Posted October 1997
Fragmented small farms in Japan and other high wage rice-based economies in monsoon Asia have become an obstacle to sustainable rural development. This problem has not yet been resolved under private land ownership. This article proposes a corporate-individual-capitalistic mixed economy, based on village corporate land ownership with physically unwithdrawable private land shares which could earn permanent remuneration and keep a back-up basic social welfare; the village could contract production land in compact form to full-time farmers, expert farmers or cooperatives/enterprises for achieving economies of scale of land, as a third way between the centrally planned economy and free market system. Intervention of governments, education of public opinion, active participation of farmers and experiments are necessary.
IN GENERAL, the Asian monsoon climate causes rains in May-October and dryness in November-April. Only rice suits this climate. It has been the major crop for about 40 centuries . Up to the end of World War Two (WWII), a feudal landlord ownership had been dominant and most peasants owned little or no land and were either tenants or wage laborers, although there were also owner-peasants. Farm work had to be done by hand, with simple tools. Reclamation of new land had reached its limit. In the rainy half year, rice cultivation required highly labor-intensive, sophisticated and coordinated work, resulting in labor shortage. This demanded more labor and caused high population growth, low per capita cultivated land and small size and fragmentation of individual (family) farming units . In contrast, during the dry half year, due to insufficient work opportunities, there were serious unemployment, underemployment or disguised unemployment . (Oshima 1987: 18-27). Poverty was widespread and persistent. These rice-based economies were dual economies, predominantly agrarian with some industries in big cities .
With the same natural conditions, such an economic situation was changed after WWII first in Japan, then also in Taiwan and South Korea. The Japanese model of rural development started in 1946. It combines nine major features or stages (summarized by the author from Oshima 1987: 60-65 and others indicated below; Oshima, however, does not note fragmentation):
Hence the resort to land lease as the second major effort toward large-scale farming. In 1970, rent control was removed, and land could be returned to landlords upon termination of contracts of more than 10 years. In 1975 and 1980, leases for shorter period were also legalized. Land lease occurred more than sale and formed some large-scale farms . As not only older farmers in mountainous areas but also part-time farmers in lowland regions increasingly faced the lack of young successors for farming, they have been more willing to lease land (Tsuge 1997). But the progress was slow and limited. On the supply side, land owners were rich enough from off-farm income and did not have much incentive to rent out land. If the rent was not sufficiently high, the part-time farmers and absentees had no incentive to lease land; but if it was high enough to satisfy the lessors, the full-time farmers could not afford it.
There was a strong egalitarianism among village people, who felt uncomfortable if a specific villager expanded his (her) farm and became competitive in the market. This resulted in entrenched inefficiency and vested interests. (Hayami 1988: 86-88, 108, 126). Farm households had a solid preference for permanent residence which has continued for generations, and regarded agricultural land as a valuable asset handed down from the ancestors which should be passed on as it is to the offspring. They still feared that once let, land would be lost, as happened in the land reform. Thus, people had a tendency to avoid renting out land. On the demand side, because the small farm was composed of many fragmented parcels located in different parts of the village, it was not always possible for the lessee to join them into large land units (since the parcels of other land owners could be interspersed amongst them) or change them to non-farmland like dams, roads, canals, ponds, etc., (since the ownership belonged to the lessor) for using large machinery. (Tabata 1990: 18, 22).
Even if the owned and leased parcels were contiguous, once the lease was terminated, the lessor may shift the lease to another lessee, hence re-splitting the joined land and reducing farm size. Full-time farmers may lack young successors. Here, private land ownership and free market forces constrained both land lease and the efficient use of leased land.
In parallel, the third major effort was land consolidation under private farmland ownership, which refers to an exchange of the private ownership and location of spatially dispersed parcels of farms to form new holdings containing just one (or as few as possible) parcel(s), with the same (or similar) wealth in land as that before the exchange. No land owner would be a loser after the consolidation. (Oldenburg 1990: 183). In Japan, land consolidation was sporadically carried out in the ancient times. In 1901, the law on cultivated land consolidation was established to enable owners of agricultural land to organize cooperatives for the consolidation of their lands. But the feudal landlords hampered the progress. The postwar government decided to promote land consolidation after the land reform. Thus, in June 1949, the Land Improvement Law was introduced. (Hyodo 1956: 558-559). During 1950-92, of the total 3,957,000 ha of farmland outside Hokkaido (data for 1992), 1,880,000 ha had been consolidated in Honshu (major part of Japan) (JSY 1993/94: 225. Tsuge 1997).
It was strengthened in 1992 as a part of the new policies, as "The Basic Direction of New Policies for Food, Agriculture and Rural Areas" of the Japanese Ministry of Agriculture, Forestry and Fisheries (JMAFF) declared that "To foster farm management bodies that will operate on large-scale, aggregated farmland, methods to promote land improvement projects will be implemented that allow land to be exchanged" (JMAFF 1992: 15). The aim was to create compact land units of 1, 2 or 3 ha. Since 1993, of the total 3,879,000 ha of farmland outside Hokkaido (data for 1994), 50,000 ha per year have been consolidated in Honshu (JSY 1996: 229. Tsuge 1997). Although the 1949 Law prescribed that agreement by 50 % of landowners of the village was sufficient for carrying out land consolidation and the 1992 new policies raised it to two thirds majority, in most cases 100 % consent was attained before starting it, but great efforts had to be made by officials to overcome serious difficulties in adjusting interests among peasants (Hyodo 1956: 559. Tsuge 1997. NIRA 1995: 174).
Land consolidation could turn farms from fragmented to compact, enlarge parcel size, and make sale, lease, and other forms of joint use of land physically easier. But it did not enlarge farm size [e.g., a farm previously composed of 10 dispersed parcels (on average 0.1 ha each) could now hold one compact parcel of 1 ha]. Nor did it ensure efficient use of the consolidated land by the full-time farmers. A part-time farmer or absentee who previously had no incentive to sell or lease his fragmented farm may now still be unwilling to do so for his compact farm.
Since the 1970s, the fourth major effort to achieve large-scale farming was commissioned agricultural work (also called custom work) - commissioning or contracting a part or the whole process of rice cultivation primarily by small households holding land up to 0.5 ha to other farmers for using the latter's machinery, labor and management. The fifth major effort was agricultural production cooperatives - groups of farm households mainly holding land of 2-5 ha and over, accomplishing all or a part of agricultural production process by jointly using machinery and assigning members to commissioned work (this was already collective use of private land). Some production cooperatives were joined by farm households of a whole village, exercised village-wide collective use and management of private farmland and machinery, eliminated boundaries among parcels, thus enlarged farming scale (NIRA 1995: 172-174, 176-177). The sixth major effort was urban-rural joint farming - enterprises other than farm households organized joint management, joint venture, production corporation and limited companies in farming including receiving commissioned work. These three forms all had advantages in tilling otherwise idle land, achieving economies of scale in using machinery, labor and management, and reducing cost of machinery. (Tabata 1990: 20-22).
But except for the village-wide collective use of private land, these three forms were less successful in achieving economies of scale of land. Without the agreement of all land owners concerned, they were unable to form large land units or change parcels to non-farmland (such as dams, roads, canals, ponds, etc.). Fragmentation was still a barrier. In the case of village-wide collective use of private land, cooperative members could agree to remove boundaries among parcels. But as long as private land was physically withdrawable, there may be three problems:
A tax might be imposed on those absentee landowners and part-time farmers who are unwilling to lease land or join cooperatives/enterprises, as proposed by, e.g., Schiller (1956: 563). Possible shortcomings may be that bureaucracy would be involved, it may not be possible to impose tax on those full-time farmers who quit a cooperative/enterprise to operate land individually, and the ruling party may even not dare to initiate such a tax for fearing loss of peasants' votes. These may explain why such a tax has not been imposed thus far. Therefore, farm expansion may still be constrained by the free market forces.
The following Table shows that not much success in economies of scale of land has been achieved. Fragmentation was preserved even in those farms enlarged to over 5 ha. Much land still remained with part-time farmers and absentees in inefficient use. In 1994, of all farm households, full-time households accounted for only 16.1 %, while part-time 1 (mainly farming) took 13.9 %, and part-time 2 (mainly on other jobs) 70 % ; of all farm household population, persons engaged in family-operated and custom farming 59.77 %, persons mainly engaged in farming 33.59 %, principal persons engaged in farming (core farmers) only 20.59 % and male principal persons engaged in farming 10.48 % (JSY 1996: 224) .
|Year||Under 0.5||0.5-1||1-2||2-3||3-5||Over 5||Total||Average farm size|
Parcels per farm over 5 ha
|1988||1-4||5-8||9 and more|
For 1950-85: Kayo 1977; JMAFF (a); JMAFF (d); Hayami 1988: 27.
For 1990 and 1994: JSY 1992: 161; JSY 1996: 223, 229.
For 1988: JMAFF 1988: 250.
As a result, the number of viable farms diminished, and farmers and cooperatives organized political lobbying for protection . The ruling party had to yield, fearing loss of votes. [JMAFF (a). JMAFF (b). Hayami 1988: 27, 49, 51, 81. JSY 1996: 223. JMAFF 1994 (b): 177]. In 1960, a "cost-of-production and income-compensation scheme" was designed. The government as the monopsonist buyer (through the national cooperatives) bought rice at a predetermined price and sold it at a lower price, thus subsidizing rice farmers. The 1961 Agricultural Basic Law prohibited rice imports. Rice prices increased to 10 times the world level in the 1980s. Stimulated by the price distortion, rice was overproduced until 1992. (Schaede 1994: 388. Schaede 1997: 427)
Consequently, in the 1980s, the budget deficit on rice rose to more than US$ 7,000 million. Internationally, protests flowed, especially from the US. The GATT Uruguay Round of 1993 stipulated a "phase-in" of rice imports of 10 % of the total market size until 2005. When Japan experienced a disastrous harvest in 1993, rice had to be imported for the first time after 1960, in 1994, from Australia, China, Thailand and the US. (Schaede 1997: 427. ESJ 1960-61: 70). Rice self-sufficiency was thus over. In 1996, two thirds of what the Japanese consumed was imported cheaper food. Further liberalization is expected. (Kristof 1996: 4). World market rice prices were pushed up, thus affecting other grain importing countries especially the poor ones of the Third World. Domestically, with fragmented small farms, it is difficult for rice farmers to subsist and for the government to establish a competitively surviving rice self-sufficiency. Subsidies have to continue. In late 1994, the government decided to spend 6,000 billion yen over six years from 1995-96 to 2000-01 for farmers to adjust to the new regime. In 1994-95, the government purchase price was maintained at the same high level as before, which again caused overproduction, and, plus the imported cheap rice, led to a glut in inventories. (Schaede 1997: 427. FEA 1997: 435).
The fragmented small farms were efficient in a low wage economy since they were conducive to development and diffusion of land-saving and scale-neutral technology, dispersion of natural risks, and provision of employment to peasants without off-farm job opportunities. But in a high wage economy, they hamper the achievement of economies of scale of land, and waste resources of land, labor, capital, management, and technology. This problem is common to all rapidly industrializing economies with limited land resources and reduced working population in agriculture (although the degrees of fragmentation and smallness of farm size may vary). Thus, the critical issue is how to effectively consolidate and enlarge the fragmented small farms. Of other rice-based economies under private land ownership in monsoon Asia, Taiwan and South Korea replicated the Japanese model. (Hayami & Yamada 1991: 7). Indonesia, Malaysia, Thailand, the Philippines; Bangladesh, India, Pakistan, Sri Lanka; Bhutan and Nepal are generally at lower stages of the model. Once their industrialization has led them into the high wage economy, this fragmented small farm structure would also prove to be inefficient. (Zhou, Jian-Ming 1996)
For example, Taiwan completed the first and second transitions during 1970-73 and 1994 respectively (SYAP 1970: 77. FEA 1977-78: 342. FEA 1997: 267). Land consolidation under private land ownership was promoted into law in 1936, started in 1959 [Huang, Chieh 1967: (Appendix) 1, 37-38, Foreword] and strengthened in 1975 as "the second land reform". By 1982, 300,000 ha, or two thirds of 446,000 ha farmland planned for consolidation had been reorganized into large, rectangular fields more suitable for mechanized farming. By 1989, however, 88.6 % of farming households were still part-time farms, which earned 62.8 % of their income from off-farm activities. (Myers 1996: 260). In 1994, 4.4 ha were the rice farming area that enabled a full-time farm family to earn an income from its farming to balance off its consumptive expenditure. But those who held this or larger land scale only accounted for 7 % of all the farm families. (Cheng, Shy-Hwa 1994: 94-95). This and the above-mentioned Japanese case clearly show how free market forces (including cultural factors) could lastingly constrain farm expansion.
As an opposite solution to the private land ownership, rural land may be turned to public ownership (state, regional or village collective). But facing increasing land prices and global wave of decollectivization and privatization, under a scheme of paying compensation, the public institutions may not afford to buy and land owners may not wish to sell; under a scheme without compensation, owners may not agree either. This may not be feasible.
Therefore, the fragmented small farms have become the remaining or last obstacle imposed by the monsoon to sustainable agricultural and rural development in monsoon Asia . Although substantial analysis of this problem has been made by many economists in this field for many years, fundamental solutions have not yet been found (e.g., Bray 1986. Oshima 1987. Hayami 1988. Rothacher 1989. Hayami & Yamada 1991. Oshima 1993. Francks 1995. NIRA 1995).
Whereas all the other means of production could be privately, publicly or jointly owned, land of each household could be turned to private land shares to earn permanent remuneration. While private land share holders still own land financially, the village corporation possesses land physically and could reorganize the land. Private land shares could be inherited and sold in financial terms in the market. But share holders could not withdraw land physically or claim financial reimbursement from the village corporation. This is similar to modern capital share-holding corporation whose share holders can earn dividends and sell shares in the market but cannot reimburse them from the corporation.
Private land could be divided into three types: housing land, either self-sufficiency land or family plot, and production land. Housing land shares would not receive revenue from the village because the owner gets remuneration from using the land. Agricultural land could be operated in a Dual-Land System where most off-farm work engaging peasants have not secured their jobs.
(1) Self-sufficiency land could be distributed in compact form equally to each household for self-sufficiency production, as a back-up basic social welfare (its significance may be seen from the recent reappearance of homeless people in cities who were mainly from rural areas ).
(2) Production land for the market should be contracted in compact form as well in long term to full-time farmers, or to expert farmers who bid for higher output of rice and other products, so that large land units could be formed and large machinery used. Contract could be transferred and renewed according to market principles of competition. If, within the contract period, other than owing to natural disaster, the output target is not reached, or the land quality destroyed, or production abandoned, etc., the contract could be stopped and sanctions engaged. If the land has been improved, awards could be given. If some production becomes surplus, fields could be used for other (even non-agricultural) productive purposes. Production cooperatives/enterprises could also be set up, in which full-time or expert farmers could work together. Urban companies could participate. Wage labor could be hired. Revenue (dividends) could be distributed among production land shares, capital shares of the internal and external investors and labor contribution of the internal and external wage laborers.
Alternatively, where most off-farm work engaging peasants have secured their jobs, a Single-Land System could be adopted.
(1) A family plot much smaller than the self-sufficiency land could be given in compact form to each household for growing some vegetables to accommodate the peasant tradition of not buying them from the market.
(2) Production land could be operated in the above-mentioned ways. Self-sufficiency land is no more needed since full-time farmers could operate production land for both self-sufficiency and the market, and off-farm workers could earn off-farm income; family plot is negligible from the quantitative point of view. Thus agricultural land is no longer divided into the above-mentioned Dual-Land, hence a Single-Land System. Reducing self-sufficiency land to family plot would correspondingly make the farming scale of the production land much larger than under the Dual-Land System. If some off-farm work engaging peasants have lost jobs there, they could re-become full-time farmers to contract production land or join production cooperative/enterprise, so that a back-up basic social welfare could be guaranteed (that is to say, there is no need to worry that once turned to shares, land would be lost). Shares for self-sufficiency land or family plot would not receive revenue from the village also because the owner gets remuneration from using the land.
One of the major advantages in this approach is that it is not necessary for villages to buy land while private land share holders could get permanent remuneration and keep back-up basic social welfare, thus would relatively be more acceptable to full-time and part-time farmers, absentees and old farmers without young successors in farming. Such a corporation could also extend to include several villages.
The result is what I summarize as a corporate-individual-capitalistic mixed economy, with public infrastructure land, corporate ownership of agricultural and housing land with physically unwithdrawable private land shares, private/public ownership of other means of production, corporate/individual/cooperative management and capitalist wage labor employment. The above-mentioned shortcomings in individual lease, sub-village and village- wide collective use of private land with physically withdrawable private land shares could be avoided.
Here is an exemple. In China, the economic reform against the centrally planned economy starting in 1978 kept collective land ownership at village, but contracted land to households, thus creating numerous fragmented small farms. In 1986, the average acreage of cultivated land of family farm was 0.613 ha, divided into 8.99 plots, each plot 0.068 ha (Group 1992: 7-8). It brought huge incentives to peasants for production. However, although some rural areas (especially in the Central and Western parts) are still remaining in the low wage economy, more and more of the others have successively moved into the high wage economy where this farming structure also hampered sustainable rural development. Thus, in the 1980s, the Dual-Land System, Single-Land System and Share-Holding System (in which households gave land back to village which contracted land in compact form to expert farmers or cooperatives/enterprises and paid households dividends) were invented. Where practiced, they achieved large-scale farming of 1 ha - 66 ha (Group 1992: 16) and hence overcame the last obstacle. This is also a third way between the centrally planned economy and free market system. (Zhou, Jian-Ming 1996). It is based on collective land ownership so that land cannot be taken away by individuals. Under my proposed village corporate land ownership, private land could not be physically withdrawn by the quitting members, thus the same goal would be reached.
In Japan, the village-wide collective use of private land (as a production cooperative) since the 1970s has been a spontaneous effort by village officials and peasants to resolve the last obstacle, a measure just opposite to the global wave of decollectivization and privatization and a surprise to the stubborn advocators of free market forces. It could remove boundaries among parcels and reach large-scale farming, thus is recommended in the 1990s by NIRA to be "actively" promoted (NIRA 1995: 173). But as long as land is physically withdrawable, members could quit with land, thus re-splitting the joined farm and reducing farm size of the cooperative, as already mentioned. Turning private land to village corporate ownership with physically unwithdrawable private land shares might be a suitable, natural and logical further development so as to overcome such shortcomings.
Compared with China, too much time (more than three decades and a half since 1960) and too many resources (including huge government subsidies) have been spent on producing too little land consolidation and expansion in Japan. It is time to recognize that yielding to free market forces is not a solution, just as the success of features 1-8 of the Japanese model was not due to free market forces. A democratic country should guide the public to abandon rather than sticking to what is harmful to the society. Therefore, intervention of governments, education of public opinion, and active participation of peasants are necessary. Details (specific ways of establishing village corporate land ownership; land-contract length and fee; proportions of dividing revenue among production land shares, capital shares and labor, etc.) should be determined through experiments, public discussions, and expert consultations. My proposal could be practiced in parallel with other experiments. Just as carrying out land consolidation, majority agreement by land owners in the village should be sufficient for establishing village corporate land ownership but great efforts should be made to try to reach consensus.
To what extent should a farm be enlarged? This is a practical question to which the answer varies across time and places. For example, in 1994, in Saitama Prefecture of Japan, the critical size for a viable rice farm has been established at 15 ha or more (Kurita 1994: 511), while in Taiwan a survival area for a full-time rice farm was 4.4 ha as mentioned above. As time passes, the economic structures (urban-rural, industry-agriculture, import-export, etc.), technologies, managing and tilling skills as well as the ratio of cost/profit in rice and other agricultural production change. Thus, farm size could be adjusted accordingly by joining compact farms for expansion or separating them for contraction.
This proposal for Japan might also be useful for other rice-based economies in monsoon Asia and relevant economies in the rest of the world under private land ownership once the fragmented small farms have become an obstacle to sustainable rural development.
2. "Farm" (or farming unit) means "agricultural holding",
which refers to all land that is used wholly or partly for agricultural
production and is operated by one person - the holder - alone or with the
assistance of others, without regard to title, size or location (FAO-PY
Fragmentation of an agricultural holding is generally defined as the state of division of the holding into many discrete parcels in a village (Fre-Gov 1950: 56. Binns 1950: 5). But some just define it as the situation in which a household operates more than one separate parcel of land (Blarel; Hazell; Place & Quiggin 1992: 233. Vander Meer 1982: 1). A parcel is defined as all land in the holding entirely surrounded by land or water of other holdings or by land or water not forming part of any holding (FAO 1981: 92). It may also be called "noncontiguous piece of land", "plot" or "land unit". Fragmentation is measured by the number of parcels of land in the holding in one village (the case of families holding land in several villages is excluded) (Heston & Kumar 1983: 199).
3. Those who are willing and able to work but cannot find work are unemployed. Among those employed, those who are working less than full time and want more hours of work are underemployed. (Oshima 1993: 103). The part of the population engaged in agriculture who could be removed without reducing agricultural output, even though the technical methods in use remain unchanged, are disguisedly unemployed (Nurkse 1953: 32).
4. Although Japan was developed, its industrialization was based on its import of foods from and export of industrial goods to colonies. Its agriculture was relatively stagnant. (Oshima 1987: 39, 109)
5. The farm size and fragmentation data in this paper exclude those of Hokkaido which is outside the monsoon region and has much larger farm size and fewer fragmented parcels.
6. Diversified cropping implies a shift from a monoculture or a few crops (mainly grains) to a larger assortment of crops (roots and tubers, pulses, oil crops, vegetables, fruits, berries, treenuts, etc.) (Oshima 1993: 125. FAO-YP 1993: iv).
7. Agriculture - depending on the context - in a broad sense includes cropping (farming), animal husbandry, fishery, forestry and hunting (Oshima 1993: 152) (the importance of hunting has been declining due to environmental protection); but in a narrow sense may only refer to cropping (farming).
8. Off-farm employment of farm families denotes their employment in nonagricultural sectors, i.e., industry and services. Industry contains mining, manufacturing, construction, public utilities, transportation and communication. Services comprise banking, real estate, business, public services which require the highest level of education and retail trade, restaurants, domestic and other personal services which only need minimal education. (Oshima 1993: 138, 152)
9. In monsoon Asia, the first transition is said to be completed when the share of the agricultural labor force in the total labor force (about three fourths) has fallen, while the share of the industrial labor force has risen, to roughly one fourth - one third. The second transition is said to be concluded when the service sector overtakes the industrial sector in size of labor force. But there are elements of arbitrariness in the definitions and some exceptions may be possible. (Oshima 1987: 56, 58)
10. Farms that earn income per farm household member equal to, or above, that of non-farm employees who are living in rural areas are "viable units" (Hayami 1988: 77).
11. "Farm size" may refer to the acreage of land, or number of households, of the farm. The large farm size advocated in this paper for monsoon Asia rice-based economies denotes the large size in land acreage of farm under village-individual dual level operation, with the basic operation level at one household or at cooperative/enterprise including a number of households as share-holders and/or employees, which should receive help from the governments.
12. For example, in Saitama Prefecture, some large scale rice-wheat farms were formed by owned and leased lands with the acreage from 3 ha to 27 ha and on average 10 ha, but operated by senior farmers often without young successors (Kurita 1994: 511, 519).
13. Full-time farm households refer to those farm households whose members are exclusively engaged in farming. Part-time ones denote those whose one or more members are engaged in jobs other than farming. Part-time 1 (mainly farming) mean those part-time households earning income mainly from farming. Part-time 2 (mainly other jobs) indicate those earning income mainly from jobs other than farming. (JSY 1996: 217)
14. Persons engaged in farming refer to those household members 16 years
of age and older who have been engaged in any work in farming for one year
or more. Persons mainly engaged in farming contain those engaged exclusively
in farming and those engaged in farming for more days than in other jobs.
Principal persons engaged in farming (core farmers) denote those mainly
engaged in farming for more than 150 days per year. (JSY 1996: 217. Hayami
It is important to note that core farmers include but do not equal full-time farmers since the non full-time core farmers still spend a part of time on other jobs which could otherwise be used on agriculture as well. Therefore, this paper recommends the promotion of full-time farmers, rather than of core farmers as advocated in Japan (e.g., by Saito; Fukukawa; Tada & Kajiya 1995: 81).
15. In 1991, FAO/Netherlands Conference on Agriculture and the Environment defined the essential and interdependent goals of sustainable agricultural and rural development as "Food security, to be obtained by ensuring an appropriate and sustainable balance between self-sufficiency and self-reliance; employment and income generation in rural areas, particularly to eradicate poverty; and natural resource conservation and environmental protection." (SDD-FAO 1995: 1)
16. Homeless people largely disappeared in cities during the economic growth of the 1950s-80s, but has reappeared since the collapse of real estate and share prices in the early 1990s. Most of them are unskilled people originally from rural areas. (Kattoulas 1997: 2)
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