Large-Scale Foreign Investment on Lands: Boon or Bane?

A PRIMER ON LARGE-SCALE FOREIGN INVESTMENT ON LANDS

Written by Reggie Aquino

This Policy Brief is issued by the People's Campaign for Agrarian Reform Network (AR Now!) and Kaisahan Tungo sa Kaunlaran ng Kanayunan at Repormang Pansakahan (KAISAHAN) to present and explain these global phenomena known as Large-Scale Foreign Investment on Lands.   This paper also underscores the need to institute mechanisms to safeguard the interests of Filipino citizens, especially the marginalized sectors, as well as to protect the environment from whatever adverse impact these may cause.

What are Large-Scale Foreign Investment on Lands?

Large-scale foreign investments on lands are massive (trans)national commercial land transactions (Borras, Hall, Scoones, & White, 2011) ranging from private-private purchases and public-private leases for biofuel production to acquisition of large parcels of land for conservation arrangements with varying outcomes (Hall, 2011).   Some of these lands have been cleared of existing inhabitants and users but not yet put into production.   In many cases, buyers and investors are simply preparing for the next global crisis (Borras, Hall, Scoones, & White, 2011, p. 209).

What is the Global Context?

The international frenzy for land was driven by the recent global economic crisis, the food price hike which heightened in 2007-2008, the increasing mandated demand for biofuels in many countries, and the inescapable effects of climate change which have added to the demand for land for agricultural production for food, energy, and carbon credits (Bernabe, 2010).

Powerful (trans)national economic actors from corporations to national governments and private equity funds are in constant search for "idle" lands often in South countries for fuel and food production (Borras, Hall, Scoones, & White, 2011, p. 209).

According to the International Food Policy Research Institute (IFPRI), the global estimate on large-scale foreign land investments reached about 20 million hectares (von Braun, 2009).   In another report, the World Bank placed the figure at 45 million hectares (World Bank report 2010 quoted on Borras, Hall, Scoones, & White, 2011). Most of the lands are in Africa, Latin America, and Southeast Asia, and lands already owned by rural communities under some tenure systems, although sometimes unregistered.   Oftentimes, States consider "idle" lands as available for disposal to foreign investors. However, although these lands may be underused, very little is not owned, vacant, or unused (Liversage, 2010).

This phenomenon is, however, not limited to agricultural lands as it can also be found in coastal areas and ancestral domains of indigenous peoples. In effect, such land investments take away the control of small producers over their resources to commercial uses, leading to hunger, poverty, and displacement.

What are the Current Issues Concerning Large-Scale Foreign Investment on Lands in the Philippines?

• Locally, 1.37 million hectares of land are being negotiated by the Philippine Agricultural Development and Commercial Corporation (PADCC), the government body established to match investors with farmers and landowners.   This figure does not yet include accounts of investments generated under bilateral and regional talks and foreign investments negotiated directly on the ground (Bernabe, 2010, p. 1);
• Foreshore areas considered public lands are also being commercialized to give way to private beach resorts, reclamation projects, aquaculture (Calvan, 2011), and seaweed biofuel production.
• Forests, upland areas, and even ancestral domains of indigenous communities were not spared from these investment deals.   Forest lands are being cleared for biofuel production, mineral production, or being converted to agricultural lands for crops to replace the lands diverted to other uses.   Likewise, ancestral domains are being encroached on for the same reasons.
• From the supply end, there are a number of factors which make foreign investment on lands enticing to the government, local businesses, landowners, and even small farmers.   These factors are limited public investments in agriculture, availability of idle lands, low agricultural incomes, and government policy (Bernabe, 2010, p. 3).

Although, some studies show that such investment on lands somehow benefits the communities, the rewards, if any, are mostly short-term. By and large, studies assert that the incursion of such foreign investments unduly exposes the marginalized sectors- the farmers, fisherfolk, and indigenous peoples - to threat of displacement and loss of control and ownership over and possession of their lands.

What Laws and Policies Govern Large-Scale Investment on Lands in the Philippines?

• Department of Agrarian Reform Administrative Order 9 (DAR AO), Series of 2006 - The DAR AO 9 provides the rules and guidelines for agribusiness venture agreements (AVAs) between agrarian reform beneficiaries (ARBs) and the private sector. AVAs, by DAR definition, is a "means by which investment of financial and other resources by the private sector can be channeled to agrarian reform areas."
• The Biofuels Act of 2006 - Republic Act (RA) 9367 or the Biofuels Act of 2006 was signed into law on January 12, 2007, by President Gloria Macapagal-Arroyo.   It seeks to reduce dependence on imported fuels with due regard to the protection of public health, the environment, and natural ecosystems consistent with the country's sustainable economic growth that would expand opportunities for livelihood.
• Joint Administrative Order (JAO) 1-2008 - JAO-1 2008 is a mega administrative order (Bernabe, 2010, p. 10) involving a number of government agencies.   It contains the omnibus guidelines for the investors and stakeholders of the biofuels industry designed to help facilitate and promote investments and avoid overlapping of regulatory requirements among implementing agencies and departments of the government.
• The Mining Act of 1995 - RA 7942 or otherwise known as The Philippine Mining Act of 1995 provides for a system of mineral resources exploration, development, utilization, and conservation.   This law also provides for the different schemes of mineral agreements.
• Special Economic Zone Act of 1995 - RA 7916 or Special Economic Zone Act of 1995 mandates the establishment of Special Economic Zones (SEZs).   These are selected areas with highly developed or which have the potential to be developed into agro-industrial, industrial tourist/recreational, commercial, banking, investment, and financial centers.   The economic zone (Ecozone) may contain any or all of the following: industrial estates (IEs), export processing zones (EPZs), free trade zones, and tourist/recreational centers.
• DENR Administrative Order No.99-34 - The Rules and Regulations Governing the Administration, Management and Development of Foreshore Areas, Marshy Lands, and other Lands Bordering Bodies of Water rationalize and regulate the utilization and occupation of the above-mentioned areas.   Also included in the AO are the terms and conditions for Foreshore Lease Contracts (FLC).
• Republic Act 8550 or the Fisheries Code of 1998 - Sec. 45 enshrines that public lands such as tidal swamps, mangroves, marshes, foreshore lands, and ponds suitable for fishery operations which may be declared available for fishpond development may be disposed or alienated for Fishpond Lease Agreements (FLAs) primarily to qualified fisherfolk cooperatives/associations.   The conditions of such an agreement are also stipulated in the Code.

Despite the existence of these laws and regulatory policies governing large-scale investments on land, the rights of marginalized communities who are party to the deals still remain unprotected.   Loopholes render the regulatory powers of these laws ineffective and insufficient to regulate such investments.

What are the Types of Investment Deals on land in the Philippines?

•  Investments on Agricultural Lands covered by the Comprehensive Agrarian Reform Program (CARP)  

DAR AO 9 Series of 2006 identified a number of Agribusiness Venture Agreements (AVA) between Agrarian Reform Beneficiaries (ARBs) and the Private Sector.   The same AO defined AVAs as an entrepreneurial collaboration between ARBs and investors to implement an agribusiness venture involving lands distributed under CARP.   AVAs include the following:

1. 1. Joint Venture Agreements (JVAs) - CARP Beneficiaries and investors form a joint venture corporation (JVC) to manage farm operations.   The beneficiaries contribute the 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 the production, processing, and marketing of agricultural goods, or construction, rehabilitation, upgrading, and operation of agricultural capital assets, infrastructure facilities;
   2. Production/Contract Growing/Growership/Marketing contracts - ARBs commit to produce certain crops which the investor buys at pre-arranged terms (e.g., volume, quality standards, selling price).   This may come in the form of production and processing agreements;
   3. Lease Agreement - ARBs bind themselves to give the former landowner or any other investor maximum control over the use and management of the land for a certain amount and for a definite period;
   4. Management Contract - ARBs hire the services of a contractor who may be an individual, partnership or corporation to assist in the management and operation of the farm for the purpose of producing high-value crops or other agricultural crops in exchange for a fixed wage and/or commission;
   5. Service Contract - ARBs engage the services of a contractor for mechanized land preparation, cultivation, harvesting, processing, post-harvest operations, and/or other farm activities for a fee;
   6. Build-Operate-Transfer (BOT) - The investor builds, rehabilitates or upgrades, at his own cost, capital assets, infrastructure, and facilities applied to the production, processing, and marketing of agricultural products and operates the same at his expense for an agreed period after the ownership thereof is conveyed to the ARBs who own the land where such improvements and facilities are located.

•  Investments on Lands for Fishery Operations

The Fisheries Code of 1998 and Fisheries Administrative Order No. 197 Series of 2000 provide the rules and regulations governing the lease of public lands for fishpond development.

Fishpond Lease - An agreement entered into by and between the Secretary of Agriculture and qualified fishpond applicant for the use of public land for fishpond development purposes for a period of twenty-five (25) years.

•  Investments on Mineral Lands

A Mineral Agreement is an agreement between a Contractor and the Government wherein the State grants to the Contractor the exclusive right to conduct mining operations within, but not title over, the contract area. Mining operations that are allowed under Mineral Agreements include development/construction and utilization of mineral resources including the continuance of exploration works during the conduct of development/construction/ utilization activities. Mineral Agreements are classified into:

1. 1. Mineral Production Sharing Agreement (MPSA)  - A mineral agreement wherein the Government shares in the production of the Contractor, whether in kind or in value, as an owner of the minerals. In return, the Contractor shall provide the necessary financing, technology, management, and personnel for the mining project;
   2. Co-Production Agreement (CA) - A mineral agreement wherein the Government provides inputs to the mining operations other than the mineral resources; and
   3. Joint Venture Agreement (JVA) - A mineral agreement wherein the Government and the Contractor organize a joint venture company with both parties having equity shares. For its share, the Government is entitled to a share in the gross output of the mining project aside from its earnings in the equity of the company.

•  Special Economic Zones

Under the SEZ Act of 1995, Ecozones may contain any or all of the following:

1. 1. Industrial Estate or a tract of land subdivided and developed according to a comprehensive plan under a unified continuous management and with provisions for basic infrastructure and utilities, with or without pre-built standard factory buildings and community facilities for the use of the community and of industries;
   2. Export Processing Zone (EPZ) or a specialized industrial estate located physically and/or administratively outside customs territory, predominantly oriented to export production. Enterprises located in export processing zones are allowed to import capital equipment and raw materials free from duties, taxes and other import restrictions;
   3. Free Trade Zone or an isolated policed area adjacent to a port of entry (as a seaport) and/or airport where imported goods may be unloaded for immediate transhipment or stored, repacked, sorted, mixed, or otherwise manipulated without being subject to import duties. However, movement of these imported goods from the free-trade area to a non-free-trade area in the country shall be subject to import duties.

Enterprises within the zone are granted preferential tax treatment and immigration laws are more lenient.

•  Investments on Foreshore Lands

DENR Administrative Order No.   99-34 enshrines the guidelines for Foreshore Lease Contract (FLC), an agreement between the Department of Environment and Natural Resources (DENR) covering foreshore lands, marshy lands, and lands bordering bodies of water for commercial, industrial, and other productive uses other than agriculture.

Why is there a Need to Pass a Bill to Monitor and Regulate Large-Scale Foreign Investment on Lands?

The gravity of the issues concerning large-scale foreign investment on lands, the current influx of such investments in the country, and the lack of regulatory measures to govern them and effectively protect the rights and interests of Filipinos, especially the marginalized groups, sufficiently justifies the need for an appropriate and effective law.   For these reasons, a bill called An Act Regulating Foreign Large-Scale Investment on Lands, "Regulation on Large-Scale Foreign Investment Act", is being proposed.

What are the Objectives of the Proposed Large-Scale Foreign Investment Act?

• Ensure that foreign investments on land will benefit Filipinos, especially the marginalized sectors;
• Guarantee that any negotiations and agreements entered into by any Filipino entity with foreign  entities are transparent and beneficial to the country and to local communities;
• Ensure that these agreements will not result in food insecurity, degradation of the environment, creation of illegitimate foreign debt, or violation of human rights laws and existing rules and regulations;
• Protect the rights of small farmers, farmworkers, fisherfolk, informal settlers, and indigenous peoples;
• Safeguard the right to self-determination and right to development of Filipinos;
• Protect the environment from any harm such foreign investments may bring;
• Preserve traditional indigenous culture, knowledge, and practice in agriculture.

 What are the Salient Provisions of the Bill?

• Clear Definition of Large-Scale Foreign Investment on Lands

The bill provides a clear definition of what constitutes large-scale foreign investment on lands taking the local context into account. Large-Scale Foreign Investment on Lands is the leasing, acquisition, or use of land exceeding an aggregate area of 5 hectares in the Philippines by foreign entities; or entering into a joint venture agreement, partnership, cooperation, or similar business agreements where the control or the beneficial use of land with an aggregate area exceeding 5 hectares is given to the foreign entity.

•  Provision of Mechanisms for the Participation of Affected Sectors and Communities

Mechanisms for participation and gathering the position of affected sectors and communities shall be conducted.   It involves giving notice of hearing/consultation to affected sectors and communities through publication or posting in conspicuous places, the conduct of a reasonable number of hearings and solicitation of positions, and the public presentation and validation of the planning results before the final adoption of the plans.

•  Setting the Scope and Parameters of the Regulation

The bill likewise identifies the foreign investment deals on land which shall be covered by the proposed measure. Specifically, it will include all contracts, agreements, negotiations, talks, and deals involving foreign investment on land exceeding an aggregate of 5 hectares shall be publicly disclosed.   It shall be approved by the National Regulatory Board on Foreign Land Investments before it is legally implemented.   The regulation covers all investment deals on land between:

• Philippine Registered Private Entity with a Foreign Entity; or
  • Philippine Registered Private Entity with a Foreign National or Local Government or its instrumentality; or
  • Philippine National Government or Instrumentality with a Foreign Entity; or
  • Philippine National Government or instrumentality with a Foreign National or Local Government or its instrumentality; or
  • Philippine Local Government Unit or its instrumentality with a Foreign Entity; or
  • Philippine Local Government Unit or its instrumentality with a Foreign National or Local Government or its instrumentality.

Establishment of a Regulatory Board to Govern Foreign Investments on Land

A National Regulatory Board will be created for the purpose of regulating Foreign Investment on Lands. The Board which will be under the Office of the President and shall have the power to approve or disapprove large-scale foreign investment agreements on land, based on the guidelines it will formulate.

 It shall also create its own Secretariat, and formulate its own organizational plan, staffing pattern, and internal rules.

•  Minimum Lease Rental of Lands by Foreign Entities

The minimum lease rental shall be computed based on the formula set by the Board and shall be incorporated in the terms and conditions of the lease agreement.

•  Inventory of Land Open for Investment to Foreign Entities

The Board shall undertake an inventory of all lands targeted for large-scale foreign investment in the Philippines within six (6) months after the passage of the Act.

•  Creation of a Congressional Oversight Committee on Foreign Investment on Lands

A Congressional Oversight Committee will be established in order to monitor the performance of the Board and to propose legislative actions in relation to foreign land grabbing.

 What are the Underlying Principles for Approval of Large-Scale Foreign Investment on Lands?

• Protection of the rights of affected sectors and local communities against the ruinous effects of large-scale foreign investment;
• Recognition and protection of the rights of Filipino citizens, especially the marginalized sectors to preferential use of the country's lands;
• Secured adequate agricultural lands to ensure the needs of the present and future generations are met without encroaching on lands delineated as ancestral domains and protected areas;
• Full transparency in all transactions, negotiations, and agreements on foreign investment on lands;
• Ensured participation of the basic sectors and the affected communities;
• Full transparency of the negotiations leading to the investment agreements and participation of the affected local stakeholders;

In line with these principles, the bill provides:

• Potential investors shall comply with certain conditions such as impact assessment of the investment, translation of the negotiations and terms of the agreement to the local dialect of the area where the land is located, and inclusion of the following mandatory provisions in the investment terms of the agreement:
  • Percentage of the crops produced shall be sold to the local markets, under specific conditions related to price of food commodities in the international markets and domestic supply and demand of the crops;
  • Non-displacement of any person from the land because of the project unless favorable relocation and livelihood shall be provided by the investor prior to project commencement;
  • Application of Philippine laws and regulations, such as, but not limited to the Comprehensive Agrarian Reform Law (CARL), Indigenous Peoples Rights Act (IPRA), Fisheries Code, Labor Code, Urban Development and Housing Act (UDHA), Agriculture and Fisheries Modernization Act (AFMA), Clean Air Act, Solid Waste Management Act, National Integrated Protected Areas Systems (NIPAS) Act;
  • Respect, promotion, and protection of human rights and related international standards of the affected sectors and provide effective remedies of violations;
  • Adoption of sustainable agriculture as the preferred farming practice;
  • Utilization of local labor;
  • Accessibility of the agreement to the public.
  • Publication of the investment deal at the inception of the investment by the foreign party and after the approval of the agreement by the Board;
  • Provision of living wages and social protection for the project workers;
  • Recognition of the right to food and sustainable development of local communities and bias for sustainable agriculture practices shall be upheld in the contract agreements particularly agro-ecological approaches and low external input farming practices;
  • Payment of user's fee for the utilization of land by the foreign party, to be used for alternative off-farm livelihood projects/enterprises, agriculture infrastructures, and funds for credit to small farmers and farm workers;
  • Annual review of the investment by the Board.

What is the Composition of the National Regulatory Board on Foreign Investment on Lands?

The Board shall be composed of the following:

• Director-General of the National Economic and Development Authority (NEDA);
• Director of the Board of Investments (BOI);
• Chairperson of the National Anti-Poverty Council (NAPC);
• Chairperson of the National Commission on the Indigenous Peoples (NCIP);
• Chairperson of the Philippine Commission on Women (PCW);
• Chairperson of the Commission on Human Rights (CHR);
• One representative each from the four basic sectors directly involved in land uses, namely the urban poor, peasants, fisherfolk, and indigenous peoples.   Of the four (4) representatives, two (2) shall be women.
• Secretary of the Department of Agriculture
• Secretary of the Department of Environment and Natural Resources; and
• Secretary of the Department of Agrarian Reform.

A Board Chairperson will be appointed by the President for a term of 3 years from among the nominees to be submitted by the National Anti-Poverty Commission (NAPC).   The basic sector representatives shall serve a term of 3 years.   The other members of the Board shall have concurrent terms with their position.

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WORKS CITED

Bernabe, R. (2010). Private Sector Agricultural Land Investments: Impacts on Small Men and Women and on Food Security. Quezon City, Philippines: Oxfam Great Britain.

Borras, S. J., Hall, R., Scoones, I., & White, B. a. (2011). Towards a Better Understanding of Global Land Grabbing: An Editorial Introduction. The Journal of Peasant Studies, Volume 38 Issue 2, 2011, 209-216.

Calvan, D. a. (2011). Retrieved December 2011, from http://www.landcoalition.org: http://www.landcoalition.org/sites/default/files/publication/1019/NFR_fisheries_web_11.03.11.pdf

Hall, R. (2011). The Many Faces of the Investor Rush in Southern Africa: Towards a Typology of Commercial Land Deals. ICAS Working Paper Series, Vol. No. 2, The HAgue: International Institute of Social Studies (ISS).

Liversage, H. (2010, December). Responding to "Land Grabbing" and Promoting Responsible Investment in Agriculture. IFAD Occasional Paper 2 . International Fund for Agricultural Development.

von Braun, J. (2009, April). von Braun, Joachim; Meinzin-Dick,Ruth. "Land Grabbing" by Foreign Investors in Developing Countries: Risks and Opportunities, Policy Brief 13. International Food Policy Research Institute.

World Bank report 2010 quoted on Borras, S. J., Hall, R., Scoones, I., & White, B. a. (2011). Journal of Peasant Studies, Volume 38 Issue 2, 2011. Towards a Better Understanding of Global Land Grabbing: An Editorial Introduction. Taylor and Francis Online.