The partial debt condonation for agrarian reform beneficiaries (ARBs) under the Bayanihan to Recover As One Act (Bayanihan 2), is merely a “band-aid solution” to farmers’ woes and the bigger problem of land fragmentation, according to a national scientist.
Raul Fabella, who is also a well-known economist, said in an interview with Inquirer that removing interest rate payments for succeeding payments for the lands under agrarian reform and considering previous installments as part of the beneficiaries’ principal payments were not enough to boost land consolidation in the sector.
According to Fabella, the country loses about P340 billion in foregone farm production annually due to the Comprehensive Agrarian Reform Program (CARP).
Under CARP, ARBs are obligated to pay their agricultural lands for 30 years from the issuance of their land titles at an interest rate of 6 percent annually. Currently, only 17 percent of ARBs are paying amortization, resulting in massive loan defaults.
Since ARBs could not make payments, the lands sometimes just lay idle. Debt condonation would allow them to finally have clean titles and sell the lands.
Even the Department of Agrarian Reform has conceded that CARP has, over the years, bred subsistence farming more than promoting economies of scale.
While giving ARBs full debt condonation would result in losses to the government amounting to P58 billion based on data from Landbank, Fabella said doing so has the potential to free up landholdings and encourage consolidation.
“The condonation starts the process of consolidation which will reverse the losses,” he said. “Bayanihan 2 was band-aid—confined only to penalties on delinquencies. It will not do.”For Fabella, there is still hope for ARBs outside Bayanihan 2.
He said lawmakers could still lobby for a full debt condonation for ARBs under the Corporate Recovery and Tax Incentives for Enterprises (Create) bill.
“If we must have Create, we have to at least make it fairer and more investment-inducing by widening the bonanza net to include the condonation of the principal of ARB debt,” he said.