Our quickly enveloping kakistocracy had first shown its head at the Department of Agriculture (DA). Unfortunately it did not stop there. It has infected the presidential appointment system, which grants the chief executive the prerogative to choose his Cabinet. Where the legislature is a rubber stamp, the Commission on Appointments, which should have been a vetting sieve, ironically serves as a catalyst that simply accelerates the infection rate.

Recent scandals prove the system’s weakness. The global shame towards the Department of Tourism may be a black swan event where it relates to agriculture, save for evidence that presidential appointments have been more politically influenced than competence-based. But the humiliation also shows the prevalence of hollow hype as a principal objective, in that the dysfunctional myopia is shared with other agencies that impact on agriculture – from the Bangko Sentral ng Pilipinas (BSP), to the Department of Agrarian Reform (DAR), to the Department of Finance (DOF). 

Historically the creation of the Land Bank of the Philippines (LBP) and the carving out of a 25% sectoral agri-agra credit portfolio statutorily mandated on all banks by the Agriculture, Fisheries, and Rural Development Financing Enhancement Law (RA 11901) was not only a recognition of agriculture’s importance and the need to focus on countryside productivity, but it was also a recognition of a sector’s relative neglect and weakness. 

Neglect and weakness are causally related. It is curious that the bill that would have granted development financing for farmers and fisherfolk has lapsed into law, unsigned by Ferdinand Marcos Jr. As concurrently the DA secretary, and who most would expect might focus on and not neglect the sector he chose to represent, such lapses are telling. 

The sector is profoundly weak. The negative factors range from our messy land titling system under the Department of Justice (DOJ), the failed agrarian reform programs under the Department of Agrarian Reform (DAR), and under the BSP, despite rhetoric on the importance of agri-agra financing, the absence of acceptable securities following a credit system largely afflicted with pawnshop mentalities. 

Let us review each briefly.

Where economies have an efficient land titling system, real property creates wealth. Creditors are not wary of lending against documented assets and securities. However, in our neck of the woods, the prevalence of tax declarations creates barriers for wealth creation. No decent creditor will accept tax declarations as securities against a loan, much less those from far-flung farming communities. The unacceptability of rural real property is understandable. Once foreclosed, the process of conversion from an agricultural asset to industrial-commercial is long and tedious. All told, the combination of a pawnshop mentality and the absence of acceptable securities is patently anti-farmer.

On failed agrarian reform initiatives, the common experience is that beneficiaries eventually sell down to non-agriculture entities, thus yielding to either the bane of relentless urbanization or the spread of golf courses, recreational theme, and memorial parks, all negatively impacting on agricultural productivity.

Now discern the increasingly bipolar, and perhaps the un-visioned nature, of our agricultural sector under a president who has vowed structural changes. 

Dousing cold water on the noble and lofty objectives of the agricultural funding law that Marcos allowed to lapse, BSP Circular 1151 crafted in the same year is a death knell for the rural banking industry, the principal ground-level conduit initially established to provide agriculture financial inclusivity. 

To comply with global standards, it compels the increase in minimum rural bank capitalization by 500% within five years. Given the asset-short and retained earnings-deficient balance sheet of nearly every rural bank that has not yet merged or sold to large commercial banks, save for a dozen, there will effectively be no rural bank by 2028. Theoretically, this defunds the countryside of a vital funding source and, where agricultural credit is concerned, this virtually defunds farmers and fisherfolk.

Worse, the effective defunding aggravates an existing reality that already denies the sector financial inclusion. Disincentivized by the absence of acceptable loan securities, agricultural creditors shun lending to farmers and fisherfolk and opt to pay the penalties imposed by the BSP. To validate, simply audit their total debt portfolios and see where most do not comply with the 25% requirement mandated earlier by RA 10000. 

Unfortunately, the BSP may have been complicit. It provided agricultural creditors a menu of ways out of the 25% obligation, permitting loopholes such as investments in specific DA or DA-authorized bonds and equity issues. While these exemptions might impact structurally on a wholesale basis, at the retail level, they effectively deny real-time debtor cash flows or emergency funding for farmers who subsist on a hand-to-mouth basis.

If these policies are not schizophrenic and bipolar enough, note the much ballyhooed condonation of agrarian reform debt under the Marcos government. Limited to agrarian reform beneficiaries, if there are any left that have not yet sold out their lands, it would have been a feather on Marcos’s cap had it not been labeled hype too-little and too-late.

After the effective defunding followed by the belated condonation of debt from a long-failed agrarian reform program, just a few weeks ago the World Bank provided as much as P33.4 billion for the DA’s various programs. Obviously, the rollercoaster ride has not ended. – Rappler.com

Dean de la Paz is a former investment banker and managing director of a New Jersey-based power company operating in the Philippines. He is the chairman of the board of a renewable energy company and is a retired Business Policy, Finance, and Mathematics professor. He collects Godzilla figures and antique tin robots.