Passed into law in 1997, the Agriculture and Fisheries Modernization Act (AFMA) was hailed as the mother of all agricultural policies that will lead the sector into modernization and global competitiveness. The policy was meant to address the effects of liberalization by pouring substantial funds to the sector to finance its modernization. It was supposed to provide a policy environment conducive to empowering small farmers and fisherfolk and at the same time synchronizing production efforts with marketing and other product enhancing activities. Sadly, after nine years of implementation, the AFMA is perceived more as another broken promise of government than a sound policy towards agricultural growth. Congress extended AFMA implementation until 2015, but full and effective enforcement remains doubtful.

In the beginning

The AFMA is a product of combining two legislative measures with the end-view of addressing the rice crisis in 1995 - by expanding the coverage of irrigation systems in the country (Irrigation Act of 1995) - and modernizing the agricultural sector (Agricultural Modernization Act). The outcome is a piece of legislation patterned after the European model of agricultural development: strengthening and enhancing the productive capacities of small farms and small farmers. This model is consistent with the terrain of the Philippine agriculture where the majority of farms ranges from one to two and a half hectares and tilled by small farmers.

Concretely, AFMA aims to modernize agriculture by transforming the sector "from a resource-based to a technology-based industry." In terms of advancing the interests of small farmers and fisherfolks, AFMA would strive to enhance their profits and incomes "by ensuring equitable access to assets, resources and services, and promoting higher-value crops, value-added processing, agribusiness activities, and agro-industrialization." Empowerment would be pursued through the development and strengthening of cooperatives. On the consumer side, the policy seeks to ensure the "accessibility, availability and stable supply of food to all at all times." Thus, rural industrialization through productivity enhancing measures within a liberalized regime is the overarching policy thrust of AFMA.

Table 1 elaborates the policy guidelines set by RA8435.

The initial step undetaken under AFMA was the identification and delineation of the Strategic Agriculture and Fisheries Development Zones or SAFDZs. Essentially, the identified SAFDZ areas would be exempt from land conversion^[1] and would receive all the identified support services. The process includes mapping of the entire archipelago with local government units identifying the areas through local ordinances. During the term of Agriculture Secretary Leonardo Q. Montemayor, the DA was able to produce the necessary maps for the SAFDZs and the whole department was gearing for the formulation of the Agriculture and Fisheries Modernization Plan (AFMP)^[2].

However, with the change in the leadership of the agriculture department, AFMA implementation became less purposive. While the program receives a share in the General Appropriations Act (GAA) funds for the implementation of the AFMP, these funds are coursed through the regular projects and programs of the DA. This means that the funds are subsumed under the Ginintuang Masaganang Ani (GMA) programs on rice, corn, high-value commercial crops (HVCCs), livestock, and fisheries.

AFMA implementation also entailed making capital accessible to small farmers and fisherfolk. The policy sought to consolidate all the credit programs of government, by collapsing all existing Direct Credit Programs (DCPs), into the Agro-Modernization Credit and Financing Program (AMCFP). Premised on the observation that government is not an efficient lender of funds, credit facilities would be coursed through the private sector, non-government organizations, and government financial institutions (GFIs). As of 2004, the Agricultural Credit Policy Council (ACPC) consolidated around twenty-nine DCPs and channeled PhP300 million to the AMCFP. They are expecting a disbursement of PhP200 million for credit facilities this year.

The President's 10 Point Agenda

In President Gloria Macapagal-Arroyo's 2003 State of the Nation Address (SONA), she introduced her administration's 10-Point Agenda. The first point pertains to the development of two million hectares of agribusiness lands. To operationalize this agenda point, the DA pursued the following tasks: 1) Identify and develop two million hectares of agriculture and fisheries areas in order to generate two million jobs; and 2) Reduce the costs of priority wage goods.

The DA's operationalization of the aforementioned tasks is in line with the Medium Term Philippine Development Program (MTPDP) goals. To address rural poverty, the MTPDP called for a "more holistic approach" in addressing "production bottlenecks in agriculture" and "its inherent vulnerabilities." It proposes the promotion of agribusiness that "will not only address agricultural production constraints but also post-production handling, value-adding, and distribution concerns, all of which are the major and inter-connected determinants of job creation and income stability in the countryside."

As of 2006, the DA reported that, in terms of achieving the first goal, it has developed a total of 112,100 hectares of agribusiness land and validated 417,515 hectares for further agribusiness development.  In attaining the second goal, the department was able to improve "transport logistics, marketing linkages and distribution systems." It also "established cold chain and roll-on, roll off (RORO) services in Visayas and Mindanao and coordinated with local authorities for more color-coded highway routes and toll-free food lanes."

Addressing Gender Issues

The DA's interventions for gender and development revolve around three areas that President Arroyo identified, namely economic empowerment, gender responsive governance and promotion of women's rights. To achieve these goals, the department provided loans, livelihood projects, micro-enterprise training, and provision of women-friendly processing equipment or facilities to their rural women constituents. They also generated sex-disaggregated data to guide policy formulation and implementation. Lastly, in promoting women's rights, the department conducted a seminar on women's right to health, a series of lectures on alternative and herbal medicines, and orientations on human rights and "various gender awareness training/seminars in different agencies and regional field units (RFU) of the Department." (2005 Annual Report, DA)

The real score

Ripped of all avowals to poverty alleviation, food security, and people empowerment, the AFMA essentially frees government from its mandate to develop and protect the agricultural sector. Liberalization is the primary intention of the policy. This is manifest in the bias for private sector intervention and heavy reliance on agribusiness to trail-blaze the path for agricultural modernization.

Based on the data from the National Economic Development Authority, "about 78.8 percent of poor families reside in the rural areas." This is practically echoed by the Medium Term Philippine Development Plan 2004-2010 report, which states that:

Philippine poverty is basically rural poverty since almost three out of four (or 73%) of the total number of poor in the country resides in the rural areas. The poverty level in rural areas is much higher at 48.8 percent against 18.6 percent in urban areas. This means that almost 5 out of 10 rural residents are poor compared with almost 2 out of 10 urban residents.

Geographically, "subsistence incidence across regions was highest in the Bicol region at 27.8% followed by Autonomous Region of Muslim Mindanao at about 27.2% and Central Mindanao at 25.5%" (Business MDG report) "The poverty situation in 2003 continued to reveal the wide disparities in poverty incidence across regions. The ARMM and Regions XIII (CARAGA) and IX (Zamboanga Peninsula) were the poorest regions.

Meanwhile, the Asian Development Bank report in January 2005 entitled Poverty in the Philippines: Income, Assets, and Access also state that:

While the data show a significant reduction of the urban poverty headcount between 1991 and 1997, the same was not the case for rural areas. In fact there has been very little overall change in the rural poverty incidence from 1985 to 2000, and nearly half of families remained income poor in 2000.

NEDA provides the link between poverty and the state of Philippine agriculture. "Rural poverty remains tied to the state of agriculture and the environment. The rural poor, consisting mainly of small and landless farmers, farm workers, fisherfolk and indigenous people, continue to lack access to productive resources including land, credit, technology and rural infrastructure."

Poverty in the Philippines is borne by the women. The government reported, in September 2004, to the United Nations that, "poverty remains the biggest obstacle in the empowerment of Filipino women. As in many countries in the Asian region, poverty has a woman's face in the Philippines." Ironically, rural women contribute a lot to food production: 45 percent in Southeast Asia and about 60 percent of the total food production in Asia.

Lack of access to and control over resources are the primary concerns of rural women. Earning less compared with their male counterparts—PhP0.36 for every peso a man earns—their work remain largely unpaid and invisible. Such invisibility is more pronounced among women members of indigenous communities.

In a report presented by the Congressional Planning and Budgeting Department (CPBD), agricultural growth is mainly erratic compared with the services and industry sectors. (Diagram 1)

Agricultural employment barely grew between 1995 and 2004. It even dipped during 1998 and 2000, the initial years of AFMA implementation. (Diagram 2)

Employment was practically stagnant across all the sectors (although a slight increase in registered by the services sector). (Diagram 3)

Sources: NSCB

Apart from unemployment, there is an increasing incidence of underemployment in the rural areas. (Table 2)

Table 2. Rural unemployment and underemployment

Year	RURAL
	Unemployment		Underemployment
	Level (in M)	Rate (%)	Level (in M)	Rate (%)
1997 1998 1999 2000 2001 2002	0.9 1.1 1.2 1.1 0.9 1.3	5.6 6.7 7.1 7.0 5.4 7.5	2.3 2.3 2.5 3.8 3.1 3.2	18.3 18.2 18.8 24.9 20.0 20.3

Source: NSCB

In terms of agricultural trade, imports exhibited a steady rise from 1994 to 2004, except during the years 1998 to 2000. (Diagram 4)

r - revised
Source: NSCB

As of 2005, the Philippines incurred trade deficits with its trading partners. (Table 3)

Table 3. Philippine Agriculture Trade Balances with Major Trading Partners, 2005

It is obvious that AFMA implementation has not reduced rural poverty. It certainly is not a beacon of growth in the agricultural sector.

Locating budgetary support for Agriculture

The bulk of government expenses in the economic services sector goes communications, roads and other transportation. Agriculture, Agrarian Reform and Natural Resources rank second while subsidies to local governments rank third. Interestingly, subsidies to local units increased, from 1996 to 1998, while allocations for agriculture declined. (Table 4)

Table 4. Economic Services Sector Expenditure Program, 1996-1998

Particulars	Levels in Billion Pesos			% Distribution
	1996	1997	1998	1996	1997	1998
Agri. Agr, Reform and Natural Resources	28.9	30.4	29.8	6.9	6.2	5.5
Trade & Industry	4.4	4.6	3.3	1.1	0.9	0.6
Tourism	0.7	0.8	0.7	0.2	0.2	0.1
Power & Energy	1.1	0.9	3.7	0.3	0.2	0.7
Water Resources Dev't and Flood Control	2.7	2.7	5.4	0.6	0.5	1.0
Comm., Roads & Other Transpo	42.9	63.8	58.1	10.3	12.9	10.7
Other Economic Services	4.8	8.6	12.2	1.2	1.7	2.3
Subsidy to LGUs	19.8	24.9	28.3	4.8	5.0	5.2
Sub-total	105.3	136.7	141.5	25.3	27.7	26.2

Source: BESF

Sectoral allocation of government expenditures in tems of percentage of the GNP show a decline in economic services, from 5.0 percent in 1994 to 3.5 percent in 2003. (Table 5)

Table 5. Sectoral Allocation of the National Government Expenditures
As a percentage of GNP
FYs 1994-2003

Historically, the Social Services Sector along with Debt Servicing and Economic Services receive the topmost allocations as percentage of government's expenditure. (Diagram 5). However, as of 2004, debt servicing overtook the economic and social services. (Diagram 6)

In terms of allocation by departments, the Department of Agriculture ranks in fifth place. The top three are the Department of Education, Culture and Sports, Department of National Defense, and Department of Public Works and Highways. (Diagram 7)

Major recipients of budget allocation
By Departments
In billions

Source: BESF

Government allocations for the various departments are apportioned only after the mandatory appropriations for debt servicing (Presidential Decree 1177) and the internal revenue allotment (Republic Act 7160, Local Government Code of 1991). It is also interesting to note that the Department of Defense receives more funds from the GAA compared to the Department of Agriculture.

Spending for agriculture

Before the enactment of AFMA, public spending for agriculture were divided into two, a regular budget for the DA and separate funding for the GATT adjustment measures (after the ratification of the GATT in 1994). AFMA mandated huge amounts of financial resources for its operationalization: PhP20 billion for the first year of implementation and PhP17 billion in the next six years. These funds are supposed to be wholly separate from the budget allocation for the operations of the DA.

AFMA was enacted in 1997, but the first budgetary support was only released in 1999. Worse, the allocations for AFMA did not reach the mandated PhP20 billion for its first year of implementation. Nor did it reach the PhP17 billion mandated for the succeeding years. Based on the GAA, allocations for the AFMP peaked at PhP16 billion in 2000. The lowest allocation was PhP9 billion in 2004. And the funds were inclusive of the DA budget.

GAA Allocations
In thousand pesos

The DA proudly announced that it proposed a staggering P19.32 billion budget for 2007. P14.14 billion will go to the implementation of the Agriculture and Fisheries Modernization Act (AFMA) while P5.18 will be allotted for the regular budget of the department.

The severe lack of funding support for AFMA was acknowledged by Negros Occidental Rep. Alfredo Maranon. He said that the AFMA "suffered miserably because of government's financial constraints due to the global economic crisis and low revenue collections. Though huge funding have been appropriated, miserable amounts were actually released annually." ("Congress OKs P17b more for farm program", Manila Standard, 2/11/04) This observation was echoed during public hearings conducted by the Committee on Agriculture and Food in the House of Representatives chaired by Congressman Maranon. During deliberations with the DA in 2002, Agriculture Undersecretary Jocelyn Bolante "disclosed that in 1999, Congress appropriated PhP14.9 billion for AFMA, but only P11.6 billion was actually received." In the following year, "PhP20.8 billion was appropriated for AFMA but only PhP16.6 billion was released; PhP16.1 billion was authorized in 2001 but PhP11.4 billion was released; and in year 2002, PhP20 billion was appropriated by Congress but only PhP14.4 billion was released." ("Congress OKs P17b more for farm program", Manila Standard, 2/11/04).

Irrigation

The AFMA has not made an impact on the development of irrigation services to the sector. Of the 10.3 million hectares of potentially irrigable lands in the country, only 1.3 million hectares have existing irrigation. The National Irrigation Administration reports that as of December 2003, about 45 percent or 1.4 million hectares have been developed for irrigation. "Areas with irrigation facilities expanded from 1.268 M hectares from 1994 to 1.396 M hectares in 2003. Correspondingly, the status of irrigation development increased from 40.57 percent to 44.66 percent in the same period." (Table 6)

Table 6. Status of Irrigation Development

Notes:

1. Potential Irrigable Area is based on the 3% slope criteria (an area can be irrigated if its slope is 3% or less).

2. Service Area refers to the area provided with irrigation facilities

3. National Irrigation Systems are NIA-managed systems, constructed, operated and maintained by NIA; portions or the whole systems are now also turned over to the organized Irrigators  Associations

4. Communal Irrigation Systems are farmer-managed systems and constructed by NIA with farmers' participation and turned over to the organized Irrigators Associations for operation & maintenance.

Private Irrigation Systems are those constructed and managed by private individuals or groups (self-financed),  some with technical assistance provided by NIA or other agencies

Rural Credit

ACPC Executive Director Jovita Corpuz reported in 2004 that PhP300 million from the AMCFP fund were turned over to the Quedancor "to bankroll corn and fisheries projects." (ACPC consolidates PhP300-M funds for agri modernization", Philippine Star, 6/20/04). The same government agency is busy with developing "innovative financing schemes" (IFS) that seek to address the needs of small farmers and fisherfolk who do not have capital and necessary collateral to access loans. "The IFS are time-bound experiments intended for replication under the AMCFP… A total of 24 institutional capacity building (ICB) programs for countryside financial institutions (CFIs) are slated to be implemented in 2006 to benefit some 200 organizations with a combined total of 1,600 members. (PhP200M to be released for loans to 10,000 farmers, fishers", Business Mirror, 5/29/06)

The LandBank, for its part, consistently supported^[3] the implementation of the AFMA. In 2004^[4], it released "PhP19.8 billion in credit and technical assistance in support of the AFMA program…The amount represents 109 percent of the bank's AFMA commitment for 2004 of PhP18.2 billion and is 10 percent higher than the PhP18 billion released in 2003. (LandBank ups support for AFMA", TODAY, 2/18/05). In 2005, "PhP15 billion—79 percent of its PhP19 billion target for AFMA for 2005—was released. The amount benefited more than 235,000 small farmers and fishrerfolk nationwide and generated more than 120,000 new jobs." (AFMA gets PhP15B from LandBank", Malaya, 11/11/05)

The policy of ensuring an environment conducive for the inflow of capital to the agricultural sector is one of the major thrusts of AFMA. But the consolidation of DCPs under the AMCFP does not necessarily translate to material benefits for small farmers. "Instead of providing farmers much needed credit at low interest rates, the private sector will undoubtedly charge higher interest rates- forcing farmers to accept such terms at the risk of reaping extremely low profits." ^[5]

SAFDZs

During the budget hearing for the Department of Agriculture at the House of Representatives^[6], Congresswoman Risa Hontiveros-Baraquel of the Akbayan Party List asked about the status of implementation of the SAFDZs.  Bureau of Soils and Water Management (BSWM) Director Roger Concepcion said that the maps of the SAFDZs are already in place and that its development would be private sector led. Pressed for clarification, Director Concepcion said that developments within the SAFDZs would be demand-driven where the private sector has a huge part to play. As an example, since demand for rubber is increasing and that there are a number of private sector players willing to invest, then such match-ups would be facilitated within the SAFDZs.

The arrangement described by Director Concepcion runs counter to the original intent of the law. Instead of following the mandate of the law to directly support the SAFDZs, the DA is merely facilitating the entry of the private sector in these areas.  It must be noted that, "not all agricultural lands are entitled to the benefits offered by SAFDZs since these will only be focused on all irrigated lands, irrigable lands with firm funding commitment, and those with existing or having the potential for HVC production." Hence, agricultural lands outside the zones are not protected from conversion nor are eligible to receive targeted support from government. With the recent policy pronouncement of the DA, it appears that the agency took two steps backward and has completely abandoned its obligation to the sector.

Extending the implementation of AFMA

Republic Act 9281 entitled An Act Strengthening the Agriculture and Fisheries Modernization Program extended AFMA implementation. It required the release of at least PhP17 billion for the program^[7]. Negros Oriental Representative Herminio Teves, chair of the House special committee on globalization, said that "the amount shall be on top of the annual budget of the Department of Agriculture and shall be free from mandatory reserves." He added that the extension of the program would "pave the way for the rise of a new generation of farmers who are not only technologically advanced, but also oriented towards surplus generation, rather than merely subsistence oriented." (Law modernizing aggri, fisheries to boost nat'l economy until 2015", Manila Bulletin, 4/16/2004)

Specifically, RA 9281 extends the tax incentives granted by AFMA to agribusiness enterprises as well as funding support for the program's implementation until 2015.^[8] Agribusinesses shall be exempt from paying tariffs and duties on imported implements such as "tractors, trailers, trucks, harvesters, threshers, sprayers, packing and refrigeration equipment, bulk conveyors and mini loaders, weighing scales, renewable energy systems and other contraptions…They shall also be exempt from the payment of import taxes of fertilizers, insecticides, pesticides, hybrid seeds, genetic materials and fingerlings, among other inputs. (Congress OKs incentives for agri equipment imports", Philippine Star, 2/6/04)

However, the NEDA rejected the implementing rules and regulations of RA9281. The Board of the economic authority halted the implementation of the IRR because it "lacked safety nets to ensure that the duty incentives would not be abused and the potential revenue losses minimized". (NEDA rejects IRR of agri law", Philippine Daily Inquirer, 7/24/04) On this score, the DA admitted that "the total foregone revenue from 1999 to 2003 as a result of the implementation of the AFMA amounted to PhP2.1 billion" (AFMA cost gov't P2.1B in foregone revenues", Manila Times, 6/30/04)

Conclusion

In July 2004, the Congressional Oversight Committee on Agriculture and Fisheries Modernization (COCAFM) commissioned a group of experts^[9] to review the implementation of AFMA^[10]. Members of COCAFM and the implementing agencies of AFMA (DA, DAR, and DENR) are still validating the expert's review. The initial findings, however, are far from rosy. Professor J. Prospero De Vera, a member of the review panel, intimated the dismal implementation of the law in terms of institutional linkages and governance. Speaking to members of the Alyansa Agrikultura^[11], Professor De Vera said that "an old bureaucratic institution was implementing the AFMA."

Full enforcement of AFMA was never achieved because of the financial constraints it experienced. The law was not consistently followed in terms of budgetary allocation and lacked a corresponding organizational mechanism. Hence, its aim of addressing poverty and ensuring agricultural growth were never realized.

The AFMA is clearly gender blind. Even Prof. De Vera conceded that the AFMA is "gender blind," when he was asked about the program's responsiveness to gender issues. It is primarily focused on enhancing the productive capacities of small farmers but does not delineate or tailor services according to the needs of the men and women farmers. While it is true that the DA has been taking steps to address gender concerns, as discussed earlier, it is debatalble whether the programs are fully empowering rural women.

In terms of funding support, government automatically appropriates funds for debt servicing and allocates more funds to the Department of Defense rather than to the Department of Agriculture, the primary government agency responsible for the implementation of AFMA. Spending more money for unproductive rather than productive activities is a recipe for disaster rather than economic development. Clearly, government needs to review its budget priorities.

Senator Ramon Magsaysay, Jr. said that, "Despite the incomplete funding assistance provided for its implementation, it cannot be denied that the AFMA has been one of the most potent formulas to assist the farmers and fishers," ("Congress amends agri modernization law", Manila Bulleting, 2/7/04) Unfortunately, the executive branch does not seem keen on pursuing AFMA as originally intended. Currently, the Arroyo government is partial towards supporting agribusiness development as stated in its 10-point agenda. Although they are supposedly synchronizing the two programs, the policy direction does not bode well for small farmers and fishers.  Then, there are allegations that the current administration is using government resources to advance its own interest. (See box: Peddling AFMA's allocations)

The Medium Term Public Investment Plan (MTPIP) identified PhP357.1 billion as the total investment requirement for AFMA's implementation from 2006 until 2010. This is more than the total mandated allocation for AFMA. Sadly, one cannot help but be pessimistic given the first nine years of the policy's implementation.