The Department of Agrarian Reform has amended and clarified existing rules for Agribusiness Venture Arrangements based on the findings of a recent FAO study.

MANILA – Through Administrative Order 4, Series of 2016, the Department of Agrarian Reform has adopted recommendations from a recent study by the Food and Agriculture Organization of the United Nations (FAO) on the effectiveness of agribusiness venture arrangements (AVAs) in improving the socio-economic conditions of agrarian reform beneficiaries (ARBs) in the Philippines.

“AVAs need to be consistent with the overall goal of agrarian reform to lift farming families out of poverty. The study results pose a challenge for both Government and the private sector to ensure that agribusiness arrangements promote the best interest of smallholder farmers and ARBs,” said FAO Representative Josè Luis Fernández.

AVAs are business arrangements between smallholder farmers, cooperatives or agrarian reform beneficiary organizations and private firms for commercial agriculture purposes. In the Philippines, these are usually undertaken through lease contracts or contract growing agreements. Both involve some form of consolidation of produce, which improves economies of scale.

The study, which was conducted jointly with DAR, looked into agrarian reform areas in Mindanao where most AVAs are situated. It highlights the need to define the role of national government agencies in the regulation of AVAs. It also found that most AVAs are disadvantageous to ARBs’ interests primarily because most of them are unaware of their contractual obligations and entitlements, which are often written in a language that they do not understand.

The study also notes the prevalence of unlawful labour practices, absence of social protection, low lease rates, lack of capacity of farmer groups to operate their farms, make collective decisions, understand financial statements and enter into adequate negotiations on the terms and conditions of their agreements.

DAR’s Administrative Order 4 of 2016 has amended and clarified existing rules for AVAs based on the findings of the FAO-DAR study. It includes revised provisions on recording and enforcing agreements during ARB-investor consultations; ensuring that investments do not result in the dispossession of legitimate tenure rights; and compliance with labour standards. The Order also stipulates the need for mandatory provision of lease rate standards based on land amortization rates, annual property taxes and core inflation rates published by the Central Bank of the Philippines.

As recommended by the study, the Administrative Order also adopted the Voluntary Guidelines on the Responsible Governance of Tenure and principles for responsible agricultural investments as a major framework for regulating AVAs.

“Another positive development that resulted from the study is a clause in the Administrative Order stating that all forms of transactions in tenure rights as a result of investments in land shall be done transparently, in line with relevant national sectoral policies, and consistent with the objectives of social and economic growth and sustainable human development focusing on smallholders,” Fernández said.