Private SectorInvestments in Landfor Food and Biofuels:

Investingin RuralDevelopmentor AggravatingHunger andPoverty?

Private Sector Investmentsin Land for Food and Biofuels:Investing in Rural Developmentor Aggravating Hunger and Poverty?

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Private SectorInvestments in Landfor Food and Biofuels:

Investingin RuralDevelopmentor AggravatingHunger andPoverty?

In 2007, local officials of the municipalityof Delfin Albano and nearby areas inIsabela province were invited to China by

Philippine Fuhua Sterling AgriculturalTechnology Development Corporation for astudy tour. One year later, the localgovernment of Delfin Albano facilitated thesigning of 25 lease agreements between thecorporation and the small farmer-landholdersof the municipality. These agreements cover350 hectares of contiguous lands in DelfinAlbano, which have been earmarked for cornproduction.

Early this year, the local government of SanMariano, also in Isabela, similarly identifiedand facilitated the participation of 91 farmers,including agrarian reform beneficiaries, in alease agreement with EcoFund LandDevelopment Inc.-Green Future Innovations(ECOF), a private company interested inproducing bioethanol from sugarcane feedstockand in building a bioethanol plant in SanMariano. At present, ECOF already has 200hectares for sugarcane nurseries and istargeting to develop at least 1,000 hectaresmore for the establishment of additionalnurseries.

The lease agreements in the aforementionedtwo municipalities alone are already extensiveby themselves but they are just a small wavein what’s increasingly becoming a deluge oflocal and foreign private sector investments inPhilippine agricultural lands, one apparentlytriggered by the increased global need for foodand energy security. For local and foreign

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investors, this situation presents a veritablewellspring of business opportunities, one thathas prompted many to put money on dealsinvolving no less than three million of thecountry’s agricultural lands.

The magnitude of ongoing and plannedagricultural investments, as well as the positiveand negative impacts that such investmentshave brought about in the past, call attentionto the need to provide safeguards to local smallfarmers and smallholders wanting to involvethemselves in such deals . In particular, thecurrent regulatory framework guidingagricultural land investments in the countryshould ensure that local producers — like themen and women farmers of Delfin Albano andSan Mariano — will truly benefit from suchinvestments.

Also, for the sake of inclusive and sustainableagricultural economic growth, there is a needfor government to strike a balance between theuse of agricultural lands to serve the country’sfood and development needs and the use ofsuch lands for private business, whether forexport or domestic food or biofuel feedstockproduction.

All these point to the urgency of coming upwith a coherent and appropriate regulatoryframework that will govern investments inPhilippine agricultural lands so that these willpromote, rather than undermine, the country’sagricultural and overall economic developmentobjectives. The sad reality is no suchframework exists at present, putting at risk notonly the interests and welfare of small farmersand landholders but the sustainability no lessof agricultural industries in the country.

Enticing investments inagricultural lands

Even prior to the surge of land investmentventures in recent years, previous Philippinegovernments had already been aggressivelypursuing programs and incentives to attractthe private sector to invest in the country’sagricultural lands. Under Republic Act (R.A.)7652 or the Foreign Investors Lease Act of1993, foreign investors are allowed to leaselands for 50 years, renewable for 25 years. TheForeign Investments Act of 1991 (amended in1996 as R.A. 8179) meanwhile, liberalized theentry of foreign investments into the countryby relaxing restrictions on the participation offoreigners as equity shareholders in local firms,using the Foreign Investment Negative List asa guide to levels of foreign equity allowed inspecific activity areas. This was followed by theprevious Arroyo administration’s Medium TermPhilippine Development Plan (MTPDP) 2004-2010, which stipulated the development of “atleast two million hectares of idle lands foragribusiness in order to create 10 million jobs”in the agricultural sector by 2010.1 Pursuant tothis goal, the former president went onnumerous trips and missions abroad partly toentice foreign investors to avail themselves ofthis business opportunity. According to thePhilippine Agricultural Development andCommercial Corporation (PADCC), thegovernment’s agribusiness marketing,investment promotion, and projectdevelopment arm created during the Arroyoadministration, many of the agricultural landinvestment deals (covering some 1.37 millionhectares) that it is now negotiating includethose that former president Arroyo hadbrokered during her foreign trips andforwarded to PADCC by the Board ofInvestments (BOI).

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Beyond PADCC’s initiatives, there are reportsthat agricultural land deals are already beingforged under bilateral and regional trade talkssuch as those for the RP-China Free TradeAgreement. Some government agencies, infact, are said to have already signed severalmemoranda of understanding (MOUs) withvarious Chinese investors for a host ofagricultural investment projects, including theproduction of rice for possible re-export toChina. These agencies include the Departmentof Agriculture (DA), the Department ofAgrarian Reform (DAR) and the Department ofEnvironment and Natural Resources (DENR),which have signed as Second Party to an MOUwith Fu Hua Corporation to lease 1 millionhectares of land for agricultural production for25 years, with the option to renew for another25 years. The MOU is supposedly one of 31agreements forged under the RP-China talks.2

Aside from China, the Gulf countries ofBahrain, Kuwait, Oman, Qatar, Saudi Arabia,and the United Arab Emirates have alsoreportedly expressed interest in investing invarious agricultural ventures in the Philippines.These investments are intended to ensure thelong-term supply of essential food commoditiessuch as cereals, meats, and vegetables fortheir populations. Bahrain has also reportedlypursued plans to lease mariculture parks in thecountry to produce seafood for export.

The Philippine government has also forged aseparate MOU with San Miguel Corporation(SMC) and the Hong Kong-based Kuok Groupof Companies to develop up to one millionhectares of agricultural land through a US$1-billion food security project dubbed “FeedingOur Future.”

In all, at least three million hectares of thecountry’s agricultural lands are estimated to be

devoted to investments for such purposes asfood and biofuels production.

Global frenzy

The frenzy of investments in Philippineagricultural lands, though, is hardly unique tothe country. All over the world, governmentsand private corporations are going intoagricultural land investments, driven mainly bythe need to secure longer-term food security inreaction to the food price spikes of 2008.Additionally, governments are looking at suchinvestments as vehicles for attaining energysecurity through biofuel feedstock production.Lately, such investments are also seen as astrategy for securing carbon credits, which canbe used particularly by Annex 1 (developed)countries to offset their commitments toreduce greenhouse gas emissions (GHG) underthe United Nations Framework Convention onClimate Change (UNFCCC).

Yet another driver of the global frenzy ofinvestments in agricultural lands is the currentworld view that investments in agriculturalproduction can be an effective hedge againstinflation and a strategy for portfoliodiversification. This, in the wake particularly of2009’s global economic crisis from which manymajor financial markets are yet to recover. Themagnitude of global demand for land foragricultural production investments is reflectedin the fact that negotiations for such land nowcover from 15 to 20 million hectares offarmlands around the world, according to theInternational Food Policy Research Institute(IFPRI).3

At the receiving end of the frenzy ofinvestements in agricultural land aredeveloping country governments such as thePhilippines, which, in a seeming race to the

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bottom, enthusiastically welcome suchinvestments as an opportunity to provideresources for agricultural support services,infrastructure development, or ruralemployment that they are otherwise unable toprovide to their agriculture sector.

These investments are also welcomed by localbusinesses and landowners looking for foreignpartners, and in many cases, even by farmer-landowners who have very limited access toproduction capital and markets for theirproducts.

On the other side of the fence are farmers’organizations and civil society groups whohave been raising concern over the detrimentalimpacts that such investments could have onthe country’s food security, poverty alleviation,land rights, and rural livelihoods. These groupsare worried because of the generally weakmonitoring of the investors’ compliance withtheir commitments, and their adherence tolocal rules and regulations. The lack ofinformation on the nature and scope of, andthe entities behind, these investments are alsoseen as a cause for concern. Oftentimes, thereis no transparency in how investments areevaluated, fuelling speculations that many ofthe transactions are fraught with irregularitiessuch as bribery of certain officials to facilitatethese transactions.

Supply and demanddrivers of agriculturalland investments

A. Demand drivers

1. FoodTwo years ago, international food prices,particularly for rice, rose to unprecedented

levels, triggering basically two kinds of reactionfrom countries around the world. On one hand,for countries such as the Philippines that donot produce enough rice to feed its population,the reaction was and still is to import rice fromcountries that have a surplus of the cereal. Onthe other hand, for countries such as China,Bahrain and South Korea that do not producerice but have the money to spend for this andother foodstuff, the tack has been to lease landin other countries and use these to serve theirown populations’ food requirements.4

Whatever the reactions may have been or willbe, the situation was and continues to be onefavourable to investors looking to cash in onthe bottomline – the increasing global demandand competition for food. Such a situation isreflected in the following facts and figures:

• According to the World Rice Productionand Consumption Index of the UnitedStates Department of Agriculture, twoyears after the 2008 food crisis, asizeable gap remains between thePhilippines’ rice consumption and riceproduction levels. For the last twoyears, the country has been producingonly an average of 10.7 million metrictons of rice per year while riceconsumption has increased from 13.6million metric tons in 2008 to 14 millionin 2009.5

• According to an OECD-FAO study, worldfood production needs to increase by40 percent by 2030, and by 70 percentby 2050 (based on the average 2005-2007 levels) in order to cope with theincreased demand resulting fromhigher incomes and biggerpopulations.6 And while food priceshave gone down since 2008, current

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food prices are still higher by 10-30percent than the previous decade. Thisstill provides an incentive for investorsto pursue agricultural land investmentsfor food crops cultivation.

2. AgrofuelsMost of the 1.37 million hectares of Philippinelands currently under negotiation for privatesector agricultural land investments throughthe PADCC7 are for the production of agrofuelfeedstock, i.e., coconut, jatropha and oil palmfor biodiesel, and sugar, sweet sorghum,cassava, and molasses for bioethanol.

Leading in the development and use of land forbiofuel production purposes is the PhilippineNational Oil Company-Alternative FuelsCorporation (PNOC-AFC), which has an overallland requirement of 192,500 hectares for thecultivation of jatropha for biodiesel production.The company has already entered into venturearrangements with several local governmentunits (LGUs) in Zambales, Quezon, Palawan,Cebu, Bohol, Bukidnon, and General Santos,and even with tribal groups in Lanao del Norte.

Meanwhile, Eastern Renewables FuelsCorporation (ERFC), a subsidiary of EasternPetroleum that is engaged in the production ofcassava for agrofuel feedstock, is targeting toexpand its cassava production area to 4,500hectares to supply its bioethanol plant.8 Thecompany has already announced its plan toestablish a plant in Central Mindanao as part ofa joint venture agreement with Junaxi StateFarm in Mainland China. ERFC also reports thatwhile the establishment of the bio-ethanolplant is still underway, it will be shipping itscassava production to China for processing intobio-ethanol. This, in turn, could later beexported back to the Philippines, the companysays.

ERFC has targeted the province of Isabela asone of its production areas. It has a standingagreement with farmers in the municipality ofQuezon covering 1,000 hectares of lands forcassava production. It has also conducted aseminar in B.K. Martinez for farmers who areinterested to produce cassava. Initially, some33 hectares of lands in B.K. Martinez arealready being planted to cassava for ERFC, andthe company is targeting to increase this to atleast 200 hectares.

Similar to the lands in Delfin Albano and SanMariano, most of the lands in Quezon and B.K.Martinez that were tapped for said agriculturalland investment deals are idle. While this hadbeen attributed to the character of the soil inthe area, this is also largely because thefarmers lack basic support services, such asirrigation, to make the same lands productive.For farmer-smallholders, leasing their idlelands is an attractive option given the potentialadditional income that such deals are expectedto generate.

Meanwhile, the passage of the PhilippineBiofuels Act of 2006, which established veryclear targets for agrofuel use, has created adomestic demand for bioethanol and biodieselproducts that is hard to resist for mostinvestors. High demand for agrofuels is notonly guaranteed by law at present but is alsoprogrammed to grow in the future.

Concern, however, has been expressed overthe effect that the high and sure demand forbiofuels would have on food production, whatwith demand for land for biofuels competingwith demand for land for food production.

3. Climate change actionClimate change mitigation activities are alsoexpected to impact on land use allocation in a

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big way, given the existence of variousincentives for utilizing land for this purpose.Foreign private companies are already makinga beeline for the Philippines to try to cash in onsuch incentives.

One such company, the Australian carbontrader Shift2Neutral Pty Limited has reportedlyalready entered into an agreement with theTribal Coalition of Mindanao Inc. (TRICOM)based in Butuan City for a carbon creditarrangement involving 340,000 hectares oftheir ancestral land in the CARAGA Region.9

This same company has also been reported tohave signed an agreement with the localgovernment of Samar to certify 400,000hectares of first growth forest for carboncredit.

However, according to the NationalCommission on Indigenous Peoples (NCIP) andthe Climate Change Commission, protocolguidelines and rules must first be set beforecarbon trading projects can be implemented. 10

This, in light particularly of the concern thatthe presence of a carbon market, whichprovides developed countries with flexibility inmeeting their greenhouse gas (GHG) emissionreduction targets, creates and exacerbatescompeting demands for agricultural lands. Forinstance, allowing countries to reduce emissionfrom deforestation and denudation (REDD) canbe expected to increase the demand for landfor purposes of reforestation, as this willenable them to earn and trade carbon credits.Similarly, the growing emphasis on the use ofrenewable energy, as an alternative to fossilfuels, has been one of the main drivers ofoverseas agricultural land investments. In thePhilippines, many of the inquiries on landinvestments relate to the production offeedstock for agrofuels.

B. Supply drivers

In the Philippines, several factors andconditions contribute to making private sectoragricultural land investments enticing to thegovernment, local businesses and landowners,and even small farmers. These, in turn,contribute to a slew of farmlands available forprivate sector investment arrangements andagreements.

1) Limited public investment in agricultureLimited public spending on agriculture is one ofthe most important supply drivers of privatesector agricultural land investments in thecountry. For instance, the potential of irrigationto increase agricultural output by at least 20percent remains largely untapped becauseirrigation is still highly inaccessible to manysmall men and women farmers. In 2006, only1.4 million hectares of the country’s 3.1 millionhectares of agricultural lands had irrigationfacilities. This means that only 45 percent — orless than half of the country’s agricultural landresources – are able to maximize their fullproduction potential.

Government intervention in credit delivery forsmall farmers is also practically non-existent.The accessibility of credit for agriculturalproduction capital has even worsened in thepast decade. Although the absolute value ofcredit extended to agriculture has increasedover the years, the ratio of agriculturalproduction loans to total loans has declinedfrom 6.99 percent in the 1990s to only 0.94percent in 2006.

2) Idle lands and low incomesfrom agricultureThe previous government had justified thedrive to generate private sector agriculturalland investments by citing the transformation

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of idle and marginal lands into productivefarms and the generation of income for ruralcommunities among its benefits.

The municipalities of Delfin Albano, SanMariano, and Quezon in Isabela province arecases in point that illustrate the lack ofirrigation facilities and other resources neededto make idle lands productive as a factor thatprompts the owners of such lands to enter intoland deals with private companies.

Farmer-landholders are also attracted to suchdeals because these bring with them thepromise of higher incomes. Many smalllandholders are into rice and corn farmers. Perdata from the Bureau of Agricultural Statistics,rice production nets an income of onlyPhP8,447 per hectare for non-irrigated lands,and PhP14,063 per hectare for irrigated lands.For yellow corn, the average net return perseason is PhP14,050 per hectare while whitecorn nets even lower, at only PhP 2,434 perseason per hectare. On the other hand, high-value food crops such as mango and pineappleare able to generate net returns of PhP70,062and PhP121,006, respectively.11

3) Government policyAt the national level, the Philippinegovernment has endeavoured to create apolicy environment that is friendly to privatesector investments. As earlier mentioned, suchpolicy environment is reflected in the previousadministration’s MTPDP, which called for thedevelopment of two million hectares of idlelands for agribusiness as a way of increasingrural employment and incomes. The previousadministration also created the PADCC to aid inthe implementation of such a policy mandate.

At the local level, the passage of the LocalGovernment Code of the Philippines has made

it easier for private investors to directlyapproach and enter into land deals with localgovernment units (LGUs). At the moment,however, there is no comprehensive inventorythat has been done of all private sector landdeals with LGUs. One reason for the absence ofsuch an inventory is the fact that many suchdeals are virtually invisible, having beenundertaken with the support of local partnersacting as frontmen.

Some other deals, though, are visible, withlocal governments actively and openlyassisting the entry of foreign investors intotheir jurisdictions as in the cases of DelfinAlbano and San Mariano municipalities inIsabela. Or the case of the Pinamalayan,Oriental Mindoro LGU, which facilitated a 15-year lease agreement between local farmersand the South Korean company K-Bio. Thelocal government also helped identify 2,000 to3,000 hectares of land for the company’s bio-diesel project.

At the regional level, the Philippines hascommitted itself to various bilateral andregional free trade and investment agreementswith provisions that aim to facilitate the influxof foreign investments into the country.Negotiations on these agreements also serveas venues to discuss investment arrangementopportunities. For instance, the RP-China FreeTrade Agreement was reported to have pavedthe way for the signing of MOUs betweenChinese companies and local governmentagencies.

Impacts of agriculturalland investments

Previous studies have already noted both thepositive and negative impacts of agricultural

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land investments on the rural sector and thePhilippine economy in general. It is important,however, to distinguish between the short-termimpact of agricultural land investments andtheir long-term implications on rurallivelihoods, food security, and environmentalsustainability. Only by weighing both short andlong term impacts can one have a morestrategic perspective of agricultural landinvestment and manage it in a way thatsupports, rather than undermines, sustainableagricultural development.

A. Short-term impacts

1. Additional income and influx ofproduction capital and resourcesThe most apparent and immediate impact ofagricultural land investments is the creation ofopportunities for additional income for smallmen and women farmers, either from leaserentals or from jobs generated through theinvestment arrangement. The absence of otherincome opportunities and the fact that ruralincomes are so low both serve as powerfulincentives for farmers to enter into landinvestment arrangements, no matter howinequitable the terms of some agreements maybe.

For the farmers of Delfin Albano and SanMariano who have entered into leasearrangements with private investors, theimmediate and more important concern is theadditional income that the previously idle landswill now provide, rather than the provisions ofthe agreement. In a situation where there islittle public investment for basic agriculturalsupport services, private investments createopportunities for production capital to flow intocommunities and stimulate agriculturalproduction.

On the other hand, for the members of theFirst Agrarian Reform Multi-PurposeCooperative (FARM Coop) in Bukidnon, thebiggest advantage of having a partnershipagreement with Dole Philippines is getting aguaranteed income of PhP 15,870 per hectareper year. Coop members receive this incomeregardless of the plantation’s level of bananaproduction and regardless of the global marketsituation for bananas.

Additionally, coop members welcome the factthat Dole provides incentives for increasedproduction. Last year, farm workers were ableto take home PhP2,500 as production incentiveon top of their regular wages. They also earnadditional income by renting out to Dole an Elftruck to haul and transport bananas. Thecooperative also operates a credit program forits members and undertakes various livelihoodprojects.

The agreement between Dole and FARM Coopis set to expire in 2013. The members of thecooperative board recognize that thecooperative has become highly dependent oncontracts with multinational companies (thecooperative also had a contract with DelMonte) for its survival and has yet to developan independent long-term developmentstrategy for itself.

To date, Dole Philippines has already investedin at least 800 hectares of banana plantationsin Bukidnon through different investmentarrangements. The output of the plantationfarms in Bukidnon is exported to Japan, SouthKorea, and Saudi Arabia, among othercountries

2. Use of idle landsTo dismiss negative claims of agriculturalinvestments on food security, the government

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has taken to citing that many of theseinvestments involve idle lands.

Even farmers of Delfin Albano and San Marianoare defending the lease agreements on theground that these are situated on idle lands. Intruth, these private companies – with sufficientinvestments — are able to make these landsproductive. This underscores government’slack of basic support services as the realreason behind the failure of farmers to benefitfrom, and maximize the use of their lands.Furthermore, using these idle lands foragrofuel feedstock production effectively limitsthe possible expansion areas for foodcultivation, which is critical to the presentsituation where rice consumption, for example,is far greater than domestic rice production.There is also no guarantee that thesecorporations will not encroach on landsdevoted to food production and domesticconsumption if production on these idle landsproved satisfying.

3. Land reconsolidation and displacementAgricultural land investments can lead to landreconsolidation and undermine the ideals,principles, and objectives of agrarian reform.Ironically, it is the government, throughPADCC, that facilitates reconsolidation offarmlands in order to produce for investors thevolume requirement for particular crops. In theprocess of land reconsolidation, however,farmers actually give up control over theirlands to investors and corporations.

In many instances, the lands that theseinvestors would consider ideal for their projectsare those that are already being cultivated andoccu-pied, since such are already developedand ready for production, arable and fertile,near water sources and other natural resources

necessary for agricultural production, and aregenerally accessible to public transport.

4. Land lock-up and one-sided contractsAll agricultural investment arrangements entaillocking up land for specific uses. Manycontracts are also structured in such a waythat would make it difficult for farmers toterminate the terms of the agreement, whilegiving investors the option to back out of theinvestment arrangement anytime without anysafeguards for farmers/landowners. Smallfarmers are often not in a position tointelligently negotiate the terms of any legalcontract with large agribusiness firms. As aresult, many of the contracts are patently one-sided and biased in favour of the firm.

In most cases, the lease agreementseffectively cede full control over the land oververy long periods and make the agribusinessfirms the veritable owners of the land, similarto the case of the farmers in Delfin Albanowhen they signed the 25-year lease agreementwith Philippine Fuhua. The agreement also hasprovisions giving the investors the flexibility toterminate the contract practically anytime.For FARM Coop members, one of thedisadvantages with having a long-termcontract with Dole is that it is difficult tochange the terms of the contract agreement torespond to changes in situations or conditions.They usually have to go through a long andtedious process of negotiation in order toamend or change the terms of their contract.The fact that the agreement is long term innature almost always gives rise to a need tochange some provisions to keep the contractupdated and current, particularly in terms ofprices, terms of production incentives, farmoperations requirements, etc. Undertaking along term contract with Dole or with any other

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company limits their flexibility to takeadvantage of new investment opportunities asthey are bound by the terms of the agreement.

In the case of the farmers in Quezon, Isabela,the risks are largely shouldered by the farmersthemselves, as they are producing cassava forERFC using loans that they themselvesaccessed from the Land Bank of thePhilippines. ERFC only guarantees 10 percentof the production loan from Land Bank. Hence,the potential for indebtedness in cases of cropfailures or even as a result of a suddendecision by ERFC to close down or transferoperations, is borne almost entirely by thefarmers.

B. Long-term implications

1. Impact on food securityAgricultural land investments that are mostlyfor agrofuel feedstock divert agricultural landsfrom actual and potential food production.Given the gap in rice/food consumption andproduction, the 1.37 million hectares identifiedby PADCC for agricultural land investments, iftapped to produce rice, could yield 2.4 millionmetric tons of rice at the very minimum. Thisis enough to make the Philippines self-sufficient in rice production and insulate it fromvolatilities in the world food market.12

Interestingly, even Vietnamese authoritieshave apparently begun to worry about therapid conversion of their own rice lands forother crops and uses, including non-foodproduction by domestic and foreign investors.Many countries have also started to re-evaluate their agrofuel initiatives, due to fearsthat such ventures directly compete for landthat should be prioritized for food production.In many cases, the crops that foreign investorswant to grow may not be essential for the host

country’s food security. The region’s rice self-sufficiency is also threatened by projectionsthat climate change will significantly reducewater availability and rice output in major riceproduction areas along the Mekong River,particularly in Vietnam.

In June this year, the new government ofMadagascar rescinded the agreement forgedby its predecessor and South Koreanconglomerate Daewoo Logistics in November2008. The agreement would have grantedDaewoo a 99-year lease of 1.3 million hectaresof Madagascar’s farmland (approximately 40percent of the nation’s total landmass) for cornand palm oil cultivation for exports.13

2) Impact on ecological sustainabilityof agricultural productionCompanies engaged in large-scale agriculturalproduction, whether for export or for thecultivation of agrofuel feedstock, always bringin their own technology package that invariablyinvolves extensive and intensive use ofchemical inputs such as fertilizers, pesticides,and herbicides. One government official fromBukidnon14 noted that many foreigncorporations are now moving to Bukidnon fromDavao precisely because the lands in Davaoare no longer productive, having beensubjected to decades of intensive andplantation-type chemical farming.

Beyond the steady income, there are alsoimportant concerns by members of the FARMCoop regarding the possible effect of intensivebanana production on the long-termsustainability of their soil and agriculturalproduction. There is great pressure even frommembers and workers to intensify chemicaluse in order to increase output because of theproduction incentives. Unfortunately, the

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extensive and intensive use of chemicals toboost production will eventually damage thenutrients and long-term productivity of thesoil.

In other Asian countries, too, there are reportsabout the detrimental impacts of large-scaleagricultural activities on the local ecology. Forinstance, there have been reports that thelarge-scale planting of non-indigenous woodspecies have started to affect the bio-diversityand ecological balance in forest areas of LaoPDR and Cambodia. Additionally, some of thetimber species like eucalyptus have allegedlystrained local aquifers because of theirrelatively massive absorption of undergroundwater and nutrients.

Conclusion andrecommendationsThere is no doubt that private agricultural landinvestments have generated significanteconomic and other benefits to farmers, small-scale entrepreneurs, and entire localcommunities in the host countries. However,experience has failed to show any guarantee oflasting improvement in the situation of smallfarmers, small landowners, and contractgrowers. Also, the interests of host countries —especially food security, environmentalsustainability, socio-economic development,and poverty alleviation – are in danger ofbeing compromised if the investments wereallowed to be purely exploitative and extractivein nature.

This underscores the imperative for anapproach that would allow investors toreasonably profit from such investments and atthe same time, provide concrete and lastingbenefits to small farmers, contract growers,

local landowners, rural communities, and therecipient country as a whole.

For this to happen, the following actions arerecommended:

1) Develop and implement aComprehensive Agricultural DevelopmentFramework and Plan, which will articulate,among other things, government’s policy onfood security, food self-sufficiency, agriculturalland use and investments, rural development,environmental protection, farmingtechnologies, and trade. This will be theoverarching development objective and policydeclaration of the government that will guideall ongoing and future private sectoragricultural land investment deals in thecountry. Among the priority legislation underthis development framework is the enactmentof a National Land Use Code that will prioritizeand set aside lands for food production, andprotect it from land and crop use conversion.

2) Develop, in consultation withstakeholders, a binding code of conductfor investors. At present, there is no code ofconduct for agricultural investors to ensurethat their goal of maximizing profit andeconomic opportunities are not being pursuedat the expense of the welfare of smallholdersand the country’s development objectives suchas food security, rural livelihoods, andenvironmental sustainability. The obligationsand commitments of foreign investors shouldbe clearly laid out before the correspondingpermits to operate are issued. Throughappropriate government agencies, theadherence by investors to the country’s labour,environmental, and land use rules and similarregulations will be regularly monitored.

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3) Plug loopholes to improve the existinginvestment regulatory and monitoringframework for land investments,including those facilitated directly on theground with local government units orwith private consolidators. Current nationallaws and regulations are not sufficient tosafeguard food security and protect the welfareof small farmers vis-à-vis the interest ofinvestors because of certain loopholes in theway these rules are structured.

4) Provide legal, negotiating, andcapability-building support to farmersentering into agricultural landinvestments. Legal and other forms ofassistance will be needed by the poor, mostlyuneducated and unorganized farmers andlandowners who are particularly vulnerable tomanipulations by speculators and unscrupulousinvestors. Such investment arrangementsshould contain provisions that allocate risks toall parties in a fair manner. As a basic tenet,there should be free, prior, and informedconsent on the part of farmers on whetherthey would prefer to lease their lands toinvestors, engage in contract growingarrangements, or sign any agreement involvingtheir lands and rights.

5) Increase public investment as astrategy to empower farmers andpromote food security. Private farmlandinvestments are not the fundamental solutionto the problems that continue to confront smallfarmers and landless rural workers in thecountry. Governments cannot forfeit theirresponsibility and pass on the obligation tobuild roads, and irrigation and post-harvestfacilities to private investors. The governmentneeds to provide sufficient public investment inagriculture as a way of providing small farmersand other rural producers the option to develop

and optimize the production potential of alltheir lands and give them the capacity ornecessary leverage to demand for betterinvestment arrangements with potentialinvestors.

There is no doubt that private agricultural landinvestments have generated significanteconomic and other benefits to farmers, small-scale entrepreneurs, and entire localcommunities in the host countries. However,experience has failed to show any guarantee oflasting improvement in the situation of smallfarmers, small landowners, and contractgrowers. Also, the interests of host countries —especially food security, environmentalsustainability, socio-economic development,and poverty alleviation – are in danger ofbeing compromised if the investments wereallowed to be purely exploitative and extractivein nature.

This underscores the imperative for anapproach that would allow investors toreasonably profit from such investments and atthe same time, provide concrete and lastingbenefits to small farmers, contract growers,local landowners, rural communities, and therecipient country as a whole.

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Notes

1 See Chapter 2:Agribusiness of the MediumTerm Development Plan

2 IDEALS, (2007).An analysis of the RP-China Memorandum ofUnderstanding on the development of 1 millionhectares of land for hybrid corn, hybrid riceand hybrid sorghum farming, AR Dialogues-No. 3-07

3 Kugelman, M. (2009). Introduction, LandGrab? The Race for the World’s Farmland [Electronic version] Woodrow WilsonInternational Center for Scholars.

4 Mann, Howard. Foreign land purchases foragriculture: what impact on sustainabledevelopment, United National Department ofEconomic and Social Affairs, from websitehttp://157.150.195.10/esa/dsd/resources/res_pdfs/publications/ib/no8.pdf

5 http://www.fas.usda.gov/grain/circular/2009/10-09/grainfull10-09.pdfID=681&hidReportRetrievalTemplateID=7

6 From OECD-FAO Agricultural Outlook 2009-2018 http://www.fao.org/es/esc/common/ecg/599/en/OECD_Highlights.pdf

7 Based on the report “Agribusiness Accountper Region,” PADCC, http://www.philagribiz.com/

8 See “Eastern unit to expand cassavaplantation” by Abigail Ho for the PhilippineDaily Inquirer, available at http://business.inquirer.net/money/breakingnews/view/20080514-136422/Eastern-unit-to-expand-cassava-plantations, May 14, 2008

9 http://balita.ph/2010/07/21/ccc-seeks-establishment-of-governing-rules-on-carbon-credit-scheme-alvarez/

10 http://www.redd-monitor.org/2010/08/19/shift2neutral-in-the-philippines-or-how-to-make-a-porsche-carbon-neutral/#more-5417

11 Bernabe, R. (2010). Private SectorAgricultural Land Investments: Impacts onSmall Men and Women Farmers and on FoodSecurity. Unpublished Paper commissioned byOxfam-GB Philippines

12Bernabe, R. (2010). Private SectorAgricultural Land Investments: Impacts onSmall Men and Women Farmers and on FoodSecurity. Unpublished Paper commissioned byOxfam-GB Philippines

13 http://craccum.co.nz/?p=3631

14 Bernabe, R. (2010). Private SectorAgricultural Land Investments: Impacts onSmall Men and Women Farmers and on FoodSecurity. Unpublished Paper commissioned byOxfam-GB Philippines

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