhP12,000 per hectare per year for the first 5 years (2004-2009); PhP13,800 per hectare per year for the 2nd 5 years (2010-2014); and PhP15,870 per hectare per year for the 3rd succeeding 5 years (2015-2019). The ARBs are also assured of employment in the plantation. Before the AVA, the annual household income of five (5) ARB-respondents ranged from PhP7,000 to PhP54,000, which was mostly derived from farming and non-farm sources. Under the AVA, their annual household income increased, ranging from PhP10,000 to PhP188,224 which is derived from two sources: employment from Dole and the lease rental payment they are receiving from the company. Based on the interviews with the ARB-respondents, there are improvements in their housing conditions and facilities, specifically in the housing materials used, the use of water sealed type of toilet facility, and the improvement on the source of water, lighting and cooking fuel. Likewise, there is marked improvement on the ownership of household and other assets. Before AVA, the most common household assets of the ARBs were transistor radios, wall clocks, aparador (wooden cabinets), wooden bed, flat iron, matresses and dividers. Under the AVA, aside from the common household assets owned, they were able to acquire the following: refrigerator, DVD, CD player, gas/electric stove, wooden dining set, cassette recorder, china cabinet, electric fan, dining set, wooden cabinet, wooden bed, VHS/VCD, sala set (bamboo) and bicycle. Thus, a significant improvement is observed on the ownership of ARBs household assets.


The ARBs used to avail of credit in the form of production loan from LBP. Under the AVA, they do not avail of loans anymore except for one who secured loan from Asian Hills Bank due to the hospitalization of a family member. Before and under the AVA, the ARBs were given opportunities to attend various types of seminar/trainings. Previously, they attended Pre-Membership and Education Seminars, Cooperative Financial and Management Seminars and Basic Leadership Training. Under the AVA, two of them attended a Family Improvement Seminar while another one attended a Womens Gender Sensitivity Seminar. Only one ARB respondent did not attend any. Before and under the AVA, all the ARB-respondents joined different organizations in the barangay such as the CARABAO Farmers Cooperative, Catholic Womens League, Barangay Council and Rural Improvement Club. VIII. Capability of the Cooperative Officers in Managing the

Cooperative and Undertaking the Agribusiness Venture Arrangement

The present set of cooperative officers have been leading the cooperative for two years. However, they have not undertaken any cooperative-related activities. In fact, the cooperative does not have its own office and utilizes the barangay hall whenever its members conduct meetings or undertake cooperative-related activities. Evidently, these officers do not have the managerial and technical capability to manage the cooperative. The capability of these officers could also be assessed from the experience they had in negotiating or in dealing with the investors, like the DMPI and Dole. Their split decision of entering into an agreement with a certain company also shows the inability of the officers to unite their members. Given the cooperatives small membership, they could have bargained for more advantageous terms and conditions if the cooperative had a strong leadership to unite its members. Likewise, its weaknesses could also be attributed to the educational background of its officers, of which the highest education attained is second year college. The key informants admitted that the cooperative leaders have no technical capability and managerial skills to enter into an agribusiness venture arrangement and in running the cooperative. IX. Perceptions of ARBs and Investors on Agribusiness Venture

Arrangements Presently, majority of the ARBs are no longer happy and contented with the agreement with DMPI because the lease rental they are receiving could not provide


for their basic household needs and there are no employment opportunities in the DMPI plantation since employment was not part of the development contract with the company. Of the 15 members who entered into development contract with DMPI, only six are employed and only as seasonal workers. Three of the five ARB-respondents favor the Development Contract. Those who favor the agreement reasoned that it helped them solve their problems on land amortizations. Those who are not in favor of the agreement perceive that the lease rental they receive from the land is not enough to sustain their basic household needs. They have common perceptions that they remained idle after the land was leased to the company because of lack of employment opportunity in the plantation. If ever a family member is employed, it is Dole who hires them. Besides, the company only employs farmworkers with ages ranging from 18 to 35 years. Likewise, as the ARBs are aware that their lands are tied up with the company for 25 years, they emphasized that after the contract expires, they will go back to individual cultivation of their respective lands. They have no plan of renewing the contract nor are interested in leasing out their lands to any company. As regards the relationship of ARBs with DMPI, they did not encounter any problems but they are not happy anymore with the existing arrangement. In fact, they recognize the contributions being given by the company especially during fiestas. During the Christmas season, it also selects a barangay where the Christmas party could be held with the people in the community, in coordination with the local officials of the area. With regard to the success of the agribusiness venture arrangement with DMPI, two of the respondents believe in the arrangement because the company complies with the terms and conditions of the contract, and that they have harmonious relations with the company. The company usually extends advance lease rental payments, that is upon the ARBs request, especially in time of financial need. Some staff of the company said DMPI management is confident that the agreement has helped the ARBs because of the cash advances it extends to them; the benefits contained in the agreement and the full payment of their lands. The company plans to expand the plantation, and its field representatives are attending to expiring contracts with other ARBs to have them renewed. On the other hand, all the ARB-respondents favor the agreement they entered into with Dole. The reasons given are: assurance of employment for the ARBs and their relatives, the guaranteed profits or lease rental payment, and settlement of ARBs problem on land amortization with the LBP. Three of the ARBs who believe that the agribusiness venture is successful reasoned that since the company is a multinational, it has enough funds and resources to provide what is stipulated in the contract with the ARBs. Three ARBs want to continue the agreement after the term expires, while the other one do not want to continue anymore.


The Field Manager of Dole also believes that the land use management agreement is favorable to the ARBs because of aforementioned reasons. Likewise, the key informants added that aside from those cited reasons, some ARBs acquisition of appliances and other household assets could be attributed to income derived from lease rental payment. They also observed that economic activities in the community became active when the AVAs were established. They also answered positively when asked as to whether the agreements entered into by the ARBs are successful. They reasoned out that ARBs have harmonious relations with the company, there was no violation of the contract, and the ARBs are still the owners of the lands awarded to them. Three of them believe the agreement with Dole is successful given the above reasons, while one of them said otherwise. This ARB believes that the agreement with Dole is not successful because he thinks that the provision on employment was not strictly followed as the company hires workers from other areas. According to the ARB-respondents, there will be a renegotiation before the expiration of the agreement. If that time comes, they are planning to opt for contract growership and enter into marketing tie-up with Dole. Should there be a new contract, they would want the duration to be only five (5) years, renewable thereafter. Otherwise, they will opt for individual cultivation and go back to corn production. Their only consolation with the present AVA is that their problem on land amortization has already been solved and they need not worry about the cost of production. X. Lessons Learned 1. The limited knowledge of the ARBs in contract negotiations prompted them to

readily enter into an agreement that they perceived could solve their problem of payment of their land amortization with the Land Bank of the Philippines without understanding the repercussions. Although the agreements stipulated profit sharing or guaranteed profit, the ARBs simply understood it as lease rental and not profit sharing. These findings imply that the DAR field personnel should ensure that the ARBs fully understand the contents of the agreement before they sign the contract with the investors. Moreover, the findings indicate the need for DAR field personnel to monitor the implementation of the AVAs entered into by ARB cooperatives or individual ARBs to ensure that the stipulations in the contract are observed by both parties.

2. The inability of ARBs to pay their land amortization forced them to enter into lease

agreements with DMPI and DOLE. This finding indicates the need to assist the ARBs in improving the productivity of their awarded lands that would generate enough income to pay for their land amortizations and meet their minimum basic needs.


3. The ARBs who entered into contract with DOLE are better off than those who entered with DMPI because of the employment provided to all ARBs and their family members in the plantation and the higher lease rental payment. This indicates that lease rental alone cannot improve the qualify of life of the ARBs without other sources of income. The CARP should be implemented to provide alternative sources of livelihood if the AVA cannot provide for this.

4. The development contract of ARBs with DMPI did not contribute to the improvement in their socio-economic conditions but only helped them solve their problem on payment of land amortization arrearages. The failure of the development contract or lease agreement to provide any improvement in their socio-economic conditions notwithstanding the profitability of the lessees business lends support to the issue that lease arrangement is not fair to the ARBs unless it is equitable and coupled with employment by the lessor.

5. The cooperative and its individual members failed to get a fair and reasonable arrangement with its investors and in running its operation due to the lack of experience and capability of its leaders and the lack of unity and cooperation among its members. Considering the educational background of the officers (the highest educational attainment is second year college) and their lack of experience or exposure in any organization, they do not possess the technical and managerial capabilities required in managing a cooperative. As a result, the cooperative is not active because they only meet if they are called to a meeting by DAR and/or other agencies. It has small capital build-up (CBU), has no permanent office, and has not extended any loan assistance to its members. The cooperative has depended only on production loans and grants from various funding institutions which have remained unpaid by the ARBs.

XI. Recommendations

1. Strengthen the managerial and technical capabilities of the Board of Directors and Officers of the Cooperative.

Considering the ARBs experiences in engaging with investors while venturing into lease arrangements and the inactive operation of the cooperative, there is a need for intensive trainings, seminars and educational tours to be attended by the cooperative officers and ARBs to enable them to have a clear understanding and grasp of matters relating to the operations of the cooperative and develop their managerial and technical capabilities, assertiveness and self-confidence.

Moreover, the DAR Field Personnel should regularly monitor and assess the capability of the officers in managing their operations thereby identifying their weaknesses so that specific actions could be undertaken to address their problems.


2. Promote unity and cooperation among ARB members of the Cooperative.

Since the Cooperative meets only when called to a meeting by DAR and/or other agencies, there is a need to activate it by conducting activities that will promote unity and cooperation among ARB members of the Cooperative. The Cooperative should be encouraged to hold social and recreational activities that will contribute to the strengthening of social capital of ARBs.

3. Monitor and document the progress of the implementation of the AVA.

The ARBs absence or lack of awareness of the basic provisions of the contract they had entered into with the investor necessitates that the DAR field personnel should monitor and document the progress of the implementation of the development contract of ARB members of CFC with the DMPI. This is to ascertain the compliance of the DMPI with the terms of agreement, particularly on the 50:50 profit sharing between the contracting parties as contained in the agreement vis--vis the actual practice of lease arrangements. The ARBs must also be briefed by the DAR on these provisions.

The results of these monitoring and documentation activities should be relayed to the ARBs for them to be informed of the compliance on the vital provisions of the contract that they have entered into and, if necessary, to enable them to initiate the necessary actions to protect their interest under the CARL.

4. Develop a framework or working model for monitoring ARBs performance.

For DAR field personnel to perform the aforementioned activities, the DARs field operations and support services office should come up with a framework or working model for monitoring the performance and status of ARBs and the ARBs cooperatives engaged in AVAs so that specific policy actions can be formulated and implemented to address their problems on support service delivery.

5. Provide microfinance credit to ARBs for the establishment of livelihood/income-generating projects.

The benefits derived by the ARBs from these lease agreements hardly provide for the basic needs of their households. Thus, DAR field personnel should ensure that the necessary support services are provided to ARBs to improve their farm productivity and household income. Specifically, the DAR Support Services Office should coordinate with institutions providing microfinance credit to ARBs for livelihood/income-generating projects, to open facilitating mechanisms for credit and alternative livelihood opportunities.

Case Study on the Development Contract (Pineapple) and Land Use Management (Banana) Agreements: ARB-Members of the CARABAO Farmers Cooperative (CFC) and Del Monte Philippines, Inc. (DMPI) and Skyland, Dole Philippines, Inc. in Barangay Cawayan, Impasug-ong, BukidnonI. Profile of the Study SiteA. Province of BukidnonB. Municipality of Impasug-ongC. Barangay CawayanProfile of Pineapple and Banana Industries in the Philippines The Investors V. The CARABAO Farmers Cooperative

VI.Process and Dynamics of the Agribusiness Venture ArrangementsB. The Establishment of Land Use Management Agreement Between Individual ARB-members of the CFC and Dole Philippines, Inc. X. Lessons Learned

ava cfc bukidnon

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