(NAR) VOL. 10 NO. 4 / OCTOBER - DECEMBER 1999
|(a)||Mobilize private sector investments in agrarian reform areas;|
|(b)||Provide adequate support services and facilities to beneficiaries;|
|(c)||Optimize the operating size of distributed lands for agricultural production;|
Ensure security of tenure and security of income of participating beneficiaries;
|(e)||Enhance or sustain the productivity and profitability of commercial farms;|
|(f)||Hasten the transformation of agrarian reform beneficiaries into farmer-entrepreneurs; and|
|(g)||Promote food security and enable local agriculture to be globally competitive.|
Section 4, Article XIII of the Constitution which provides that "x x x The State shall further provide incentives for voluntary land-sharing." (also Sec. 2, par. 3, RA 6657);
Section 5, Article XIII of the Constitution, which declares: "The State x x x shall provide support to agriculture through appropriate technology and research, and adequate financial, production, marketing, and other support services"( also Sec. 2, par. 4, RA 6657);
Section 35, RA 6657, as amended by RA 7905, which states: "There is hereby created the Office of Support Services under the DAR to be headed by an Undersecretary. x x x. The Office shall provide general support and coordinative services in the implementation of the program, particularly in carrying out the provisions of the following services to farmer beneficiaries and affected landowners: x x x (2) Infrastructure development and public works projects in areas and settlements that come under agrarian reform x x x. For the purpose of providing the aforecited infrastructure and facilities, the DAR is authorized to enter into contracts with interested private parties on long term basis or through joint venture agreements or build-operate-transfer schemes; x x x (10) Assistance in the identification of ready markets for agricultural produce and training in other various aspects of marketing; x x x and (13) Administration, operation, management and funding of support services programs and projects including pilot projects and models related to agrarian reform as developed by the DAR";
Section 44, RA 6657, as amended by RA 7905, which provides "x x x The PARCCOM shall coordinate and monitor the implementation of the CARP in the province. x x x, in addition, it shall: a) recommend to the PARC the following: x x x 3) continuous processing of applications for lease back agreements, joint venture agreements and other schemes that will optimize the operating size for agricultural production and also promote both security of tenure and security of income to farmer beneficiaries: Provided, that lease back arrangements should be the last resort;"
Section 38, RA 6657, which directs the PARC to provide "x x x Investment information, financial and counseling assistance x x x" to affected landowners;
Section 3, EO 129-A, which declares that "the State shall: (a) establish owner-cultivated, economic, family-size farms and collectively-owned/cooperatively-cultivated farms as the foundation of Philippine agriculture; x x x (c) rechannel and divert landlord capital in agriculture to industrial development; x x x (f) create just and viable socio-economic structures in agriculture conducive to greater productivity and higher incomes through the cooperative system of production, processing, marketing, distribution and credit services; x x x (i) provide specific investment opportunities, alternative employment, and other incentives for landowners affected by agrarian reform; x x x;"
Section 4 (h), EO 129-A, which authorizes the DAR to "develop and implement alternative land tenure systems such as cooperative farming and agro-industrial estates, among others"; and
Section 49, RA 6657, which provides that "The PARC and the DAR shall have the power to issue rules and regulations, whether substantive or procedural, to carry out the objects and purposes of this Act." x x x;
Agrarian Reform Beneficiaries (ARBs) or Beneficiaries refer to individual beneficiaries under PD 27 or RA 6657, or their cooperative, association, or federation, duly registered with the Securities and Exchange Commission (SEC) or the Cooperative Development Authority (CDA);
Equity is the value of the shares subscribed and paid for by each party in relation to the authorized capital stock of a joint venture corporation;
Joint Economic Enterprises generally refer to partnerships or arrangements between beneficiaries and investors to implement an agribusiness enterprise in agrarian reform areas. It may take any of the following forms:
(i) Joint Venture whereby the beneficiaries contribute use of the land held individually or in common and the facilities and improvements if any. On the other hand, the investor furnishes capital and technology for production, processing and marketing of agricultural goods, or construction, rehabilitation, upgrading and operation of agricultural capital assets, infrastructure, and facilities. It has a personality separate and distinct from its components;
(ii) Production, Processing and Marketing Agreement whereby the beneficiaries engage in the production and processing of agricultural products and directly sell the same to the investor who provides loans and technology;
(iii) Build-Operate-Transfer Scheme whereby the investor introduces, rehabilitates or upgrades, at his own cost, capital assets, infrastructure, services and facilities applied to the production, processing and marketing of agricultural products at his own cost, and operates the same for an agreed period, upon expiration of which, collective ownership thereof is consolidated with the beneficiaries who own the land where the improvements and facilities are located;
(iv) Management Contract whereby the beneficiaries hire the services of a contractor who may be an individual, partnership or corporation to assist in the management and operation of the farm in exchange for a fixed wage and/or commission;
(v) Service Contract whereby the beneficiaries engage for a fee the services of a contractor for mechanized land preparation, cultivation, harvesting, processing, post-harvest operations, and other farm activities;
(vi) Lease Contract whereby the beneficiaries bind themselves to give to the investor the enjoyment or use of their land for a price certain and for a definite period;
(vii) Any combination of the preceding schemes; or
(viii) Such other schemes that will promote the productivity of agrarian reform areas consistent with existing laws;
Investors refer to either former landowners, private individuals, corporations or partnerships, non-government organizations, ARB cooperatives or associations, government owned or controlled corporations or entities duly authorized by law, who are willing and able to contribute their capital, equipment and facilities, technology, and management services, with proven organizational, financial, and technical capability to meet their obligations under the agreement, as evidenced by their track record, financial statements, and other relevant proofs;
Mediation or Conciliation is a mode of resolving disputes whereby the contending parties negotiate towards a mutually acceptable and beneficial solution of their dispute with a third party acting as facilitator;
Usufruct is a right to enjoy the property of another with the obligation of preserving its form and substance (Art. 562, Civil Code). The usufructuary or person in whose favor a usufruct over distributed land is constituted cannot assign his right to another person or entity without the consent of the beneficiaries; and
Voluntary Arbitration is a mode of resolving disputes whereby the contending parties mutually agree to refer the same to a third party. The latter renders a decision based on the results of investigation.
|(a)||Production, processing and marketing of agricultural products; or|
|(b)||Introduction, maintenance, rehabilitation or upgrading of agricultural capital assets, infrastructure, facilities or services; or|
|(c)||Provision of expertise, technology, equipment and other services that will make distributed lands productive.|
(i) A joint venture seeks to implement agri-related projects and activities over distributed lands. It shall have a personality separate and distinct from that of the contracting parties in accordance with the Corporation Code of the Philippines;(b) Production, Processing and Marketing Agreement
(ii) The joint venture shall acquire merely usufructuary, but not ownership, rights over the land for an agreed period, subject to the limitations provided for under Art. 605 of the Civil Code, and subject, further, to the condition that it shall preserve the form and substance thereof. Ownership of the land remains with the beneficiaries and the property can not be used to settle obligations of the joint venture corporation (JVC) in the event of insolvency or bankruptcy;
(iii) The JVC or entity shall be liable for taxes due on the improvements, while the ARBs are accountable for taxes due on the land pursuant to Art. 596 and 597 of the Civil Code;
(iv) The equity participation of the beneficiaries shall be determined based on the value of the use of the land, its improvements and facilities, if any, and such other applicable factors consistent with standard valuation practices. It shall be, at the minimum, equivalent to the lease rental thereof as determined in accordance with existing laws. It shall be, in no case, less than the total amount due from the ARBs as payment for the land and its improvements as appropriate. The equity shall be in the form of voting shares unless the beneficiaries prefer otherwise. Through equity review mechanism, increases in the fair market value of the use of the land, facilities and improvements may result in corresponding increase in equity. For this purpose, the beneficiaries and the investors may engage the services of independent appraisers or valuators;
(v) The JVC shall be managed jointly by the investors and the ARBs. The beneficiaries shall be given a fixed number of seats in its board of directors corresponding to their equity interest. They may be given additional seats in the board, as agreed upon by the parties, as special privilege as incorporators or founders pursuant to Sec. 7 of Batas Pambansa (BP) Blg. 68, or the "Corporation Code of the Philippines";
(vi) The equity of the beneficiaries shall not be, in any manner, subject to dilution in case of additional issuance by the JVC of shares of the capital stock to reduce their voting rights. For this purpose, additional issuance shall consist of non-voting shares;
(vii) Beneficiaries and/or their dependents shall be given preference for employment in the joint venture. They shall receive salaries/wages for their labor in accordance with existing labor laws, in addition to dividends on their equity interest and other income from the land used under the joint venture;
(viii) The joint venture agreement may provide for the creation of a Social Fund out of such funds as the parties may determine. The fund shall be used to support social and welfare projects for the beneficiaries. It shall be managed jointly by representatives of the investors and the ARBs;
(ix) A Sinking Fund equal to the amortization for the land and the improvements, as appropriate, is established out of the joint venture's net earnings after tax. The fund shall amortize the land and the improvements. It shall be deductible from the cash dividends or proceeds due to the ARBs;
(x) The agreement shall incorporate a human resource development program that will provide management capability building for beneficiaries, facilitate transfer of technology, and hasten their transformation into rural entrepreneurs;
(xi) The agreement shall provide for the procedures, terms and conditions for equity divestment by the investor in favor of the beneficiaries;
(xii) Joint venture agreements executed by ARBs before the organization of the JVC shall survive the incorporation thereof and shall continue to be valid and binding to the extent that they are not inconsistent with the articles of incorporation and by-laws of the JVC; and
(xiii) The JVC articles and by-laws and the joint venture agreement shall incorporate the basic features provided herein as warranted.
(i) The beneficiaries engage in production and processing of agricultural crops, while the investor buys the crops pursuant to a pre-agreed selling price and takes charge of their marketing;(c) Build-Operate-Transfer Scheme
(ii) The investor makes available, at the earliest opportunity and for a reasonable cost, the technology prescribed for the production and processing of agricultural goods according to the quality standards set by the market. Any loss resulting from arbitrary adjustments in the quality standards shall be borne by the investor unless the ARBs are informed, at the earliest opportunity, of the adjustments and are provided with reasonable means to cope therewith;
(iii) If the application of the prescribed production and processing technology results in the degradation of the substance and form of the land, the beneficiaries shall be justified in applying alternative and equally effective production technology upon proper notice to the investor;
(iv) Deduction of amounts representing the cost or value of the use of the technology, equipment, facilities and services provided by the investor to the beneficiaries shall not be arbitrary. The amount and schedule of deduction shall be clearly stipulated in the contract; and
(v) Liability for rejects in excess of allowable rate or crop losses shall be stipulated in the agreement on the basis of the respective roles and responsibilities of the parties in the production, processing, and marketing of agricultural crops;
(vi) If production exceeds the volume of crops agreed upon in the contract, the ARBs may dispose the excess to other interested buyers, subject to the investor's right of first refusal. The proceeds of the sale of the excess shall pertain exclusively to the ARBs;
(vii) The period for acceptance by the investor of the products delivered shall be in accordance with industry practice. Acceptance is implied from the investor's failure to notify the beneficiaries of its rejection of the products after the lapse of the agreed period; and
(viii) The agreement shall incorporate a price review mechanism taking into consideration industry practice, prevailing market prices, and other appropriate factors.
(i) The investor builds or rehabilitates facilities and improvements necessary to make the lands productive and directly operates the same for a specified period. The facilities and improvements shall be constructed at the investor's own expense, and he shall not be allowed to access, for this purpose, government funds that would, otherwise, be available as financing or capital for beneficiaries;(d) Management Contract
(ii) The beneficiaries shall receive reasonable rent for the use of the land where the facilities and improvements are located, taking into consideration the area utilized, amount of amortizations and other relevant factors. They may continue to engage in production activities on portions of the land not affected by the facilities and improvements;
(iii) The investor shall be liable for taxes due on the improvements, while the ARBs for taxes due on the land pursuant to Art. 596 and 597 of the Civil Code;
(iv) Any increase in the value of the land resulting from the introduction, rehabilitation or upgrading of infrastructure services and facilities made by an investor shall accrue to the beneficiaries; and
(v) This scheme is separate and distinct from that provided for under RA 6957, as amended by RA 7718, otherwise known as "the BOT Law." Thus, Sec. 3 (b) of DAR Administrative Order No. 9, Series of 1998, "Rules and Regulations on the Acquisition, Valuation, Compensation and Distribution of Deferred Commercial Farms," is hereby amended or modified.
(i) The ARBs hire the services of a contractor to manage and operate the farm for the purpose of producing high value crops or other agricultural crops for export;(e) Service Contract
(ii) The farm remains under the control of the ARBs and the management contractor receives a fixed compensation, commission or other forms of remuneration for his services;
(iii) The management contractor shall prepare the development plan, cost estimates, annual budget, manpower requirements of the agribusiness enterprise, subject to approval of the ARBs, and assist in sourcing funds to finance its operations;
(iv) Employees of the management contractor shall be limited to essential management positions and those engaged in the introduction and transfer of appropriate technology. The ARBs shall provide the labor necessary for farm operations;
(v) A human resource development program for members of the cooperative, association or federation shall be implemented to facilitate transfer of technology and management techniques to enable them to directly manage and operate the farm;
(vi) All income from the operation of the farm shall accrue exclusively to the ARBs. Disbursements shall be made jointly by the management contractor and the ARBs through their duly authorized representatives, unless the parties stipulate otherwise; and
(vii) The amortization and taxes due for the land and its improvements shall be the responsibility of the ARBs.
(i) Beneficiaries engage the services of a contractor for mechanized land preparation, seeding or harvesting, use of post-harvest facilities for storage and packing, and other aspects of agricultural production. They remain to be in control and possession of the land;(f) Lease Contract
(ii) The service contractors may include other ARBs with necessary equipment and facilities for mechanized farm operations. Provision of farm-related services by duly-qualified ARBs will allow intensive and efficient use of equipment and facilities, thus, making such services accessible to other ARBs at lower cost; and
(iii) Beneficiaries who wish to engage in service contracting but with limited financial capability may avail of loan facilities or credits pursuant to Section 35, RA 6657, as amended by RA 7905.
(i) The lessee may be either a former landowner or other investors. However, under Sec. 44, RA 6657, as amended by RA 7905, leaseback arrangements should be the last resort. This means that the ARBs and the investor (former landowner) must first consider other types of agribusiness arrangements before deciding on a lease;(g) Combinations or Phased Arrangements
(ii) The lessee or investor provides the capital to develop, cultivate, plant, harvest or process the agricultural crops; extend all technical and management services for the efficient operation of the farm; and assumes the risk of loss of agricultural operations. The lessors or ARBs, on the other hand, shall allow or authorize the lessee to exclusively occupy, use, and cultivate their land, for the purpose of agricultural production. If the loss is caused by force majeure, payment of lease rental may be deferred or paid on installment basis until such time the lessee-investor recovers the losses;
(iii) Property taxes due on the buildings or any other improvements on the land shall be for the account of the lessee/investor. Properly taxes on the lands shall be the liability of the lessor/ARBs;
(iv) The lessee/investor shall have the right to construct buildings and introduce other physical improvements or facilities on the property subject of lease necessary for agricultural operations. In no case, however, shall any improvement on the property decrease the aggregate agricultural area to the extent of lowering the land rental and other privileges accruing to the ARBs;
(v) All buildings, roads, bridges and other permanent structures/improvements and facilities on the land under lease, shall accrue or belong to the ARBs upon termination of the lease. The lessee/investor, on the other hand, shall have the option to remove or transfer any non-permanent improvement, prior to or upon termination/expiration of the agreement at the latter's own expense, but which removal shall not in any manner cause damage to the land;
(vi) The lessee/investor shall give priority to qualified and willing ARBs and their dependents for employment in the enterprise. In such case, they (ARBs) shall be treated as employees of the lessee/investor and shall be entitled to the mandated minimum wage and other economic benefits granted under the Labor Code and other existing laws; and
(vii) The maximum 10 year period in the definition of a lease arrangement under Sec. 3 (j) of DAR Administrative Order No. 9, Series of 1998, is hereby deleted. The period for lease is subject to stipulation by the parties in accordance with law.
These arrangements combine the features of any or all of the preceding forms of agribusiness enterprises, or provide for a phased implementation thereof. For instance, production and processing of agricultural crops may be covered by contract growing, while marketing may be under a joint venture. Small growers may engage production, while a corporation may undertake processing and marketing. Initially, the arrangement may provide for leaseback, followed by contract growing, and, finally, joint venture.(h) Other Schemes
They refer to other agribusiness arrangements or schemes that optimize the operating size of distributed lands for agricultural production consistent with existing laws and regulations.SECTION 8. Consent of Beneficiaries. — Beneficiaries shall have full freedom to engage in a joint economic enterprise with investors of their own choice. However; in case of commercial farms, the former landowner or operator shall be given priority pursuant to Sec. 30 (a) (3) of DAR Administrative Order No. 9 Series of 1998.
DAR Adjudication Board (DARAB) if it involves interpretation and enforcement of an agribusiness agreement or an agrarian dispute as defined in Sec. 3(d) of RA 6657;
Securities and Exchange Commission (SEC) if it involves an intra-corporate dispute;
Cooperative Development Authority (CDA) if it involves an intra-cooperative dispute; or
National Labor Relations Commission (NLRC) if it involves employer-employee relations.
|(a)||Where there is clear and imminent threat to life or property;|
|(b)||Where the dispute will cause serious and irreparable damage to either party or to the agribusiness enterprise; or|
|(c)||Where, in his judgment, there is an urgent need to protect the national interest.|
Existence of clear and substantial breach of the contract;
Prior demand by the injured party for the other party to comply with his obligations with a warning that the agreement shall be rescinded upon failure to do so; and
Affected party may question the rescission before the proper forum.
|(a)||it will optimize the operating size for agricultural production;|
|(b)||the investor is the former landowner; and|
|(c)||it will require conveyance of the use and possession of the land in favor of the investor (or former landowner),|
Conduct information campaign on joint economic enterprises with emphasis on the rights and obligations of beneficiaries;
Establish and maintain a directory of investors and agrarian reform beneficiaries, their business profiles and prospects, and other pertinent information;
Assist in the identification of available lands for investment and in resolving any land tenure problem or agrarian dispute in these areas, if any;
Facilitate linkages between ARBs and investors;
Provide institutional development training and capability building for ARBs, e.g., organization of cooperatives or associations; formulation of project proposals, and agribusiness management;
Provide legal assistance to agrarian reform beneficiaries particularly in the review and drafting of contracts and in negotiations with investors;
Facilitate negotiations between beneficiaries and investors to ensure that the terms and conditions of the agribusiness arrangement are fair and just for both parties;
Mediate or arbitrate any dispute involving the interpretation or enforcement of the terms and conditions of the agribusiness contracts upon request by both parties; and
Perform such other services as will promote the objectives of joint economic enterprises.