Virgilio R. De Los Reyes Secretary of Agrarian Reform, Philippines 2016 Land and Poverty Conference 15 March 2016; Washington D.C. Consent and Bargaining Power: Crafting Regulations to Support Sustainable Partnerships between Smallholder Farmers and Agro-Enterprises

Presentation flow: 1. Existing paradigm in Philippine agribusiness 2. New paradigm emphasizing consent and bargaining power of smallholder farmers 3. Mechanisms for enhancing consent 4. Mechanisms for improving farmers’ bargaining power 5. International standards for agricultural investments 6. Recommendations for improving the LGAF 7. Crafting new Philippine regulations on AVAs 2

The existing paradigm in Philippine agribusiness involving smallholder farmers  Characterized by:  Land control thru ownership or long-term land lease of large tracts of land  Plantation farming as agribusiness model  Issue of consent: Even with agrarian reform, control of land is not with smallholders but w/ investors  Smallholders have no access to financial services & other mechanisms  Their freedom of choice nullified by insufficient resources  Agrarian reform beneficiaries or smallholder farmers with little bargaining power vis-à-vis agricultural business firms *Framework for contractual arrangement between small farmers and investors need revisiting 3

Need for new paradigm Characteristics of new paradigm - Seeking viable consent of smallholder farmers - Increasing bargaining power of smallholder farmers &/or their organizations 4

Need to enhance consent mechanisms 55  Blurred sense of consent resulting from  Vague principles & policies; also, there shortcuts were done:  consent secured not from the individual smallholder but from their representatives  “consent” obtained without a serious discussion of issues  Two situations:  Multiple consent givers (principals) and multiple agents  Multiple consent givers (principals) and single agents  Formation of organizations encouraged to simplify process but danger of shortcuts  Collective titles sometimes undermines consent-giving procedures

Need to improve farmers’ bargaining power 6 C) Farmers’ bargaining capacity enhanced when government provides critical support services:  That were revenue-enhancing  That improved credit access  That provided rural infrastructure to enhance productivity  But that DOES NOT distort prices, tinker with credit interest rates or provide continuous, unending and difficult-to-terminate subsidies A )Bargaining power of smallholder farmers based on their ownership or possession of land; & capacity to provide farm labor B) Bargaining power of investors based on their:  access to capital, technology, and institutional markets;  access to market, salient information & networks

International standards for agricultural investments 7

Recommendations for improving LGAF 8  LGAF Panels 1, 4, and 5 measures extent of securing land tenure but do not capture concerns related to consent and bargaining power.  Additional panels recommended  Panel 10: Securing smallholder farmers’ consent  Clarity of agreements and contracts involving land  Extent of participation in contract formation and negotiations  Transparency  Where long-term lease is necessary and agreed upon, the terms and conditions of lease  Registry of Contracts  Panel 11: Enhancing bargaining power of smallholder farmers  Provision of capacity-building  Provision of revenue-enhancing common service facilities  Provisions for rural infrastructure to smallholder farmers involved in agribusiness ventures

Existing agri-investments involving smallholder farmers in the Philippines *** Challenge for DAR is to resolve existing issues and craft new rules 9

Addressing issues on existing Agri- business Venture Agreements (AVAs) 10  Need to scrutinize contracts between smallholder farmers and investors and approved by government  Who are the parties and their representatives?  Was consent freely given?  Contract renegotiation  Explore alternative dispute resolution because  Arbitration and judicial determination of the rights and obligations may not be the most expeditious way to move forward  Long and winding appeals process

Possible elements of the new regulations on AVAs 11  Should be aligned with international standards  Should highlight securing of free and informed consent of individual farmers and the improvement of their collective bargaining power  Roles of government  intervene ex-ante to the contract formation in ensuring that consent of individual farmers is secured  assist the farmers’ organizations in understanding and explaining the contract provisions and implications  improve the bargaining power of the farmers by making available, or committing to make available, assistance such as capacity building, technical extension and rural infrastructure ***Approval of contract should be based not on the substance / merit of the contract but on the manner it was entered into

New rules: Possible mechanisms for securing consent Stability of land tenure:  Reviewing process by which collective titles were issued  Finalizing delineation of forest line  Easing the process and cost of property transfer and subsequent registration of new owners 2. Strengthening farmers’ organizations:  Ease mechanisms for farmers doing business  Simplify registration of farmers organizations and regulatory framework  If needed, tap professional service providers to assist farmers groups in business development  If possible, provide starter-programs that can allow synchronized production (e.g farm equipment but with clear exit mechanisms)

Possible mechanisms for enhancing the smallholder farmers’ bargaining power Synchronized government intervention and investments  Strategic and non-distorting public goods so that the farmers improve their own investments in agriculture.  Priority for farmers’ organizations that have actual or potential agricultural enterprise partners. 2. Access to credit: available for smallholders & investors 3. Reduced information asymmetry and nebulousness of policy environment.  Clearer rules are clearer.  Creation of a Registry of Contracts  Credit Information System Act  Market information 4. Market linkage

Thank you 14