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Special Issues in Agriculture in the Philippines

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Special Issues in Agriculture

Special Issues in Agriculture

Edited by

Eliseo R. Ponce

PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas

BUREAU OF AGRICULTURAL RESEARCH

Copyright 2004 by the Philippine Institute for Development Studies (PIDS) and the Bureau of Agricultural Research (BAR)

Printed in the Philippines. All rights reserved. The views expressed in this book are those of the authors and do not necessarily reflect the views of any organzation.

Please address all inquiries to:

PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES NEDA sa Makati Building, 106 Amorsolo Street Legaspi Village, 1229 Makati City, Philippines Tel.: (63-2) 8935705/8924059 Fax: (63-2) 8939589/8161091 E-mail: publications@pidsnet.gov.ph URL: http://www.pids.gov.ph

ISBN 971-564-074-5 RP 11-04-300

T ABLE ABLE
Foreword Preface

OF OF

ONTENTS C ONTENTS

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C H A P T E R ON E
Research Program Planning for Agricultural Resource Management: A Background Analysis by Agnes C. Rola Introduction ......................................................................................... 1 Status of the Agricultural Resource Base in the Philippines ............................................................... 2 Soil Degradation in Lowland Agriculture: The Role of Nutrient Management ........................................... 4 Imperatives for Soil Conservation in the Uplands ........................... 11 Water and Agriculture ....................................................................... 14 Proposed Research Program for NRM: Focus on Agricultural Resource Management ........................ 19 Conclusion .......................................................................................... 22 References .......................................................................................... 22

C HAPTER T WO
Literature Review of the Agricultural Distribution Services Sector: Performance, Efficiency and Research Issues by Ponciano S. Intal Jr. and Luis Osman Ranit Introduction ....................................................................................... 29 The Philippine Agricultural Distribution System ............................. 32 Marketing Margins and Distribution Services .................................. 69 Other Research Concerns: Price Policy, Multimarket Analysis and Export Marketing .......................... 80 Conclusion: Research Gaps and Suggestions for Research on Agricultural Distribution and Development ............................................................................. 83 Appendix .......................................................................................... 87 References .......................................................................................... 97

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C HAPTER T HREE
Agricultural Biotechnology Research and Development in the Philippines: The Need for a Strategic Approach by Saturnina C. Halos Introduction ..................................................................................... 101 Scope of Biotechnology Applications in Agriculture ..................... 102 Trends and Issues ............................................................................. 110 Philippine Agricultural Biotechnology R&D .................................. 128 The Proposed National Biotechnology Research and Development Program for Agriculture, Forestry and Environment (PCARRD) ........................................................ 133 Conclusion: Integrating Biotechnology into the Agricultural Research Agenda ......................................... 149 References ........................................................................................ 151

C HAPTER FOUR
Property Rights Reform in Philippine Agriculture: Framework for Analysis of Recent Experiences by Roehlano M. Briones Introduction ..................................................................................... 157 Analytical Framework for Land Rights ........................................... 158 The Comprehensive Agrarian Reform Program ............................ 168 Property Rights Reforms in Fishery and Forestry .......................... 186 Conclusion ........................................................................................ 195 Appendix ........................................................................................ 197 References ........................................................................................ 199 About the Authors .................................................................................. 206

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ST L II S T

OF OF

T ABLES ABLES

Chapter One Table 1. Problem soils of the Philippines (1991) ............................... 3 Table 2. Land use in the Philippine uplands (hectares) ................... 3 Table 3. Estimated total soil loss for land uses and slopes (tons/year) ........................................................ 4 Table 4. Technology options for soil management ............................ 6 Table 5. Potential of nitrogen-fixing green manure as multipurpose crop in an integrated farming system ............................................................................ 7 Table 6. Available water technologies in the Philippines (1999) .................................................................... 16 Chapter Two Table 1. Number of agriculture-related wholesale and retail establishment .......................................... 48 Table 2a. Employment, gross sales and value added of agriculture-related wholesale and retail establishment (1988) .............................. 51 Table 2b. Employment, gross sales and value added of agriculture-related wholesale and retail establishments (1994) ............................ 53 Table 3. Labor productivity in agriculture-related wholesale and retail industries ................................................. 57 Table 4. Summary statistics for agriculturerelated small wholesale establishment (1988) ........................ 58 Table 5. Summary statistics for agriculturerelated small wholesale establishment (1995) ........................ 60 Table 6. Gross margin to sales ratio of small and large agriculture-related establishments (1988 and1994) ......................................................................... 72 Table 7. Marketing margin and cost: Two examples ........................ 76 Chapter Three Table 1. Traits of some transgenic crops commercialized and field tested ............................................ 111

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Table 2. Benefits reported from the commercial production of transgenic crops .............................................. 113 Table 3. Product target and techniques used in Philippine biotechnology research (1979-1997) ................... 130 Table 4. Fields of specialization of senior researchers in agricultural biotechnology (1977-1997) ............................................................................. 133 Table 5. Technologies developed at BIOTECH, UP Los Baños (1979-1998) ..................................................... 134 Table 6. Technologies patented or patents applied for by BIOTECH, UP Los Baños (1979-1998) ....................... 135 Table 7. Research resources for crop biotechnology ..................... 136 Table 8. Five steps in a conventional crop improvement program ........................................................... 147 Chapter Four Table 1a. Accomplishments of land acquisition and distribution, by land type (1972-December 1999) ................ 170 Table 1b. Accomplishments of land acquisition and distribution, by region: 1972-December 1999 ....................... 171 Table 2. Accomplishments of CARP support services (1987-July 1999) ...................................................................... 172 Table 3. Administrative costs of implementing CARP (1987-1999) .................................................................. 173 Table 4. Distribution of respondents’ parcels by tenure by survey (in %) .......................................................... 174 Table 5. Distribution of respondents by availment of support services (in %, multiple responses) ..................... 175 Table 6. Crop yields of respondents by type of crop by survey (in tons/ha) ................................................... 179 Table 7. Income, poverty, and income sources of respondents by survey ............................................................. 180 Table 8. Borrowing sources of respondents (multiple responses) ............................................................... 181

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L II S T ST

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GURES F II G U R E S

Chapter Two Figure 1a. Geographical flow of yellow corn from Cagayan Province, 1991 ................................................... 34 Figure 1b. Geographical flow of yellow corn from Isabela Province, 1991 ..................................................... 35 Figure 2a. Marketing channels of Frenzi potatoes in Bukidnon, May-December 1994 .......................................... 36 Figure 2b. Marketing channels of other potato varieties in Benguet, November 1993-January 1994 .............................. 37 Figure 3a. Marketing channels of green mungbean in Pangasinan, December 1993-April 1994 ............................. 38 Figure 3b. Marketing channels of yellow mungbean in Pangasinan, December 1993-April 1994 ............................. 39 Figure 4. Marketing channels of roses .............................................. 40 Figure 5. Marketing channels of carabao mangoes in Cebu, March-May 1993 ......................................................... 41 Figure 6. Marketing channels of carabao mangoes in Batangas, March-May 1993 ................................................... 42 Chapter Three Figure 1. Traits of some selected transgenic crops, commercialized and for field test .......................................... 114

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OREWORD F OREWORD

In the Philippines, about one-half of the labor force is engaged in agricultural activities. Agriculture then plays a major role in the economy and if a stable national growth is to become a realization, a modern and competitive agricultural sector is a necessity. Thus, it is no surprise that the agricultural sector is one of the most studied areas in the country's history. In spite of this, much is yet to be achieved to ensure food security and sustainable competitiveness. However, findings and recommendations from past researches have not been fully utilized and neither have current programs undergone regular analyses and intensive evaluation. This book, Special Issues in Agriculture, focuses on concerns relating to resource management and sustainability that are critical to agricultural growth and development. It also gives premium to the institutional issues in the area of property rights: land, water, fishery, and forestry, including an evaluation of the CARP and other tenure-related government programs. Certainly, the four papers in this book present the strategies for the policy, regulatory and institutional framework crucial not only in promoting but in enforcing a more efficient, effective, equitable and sustainable agricultural growth for the country. It is therefore hoped that this book will herald further researches geared for the analyses on the performance and development of the agricultural

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sector. It is also our desire that studies in this book will be catalysts for positive changes in the field of agriculture. Lastly, I thank the Bureau of Agricultural Resources (BAR) for giving the Philippine Institute for Development Studies the opportunity to work with the experts in the field of agricultural research. My deepest gratitude to all the authors included in this book for giving their time and sharing their knowledge and expertise in this favorable project.

Mario B. Lamberte, Ph.D. President, PIDS

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REFACE P REFACE

It is the aim of the Department of Agriculture’s Bureau of Agriculture Research through the Social Science and Policy Network (SSPN) to develop a strong national program on social science and policy research as a dynamic component of the national research and development program in agriculture and fisheries. This is in line with the Agriculture and Fisheries Modernization Act (AFMA) of 1997, which mandated that the growth of agriculture must be technology-based within the overall framework of the Philippine Strategy for Sustainable Development. This book, Special Issues in Agriculture, is part of SSPN’s contribution to the AFMA mandate. This book contains four chapters that look into four key issues that affect and remain outstanding in the agriculture sector, namely, agricultural distribution system, agricultural biotechnology, natural resource management and property rights reform. These chapters review related significant studies, the extent of technologies utilized and suggest further research in the agriculture and natural resources management. Resource management and sustainability, and institutional issues are the two focal points of the book. The farmers’ and fishermen’s management practices as well as the cause and effect of natural resources degradation are given special attention. The availability of appropriate regulatory and market-based instruments crucial to agricultural sustainability is also

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emphasized. Property rights, on the other hand, is discussed as an integral resource allocation mechanism. The first chapter on research program planning for agricultural resource management highlights the significance of including natural resource management in regional research programs to attain the sustainable use of soil and water resources. Although numerous efforts have been undertaken on the subject, degradation still prevails. Inclusion of natural resource management in the regional research program, therefore, will help shed light in the ways resources are used by farmers. The second chapter is a literature review of the agricultural distribution services sector and research issues. It shows that a competitive agriculture sector requires not only productive farms but also an efficient distribution system. One way to attain this is to have regular analyses and thorough assessments of the competitiveness of the agricultural distribution system. The third chapter on agricultural biotechnology details the numerous written research works that promote biotechnology’s positive effect on the agricultural sector, specifically in food security. Its application, however, emphasizes safety and reliability as well as opportunities to increase farm productivity. The fourth chapter is on property rights reform and discusses how much—or less—of the recommendations from various research works are yet to be employed in the natural and agricultural resource sector. Despite having experienced widespread property rights reforms, the sector has not been receptive to the utilization of research findings to address sectoral issues. In conclusion, publishing this book is just one of the avenues identified by SSPN in realizing its goal of a modern and sustainable agricultural sector.

Cristina C. David, Ph.D.

Eliseo R. Ponce, Ph.D. Project Leaders, PIDS–BAR Project

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I Research program planning for agricultural resource management: a background analysis by Agnes C. Rola

Introduction
Conventionally, agricultural resource management per se is not a popular area of research. Previous agricultural production research studies aimed at optimizing fertilizer recommendations to maximize yields, or identifying cropping patterns that will maximize output and profits. Soil was considered a fixed input. Soil productivity was not considered an issue. Neither was water productivity. It was during the 1980s that researchers began experiments that focused on sustainable agricultural resource management. Farmer participation got a foothold with the onfarm trial programs of the farming systems research institutes in several state universities and colleges (SUCs). These onfarm trials studied not just the productivity effects but the environmental effects of the alternative cropping systems as well. To date, however, there is no systematic way of determining the adoption of these technologies or the impact of these studies on soil and water quality.1 This paper synthesizes and analyzes the results of studies on soil and water management conducted from the 1980s to the 1990s and provides background information for research program planning for Natural Resource Management (NRM) in agriculture. The analyses focus on three points. First, production losses as a result of nonsustainable resource use. 1

Agricultural resources are also influenced by the wider environmental quality such as the state of the watershed health. The literature on watershed management as it affects sustainable agriculture is reviewed in Rola (2000).

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Monocropping and intensive cultivation of steep slopes are examples of these nonsustainable practices. Second, there are available research products that could have minimized these losses; e.g., new technologies/ knowledge on crop/resource management. Third, the evidence of continuous degradation of the agricultural resource base points to the serious constraints to adoption of these sustainable technologies/ management options. Future NRM research programs then will need to highlight activities that relax these constraints. Data were sourced from different agricultural research institutions, graduate students' theses and technical reports (see Rola 2000 for details). The paper is divided into five parts. The first part establishes the current state of agricultural resources in the Philippines. The second part summarizes the research efforts on soil nutrient management (onsite effects). Upland soil conservation technologies and their adoption constraints are discussed in the third section. Research has produced a number of new location-specific and cropping system-specific techniques for soil conservation. Still, the big question is, why is adoption not satisfactory? The answers to this will be reviewed in this section. The fourth part deals with water management/technologies/ alternative delivery systems to increase water productivity and water use efficiency in agriculture. The last section lays out the discussion points that can be used for research program planning for natural resource management (NRM) in agriculture.

Status of the agricultural resource base in the Philippines Soil resources The total land area of the Philippines is only 30 million hectares (ha.), 8.2 million ha. of which are arable and permanent croplands. About 25.1 percent of the total area is constraint-free while the remaining 74.9 percent consists of areas with various kinds of problem soils. The Bureau of Soil and Water Management (BSWM) recognizes and classifies several categories of problem soils in the Philippines and their corresponding extent in Table 1. About 16 million ha. (71.2%) of land with various forms of problem soils are further marginalized by various degrees of soil acidity. More disturbing statistics includes the current estimates of soil loss in the Philippine uplands. Land use statistics in the fragile Philippine uplands shows dominance of rice and corn over other crops (Table 2). Estimated total soil loss for various land uses and slopes reveal that corn production in the uplands could be contributing about 90 percent of the total soil loss (Table 3).

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Table 1. Problem soils of the Philippines (1991)
Problem Soils Steep slopes Poor drainage Coarse textured soils Heavy cracking clays Severe fertility limitations Saline soils Acid sulfate soils Peat lands Mine tailings & polluted lands Source: BSWM 1991 % of Total Area 29.7 0.3 1.6 2.5 39.2 1.3 0.1 0.1 0.1 Extent (ha) 8,900,000 91,000 360,000 766,000 12,000,000 400,000 27,000 16,000 22,000

Table 2. Land use in the Philippine uplands (hectares)
Slope Category (%) Land Use Rice Corn Fallow Other Agriculture Nonagricultural (Forest) All Uses Source: Coxhead and Shively 1998 18-30 315,000 375,000 3,970,000 592,000 30+ 52,500 61,250 1,540,000 96,250 Total 367,500 436,250 5,510,000 688,250 7,900,000 14,902,000

On the other hand, the gross wetland rice soil resource base of the Philippines is estimated at 4.2 million ha. Its gross area of highly suitable and moderately suitable lands amount to 2.3 million ha. Thus, some 1.9 million ha. of rice lands are marginal and unsuitable for wetlands rice production.

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Table 3. Estimated total soil loss for land uses and slopes (tons/year) Slope Category (%) Land Use Rice Corn with Fallow Other Agriculture Nonagricultural (Forest) All Uses Source: Coxhead and Shively 1998 18-30 15,750,000 217,250,000 14,800,000 30+ 5,250,000 240,190,000 4,812,500 Total 21,000,000 457,340,000 19,612,500 7,900,000 505,852,500

Irrigation water resources
As documented by existing literature, the productivity of soil resource is "intimately tied up" to the status of the host watershed areas. Among others, watershed health also influences the supply of irrigation water, occurrence of floods and encroachment of salinity in marine coastal and estuarine areas. However, many of these watersheds are in varying state of degradation (PCARRD et al. 1999). The report by David (1999) cites an alarming indication of decreasing efficiency in the planning and implementation of National Irrigation Systems (NIS) and Communal Irrigation Systems (CIS). It also reports that the area actually irrigated by these systems during the dry season is only about 75 percent of their designed serviced area. The estimate of potentially irrigable agricultural lands in the Philippines is 4.7 million ha of which an estimated 0.65 million ha., 0.44 million ha. and 0.5 million ha. are irrigated by national, communal and minor irrigation systems, respectively (David 1999). The NIS and CIS utilize surface water. Because of watershed degradation, this resource is becoming limited. On the other hand, the country has abundant shallow groundwater resources, with an estimated 5.1 million ha. shallow well area.

Soil degradation in lowland agriculture: The role of nutrient management The degradation story in the lowland rice systems and other crops In the early 1990s, evidence showed that the rice yields in irrigated areas leveled off and that there was a danger of future declines in the yield growth (Pingali, Moya and Velasco 1990). There also was a growing evidence that

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unintended environmental effects from land intensification led to the decline in productivity growth. This was illustrated by Cassman and Pingali (1995) among others, via an analysis of yield trends from long-term trials conducted at the experiment stations of the International Rice Research Institute (IRRI). Research at IRRI also showed that the decline in nitrogen productivity was due to the reduction in the nitrogen-supplying capacity of intensively cultivated wetland soils. There was likewise an increased incidence of phosphorus and potassium deficiency brought by the lack of nutrient balance in the applied fertilizers (De Datta, Gomez and Descalsota 1988). The imbalanced fertilization resulted in a decline in the efficiency of fertilizer use over time (Desai and Gandhi 1989; Stone 1986; Ahmed 1985). Such is the case with bananas. In 1990, a survey was conducted in several plantations in Davao del Norte to identify soil properties that influence land productivity and to establish a soil fertility management technology to achieve sustained crop productivity (Sadasa et al. 1991). The study revealed that despite the maximum use of inorganic fertilizers, yields of banana declined steadily over time after reaching a peak during the first few years. The yield decline was associated with the alteration of the nutrient ratios—i.e., the application of some nutrients to some and none for others. The study recommended that nutrient ratios be carefully managed to sustain soil productivity even after long years of continuous cropping. These limited data show that intensive and continuous cultivation using pure inorganic fertilizers for longer periods is not sustainable in the long run.

Technological options for improving soil quality
Because inorganic fertilizer use practiced in intensive agriculture is not sustainable, technological options are needed. In the existing literature, there are at least three techniques for improving soil quality, and hence, improving/sustaining soil productivity. These are: (1) the use of organic fertilizer; (2) the integrated nutrient management or the combined use of organic and inorganic fertilizers; and (3) diversified farming. These are described in Table 4.

Use of organic fertilizer
Green manure was thought to have an advantage over other organic manures because the latter can be grown right in the field and incorporated during regular land preparation or weeding operations. However, this never

6 Table 4. Technology options for soil management
Options 1. Organic fertilizer
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Description This consists of organic manures from living organisms such as azolla and green manure; and decayed organisms including animal manure and compost. Recommendation for a 50% inorganic and 50% organic fertilizers. This was disseminated in a national program on rapid composting. This involved coming up with location-specific recommendations, where both the micronutrients and macronutrients were taken into account. This made use of the previously packaged diagnostics such as the soil test kit and the chlorometer at IRRI. This recommends to gor for diverse crops rather than monocrop that intensely uses inorganic fertilizer.

2. Integrated use of organic and inorganic fertilizers

Balanced fertilization

3. Diversified cropping

became popular due to several constraints (Table 5). The most serious constraint is the labor intensity of the process. With increasing commercialization of agriculture and higher wages, this constraint poses great limitation. There is sufficient evidence in the literature concerning the benefits in terms of grain yield increases from green manure. However, little is known about its long-term effects. The paper by Ventura and Ladha (1996) reports that the long-term biofertilizer experiment at IRRI showed an increase in the total nitrogen in soil after 10 years of green manuring. There is no such benefit from the urea fertilization. It is suggested that long-term field experiments be conducted to provide a better understanding of the nutrient constraints and management problems of soil.

Integrated use of organic and inorganic fertilizers for nutrient management Integrated use of organic manures and mineral fertilizers has been found to be promising in maintaining stability in crop production on certain soils. Studies however show that while organic fertilizers improved soil fertility, it alone cannot sustain the high yield during the later years of production. An integrated fertilizer management is found to be more sustainable.

Agnes C. Rola Table 5. Potential of nitrogen-fixing green manure as multipurpose crop in an integrated farming system Green Manure Azolla N2 Fixing Potential High 45-120 kg/ha. in 45 days ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

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Actual Adoption by Potential to Farmers Overcome Constraints Low Technological and socio-economic constraints (inoculum, labor, water, pests) restrict adoption Low Socio-economic constraints (seed, labor, opportunity costs) restrict adoption) Medium Fast growth; can be used also as animal feed (poultry, hog, fish)

Semi-aquatic legumes (Sesbania Aeschynomene)

High 45-120 kg N/ha. in 60 d

Medium to High With wide range of suitable species; can be grown under a wide range of soil and moisture conditions and used as feeds for ruminants (or the stem can be used as firewood) Medium to High Resistant to drought; adopted in the Ilocos provinces as a green manure; commonly intercropped with annual upland crops Medium to High Low cultural management requirement; leaves used also as feeds for ruminants, sterm as firewood; serves as windbreak and catch crop for excess NO3

Indigo

High 60 to 250 kg N/ha. in 60 d

Low Usage in the Philippines is limited in the Ilocos region. Socio-economic constraints (seed, labor) Low Technological and socioeconomic constraints (pests, competes with main crop for light, water and nutrients, labor, opportunity costs).

Leguminous trees (Gliricidia, Leucaena)

High 40 to 120 kg N/ha. per pruning

Source: Ventura and Ladha 1996

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The rice farm sector was first introduced to the Integrated Nutrient Management (INM) through the program using the Compost Fungus Activator (CFA). This recommended a combined use of one-half organic and one-half dose of inorganic fertilizer (Cuevas 1989). This technology improved crop yields by as much as 20 percent. Labor input cost in compost preparation and field application was expected to be offset by the gains in yield increase. Later studies show that this is true only if wages in the community are low and nonfarm incomes are not available (Rola et al. 1996). One downside of this program was that the recommendation was generalized for the whole country. Aside from other administrative setbacks of the rice program (i.e., delay in supply of the compost, inadequate knowledge of both the technicians and the farmers on the use of compost), this technology did not quite prosper due to technical constraints. Only users who have a priori knowledge of the soil characteristics were able to capture the benefits (in terms of lower inorganic fertilizer use and stable yields) of this program. A natural sequel to the blanket recommendation on the rapid compost is the balanced fertilization program launched in 1998. Balanced fertilization is defined as the optimum use of organic and inorganic fertilizers with the proper grades and amounts that supply the correct ratio of plant nutrients and ensure soils will sustain high crop yields over long cropping season. The Gintong Ani Balanced Fertilization Program was the central strategy for sustainable agricultural development. For this purpose, the BSWM classified the various soils devoted to rice and corn into five soil fertilizer groups. In the balanced fertilization, the recommendations were location- and season- specific as well as dynamic. That is, the recommended mix of fertilizer this year is different from that for next year and the year thereafter. This technology is very knowledge intensive. Farmers need to know the base nutrient content of their soil, what amounts of organic and inorganic fertilizers have been applied and the crop grown in the current year. Thereafter, a corresponding adjustment in the proportion of organic and inorganic fertilizer will be applied the following year. Several research studies had backed up the balanced fertilization program. One is the characterization of the soil at the local level to get local recommendations. The others would be the use of the diagnostics such as the soil test kit and the leaf color chart.

Agnes C. Rola

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Diversified cropping: the role of farming systems research
The farming systems research of the 1980s was meant to develop technologies that would increase small farmer incomes while promoting environmental sustainability. In the early period of this paradigm, the research activities focused on developing through onfarm research, cropping patterns that will increase farm incomes. It was only of late that data to support the sustainability of the resource base corresponding to the introduced cropping systems were generated. Hence, the merit of soil amelioration from diversified cropping vis-à-vis the monocrop was the highlight of some of these trials. Studies such as that of Oren in Iloilo (1992) had the kakawati as part of the cropping system and was a potential source of compost. Farming systems research had several stages: technology development, verification, adaptation and dissemination. With the current trend of participatory research, these stages may be modified, where one starts with the farmer technology and build components from there. This is in contrast to the previous method where farmers' indigenous practice was one of the technologies verified and pitted against the researchers' technology. Farming systems research was primarily done in resource-poor environments. Hence, the upland systems were a popular subject of research. Water scarce areas in the lowland were likewise given some attention. For instance, to find a way to go around the water scarcity in the lowland's irrigated areas as well as to minimize the intensive and continuous rice cultivation, the adaptability of traditionally upland crops was studied in the lowland areas at the University of the Philippines-Los Baños (UPLB) and in Bulacan. Results showed that all the upland crops evaluated in this study can be grown after lowland rice under UPLB condition, while mungbean did not perform well in Bulacan (Labios et al. 1995). Yield performance differed for each crop and the combined use of bio-organic and inorganic fertilizers gave yields comparable to that of the inorganic fertilizer use only. Nutrient management in the highly acid upland soil was also studied via farming systems research. Other experiments in other soil types also indicate that time is a good neutralizer (Taburada 1994). Between relay cropping and monocropping systems, it was found that relay cropping is somehow environmentally and, in most cases, economically better than the monoculture scheme.















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Constraints to adoption of soil management technologies
Constraints to adoption of sustainable soil management technologies can be grouped into the following: technical, socioeconomic and institutional constraints.

Technical constraints
Meeting the nutrient needs of modern short-duration, high yielding crops by introducing organic manures alone poses several problems such as low organic contents of organic materials, and slow and irregular release of nutrients from manures. This thus makes target fertilization impossible, among others (Schoning and Wickman 1990).

Socioeconomic constraints
Growing green manure means competing for land and water. Also, green manuring has not gained general acceptance for several reasons: (1) it gives no immediate income; (2) it has not fit into the farmer's traditional mixed cropping systems; and (3) it requires labor that farmers consider unnecessary. The low demand for commercialized organic fertilizers may be because farmers do not understand how to use this. Also, long-term effects are of course not immediately visible to the farmer, who always tends to have shortterm production plans. Diversified cropping system is dependent on output prices, and prices are dependent on policies and other government incentives.

Institutional constraints
It has to be recognized that sustainable technologies are knowledge intensive, long-term in benefits and very location specific. In this sense, a major institutional restructuring is needed to meet the aim of promoting such technologies. The role of extension and the kind of extension strategies consistent with the nature of those technologies have to be investigated. Participatory approaches are warranted because one needs to know farmers' level of awareness with respect to sustainability and resource management. Commercialization of products such as biofertilizer failed to take off, again due to severe institutional constraints. Among the business requirements that private marketing agents need to comply with are: a patent, a permit from the Fertilizer and Pesticide Authority, and a mechanism for quality assurance of the product.

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Imperatives for soil conservation in the uplands Does upland agriculture create an environmental problem? Because of population pressure, agriculture now encroaches on unfavorable upland suited only for forestry or perennial crops. The question here is whether and to what extent upland agriculture creates an environmental problem. If this were so, what would be the solutions for a more sustainable agriculture in the uplands? A recent investigation in the highlands of Lantapan, Bukidnon showed that expansion of sugar and corn cultivation at low altitudes, and of vegetables and corn at high altitudes, has occurred substantially at the expense of perennial crops, whether pasture/grassland, forest/bush fallow or coffee (Coxhead and Rola 1998). Field measurements and experiments with corn and vegetable crop cultivation under a range of management regimes in Lantapan confirm the existence of rapid soil erosion rates and depletion rates of soil nutrient and organic matter content in soils that are generally of poor initial quality (Midmore et al. 1997). The unchecked expansion of agricultural production at the margins of the remaining forest systems poses a potential threat to the integrity of such systems. One of the consequences is the reduction in water retention capacity of the upper watershed, which thus changes the quantity and seasonal distribution of water flow in the springs and rivers (Deutsch et al. 1998). Another is the possible irreversible change in biodiversity. Other studies also showed severe land degradation as a result of upland farming (Navasero 1993) such as that shown in Lucban, Quezon. A number of studies investigated the onsite and offsite effects of upland agriculture. These studies also show the same results. Understanding the policies and technologies plays a key role in countering environmental degradation. Most of the solutions center on the usefulness of soil conservation measures such as agroforestry and diversified cropping systems. Policy options, however, are not popular solutions to upland degradation.

Technology options for upland soil conservation Contours and hedgerows In the Philippines and Southeast Asia, in general, hedgerow or alley cropping is the most popular form of soil conservation technology. This technology is, however, indigenous in some parts of Asia. Farmers in Cebu, Philippines have used indigenously a contour hedgerow system of Leucaena leucocephala to cultivate steep slopes even before 1923, according to the research of Francisco (1998).

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Planting hedgerows of leguminous tree species along the contour of sloping fields was deemed to be a promising technology. This technology provides a vegetative barrier to soil erosion while contributing green leaf manure to the cereal crops (rice or corn) grown in the alleys. By the early 1980s, hedgerow intercropping was advocated widely as a technology to better sustain permanent cereal cropping even with minimal or no fertilizer input (Garrity 1993).

Agroforestry and diversified cropping in the uplands
Like contour hedgerows, agroforestry is also an indigenous technology in the uplands. The study of the indigenous systems of the Hanunuo Mangyans revealed that they maintain three agroforestry systems: swidden/kaingin, multi-storey farming and home gardens (Gascon 1998). Swidden farms were cropped with rice or corn; multistorey farms, with cash crops such as bananas and mangoes. The basic need is produced in the kaingin farms, which were found to be nonsustainable because farmers tend to cut more forest land for swidden farming. The best recommendation to discourage opening up of more areas for swidden farming is to give more security of tenure to forest occupants. The sloping agricultural land technology is another agroforestry scheme. In Laguna, this was studied in a modified form (from the one developed by the Mindanao Baptist Rural Life Center) (Calanog 1990). However, the recorded rate of adoption is also low (Garrity 1993). An agroforestry farm assessment (AFA) was designed by Lasco and colleagues to assess the positive and negative impacts of any introduced agroforestry technology. This provides a continuous feedback mechanism for immediate technology refinement and improvement. Farmers and upland extension workers can use this. There are four defined criteria in this assessment: productivity, security, sustainability and adaptability. However, this has to be tested for practical use. There was no mention of how the sustainability criteria will be observed in the short term. In a similar manner, Lawas and his colleagues also recommended the use of agroforestry land capability mapping schemes (ALCAMS) to plan agroforestry programs. This answers two key questions: adaptability of the given site to or better use for agroforestry; and appropriate systems, practices and components of the area. No application of this or the AFA is reported in literature.

Other upland soil conservation measures
Most studies conducted under the orchestration of the Bureau of Agricultural Research (BAR) during the 1990s focused on the management

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of soils and upland rice crop. The projects included an examination of indigenous materials to be used as fertilizer, the timing of fertilizer applications that will maximize yields, the timing of planting to minimize the harsh effects of the different mulch media and tillage practices for upland rice. Different rates of rice straw compost and guano as supplementary fertilizer to upland rice were also studied. Here, the exact or appropriate amount of supplemental fertilizer to be used was not established. All these studies are location specific. Almost all showed that the economic returns of the introduced practices are very high (probably because the family labor is not imputed as cost). Adoption studies were not available for these technologies.

Policy options for upland soil conservation
Policy options for soil conservation in the uplands have not been a popular area of study because of the common perception that technologies are the better option for subsistence upland farmers. There is an intricate story behind why there is a need to look at policy options for soil conservation. Coxhead and Rola (1998) argue that prices outside the watershed influence both land use and soil conservation decisions of upland farmers. This assumes that planting of perennial crops is also a soil conservation measure. It is likewise argued that nonfarm incomes affect upland farmers labor use and hence, technology choices. Commodity and input prices, and other economic instruments are affected by economy-wide shocks, both at the global and local levels. It is important to understand that intersectoral linkages can significantly influence environmental degradation caused by upland agriculture. Policies to promote soil conservation measures at the community level (i.e. through incentives or subsidies) may make economic sense. This is because the benefits derived will not only accrue to the individual farmers but to the community at large. There are instances where it had been difficult for individual farmers pay for soil conservation Technology (Francisco 1998). The appropriate subsidies and incentives are, however, still an issue that needs further research.

Factors influencing adoption of upland soil conservation practices Early on, one of the identified reasons for the low adoption of perennial crops was the lack of security of tenant tenure. This could occur in areas where a lot of migrants come to use the lands. Native residents have to also be taught of more sustainable technologies to keep them away from the kaingin system of farming. Government, thus, has put in place such programs

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as the stewardship contract certificate where tillers in government lands of more than 18 percent slope have a long-term contract to till. Other programs, such as those on reforestation and agroforestry, encourage farmers to go back to perennial crops. Accessibility to markets also increases farmers' incomes and help sustain their means of livelihood with agroforestry systems. Note that high discount rates and unsecured land tenure are the ones that reduced farmers' value over sustained economic returns from hedgerow intercropping (Garcia et al. 1996). The literature likewise cite the following as factors affecting adoption of soil conservation practices in the uplands (Villanueva et al. 1993): (1) Farmers' perception of the extent of the soil erosion problem; (2) Family income, liquidity position and debt-asset ratio; and (3) farm size, land tenure, age of farmer, land productivity and slope of the land.

Water and agriculture
If water supply for agriculture is at all declining, what are the alternatives? What needs to be done in the water stressed agricultural areas in the lowlands? What are more efficient types of water delivery systems? The review in this section will focus on the productivity of water, the available alternative water technologies and the constraints in the efficient delivery of water to the farmlands.

Water productivity
A recent investigation about irrigated rice farming in Iloilo showed that water was a major constraint to higher productivity. Water was the most significant source of yield loss and measured to be about 50 percent in one particular season (Rola et al. 1998). Such unavailability of water and incorrect water timing are due to the degraded watersheds and the poor maintenance of the CIS in the area. This case study shows that any efforts to maintain and sustain lowland agriculture must take into account the source of water. There is a need to come up with alternative water sources and water delivery technologies that will lead to an efficient and more productive water input. The issue on water productivity was addressed in the paper of Guerra et al. (1998), where the authors reviewed the literature on irrigation efficiency and the potential for increasing water productivity in rice-based systems. They argued that there is a need to measure the productivity of water at the farm, system and the basin levels, and to understand how the productivity at one level relates to the productivity at another. Information from these water balance studies can be used to identify the potential

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economic benefits of alternative interventions and the most appropriate strategies for increasing water productivity in rice-based systems.

Water technologies
Table 6 summarizes the different technologies for water delivery in agriculture. Experimental studies at the Philippine Rice Research Institute (Philrice) showed that intermittent irrigation can save about 40 percent of water without sacrificing yield in the dry season (De Dios et al. 1998). The results of the drip irrigation trials for cotton production as reported by Ganotisi et al. (1998) showed that drip irrigation was more economical than the conventional furrow irrigation methods. However, drip irrigation is quite expensive for small farmers, but affordable to medium- and largescale farmers as noted in a study in Cavite (Lamanilao 1990). Worth mentioning are the farmer friendly indicators for drip and furrow irrigation scheduling in tomato that were studied by Tanguilig et al (1996). The leaf of the upland rice was used as an indicator and compared with other indicators. Irrigation was done whenever the upland rice's leaves rolled slightly. Water application was stopped when the leaves of the indicator became fully unrolled. Using this indicator, irrigation frequency was reduced by 67 percent (in drip) and 60 percent (in furrow) when compared to the control. Results of a study on the trickle irrigation system using a twin-wall emitter tubing showed that its seed cotton yielded 25 percent higher than that via the conventional irrigation method (Cruz and Agulto 1996). At the same time, 30 percent of water can also be saved. Furthermore, Baradas and Mina (1998) argued that natural rainwater management is a very efficient and cheap precursor, complement or even alternative in some cases, to the irrigation of currently rainfed areas. Floods and droughts are nature's solutions to low food production. To use this phenomenon to farmers' advantage meant a thorough knowledge of weather trends and management of the water resource. In practice, these concepts boil down to sunshine harvesting, rainfall harvesting, and integrated flood, soil sediment and drought control. Onfarm reservoir (OFRs) technology is found more favorable for areas that have mild slopes to support gravity distribution of the stored water and where water loss by seepage and percolation is low. The economic analysis, assuming a 15-year life span of the reservoirs with a three-year maintenance schedule, shows a high benefit-cost ratio of 5.1, or an internal rate of return of 177 percent. This was found to be viable in parts of Central Luzon (Moya

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Table 6. Available water technologies in the Philippines (1999) Technology Intermittent irrigation Description Used in rice, this consists of applying 5 cm. water every 14 days from 10 to 80 days after transplanting. This method provides water most efficiently by applying it at the right rate and practically only to the plant root area. This uses a twin-wall emitter tubing. A weather-based decisionmaking for water management and crop production, this involves developing localized cropping patterns based on climatological probabilities of the occurrence of significant weather. Stores water for intermittent production. Socioeconomic and technical constraints impeded farmer adoption. These are equipped with centrifugal pumps that are driven by single cylinder diesel engines. Optimal placement of rice in the fields can sustain continuous water supply. This is popular in most areas of the country. Practical surface drainage method that is used to reduce interlogging through a simple ridging technology. Just like shallow tubewell principle, but needs electricity. This is only feasible if electric lines are near the fields. Production is in a soil-less and waterless medium.

Drip irrigation

Designed trickle irrigation system Rainwater management

Onfarm Reservoir

Shallow tubewells for irrigation

Drainage technology

Small electric pumps

Hydrophonics

Note: For more information of constraints and advantages of some of these technologies, refer to David (1999)

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et al. 1998). The technology was also found to be indigenous in origin. An OFR optimization model (FROM) was later developed (Galang and Bhuiyan 1994; 1995) with the objective of maximizing returns from the use of the OFRs. However, the researchers found some difficulty with this method at the level of the extension agents. A nomograph2 was then developed, which allowed some practical use for the model. This nomograph was expected to help farmers as well as extension staff decide on the crops to plant and the area to cultivate for particular crops to maximize profits. It is not known whether this tool was actually used by farmers or by extension agents. The Geographic Information Systems (GIS) method was recommended in identifying the ideal location for OFRs (Galang et al. 1994). The spatial analysis systems (SPANS) were used but only at the macro level. Micro level surveys are still needed to determine whether OFRs should be developed in a given area and where they should be located. A 1994 evaluation of the OFR showed that additional benefits included being able to grow dry season rice crop and fish in the reservoirs. On the other hand, some of farmers' main complaints were insufficient capacity, high water loss and locations that required pumping (Fujisaka et al. 1994). Small farmer reservoir (SFR) is an upstream defense against soil erosion and flooding of the low lying areas. Undan et al.'s paper (1994) focused on the pilot SFRs set up in 10 towns of six provinces in Central Luzon. Since the SFR technology promotion efforts started in 1990, some 572 SFRs have already been established in 42 barangays within the 12 towns of the six provinces. It is not known at this time whether this system became sustainable. The shallow groundwater potential for irrigation was studied by Sibayan and Undan (1994). In this technology, farmers either dig wells or drive 4-inch GI pipes into the ground to draw water from shallow wells. Results revealed that the individual pump systems have service areas ranging from 1.3 ha. to 2 ha. for the nonrice crop and can increase to 1.9 ha. to 3.2 ha. for maximum pump efficiency. Small electric pumps were also introduced to Philippine farmers (Rotor et al. 1993). These were deemed to be a promising technology only if there are electric lines near the rice fields. Based on the Iloilo data, the total costs of the supplemental irrigation

2

This is a chart representing numerical relationships.

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from the electric pump is P1,406 or 564 kg/ha (Resurreccion and Salazar 1991). Spiral pumps were likewise designed as nonconventional means to harness available water (Naegell et al. 1990). One of the latest technologies for water as well as soil management is the hydrophonics (Dorado and Balimbing 1999). This is production in a soil-less medium and will produce higher quality products free of pesticides and other chemicals. This is a very promising technology although it needs an ex-ante economic analysis.

Constraints to effective water delivery and efficient water use Why is there a decline in the system performance of the irrigation structure? The possible reasons are two-fold: (1) the deterioration of the quality/ quantity of the irrigation water; and (2) the management of the system. When it comes to management of public irrigation systems, the poor performance of many governments is well documented (Easter 1993). In this study, Easter (1993) uses a model that includes internal and external assurance, commitment and fairness to explain the performance of irrigation systems in the various Asian countries. Public investments in irrigation have tapered off due to lack of funds for systems operations and maintenance (Marciano et al. 1997). The resulting deterioration in the condition of some systems encouraged investments in privately owned irrigation facilities instead. The economics of the private system as analyzed by Gascon and Hossain (1995) showed that pump-irrigated farms improved land productivity and profitability. This is due to the reliable and efficient water source. The irrigators' association has an important role in increasing efficiency in water use. Llandelar (1995) showed that irrigators' association can bring about more services (and better quality). Oliva (1995) also notes that the NIA's support to the agrarian reform beneficiaries significantly affected the extent of the irrigation project in Legaspi, Albay. Nonetheless, a number of questions continue to plague the water delivery system. For instance, what has been the impact of the NIA policy to turn over the irrigation management to farmers' coops? What are the changes made in the NIA? What extent have farmers taken over the management of the irrigation and how did they perform? What are the productivity effects (Wijayaratne and Vermillion 1994)? What are the indicators for evaluating whether the farmer-managed system works? An earlier study in Iloilo by Alicante (1991) showed that irrigation systems that were economically and socially sustainable were those with larger farms and involving mostly farm owners and lessees. Other factors

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affecting conflicts and performance among communal irrigation system members are kinship and political relationship (Poudel 1990). The political relationships and kinship had a significant negative impact on members' time for repair and maintenance, while farmer-to-farmer reciprocal relationship and agricultural incomes had positive effects. The location of the members' farm within the service area had no significant effect on any of their performance except their participation in repair and maintenance. A recent analysis showed that the thrust in the development of new irrigation facilities should be on small scale, private sector-led, farmercontrolled, cost effective and efficient minor irrigation technologies (David 1999), instead of the traditional NIS/CIS systems. In other Asian countries, water markets are also getting to be popular in the farming communities. Such arrangement is especially convenient in cases where farmers' plots are far apart from each other. The farmer can sell his water from the pump to his adjoining (neighboring) farmer and buys water from whoever is near his plot (Bhandari 1999). Part of the efficient use of water for irrigation also requires a disciplined scheme for water distribution and rotation in the service areas. During the dry months, where water level is very low, a scheme of water rationing may have to be devised (PCARRD et al. 1999).

Proposed research program for NRM: focus on agricultural resource management Soil management Several research areas can be defined for sustainable soil resource management in particular, and NRM in general. These are: 1. The characteristics of the soil and the dynamics of such features as a result of the farmer's cropping patterns. In the case of problem soils both in the upland and lowlands, studies may focus on whether subsidizing the treatment to bring the soil back to its fertile state may make economic sense. In such a case, the soil can also be treated as a common property resources. What is the economics of giving the information on sustainable soil management technologies to the community as a whole rather than expecting individual farmers to be optimal managers of the resource? What is the cost of agricultural sustainability? Who is going to shoulder this cost? Is it fair for farmers to bear this burden alone? What policies can be formulated to share this cost to consumers and other beneficiaries?

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2.

3.

4.

5.

The development of management information as the most important input in sustainable agriculture. How do farmers handle this information? How can government upgrade farmers' management skills so the latter can perform better for sustainable agriculture? There is also a need to unravel the processes farmers decide in agricultural resource management. What are farmers' knowledge bases? What other information can increase that knowledge base for sustainable resource management? How can this knowledge-intensive technologies be extended? How do researchers scan farmer knowledge and determine the base by which intervention would be useful? One can also study farmers' responsiveness to diagnostic kits as aids/tools in his soil management decisions. What are the roles of government laboratories as decision support to farmers? How can impact be measured in terms of improvement in soil quality? Long-term farming systems research on the impact of alternative cropping patterns and soil management technologies on the resource base, and on farmer incomes. The Regional Integrated Agricultural Research Council (RIARC) can do this, but only on a long-term basis. The choice of crops and technologies should be attuned to the market demand in the area, and the feasibility and social acceptability of the technologies. Along this line, ex-ante technology assessment can use the data from these experiment stations. The commercialization of biofertilizers. What are the merits of biofertilizers' use? What would be the economics of purely subsidizing the use of biofertilizers? What would be the economics of having a package of fertilizers that contain both the organic and inorganic elements? Why does the private sector not respond to the knowledge that a combination of organic and inorganic fertilizer is more sustainable across all crops studied, and thus package the combination of such? What is the role of the Fertilizer and Pesticide Authority (FPA) in the use and commercialization of biofertilizers? Sustainable soil management technologies in the context of the broader economic development objectives. How does the country reconcile labor-intensive sustainable agricultural technologies and the

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growing scarcity of labor in agriculture as a result of increases in nonfarm income opportunities? This condition is to be expected as the country shifts to a higher level of economic development. Contribution of the resource base, that is, soil productivity, in future productivity growth analyses. This area requires an interdisciplinary work between soil and social scientists in assessing soil productivity in the different production environments.

Water management
The issue in water management is also about water productivity. This is, however, a function of water quantity, quality and water delivery efficiency. Agricultural decisionmakers should take active part in the management of the watershed as a significant source of surface water for irrigation. The shallow groundwater should be guarded from the environmental pollutants that could affect its utility in agriculture. The current debate by experts on the optimal combination of two sources of irrigation water, i.e. surface water and groundwater, should also be taken into consideration. Finally, the most efficient mode of delivery should be studied. Research areas for water management in agriculture could fall under any of the following: 1. Good watershed management as a prerequisite for a sustainable source of irrigation water. How can the Department of Agriculture help in preventing future degradation of this water resource? What is the economics of water use in agriculture when compared to other competing uses? How can the roles of institutions and policies in the sustainable management of watersheds be highlighted? What are local initiatives for watershed development and management? 2. Water quality and its use in agriculture. What are the causes of the water pollution? How can these be minimized? What are the impacts of polluted water on productivity? 3. Alternative delivery of water. Use of small water pumps and other private initiatives are getting popular. Water markets are developing in other countries. This is to make the most efficient use of water in particular locations. What are incentives for efficient water market to work? Public sector research on the optimal distancing, coverage and timing of water extraction is also needed. The design development of irrigation machines may be left with the private

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sector. However, institutional support in terms of credit for small farmers and subsidies in gasoline/diesel fuel has to be studied. The merits of the use and promotion of more knowledge-intensive water management (i.e., rainwater harvesting) technologies. Optimal timing of irrigation in crops, use of diagnostics for the right timing of irrigation, farmers' indicator of timing of water use, etc. have been studied but not popularized. What could have been the constraints?

Conclusion
The findings of this review show that research on soil and water management has in the past been substantial. Despite the volumes of research reports and other publications, the ongoing resource degradation implies that the desired sustainability objectives of all these studies are not attained. There may be a need to reexamine (1) the context in which soil and water management research agenda are designed, and (2) the process of filtering the results to people who actually use and/or decide on the use of the resource. One approach to achieve impact is to put NRM research in the context of regional research program. Regional research programs contribute to agricultural development in a number of fields (Janssen and Kissi 1997), among which is the rational exploitation of the natural resources such as water, soil, vegetation and genetic resources. Among others, regional research programs take into account the different ways natural resources are used by farmers and others, and the links between resource use and resource quality.

References
Ahmed, N. 1985. Fertilizer efficiency and crop yields in Pakistan. Phosphorous in agriculture 89, 17-32. Alicante, E.L. 1991. Social and economic sustainability of communal irrigation systems in Iloilo province. University of the PhilipppinesLos Baños (UPLB), Laguna, Philippines. Baradas, M.W. and J.D.G. Mina. 1998. Water management 2000: not by irrigation alone. Center for Policy and Development Studies (CPDS), UPLB, Laguna, p.24.

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Bhandari, Hum Nath, 1999. The economic of groundwater irrigation in rice-based systems in Terai of Nepal. Unpublished Ph.D. dissertation, University of the Philippines Los Banos, College, Laguna, Philippines. Bureau of Soils and Water Management (BSWM). 1991. Management and utilization of acid soils. Book Series No. 114. Quezon City: BSWM. ———. 1998. Balanced Fertilization Strategy on Rice and Corn. Quezon City: BSWM. Calanog, L. 1990. Sloping agricultural land technology in Liliw. Ecosystems Research and Development Bureau (ERDB), College, Laguna. Cassman K.G. and P.L. Pingali. 1995. Extrapolating trends from long-term experiments to farmers' fields: the case of irrigated rice systems in Asia. In Agricultural Sustainability: Economic, Environmental and Statistical Considerations edited by V. Barnette, R. Payne, and R. Steiner. New York: John Wiley and Sons Ltd. Coxhead, I. and A.C. Rola. 1998. Economic development, agricultural growth and environmental management: an investigation of their linkages in Lantapan, Bukidnon. Institute for Strategic Planning and Policy Studies Working Paper No. 98-04. Laguna: ISPPS, UPLB. Coxhead, I. and G. Shively. 1998. Some economic and environmental implications of technical progress in Philippine corn agriculture: An economy-wide perspective. Journal of Agricultural Economics and Development 26 (1-2): 60-90. Cruz, R.S. and I.C. Agulto. 1996. Economics of a designed trickle irrigation system using a twin-wall emitter tubing. Cotton Research Journal 9(1-2): 52-58. Cuevas, V.C. 1989. Utilization of trichoderma in composting. In Proceedings of the National Symposium on Biofertilizers and Organic Fertilizers. National Azolla Action Program, UPLB, College, Laguna. David, W.P. 1999. Options in irrigation development. Draft working paper for the Department of Agriculture, UP Los Baños, College, Laguna. De Datta, S.K., K.A. Gomez and J.P. Descalsota.1988. Changes in yield response to major nutrients and in soil fertility under intensive rice cropping. Soil Science 46:350-358. De Dios, S.L., A.A. Corpuz, E.M.S. Punzalan, J.P. Quiland, and R.T. Cruz. 1998. Intermittent irrigation and yield of transplanted lowland rice. Philippine Journal of Crop Science 23(1). Desai, G.M. and V. Gandhi. 1989. Phosphorous for sustainable agriculture growth in Asia: an assessment of alternative sources and management. In Proceedings of the Symposium on Phosphorous Requirements for

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Sustainable Agriculture in Asia and the Pacific region. International Rice Research Institute,Los Baños, Laguna, Philippines. Deutsch, W.G., A.L. Busby, J.L. Orprecio, J.P. Bago, E.Y. Cequiña. 1998. Community-based water quality indicators and public policy in the rural Philippines. Paper presented in the SANREM CRSP/Philippines, Annual Conference, May 18-21, Malaybalay, Bukidnon, Philippines. Dorado, M.A. and C.B. Balimbing. 1999. Big money in hydrophonics. In Food Security in the Philippines edited by L. S. Cabanilla and M.M. Paunlagui. Easter, K.W. 1993. Economic failure plagues developing countries' public irrigation: an assurance problem. Water Resources Research (USA). 29(7):1913-1992. Francisco, H.A. 1998. The economy of soil conservation in selected Asia land management of sloping lands network sites. University of the Philippines Los Baños. Fujisaka, S.R. Guino, and L. Obusan. 1994. Costs and benefits of onfarm reservoirs in Central Luzon, Philippines. International Rice Research Institute, Los Baños, Laguna, Social Sciences Division. Galang, A.L. and S.I. Bhuiyan. 1994. Decision support model for optimizing economic returns from resource allocation in farms with rainwater storage facilities. International Rice Research Institute, Los Baños, Laguna. Soil and Water Sciences Division. ———. 1995. Alleviating drought and intensifying cropping with onfarm reservoirs. International Rice Research Institute, Los Baños, Laguna. Garcia J.N.M., R.V. Gerrits, R.A. Cramb, G.C. Saguiguit Jr., J.J. Conchada, R.T. Yao, R.G. Bernardo and A. S. Perez. 1996. Soil conservation in an upland farming system in Nueva Vizcaya, Philippines: a socioeconomic survey. SEAMEO-Southeast Asian Research Center for Agriculture (SEARCA), College, Laguna, Philippines. Garrity, D.P. 1993. Sustainable land use system for sloping uplands in SE Asia. In Technologies for Sustainable Agriculture in the Tropics. American Society of Agronomy. Special Publication 56, Madison, Wisconsin, USA. Ganotisi, N.D. and H.L. Angeles. 1990. Irrigation strategies for cotton under limited water supply. Cotton Research and Development Institute, Batac, Ilocos Norte, Philippines. Gascon, C.S.N. 1998. Sustainability indicators of the Hanunuo Mangyan agroforestry systems: Sitio Dangkalan, Bulalacao, Oriental Mindoro, Philippines. Ph.D. thesis in forestry: silviculture and forest influences. UPLB, College, Laguna.

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Gascon, F.B. and M. Hossain. 1995. Relative efficiency of private and public irrigation system: the case of two Philippine villages. Philippine Journal of Crop Science 20:44. Supplement No. 1. Guerra, L.C., S.I. Bhuiyan, T.P. Tuong and R. Barker. 1998. Producing more rice with less water from irrigated systems. University of the Philippines, Los Baños, College of Engineering and Agro-Industrial Technology. International Rice Research Institute, Manila (Philippines), International Irrigation Management Institute, Colombo (Sri Lanka). Janssen, W. and A. Kissi. 1997. Planning and priority setting for regional research: a practical approach to combine natural resource management and productivity concerns. International Service for National Agricultural Research (ISNAR), The Hague, Netherlands. Labios, R.V., J.D. Labios, V.T. Villancio, A. M. Salazar, and R.E. Delos Santos. 1995. Upland crop production in rainfed lowland rice areas. Philippine Journal of Crop Science 20:41. Lamanilao, J.D. 1990. Viability of drip irrigation in Northeast Cavite: a miniassessment of an emerging technology. Laguna: UPLB. Llandelar, L.S.L. 1995. Dimensions of organizational climate and performance of irrigator's association in communal systems in the Bicol mainland. MS Thesis in Management. Bicol University. Marciano, E. B., M. Fujita, H. Mahabub, and M. Kikuchi. 1997. Economic analysis of the deterioration of a national irrigation system in Laguna, Philippines. Philippine Journal of Crop Science 22 (48). Midmore, D.J., T.M. Nissen, D.D. Poudel. 1998. Making a living out of agriculture: some reflections on vegetable production systems in the Manupali watershed, Mindanao, Philippines. Paper presented at the SANREM CRSP/Philippines Annual Conference, May 18-21. Malaybalay, Bukidnon, Philippines. Moya, T.B., W.C. dela Vina, and S.I. Bhuiyan. 1998. Potential of onfarm reservoir use for increasing productivity of Philippine rainfed rice areas. CPDS, UPLB, College, Laguna. Naegel, L.C.A., J.G. Real, and A.M. Mazaredo. 1990. Research and development of the spiral pump for water-disadvantaged areas in the Philippines: statistically aided design of prototypes at Los Baños. Philippine Technology Journal 15(4). Navasero, C.S. 1993. Upland farming systems in Lucban, Quezon, Philippines. Unpublished M.S. Thesis. University of the Philippines at Los Baños, College, Laguna. Oliva, J.D. 1995. Impact of Comprehensive Agrarian Reform Program assisted communal irrigation project on agrarian reform beneficiaries

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of Pulangui, Albay. MS Thesis in Management. Legazpi City, Bicol. Oren, C.D. 1992. Rice - corn + cowpea + mungbean/kakawate cropping systems in Hillysand. Iloilo City, Philippines. Philippine Council for Agricultural Resources Research and Development (PCARRD). 1991. Philippines recommends for watershed management. Los Baños, Laguna. Philippine Council for Agriculture, Forestry and Natural Resources Research and Development (PCARRD), Department of Science and Technology (DOST), Department of Environment and Natural Resources (DENR), Forest Management Bureau (FMB), Department of Agriculture (DA), University of the Philippines Los Baños(UPLB), College of Forestry and Natural Resources (CFNR), Forestry Department Center (FDC) and Environmental Forestry Program (ENFOR). 1999. Guidelines for watershed management and development in the Philippines. Los Baños, Laguna: PCARRD-DOST-DENR-FMB-DA-UPLB-CFNR-FDC/ENFOR. Pingali, P.L. and M.W. Rosegrant.1993. Confronting the environmental consequences of the green revolution in Asia. In Proceedings of the 1993 American agricultural economist association international preconference on Post Green Revolution Agricultural Development Strategies in the Third World: What Next? Pingali, P.L., P.F. Moya and L.E. Velasco. 1990. The post-green revolution blues in Asian rice production: the diminished gap between experiment station and farmer yields. Social Science Division Paper No. 90-01. International Rice Research Institute, Los Baños, Laguna, Philippines. Poudel, R. 1990. Factors affecting performance of communal irrigation system members: the case of Bugaan communal irrigation system (Laurel, Batangas, Philippines). College, Laguna, Philippines. Resurreccion, A.N. and G.C. Salazar. 1991. Improving farm productivity with small electric pumps. College of Engineering and Agro-Industrial Technology, UPLB, College, Laguna. PCARRD, Los Baños, Laguna. Rola, A.C. 2000. Research program planning for Natural Resource Management: a background analysis. PIDS Discussion Paper Series No. 2000-09. Makati City, Philippines: PIDS. Rola, A.C., A.R. Chupungco, and M.G. Umali. 1996. Socioeconomic evaluation and policy analysis of the commercialization of the rapid composting technology. Paper presented at the Symposium-Workshop on the Impact and Future Directions of the National Program on Rapid Composting. PCARRD, Los Baños, Laguna. November .

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Rola, A.C., Z.S. Provido and M.M. Olanday. 1998. Making farmers better decision makers through the paper field schools. SEARCA, College, Laguna. Rola, A.C. and I. Coxhead. 2000. Soil conservation decisions and nonfarm economic conditions: a study of the rural labor markets in the Philippine uplands of Bukidnon edited by I. Coxhead and G. Buenavista. In Seeking sustainability: challenges of agricultural development and environmental management in a Philippine watershed. Los Baños, Laguna, Philippines: PCARRD. Rotor, P.V.B, Jr. B.C. Gonzalo, T.C. Silva, G. Salazar, B.O. Tadeo and R.E. Stickney. 1993. Design, development and testing of a small electric pump for supplementary irrigation in rainfed areas. Philippine Journal of Plant Industry 54 (4):33-45. Sadasa, D., M. Baratang, L. Siase, H. Aplinares, and M.R. Recel. 1991. Nutrient management for sustaining crop production. Soil Resources Development Center. Bureau of Soils and Water Management. Schoning, E. and W. Wickman. 1990. Organic manures: no alternative to mineral fertilizers for developing countries. BASF Agricultural News 2/90. Sibayan, E.B. and R.C. Undan. 1994. Shallow groundwater potential and constraints in irrigating lowland rainfed rice-based farms. Philippine Journal of Crop Science 19:33. Stone, B. 1986. Chinese fertilizer application in the 1980s and the 1990s: issues of growth, balances, allocation efficiency and response. In China's Economy Looks Toward the Year 2000. Volume 1. Congress of the United States, Washington, D.C. Sustainable Agriculture and Natural Resource Management (SANREM). 1998. Economic growth and sustainable resource management: are they compatible? Paper presented at the SANREM/CRSP Philippines Annual Conference, May 18-21. Malaybalay, Bukidnon. Taburada, L.A.D. 1994. Characterization of soils in Mt. Pangasugan floodplain. Philippine Journal of Crop Science Volume 19, Supplement No. 1. Tanguilig, V.C, F.P. Obrero, and J.M. Zacal. 1996. Using upland rice (Oryza Sativa L. Cv Dinorado) as an indicator for drip- and furrow-rrigation scheduling in tomato. Philippine Journal of Crop Science 21: 46. Undan, R.C., J.L. Tabago, C.P. Aganon, M.E.M. Orden, N.E. dela Cruz, E. Lopez. 1994. Small farm reservoir (SFR) technology for improving productivity of rainfed farms. Philippine Journal of Crop Science 19:19. Ventura, W. and J. K. Ladha. 1996. Use of N2 fixing green manures for improving soil fertility. In Proceedings of a Seminar on Improvement

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of Ultisols for increasing crop productivity. Statistical Research and Training Center, Diliman, Quezon City, Philippines. Villanueva, C.T., Parilla, L.S. and Gisulga, S.B. 1993. Socioeconomic constraints to the adoption of cropping methods for soil conservation by upland farmers in Leyte, Philippines. Los Baños, Laguna: Philippine Council for Agriculture, Forestry and Natural Resources Research and Development (PCARRD). Wijayaratne, C.M. and D.L. Vermillion. 1994. Irrigation management turnover in the Philippines: strategy of the National Irrigation Administration. Colombo, Sri Lanka: International Irrigation Management Institute.

II Literature review of the agricultural distribution services sector: performance efficiency and research issues by Ponciano S. Intal Jr. and Luis Osman Ranit
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Introduction
A competitive agriculture sector requires not only more productive farms and agricultural processors but a more efficient agriculture distribution system as well. This is especially the case for the Philippines, an archipelago of thousands of islands but where only a few are large enough to have the farm size that allows economies of scale in processing. In comparison to Vietnam or Thailand or Peninsula Malaysia, the Philippine agricultural economy is more vulnerable to the inefficiencies and vagaries of the country's distribution system. There is a familiar lament about the state of the Philippine agricultural distribution system; that is, it is cheaper to bring corn from Bangkok to Manila than to bring corn from Cotabato to Manila. This familiar lament exemplifies a fragmented agricultural economy. A fragmented agricultural economy has negative welfare effects on the country. First, as the Congressional Commission on Agricultural Modernization (Congress of the Philippines 1997) noted, "marketing inefficiencies result in farmers' getting low prices for their produce and consumers paying more than the fair price." Second, unexpected large harvests leave farmers with much lower farm prices in a fragmented economy than in a well-functioning distribution system. Third, the unexpected demand surges would increase imports rather than sales of domestic farmers. Part of it may be the result of the system's limited capacity to absorb fluctuating volumes of production. The farmer's capability to respond to market demand is also a critical issue here. Fourth, an inefficient distribution system leads to additional pressure for agricultural protection so that

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domestic producers will be able to compete with imports in Greater Manila, the country's largest net deficit food market. And finally, the resulting high food prices lead to demands for higher wages.1 The last mentioned effect deserves elaboration. Higher wages without corresponding increases in labor productivity means higher unit labor costs, which---other things being equal---result in the decline of the international competitiveness of the country's export and import-substituting industries. In addition, higher wages lead to higher-than-necessary wage bill in the country's nontraded sectors (e.g., government). Indeed, for the government that is faced with tight budget constraint, the higher wage bill leaves less room for expenditures in the very important areas of operations and maintenance as well as capital expenditures. In short, the protection-induced higher domestic food prices, caused in part by the fragmentation of the agricultural economy and the inefficiency of the agricultural distribution sector, have significant macroeconomic impact on the rest of the economy. The macroeconomic implications of high food prices cannot be underestimated. Indeed, it can be argued that one key reason for the comparatively lackluster performance of the Philippine manufacturing sector during the 1990s was the higher wages in the country compared to those of competitor countries such as Indonesia and China. The higher domestic wages coincided with the significant rise in agriculture protection, and the consequent higher food costs, in the country during the latter 1980s and the 1990s. Aggravating the cost-push effect of the higher food prices on the manufacturing sector were the decline in industrial protection and the appreciation of the Philippine peso. As a result, many manufacturing plants folded up. It has been mainly in the semiskilled, less wage-sensitive industries such as electrical machinery and automobile parts where the Philippine manufacturing sector registered robust growth. Even the country's nontraded sector has been affected by the agriculture protection-induced higher wages during the 1990s. Thus, for example, the World Bank (2000) asserts that the rise in the share of personnel expenditures in the total government budget in the 1990s can be explained in part by the salary increases during the decade as induced in part by higher food costs. Because of the higher wage bill, the government budget for operations and maintenance suffered, leading to, for example, poorly maintained irrigation facilities, roads and bridges. It must be

1

Higher prices do not filter down fast enough to the production and remains in the intervening system; therefore, high prices take time to become incentives for more production. Intermittent high price fluctuation also does not significantly improve farmers’ purchasing power.

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emphasized that the poor maintenance of the country's main irrigation facilities, for example, has contributed to the significant drop in recent years in the proportion of farms irrigated compared to the total programmed irrigated areas (Tolentino et. al. 2001). Clearly, with the drop in the actual irrigation rate, agricultural productivity is ultimately compromised. Similarly, the inefficiency of the agricultural distribution system can be attributed in part to poor rural infrastructure facilities such as rural roads and bridges. It is therefore important that the government gives as much policy importance to the distribution system as to the production sector. How can the Philippines have an efficient and dynamic agricultural distribution services sector? How can the sector be a catalyst for changes and innovation in the agricultural sector? Making the distribution system and the market work better for the farmers, processors and consumers is a continuing challenge. This means, on the one hand, allowing private sector reforms under competitive or contestable conditions that encourage continuing private investment in the distribution services sector. This also means, on the other hand, high social returns to the government's complementary roles and investments in the sector. By making the market work better, farmers and processors are provided better information on the changing demands on the agricultural sector and its products. Also, farmers, distribution service providers and processors will be able to coordinate better in meeting effectively the changing demands for agribased products. With the agricultural sector remaining as a major economic sector of the Philippine economy, a more efficient agricultural distribution sector will lead to greater social benefits to the whole society. Because there is a critical need for the agricultural distribution service sector to be efficient, progressive and dynamic in the long term as well as for the Philippines to be competitive, productive and dynamic in an increasingly liberalized trading environment, one has to understand the agricultural sector in the following areas: 1) the organization and dynamics of the agriculture distribution services sector; 2) the interaction and interrelationship of markets and prices across area and over time; and 3) the impact of government policies and programs on the workings of agricultural markets and the agricultural distribution services sector. This implies a need for a research program on the Philippine agricultural distribution sector as well as agricultural markets.

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This paper is a review of literature to jumpstart the research program. It focuses on the characterization of the structure and performance of the agricultural distribution sector, and on the efficiency or inefficiency of agricultural markets as well as its distribution services sector. Specifically, the literature studied can tell something about how the flow of agricultural goods is characterized through the distribution system. It can say a lot about the efficiency of the price transmission process in the Philippine agricultural economy. Its studies on price margins can show the (in)efficiency of agricultural product markets and how such could be explained by monopoly elements or by transport, storage and handling costs. From there, one can glean the research gaps and possible solutions to the issues of agricultural market (in)efficiency and the development of the agricultural distribution services sector. This paper consists of five sections. Section Two is a characterization of the Philippine agricultural distribution system. Section Three examines the issue of market integration and the efficiency of the price transmission process. Section Four discusses determinants of price margins, including the issue of monopoly in agricultural trading. The section also discusses policy issues. Section Five presents research issues and gaps.

The Philippine agriculture distribution system
Agricultural distribution or marketing is primarily concerned with moving agricultural produce from the farm gate to consumers at home and abroad. However, bringing agricultural produce from the farm to the consumers involves a complex distribution system involving several functions, including assembling, cleaning, sorting, transporting, storing, processing, grading, wholesaling, retailing, importing and exporting. Complementary or support services include financing and market information services. Marketing costs are necessarily incurred at each stage of the distribution system.

Complex and diverse distribution system
The prevailing impression about the Philippine agricultural distribution system is best exemplified in the following excerpt from the Report and Recommendations of the Congressional Commission on Agricultural Modernization (Congress of the Philippines 1997). The country's agricultural marketing system is complicated, unwieldy and chaotic. Too many layers impede the smooth flow of agricultural commodities from the producers to the consumers. The system could be compared to an hourglass, where the producers are

Intal and Ranit
on top and the consumers in the bottom. The market intermediaries are crowded in the neck of the hourglass…. High marketing costs are partly due to poor infrastructure and the multiple layers of trade margins. ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

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The complexity, diversity and multiple layering of the agricultural distribution system are best illustrated by a number of studies on the marketing systems of a number of agricultural products in the Philippines. These studies were undertaken by the Foundation for Resource Linkage and Development, Inc. (FRLD) and the Confederation of Grains Association, Inc. for the Department of Agriculture and United States Agency for International Development (USAID). Studies include those on corn, potato, mungbean, mango, tomatoes and cutflowers. Other important studies are on rice (Lantican 1992), livestock (Galvez 1998) and fish (Sikap/ Strive Foundation 2000). A good review of the marketing participants and marketing flows is given in Sikap/Strive Foundation's (2000) final report of the study on strategic food and agricultural commodity exchange. Various studies show that market participants in the agricultural distribution system are numerous and varied. Similarly, the distribution channels and networks differ among commodities and even by area. Participants and their relationships in the distribution system are illustrated in the case of corn in Cagayan Valley (see Figures 1a and 1b and Malenab et al. 1991). Farmers' link to the demand market is primarily through the hierarchy of traders at the barangay, municipality and provincial levels. The municipal and provincial traders distribute the yellow corn mainly to the integrators and feedmillers in Central Luzon, the National Capital Region and Southern Tagalog. The less important links are through the farmers' cooperatives (which then feeds into the National Food Authority) and the direct links to poultry integrators and feedmillers in the Cagayan Valley region. Other distribution links include: 1) the so-called viajeros or itinerant traders from the demand regions (Central Luzon and Southern Tagalog) who travel to Cagayan Valley for the yellow corn; 2) agents and brokers who are individuals acting as intermediaries between the viajeros and municipal traders; and 3) Trader-brokers who are feed ingredient suppliers and who broker between corn traders to supplement their feed ingredient business. Itinerant traders usually offer slightly higher prices to farmers than the prevailing prices to make sure that their trucks brought to the site are filled up. Agents and brokers receive commissions for their services.

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Figure 1a. Geographical flow of yellow corn from Cagayan Provinces, 1991 -------------------------------- Farmers
Farmer’s Cooperative S U P P L Y R E G I O N Region 2

▼ ▼

--



Barangay Traders/ Agents



--

-------------------------------- Barangay






Traders
▼ ▼ ▼▼





Feedmillers Municipal Traders
▼ ▼



Integrator

NFA


-------------------------------------------------------------------------------------------------------------------------▼ NFA ▼

----------



-------------------------------------------------------------------------------------------------------------------------Viajeros ▼

---------------------------------



Poultry Raisers (Contract)

-------------------------------------------

▼▼







Traders from other provinces

Provincial Traders

Hog Raisers

------------- Agents

Integrators/ ---------- Feedmillers (Region 3)

▼ ▼▼

Food Ingredient Suppliers/ Traders


D E M A N D





Hog & Poultry Farms (Region 3) Hog Farms NCR Hog & Poultry Farms (Region 4)

Legend: Major Minor Coordinating

▼▼



-------

(NCR)



Integrators/ ---------- Feedmillers

R E G I O N Region 3, 4 and NCR

▼▼

Source: Malenab et al. 1991

Notice that the participants in the yellow corn distribution system barely include retailers. This is because yellow corn is largely a production input into the feedmilling, livestock and poultry industries. In contrast, in largely consumer agricultural produce such as potatoes (Figures 2a and 2b) and mungbeans (Figures 3a and 3b), wholesalers-retailers and retailers play large roles in the distribution process, although producers have direct links primarily with wholesalers and assemblers (also called viajeros), wholesalers (for potatoes), contract buyers and agents (for mungbeans).



---------- Feedmillers
(Region 4)



▼ ▼ ▼ ▼

▼ ▼▼

Intal and Ranit Figure 1b. Geographical flow of yellow corn from Isabela Province, 1991 ▼
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Farmers


Integrator


Farmer’s Cooperative


Poultry Raisers (Contract)

Barangay Traders

S U P P L Y R E G I O N Region 2



---------------------------------

------------------------------------------------



Provincial Traders Poultry Raisers


▼ ▼

-------------------------------------------------------------------------------------------------------------------------▼ Viajeros

------------------------------------------------------------------------------------------------------------------------------▼ ▼ ▼

-- Agents
▼▼

▼ ▼





Food Integrated Suppliers/ Traders







NFA Municipal Traders
▼ ▼

------------------------

Feedmillers

Agents



Hog Raisers

NFA Integrators/ Feedmillers (Region 3)





Hog & Poultry Farms (Region 3)

D E M A N D R E G I O N Region 3, 4 and NCR



Legend: Major Minor Coordinating

Hog Farms (NCR)

Integrators/ Feedmillers (NCR)

▼ ▼



-------

Hog & Poultry Farms (Region 4)

Feedmillers (Region 4)


▼▼





Source: Malenab et al. 1991

Contract buyers in yellow mungbean in Pangasinan sell to assemblerwholesalers (FRLD 1995a and 1995b). The case of rice also brings out the multilayered relationship at the wholesale level before the commodity reaches the consumer. Generally, the producers' link is with assembler-wholesalers, wholesalers and commission agents, except for those with limited marketable surplus where palay is sold primarily to nearby millers or local buyers. The assemblerswholesalers and commission agents pass the palay to rice millers-wholesalers



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Figure 2a. Marketing channels of Frenzi potatoes in Bukidnon, May-December 1994

GROWER 100% 52% 14% 31% 34%



ASSEMBLER-WHOLESALER Cagayan de Oro City 52%

ASSEMBLER-WHOLESALER Other Provinces 46%

12%

Bukidnon Cagayan de Oro City Cebu

12% 12% 19%

10%

INSTITUTIONAL BUYER Cagayan de Oro City Cebu 18% 10%

Source: FRLD 1995a

and to wholesalers-retailers before rice (unhusked palay) is sold to consumers, primarily through retailers (see Lantican 1992 as presented in Sikap/Strive Foundation 2000). The marketing channel of roses for Benguet, Cebu and Davao City further illustrates the diversity of marketing flows and relationships (Figure 4 and FRLD 1993). In major supply areas where local demand is limited, or



RETAILER/SUPERMARKET






21%



WHOLESALER Bukidnon Cagayan de Oro City Cebu 28% 15% 34% 26%

→ → →

25%





WHOLESALER-RETAILER Cagayan de Oro City Cebu 23% 19%

13%



21% 23%

HOUSEHOLD CONSUMER



Bukidnon Cagayan de Oro City Cebu

12% 15% 19%

8%

Intal and Ranit
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37
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Figure 2b. Marketing channels of other potato varieties in Benguet, November 1993-January 1994 GROWER 100% 29% 71%

Benguet Metro Manila 6%

29% 53%

11% Benguet 6%

29% WHOLESALER-RETAILER

Benguet Metro Manila 8%

16% 28%

Metro Manila

18%

23% 23% 10%

INSTITUTIONAL BUYER Benguet Metro Manila 11% 17%

RETAILER/SUPERMARKET Benguet Metro Manila 43% HOUSEHOLD CONSUMER 16% 47%

8%

Benguet Metro Manila

15% 41%

Source: FRLD 1995a

in the major demand areas that are far from production areas (e.g., Benguet and Davao City), the marketing flows are primarily through the assemblerwholesalers, wholesalers-retailers and the assembler-wholesalers-retailers. In sharp contrast, in places such as Cebu—where production is barely enough for the local market—the preponderant marketing link is from



5%







BUYING STATION



→ → →

WHOLESALER

13% 53%



→ →

ASSEMBLER-WHOLESALER Benguet Metro Manila 7% 19% 65% 12%

ASSEMBLER-WHOLESALER Other Provinces 18% 7%

→ →
6% PROCESSOR







→ →

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Figure 3a. Marketing channels of green mungbean in Pangasinan, December 1993-April 1994 GROWER 100% 5% 9% 13% 15%



AGENT 13% 13% 58% 29% 7% WHOLESALER Pangasinan Metro Manila 22% 65%



65%




31%

▼ ▼

CONTRACT-BUYER 71%

56%

ASSEMBLER-WHOLESALER



Metro Manila Other Provinces

65% 35%

4% ▼ WHOLESALER-RETAILER Pangasinan Metro Manila 14% 28%

8% 21% PROCESSOR



5%

Hopia Togue Sotanghon

18% 14% 13%



▼▼

14%

1%


4%



EXPORTER Metro Manila 1%



RETAILER

5%



Pangasinan Metro Manila

17% 16%

9%


HOUSEHOLD CONSUMER



23% 6% INSTITUTIONAL BUYER

Pangasinan Metro Manila

10% 22%



Metro Manila

6%

Source: FRLD 1995b

Intal and Ranit Figure 3b. Marketing channels of yellow mungbean in Pangasinan, December 1993-April 1994 ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

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2%


AGENT 2%

GROWER 100%

2% 2% 77%

2%



8% CONTRACT-BUYER 79%



WHOLESALER Pangasinan Metro Manila 10% 56%

8%

29%

14%









7%

WHOLESALER-RETAILER Pangasinan Metro Manila 10% 29%

ASSEMBLER-WHOLESALER Metro Manila Other Provinces 56% 40%

58%



11%



14%

PROCESSOR Hopia Togue Sotanghon 13% 15% 11%



5% RETAILER 15%



Pangasinan Metro Manila

18% 26% 1% EXPORTERS Metro Manila 0, f″ < 0. To purchase k, the individual borrows the amount, pays the interest rate equal to r and puts up his current wealth w as collateral. The borrower may, however, abscond, forfeiting w. If

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he evades creditors, the person keeps f(k); if he is caught, he gets nothing. The probability of being caught is where π(k), 0 ≤ π(k) ≤ 1 is nondecreasing in k. The agent is risk neutral; hence, he seeks to maximize expected profit. Incentive compatibility requires f(k) − (k − w)r ≥ [1 − π(k)] f (k). Optimal borrowing, denoted as k*, is at f′ (k*) = r. Then solve for critical wealth w* that just provides a repayment incentive at the optimal investment: w* = k* −

π(k*) . r

If w falls below w*, then the lender does not lend the optimal investment level. The reason is that there is a lower bound (zero) on the borrower's punishment. As the poor are already near zero wealth, then they are less deterred by the prospect of being caught. Note that if an individual has an endowment greater than w* and another slightly below it, then a reallocation of capital or wealth from the former to the latter in the current period will increase aggregate output. Information and enforcement problems prevent the market from making this reallocation.

The efficiency-equity link: agency relations in land cultivation Another source of failure in land markets arises through agency relations in land cultivation. When ownership of land is skewed, the owner inevitably delegates production tasks to agents. Two options are available: first, the owner hires and supervises wage labor; second, the owner delegates operations to a tenant-cultivator. For the first option, the difficulty lies in the high cost of supervising wage labor (Family labor requires less supervision but of course is in limited supply). The transaction cost of using wage labor is the generally explanation behind the pattern of declining yield that accompany farm size increases (Faruquee and Caree 1997). Doubts have been raised against the robustness of this stylized fact. For example, Benjamin (1995) suggests that the pattern may be partly due to the omission of variables such as soil quality. The relationship is reasserted by Heltberg (1998). Hayami, Quisumbing and Adriano (1990) confirm the

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absence of clear empirical evidence regarding economies of scale in agriculture. In the case of plantation agriculture, the apparent scale economies can be attributed to coordination problems at the processing and distribution stage, and not from increasing returns at the production stage. The second option, which is to delegate operations to a tenantcultivator, takes the form of either fixed rent or sharecropping. Sharecropping, however, faces an incentive problem if the agent receives earnings that are lower than the marginal product value of the land. In contrast, the cultivator under leasehold receives this marginal product value. The "Marshallian inefficiency" hypothesis posits that the effort of the agent is lower under sharecropping than under leasehold. Share tenancy is regarded as a feudal vestige to be superseded by leasehold as the countryside begins to progress economically. However, the prevalence and persistence of share tenancy has brought forth theories that examine its basis in rational contracting. Tenancy contracts must combine work incentives with risk-sharing. If the agent shirks from working due to high transaction costs involved in the monitoring process, any output losses from such shirking (a form of moral hazard) cannot be distinguished from those due to environmental factors. Sharecropping, on the other hand, may be used as incentive to workers who also share the risks in agriculture (Stiglitz 1974; Newberry and Stiglitz 1979; Otsuka and Hayami 1988). An interesting suggestion by Eswaran and Kotwal (1985) distinguishes two types of moral hazard: in addition to shirking by the cultivator, the landowner may also shirk in providing managerial services to production. This provides an additional justification for the share contract. In their model, depending on the specific set of local conditions and agent preferences, sharecropping may be Pareto superior to leasehold. Instead of moral hazard, another form of asymmetric information that could lead to sharecropping is adverse selection (Hallagan 1978; Muthoo 1998). Own skill or ability may be the private knowledge of a farmer; hence, the contract offers are designed to screen farmers based on skill. However, the adverse selection explanation for sharecropping does not seem to jibe with evidence that finds information regarding skill to be public knowledge within a village (Lanjouw 1999). Moral hazard is deemed to be the more likely explanation for share tenancy. The concept of sharecropping also came about as an outcome of an imperfect labor market (Ray 1999). In this interpretation, share tenancy is

Roehlano M. Briones
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a form of strategic delegation undertaken by competing landowners. The model is set up as follows: (1) The landlord can either operate the farm and hire workers, or delegate operation to a share tenant. (2) The structure of competition is such that when one farm reduces its wage, a rival farm must also reduce its wage. (3) The decision to hire a tenant is construed as a credible commitment that a lower wage will be paid, because the tenant is given only a partial output incentive. This view is hospitable to the thesis of Marshallian inefficiency. A survey of the empirical literature by Hayami and Otsuka (1993) nevertheless yields little evidence for Marshallian inefficiency. Agrarian contracts are found to adapt to real world enforcement problems; hence, share tenancy is more frequently observed in cases where monitoring is less costly, that is in closely-knit communities and families. A study for the Philippines confirms that share tenancy contracts between kin did not weaken production incentives (Sadoulet, de Janvry and Fukui 1997). There seems to be no compelling reason to attribute production inefficiency to sharecropping. There are on the contrary, good reasons to believe that sharecropping promotes efficiency, based on the foregoing. It permits cultivation by family labor, reduces reliance on hired labor, spreads risk between tenant and landlord and provides incentives for landlords to supply managerial input. Sharecropping also mitigates credit problems, as sharing of output is often accompanied by sharing of cost outlays. Often, landowners purchase fertilizers, pesticides and other inputs, and share their cost (Otsuka 1999). Moreover, the harvest rights acquired by the tenant upon gaining access to land opens up credit opportunities from moneylenders and traders. These advantages imply that share tenancy promotes equity. Given the traditional criticism of sharecropping as a brutal form of exploitation, the revisionist view of modern economic theory is quite remarkable.

The efficiency-equity link: localized linkages in income diversification The final argument regarding the inefficiency of inequality rests on the potential for localized linkages to promote rural industries when incomes 3

In a rural setting, linkages are conceptualized in a Keynesian type framework, and are quantified by computing localized multipliers. This approach, however, lacks micro foundations (as does the macro model from which it derives), and its appropriateness for explaining development per se is suspect. See Briones (2000).

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are evenly distributed. "Localized" is used here to distinguish this from the traditional view that sees land reform as a means to indirectly promote national industrialization. According to this argument, industrialization is precluded by the excessive diversion of productive capital into relatively unproductive assets of the landed class (see e.g., Cornista et al. 1989). There is no coherent framework to account for this persistently inefficient and perhaps irrational behavior, nor is there persuasive evidence to show that urban-based industrialization requires liquidation of the landed class' assets. A localized linkages framework on the other hand uses the following argument: Consider a rural economy divided into a household and a production sector. The latter is further subdivided into agriculture and manufacturing. The development of rural manufacturing is initially dependent on strong local demand, both from the agricultural and household sectors. The distribution of household incomes may be a determinant of this demand when nonfarm goods are income elastic. The argument is most applicable to an agriculture-dependent region where the greater bulk of the population is poor, and land ownership is highly skewed. Agricultural development and asset redistribution may be the impetus for rural growth linkages (Ranis and Stewart 1993). The importance of income equality in promoting local linkages is echoed by Park and Johnston (1995) in the case of Taiwan. The concept of linkages can make sense3 by relating it to the concept of scale economies (Krugman 1993), assuming a case of perfect markets. Fafchamps and Helms (1996) construct a formal model of local linkages, summarized as follows: consider a village whose transactions with the outside world are costly. Suppose rural manufacturing is characterized by increasing returns; moreover, the proportion of manufactures in total expenditure rises with income (i.e., preferences are nonhomothetic). A multiple equilibrium situation is possible, with some levels of Pareto equilibrium dominated by others. In a low-level equilibrium, village manufacturing is underdeveloped because of low demand for its output---but demand is low precisely because incomes are low in the absence of highly productive manufacturing activities. Under these circumstances, how a costless asset redistribution affects the size of the rural manufacturing sector depends on the composition of output demand as income varies. In one of their

4

The equity-growth view is not without its detractors. Li and Zhou (1998) argue that, if public consumption goods are financed by a growth-reducing tax, then majority voting leads to a distortionary regime when inequality is low. A regression of GDP growth on past values of the Gini co-efficient confirms the hypothesis.

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simulations for Guatemalan villages, the researchers of the study found that redistribution efforts meant to reduce asset inequality could trigger rural small-scale industrialization. These arguments hint that the industrialization and development process is dynamic. Likewise, the efficiency-equity link model can be completed only by looking at its dynamic aspect.

Dynamic version of the efficiency-equity link
The dynamic version of the model of Banerjee and Newman (1994) concludes that a one-time wealth redistribution can alter the equilibrium path and lead to higher rates of long- run growth. That is, redistribution increases the wealth of the poor and permits them access to credit markets, which increases the over-all rate of capital accumulation. The efficiency-equity link may be stated in dynamic terms as the growth-equity hypothesis: a more equal asset distribution leads to higher future growth rates. In contrast, the traditional view is expressed by the Kuznets hypothesis: as an economy grows, inequality at first rises before declining. Recent evidence tends to support the equity-growth hypothesis (Alessina and Rodrik 1994; Clarke 1995). In particular, Deininger and Squire (1998) zero in on land inequality as a determinant of future growth. The distribution of operational landholdings is a proxy for asset distribution. Using a pooled time-series and cross-section country data (characterized as a "high quality" data set), they find little evidence for the Kuznets hypothesis; instead, there is a strong negative relationship between inequality and growth. Moreover, weak income growth tends to be concentrated at the lower end of a skewed income distribution.4 The theory and available evidence seem to favor a one-time redistribution of assets for an economy with marked inequities and feeble growth. Where landholding is an important store of wealth and favored collateral form, redistribution may be targeted at landowning. However, this one-time redistribution of land may not lead to a permanent reduction in land inequality once risk is introduced into the analysis. Random shocks on individual wealth holdings, when credit and insurance markets are imperfect, may result in widening gaps between the lucky and the unlucky over time. Covariation of shocks, localization of land markets, and the absence of nonfarm employment reinforce these distributional trends. Land sales tend to be concentrated in periods of adverse natural or economic conditions (e.g., drought or low prices), where "distress sales" within an area (e.g., stricken by a common shock) force

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land prices down. Land buyers, on the other hand, possess financial assets. Hence, there may be a secular tendency for land ownership to continue to be concentrated (Binswanger and Deininger 1997; Carter and Zimmerman 1998). This consideration may justify complementing land redistribution with programs that offset adverse shocks such as credit support. The following section therefore now examines the case of the CARP in the Philippines, which combines land redistribution with support service provision.

The Comprehensive Agrarian Reform Program
The CARP is arguably the most ambitious program for property rights reform in the Philippines. In principle, the CARP encompasses all agricultural lands. The actual coverage is estimated at 8.06 million hectares, or around 83 percent of agricultural lands. Of these, 4.32 million hectares (around 54 %) are private lands, government lands and resettlement areas, all falling under the jurisdiction of the Department of Agrarian Reform (DAR). The remainder (3.74 million ha.) consists of public agricultural lands, including public alienable and disposable lands and some forest lands, falling under the Department of Environment and Natural Resources (DENR). The CARL sets a 5-hectare ceiling on private land ownership. An additional 3 hectares for each of the landowner's children may be retained for owner-cultivation. Land sizes exceeding these retention limits are acquired by the Land Bank of the Philippines (LBP). Landowners must be paid a "just compensation" to be determined in the course of implementation. Up to 35 percent of the compensation may be given in cash, with the remainder in the form of government financial instruments and LBP bonds. The yield is set by the 91-day T-Bill. Landowners may also opt for "voluntary" sale or transfer. Ownership of acquired land is then transferred to cultivators. Persons prioritized to receive transfers are tenants, followed by regular farmworkers, seasonal farmworkers, other farmworkers, tillers of public land and other cultivators. Agrarian Reform Beneficiaries (ARBs) are entitled to no more than 3 hectares of land. In the case of acquired private land, ARBs are required to pay 30 annual amortizations to the LBP at 6 percent interest. Exempted from coverage are lands for public use, livestock and poultry farms, prawn farms and fishponds, and lands converted to nonagricultural use. The last exemption has gained notoriety, given the Local Government Code provision that authorizes local governments to reclassify up to 15 percent of agricultural land in their jurisdiction. In addition, compulsory

Roehlano M. Briones
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acquisition of commercial farms will be deferred for 10 years after the validity of the program. For commercial estates, CARP provides alternative arrangements for asset reform such as stock distribution and profit-sharing. Land acquisition and distribution (LAD) is scheduled by the CARL as follows: Phase 1 (1988-1992): Rice and corn lands under PD 27, idle lands, private lands under voluntary sale or transfer and government lands; Phase 2 (1988-1992): Public alienable and disposable lands, resettlement areas and private agricultural lands in excess of 50 hectares; Phase 3 (1992-1995): Private lands between 24 and 50 hectares; (19941998) private lands below 24 hectares. Other features of the program include prohibitions against sharecropping as well as rental ceilings for leasehold, which are carryover policies of previous land reform legislations. Moreover, land transactions are effectively frozen: land covered by CARP cannot be sold while distributed land cannot be transferred for the next 10 years. (The exceptions are transfers to the government or the LBP, or transfers by inheritance.) Finally, the CARP seeks not only to redistribute land but raise agricultural productivity by providing support services to ARBs as well. These services include the provision of credit, infrastructure, technical assistance and community organization. To operationalize beneficiaries' development, the CARL also provides for the creation of Agrarian Reform Communities (ARCs). These are each composed of a barangay or a cluster of barangays and "primarily composed and managed" by ARBs. In each area, a farmer's organization or cooperative will be identified to take the lead in the agricultural development of the locality. The ARC em bodies in principle the development approach anchored on participation, local empowerment and area integration. The DAR is assigned as the lead agency for CARP implementation. Support services are shared with the Department of Agriculture (DA), the Department of Public Works and Highways (DPWH) and the Department of Interior and Local Governments (DILG), in cooperation with Local Government Units (LGUs). The law also mandates the creation of coordinating bodies at the national, provincial and barangay levels. Members in these bodies include representatives of landowners, farmers and beneficiaries.

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Accomplishments and administrative costs
Official figures on accomplishments regarding land acquisitions and distribution are shown in Table 1a. Not surprisingly, redistribution is most successful for government-owned and public lands as well as land under voluntary sale or transfer. The exception is public alienable and disposable land although the Integrated Social Forestry program (under the DENR) performs well. Least successful is land under compulsory acquisition, which can be readily attributed to landowners' resistance. Such lands represent a fifth of CARP's coverage. Contrary to popular impression, the worst record for compulsory acquisition is held not by those owning the largest areas under CARP coverage but rather, by those belonging to the smallest land category. An oft-cited cause of delay in the implementation of LAD is the disagreement with landowners over land valuation. Land Bank's formula is Table 1a. Accomplishments of land acquisition and distribution, by land type (1972-December 1999) Land type Private Land Tenanted rice and corn (P.D. 27) Voluntary sale or transfer Compulsory acquisition By size category (as of 1996) 25 - 24 ha. 24 - 50 ha. over 50 ha. Total Government-owned and Public Land Under DAR jurisdiction** Public alienable and disposable land Integrated Social Forestry Areas Total Total land (8,061,764 ha.) Scope (% of total) Distributed (% of Scope)

7 8 19 6 4 9 37

87 100* 10 16 2 3 53

16 31 16 63 100

100* 46 90 73 65

*Actual distribution in excess of coverage **Includes land owned by government financial institutions, KKK lands, settlements, and landed estates SOURCE: PARC Secretariat

Roehlano M. Briones
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based on a weighted average of the price from comparable sales, capitalized net income and market value based on tax declaration. Unfortunately, reliable information on capitalized net income and comparable sales are usually unavailable. In the case of sales figures, CARP regulations are part of the reason for data unavailability (Bravo and Pantoja 1998). Low assessment values also preclude reliance on the tax declaration. In the absence of clear information on land values, fiscal constraints probably lead to the landowner's systematic undervaluation of their compensation. Adriano (1994), meanwhile, notes that measures undertaken to prevent corruption (to which land redistribution programs are especially vulnerable) have created a multilayered, horizontally coordinated system, further slowing down implementation. Another problem with LAD is its tendency to perform poorly in regions where land is more inequitably distributed (Table 1b). Consider the two worst performers in LAD, Regions V and VI. Based on the 1991 Census of Agriculture, the Gini ratio of landholding inequality in these regions is 0.81, compared to the national average of 0.57. These two regions account for 23.6 percent of the national CARP coverage. Over-all, it seems that land reform has managed to redistribute land only in places where it was relatively better distributed from the start (World Bank 1999). Table 1b.Accomplishments of land acquisition and distribution, by region: 1972December 1999 Region Western Mindanao Northern Mindanao Cagayan Valley CAR CARAGA Southern Mindanao Central Luzon Ilocos Region Eastern Visayas Central Mindanao Sourthern Tagalog Central Visayas Western Visayas Bicol Region Total Lands (8,061,764 ha.) Percentage of Total Scope 4.4 4.2 7 1.8 4.7 6.7 9.2 3.3 9.6 13.3 9 3.9 13 10.6 100 Percentage Distributed 103 97 95 89 85 85 84 80 68 66 63 53 45 42 65

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Meanwhile, Table 2 details CARP accomplishment by support service type. Credit provision (mostly channeled through the Land Bank) to ARBs reaches a sizeable number of farmers, while total releases average nearly P7 billion annually in nominal terms. Infrastructure provision is unimpressive while no quantifiable benefits from farmer training are available. Finally, it is unclear whether CARP made a substantial difference in the quantity of services being delivered (given that these services are standard fare of government development programs) or in the targeting of these services (i.e., specifically toward new land awardees)..5 Implementation of the CARP is financed by a special fund,6 whose breakdown is shown in Table 3. These are again nominal figures spanning a 12-year interval. Total cost averages less than P5 billion a year, which is only one-fifth of average public agriculture and natural resource expenditures per annum from 1989-1998 (based on data from David and Inocencio 2000). Landowner compensation takes up less than a third of total cost, which is expected given the low rates of accomplishment in distributing private lands. Nearly a quarter of administrative cost is taken up by personnel services, in contrast to the 12 percent allocation for infrastructure, a highly capitalintensive activity. The administrative demands of the program under the over-all fiscal bind can explain this seemingly lopsided allocation.

Field evidence on CARP implementation
Official statistics mentioned earlier present accomplishments on a highly aggregated basis. This section presents findings on the progress of CARP Table 2. Accomplishments of CARP support services (1987-July 1999) Support Service Component Credit Loans released (P million) Number of small farmers benefited Infrastructure Completed roads (km) Communal irrigation service (area, ha.) Extension Number of farmers trained Number of farmers provided technical assistance SOURCE: PARC Secretariat Amount

82,290.50 6,153,380

5,639 67,380

2,767,348 1,739,457

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Table 3. Administrative costs of implementing CARP (1987-1999) Item Landowner compensation Other activities Credit (LBP) Infrastructure Extension Others Personnel services Other items Total SOURCE: PARC Secretariat Amount (P million) 15,685 5,690.70 2,768 6,707.10 2,056.90 3,583.10 13,465.50 5,362.20 55,318.50 % of total 28.4 10.3 5 12.1 3.7 6.4 24.4 9.7 100

implementation at the farm level. This discussion starts off by identifying and describing several "major data sets" specifically designed for CARP evaluation. Most of these data sets are the main vehicle for this study's agrarian reform impact assessment. Except for the panel study conducted by the World Bank (Deininger et. al. 1999), which is based on village surveys, the major data sets emanate from the following nationwide surveys: (1) The Benchmark Survey (covering crop year 1989-1990) (2) The ARB Performance Monitoring and Evaluation System (PMES) Phase 2 (crop year 1994-1995) • • Phase 3 (crop year 1996-1997) (3) The Benchmark Survey of ARCs (crop year 1993-1994) (4) MODE Impact of Agrarian Reform Survey (crop year 1996-1997) Except for the fourth, which was undertaken by a nongovernmental organization, MODE Inc., these surveys were commissioned by the DAR to the Institute of Agrarian and Rurban Studies (IARDS), formerly the Institute of Agrarian Studies (IASt) at the University of the Philippines in Los Baños. These surveys have different sampling frames (i.e., even PMES 3 differs from PMES 2); the closest to a time-series survey is the Benchmark SurveyMODE Survey comparison, although even here significant noncomparables should be noted. Further details regarding these data sets are available in the Appendix.

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Accomplishment of agrarian reform based on the nationwide studies The PMES Surveys describe the average ARB as similar to the typical farmer. The head of the household is usually male, married and in his 50s, with three to four children, and has received little more than primary education. Other surveys with a broader class of respondents do not deviate much from this characterization. The portrait of the beneficiary as a smallholder is justified: according to the PMES 2, average farm size of the ARB is only 2.41 hectares. The MODE Survey estimates average farm size at 2.6 hectares Similarly, the 1991 Census of Agriculture and Fisheries estimates the average farm size in the country at 2.2 hectares. Table 4 shows the distribution of farmers by type of tenure. Sharecropping, an illegal arrangement, accounted for a quarter of the sample in the 1989 Benchmark. The MODE survey shows that, despite six years of CARP implementation, practically the same proportion (25%) of farmers remained as share tenants. Likewise, there is no recorded increase in the proportion of owner-cultivators. Meanwhile, the PMES Surveys, along with the ARC Survey, report a low incidence of sharecropping among ARBs. All of the surveys, though, report higher proportions of amortizing owners compared to the Benchmark 1989 figure. In a separate report, the MODE Survey shows only a minimal change in the number of owners. It further states that only 8.2 percent of owner-cultivators claim to have received their land from the CARP; in contrast, 58 percent inherited their land while 32 percent purchased it outright. Note that the rice and corn are the major crops raised by ARBs (57% according to the PMES 3). Rice and corn are the main crops of all Table 4. Distribution of respondents’ parcels by tenure by survey (in %) Benchmark 1989 Share tenant Leaseholder Owner Owner-cultivator (awaiting certificate) Landless worker Others Total 25 19 6 ARC 1993 9 8 29 MODE 1995 26 15 11 PMES 1994 3 10 18 PMES 1996 7 9 10

35 6 8 100

32 22 100

34.5 5.7 14 100

23 38 100

33 35 100

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respondents in the ARC survey while rice is planted by over 60 percent of respondents in the Benchmark and MODE surveys. The bulk of the reported LAD accomplishments among rice and corn farmers may actually be due to the implementation of PD 27, even prior to CARP. The data in Table 5 regarding support services is not very encouraging. The PMES reports that even among the ARBs, a substantial minority (33%) does not recall receiving assistance from any government agency or unit. Naturally, in the non-PMES surveys that included non-ARB respondents, the proportions of those receiving assistance is much lower than those reported in the PMES. The PMES 3 Survey is more upbeat: 63 percent of ARBs recall receiving government assistance. In this survey, assistance is classified by activity, namely: training (39%), fertilizer dispersal (9%), animal dispersal (7%), seed dispersal (11%), infrastructure (27%), technology transfer (31%), postharvest facilities (4%), marketing assistance (1%) and crop insurance (2%).

Agrarian reform accomplishment based on the panel study
The panel study observes that, consistent with the findings of nationwide surveys, a decade of CARP implementation failed to eliminate share tenancy even in rice farms. Only 12 percent of the sample in 1985 are share tenants, which was the result of aggressive implementation of PD 27 before CARP; in 1988 share tenants still account for 8 percent of the sample. A more alarming trend is the simultaneous increase in landlessness in the surveyed villages. Owners comprised a quarter of the sample in 1985; 38 percent in 1998. Meanwhile, an additional 5 percent of the sample Table 5. Distribution of respondents by availment of support services (in %, multiple responses) Availment With assistance Source of assistance DA DAR DENR DPWH LGU Others PMES 1994 67 ARC 1993 42 MODE 1996 -

67 33 31 11 -

24.9 49 0.8 0.3 10 42.6

41.6 28.3 9.5 -

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became landless. This is probably still an underestimate figure, given the possible out-migration activities. Movement up the "agricultural ladder" therefore seems to have slowed down during the CARP period. While there is an increasing share of ownercultivators (i.e., more and more families reaching the top of the ladder) there is also an increasing landlessness (i.e., more and more families failing to get on the first rung). Former share tenants and landless workers comprised 82 percent of the new owners in 1988 (compared to 1972), but accounted for only 20 percent of the new owners in 1998 (compared to 1985). A probit estimation confirms the observation. This evidence suggests that while PD 27 had been targeted for the poor, the CARP's aimed at other land reform objectives. Apparently, DAR focused on completing the granting of land ownership to leaseholders and awardees of the Certificate of Land Transfer under PD 27. The success of the PD 27 program, in contrast to the laggard CARP, has been largely attributed to the coincident onset of the Green Revolution (Otsuka 1991). Effectively, PD 27 maintained the land incomes and values of the landowners at the pre-reform levels, defusing their opposition. Leaseholders and land awardees, meanwhile, received the income gains from the introduction of modern varieties. There is evidence to suggest that payments of leaseholders are only half that of share tenants precisely because of these lease controls (Otsuka, Cordova and David 1992).

Hypotheses regarding impacts of reform
An earlier section of this study hypothesized that asset inequality is negatively related to future growth, hence measures intended to reduce inequality such as agrarian reform may promote growth later. For the Philippines, however, no study regarding the link between asset inequality and growth has yet been conducted. Balisacan (1999) investigates the link between initial landholding inequality and subsequent regional poverty and finds a strong positive relationship. Quite possibly the causation runs from equality to growth to poverty reduction, although further study is needed to finalize this claim. Another possibility is wealth equality's impact on promoting local consumption linkages, which consequently expands rural industries. Only one study (Ranis, Stewart and Reyes 1989) explores the inequality-rural industry link for the Philippines but even this fails to assemble evidence from village data. Hence, the inequality-rural industry link remains an unsubstantiated, although interesting, conjecture. Focus is therefore shifted on the more specific hypotheses regarding CARP impacts.

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Expected CARP impacts
According to the framework, the land distribution component of the program may enhance economic efficiency. In the case of public land transfer, and perhaps even for government-owned lands, beneficiaries may in most instances be the current occupants. Hence, the transfer essentially formalizes land rights, thus, establishing tenurial security. Given that the bulk of CARP accomplishment in LAD falls under this category (63%, excluding forestry areas which account for another 16%), this is expected to be currently the major source of CARP redistribution benefits. However, note that no studies have been conducted on the productivity gained by awardees of government and public property as an offshoot of the tenure formalization under CARP. This study will hence redirect focus on the impacts of CARP on private nongovernment lands. Credit services supporting CARP also serve to overcome market failures. Meanwhile, infrastructure, technical assistance and even community organizations may be means to give farmers access to public or quasipublic goods, which their markets are ill-equipped to supply. These complementary services are perhaps essential to breaking the dynamic pattern of inequitable land distribution and its accompanying efficiency losses. On the other hand, the program does undermine efficiency in other ways. Some of its features introduce distortions in agrarian markets. Tenancy regulation induces owner cultivation with hired labor, which may be less efficient. On the other hand, the permitted tenancy contract (the leasehold) exposes the tenant to more risk. The regulation of land markets further suppresses their development for land rights. Even as the program aims at expanding an ownership base, nonowners' access to land is restricted. These regulations can further fragment the fragile credit market. In the informal sector, the shift to owner-cultivation and leasehold may sever landlord-tenant ties that are characterized by interlinked credit and costsharing. Restrictions on land access may also constrain the credit ties with other lenders (i.e. traders, input dealers, etc.) who typically practice informal lending where the farmer's share in the produce is used as collateral. In the formal sector, lenders such as banks may experience a dramatic climb in the transaction cost of agricultural lending, as a burgeoning mass of owner-cultivators apply for small loans. In addition, and perhaps most importantly, landowners may find themselves rationed even more severely in the credit market, as the collateral value of their land vanishes in the face of restrictions on land transactions. The protracted and unpredictable implementation of the program is another source of distortion. CARP weakens incentives to invest in land





















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improvements during its implementation phase. Moreover, given that only agricultural lands are covered, a common criticism of the Program (aired especially by vocal farmer groups) is its failure to address evasive land conversion. In sum, these hypotheses summarize the foregoing discussions: (1) Credit, investment, and CARP beneficiaries. Land awardees obtain more credit and accumulate more assets without the program. (2) Land access and CARP. The program restricts access to land, thereby suppressing upward mobility of the rural poor. (3) Credit, investment and landowners. The program reduces landowner's investments in land improvements. • The program reduces aggregate investments due to the diminished collateral value of agricultural landand to scale diseconomies in smallholder lending. (4) Land use and CARP. The program introduces inefficient land use practices due to uncertainty in land rights and excessive regulation of land markets.

CARP impacts on landowners and land use
The incentive effects of CARP on land investment are uncertain. A survey made by of the Management Association of the Philippines in 1990 found that over 60 percent of 39 respondents (farming over 72,000 ha.) either reduced their investments or shelved expansion plans (Llanto and Estanislao 1993). Even granting that this survey is credible, the only other evidence remains anecdotal. Meanwhile, the erosion in the collateral value of land has been looked into by Llanto and Dingcong (1994). They gathered data on borrowings by landowners and agrarian reform beneficiaries and using logit regression, concludes that the probability of being rationed does not depend on the size of agricultural land, which suggests that such property has lost its collateral value. However, the magnitude of the implied credit reduction is unclear. Clarete (1992, as cited in Llanto and Estanislao 1993) has attempted to quantify the welfare losses arising from the loss of collateral value of land, using Computable General Equilibrium (CGE) methods. He estimates the productivity of farming and other primary sectors to fall by 4.7 percent and 3.7 percent respectively as a result of this effect. The annual decline comes to around P2 billion a year. These similations are indicative of the orders of magnitude associated with these losses.

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Some evidence on rising transaction cost has been gathered by Casuga (1994). Based on her sample of 64 formal sector creditors, she measured the transaction cost in 1986 (before CARP) as 4 centavos per peso loan for rural banks. Three years later (after one year of CARP implementation), the transaction cost grew to 9 cents per peso. However, she rightly cautioned against attributing this increase to the program. Likewise, little can be said about the actual land use distortions inadvertently imposed by CARP. Land conversion, a hotly disputed issue in land use, does not appear to reach alarming proportions; approved conversions totaled only 1.2 percent of DAR coverage in 1997, and only 1.3 percent of total rice areas. Even taking into account illegal conversions, such behavior cannot on the whole be seen as endangering CARP objectives. Nevertheless, the future potential for expanded land conversion is a cause of concern, as 88 percent of municipalities lack a land use plan (Gordoncillo et al. 1998). In sum, there is a mild confirmation of hypotheses 3 and 4 but no hard evidence regarding the gravity of the hypothesized welfare losses.

CARP impacts on actual and potential beneficiaries
To determine the impacts of CARP on actual and potential beneficiaries, this section examines issues of credit, capital accumulation and land access. As a prelude, the following reviews existing data on productivity and incomes.

Production and earnings
Yield comparisons by crop are presented in Table 6. The ARBs produced approximately the same yields as the average farmer. The only serious difference is the estimate for rice yield from the MODE Survey. Smaller surveys also suggest that yields of CARP-affected farmers are similar to national yields, for example, Geron (1994). Table 7 presents the magnitude and sources of income. Poverty incidence of families among ARBs is over 60 percent. According to the Table 6. Crop yields of respondents by type of crop by survey (in tons/ha) Crop Rice Corn Copra (annual) National average 1994 2.9 1.8 1.2 1996 2.8 1.5 1.3 PMES 1994 2.9 1.6 1.2 PMES 1996 2.7 1.7 1.4 MODE 1996 3.7 1.7 -

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MODE Survey, around 70 percent of respondents were poor (using a slightly higher poverty line than that employed in the PMES). Note though that, except for the PMES 3, surveys compute sample poverty using total household incomes, hence, requiring the imputation of a family poverty line (unadjusted for household size). These figures are higher than official figures on rural poverty of households (44.4% in 1997). The appropriate data that can be compared with that on ARBs are the poverty rates in agricultural households, for which no figures are available in 1997. Previous studies suggest that agricultural poverty is higher than rural poverty.7 Income from farming accounts for less than half of total household income—a fact corroborated by three surveys conducted in the mid-1990s. Meanwhile, off-farm incomes accounts for only 5 percent to 10 percent of household income; nonfarm income accounts for a large share in earnings. The surveys covering 1996 show that over half of family income is from nonfarm sources. In the ARC Benchmark Survey, nonfarm incomes were apparently the source of inequalities as some of these are OCW remittances; in the PMES 2, however, the distribution of the share of nonfarm income in total income did not vary much across income deciles (Bravo and Pantoja 1999). Household income figures, however, may not be fully comparable across surveys. Consider the net farm income per hectares (gross of rent): the MODE Survey has the figures P17,942 for rice, P6,892 for corn, and P3,830 for coconut. Contrast this with the corresponding PMES 3 estimates: 35,718 Table 7. Income, poverty, and income sources of respondents by survey ARC 1993 Average income (pesos) Proportion below line (%) Sources of income (%) Farm Off-farm Nonfarm 51,939 54.5 MODE 1996 71.7 PMES 1994 47,884 ~60 PMES 1996 54,631 62.8

46.6 8.9 44.5

43 4.9 52.3

47.9 5.5 46.6

42.8 2.7 54.5

7

If Balisacan’s (1997) calculations are extrapolated to estimate the divergence between national poverty and poverty among agricultural-dependent households, the resultant figure is closer (58.5%) to rural poverty of households.

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pesos, 12,801 pesos, and 2,508 pesos, respectively. The divergences are perhaps too large to be accounted for simply by the profit edge of ARBs.

Credit
According to the MODE survey, 47 percent of respondents are dissavings. The PMES 3 reports that 54 percent of ARB respondents made borrowings, a figure close to the 56 percent of the MODE Survey. According to the latter, a greater proportion of ARBs and leaseholders are borrowers, compared to other respondents. Table 8 details the sources of credit. The PMES Surveys seem to show a large increase in credit access. This is due to the unusually low proportion of respondents (30%) who claimed to have borrowed in 1994. Borrowing from formal sources appears quite limited. Instead, respondents who borrowed relied mostly on informal credit. Contrary to popular impression, moneylenders are not the main source of informal credit. Surveys show an important role played by credit coming from buyers (MODE) and suppliers (PMES 3). Credit sourced from buyers is probably an interlinked scheme while the credit from suppliers is probably trade credits from fertilizer, pesticide and seed dealers. Informal lenders demanded collateral only from a few of the borrowers (27%, according to the MODE Survey). The PMES surveys contain data on ARB amortization compliance. A little more than a tenth of ARBs were irregularly paying amortization in 1994. By 1996, this proportion reached one-fifth of ARBs. While the survey Table 8. Borrowing sources of respondents as % of all respondents, by survey (multiple responses) Source Formal sources Cooperative Other formal sources Informal sources Traders Input dealers Moneyleaders Relatives and friends Others PMES 1994 9.1 6.9 2.2 21.5 6.7 2.5 6.9 5.3 0 PMES 1996 13.5 7.6 5.9 40.5 13.5 15.7 6.5 15.7 2.7 MODE 1996 6.4 3.4 21 1.1 5.5 11.4 6.7

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rules out ARB default on a massive scale, no information is available regarding the severity of the default threat among irregular payers. Nor have any studies been conducted on the measures taken by Land Bank to deal with these cases, particularly with ARBs who ceased repayment (7% in 1994). These data show that ARBs are no less productive than average small farmers and even slightly poorer than the typical agriculture-dependent household. There is a significant dependence on nonagricultural earnings, and there are indications that such dependence is growing. Many ARBs borrow, but mostly from the informal sector, where fixed asset collateral is seldom required. Note that the agrarian reform regulations preclude even full-fledged owners-beneficiaries from using the awarded land as collateral for at least ten years upon the awarding. Nor can government credit be expected to substantially offset this, given weak availment rates of cooperative credit, which is the main channel of such credit support. The major question, of course, is whether CARP or agrarian reform in general positively affected productivity and income. The question cannot be answered using the available nationwide studies for two reasons: First, the issue of causation, which can be most effectively addressed by regression analysis,8 is not covered by any nationwide studies. Second, sampling frames differ across surveys, making intertemporal comparison difficult, if not impossible.9

Capital accumulation
The panel study yields productivity and income trends that suggest improving households' circumstances due to agrarian reform. Average household incomes in real terms rose by 46 percent between survey rounds; by 1998, average household expenditure was above the World Bank poverty line. There is, however, no trend found in terms of more diversity of income sources. Agriculture continues to provide the bulk of household earnings.

8

Of course, regression analysis does not establish causation per se but can substantiate the magnitude of an assumed causation. Justification of the assumed causation requires appeal to principles or evidence other than the regression analysis itself. 9 An example of a pitfall in the use of these surveys can be seen in the report of Garilao (1998), which alleges that ARB income increased, by comparing average income of farmers from the Benchmark Survey (P47,884) and that of the ARBs from the PMES 2 Survey (P56,646). The comparison is obviously faulty given that only nominal incomes have been measured, and that any number of other factors may have led to an income change. In addition, it is difficult to compare households composed of affected farmers in a broad sense (Benchmark Survey) with ARBs in the narrow sense (PMES Survey).

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This study used multivariate regression analysis to isolate the contribution of agrarian reform to the trends. The method consists of regressing (in differenced form) an outcome variable against household attributes, time trend and a reform beneficiary dummy. The study found that ARBs were able to provide education to their children as well as accumulate more assets. That is, agrarian reform increased investments in human and other capital. The magnitude of the welfare gains is significant by any standard, as land reform beneficiaries earn 30 percent more than the national percapita income. This study explains these wealth effects based on the idea that an asset transfer lends to growth by encouraging investments and easing credit constraints. The study, however, gives no direct evidence regarding agrarian reform's impact on credit.

Land access
Nationwide studies are largely silent about land access. Village surveys over the last two decades have on the other hand substantiated the notion that agrarian reform restricts access to land. The direct evidence takes the form of tenant eviction: this may have befallen one-fifth to one-half of tenants in Central Luzon and Panay, going by the findings of a survey of five villages in conducted in 1986 (Otsuka 1991). The emergence of permanent labor contracts is a persuasive circumstantial evidence regarding the decline of land access opportunities. A new kind of labor contract in Central Luzon, called the kasugpong, is probably substituting for the prohibited tenancy contracts (Hayami and Otsuka 1993). The proportion of permanent laborers versus landless workers in some Central Luzon villages has increased from virtually zero to around 30 percent by the 1980s, after two decades of PD 27 implementation. Under this permanent labor contract, a worker receives a fixed amount of paddy rice or a small proportion of harvest in exchange for services throughout the cropping season. However, by the fixed nature of the payment to these workers, labor requires constant supervision and is prone to shirking. In the Central Luzon farms, the residual profit from kasugpong farms is around a quarter below those of family-operated farms. More direct evidence on the reform-land access link is given by the panel study. A nonparametric regression finds that ownership of land is strongly related with size of landholding, whereas under a healthy rental market no such relationship could be found. A parametric regression confirms that area cultivated is strongly affected by size of owned land. The welfare impact of restricted access could be substantial: the consumption of

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the landless who later successfully gained land access was 30 percent greater than those who failed. On the whole, the negative impact may well have exceeded the benefits of agrarian reform. Prohibitions on share tenancy as well as rent controls deny the landless the opportunity to rise in the "agricultural ladder." Adverse equity and efficiency consequences are expected to the extent that poverty is concentrated in this sector, as is the finding of income studies (Balisacan 1993; David and Otsuka 1994).

Implications for policy
If the hypotheses mentioned earlier hold for the Philippines, then the policy prescriptions for changing course in agrarian reform become clear. The experience of World Bank-supported land reform programs may be used to enumerate a set of broadly stated best practices (Deininger and Binswanger 1999). The World Bank policy agenda proposed in the mid-1970s were focused on the following desirable goals: owner-operation, active land markets and egalitarian asset distribution. Their merit has been largely confirmed over a quarter of a century. Add to this a few more hindsight/ ideas. One is that land transfers should be accompanied by broader efforts to improve related markets and infrastructure. Another is that the reform process should take into account the considerable potential of markets for land rentals and sales in promoting land access and egalitarian land distribution. Restrictions on tenancy and land markets must therefore be lifted (Otsuka 1999). A recommendation is to shift away from crudely coercing land distribution and toward the more subtle form of coercion, land taxes. Progressive taxes on land, and taxes on idle land are highly favored as relatively efficient instruments for indirect land redistribution (Hayami, Quisumbing and Adriano 1991). The revenue potential from progressive land taxes is respectable, judging from the CGE simulations of Habito (1989). The administrative demands of levying such taxes are however daunting, particularly at the national level. First, landowners would be likely to misdeclare land ownership and quality. Second, land taxes encounter considerable coordinated opposition from landed interests, particularly when they see it as an pure tax burden, whereas the constituency for such taxes are poorly organized (Skinner 1993). An emerging consensus on land reform is to back up tax instruments with "negotiated" solutions and implement in a decentralized fashion with reliance on beneficiary participation (Deininger 1999). This strategy is

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counter to the "voluntary" nature prevailing in the CARP. Deininger et al. (1999) suggests that the opposition may be mitigated by tying revisions in the tax regime with the lifting of restrictions on land markets or even of ownership ceilings. While other analysts refrain from recommending a repeal of retention limits (as advocated by Hayami, Quisumbing and Adriano), there is a broad consensus among economic analysts regarding the "reform of land reform."

Research issues: agrarian
This summary recapitulates the general link between equity and growth in the Philippines as well as the impacts of agrarian reform on landowner investment and intended beneficiaries. First, the positive relationship between land ownership equality and future growth is yet to be convincingly established from Philippine experience. It is a fact, however, that asset equality is positively related to future poverty reduction. Because of this and other considerations, there are good reasons to expect the posited relationship to hold. The requisite test is not too demanding; one only needs to conduct an analysis, perhaps on a regional level, and compare area growth rates with some measure of initial asset inequality. The available measure pertains to operational landholdings (available from the Census of Agriculture and Fisheries). A more demanding but still feasible exercise may be to use as a measure the inequality of land ownership. It is possible to work on the existing DAR and Land Registration Authority records to assemble a database on recent land ownership patterns by region, and compare this with subsequent growth rates. In this vein, much work still needs to be done on the relationship between income inequality, local linkages and the growth of rural-based industries. Data from ARCs can help frame this particular thrust. Second, evidence concerning foregone landowner investment due to agrarian reform remains little more than anecdotal. An intensive data gathering---from landowners, banks to other financial intermediaries---is recommended to quantify the investment losses attributed to agrarian reform. Preliminary efforts based on rapid appraisal methods will be a good start. Third, there are yet no nationally valid evidence on the contribution of agrarian reform to incomes and assets of beneficiaries of private land redistribution. Data gathering should focus not merely on ARBs but rather on representative samples of the rural population; data should focus on production, income, credit, assets and education. If possible, impacts from various agrarian reform interventions should be isolated. Moreover, nationwide surveys of rural households should be undertaken repeatedly and consistently. The

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past decade has seen several lost opportunities for a time-series study that tracks trends for beneficiaries and nonbeneficiaries. Fourth, the implications of land market regulation on land access, equity and poverty should be quantified at the national level. Findings on land access trends based on village studies need to be integrated at the national level; this is a must since out-migration may conceal the magnitude of rental market suppression. Hence, these nationwide studies must be representative enough to include a sufficient proportion and number of the landless. The existing nationwide surveys nevertheless can be mined for further information, if not about trends, at least about the link between land access and ownership. Moreover, a well-rounded analysis should include those on agrarian contracts that may arise to circumvent the land market restrictions. Research should proceed beyond the already well-researched villages and provinces and into other informal rural markets all over the country. Fifth, practically no work has been done regarding the productivity and welfare impacts of providing tenurial ssecurity to occupants of government and public lands. The gap in agrarian reform research is striking, given the concentration of land distribution accomplishment in government and public lands only. Research specifically intended at quantifying CARP impacts only (i.e., not the cumulative effects of all land programs undertaken in the country) should probably take this issue as a starting point. Sixth, policy research may begin to seriously investigate tax-oriented, and otherwise noncoercive schemes for agrarian reform. While evidence on the harmful effects of current land reform efforts is yet to be finalized, the implementation roadblocks currently being encountered pose strong objections to the drive to complete CARP within its current set-up. Innovative approaches to rural land markets should now begin to draw the attention of policy analysts and policymakers.

Property rights reforms in fishery and forestry
There are three reasons why the current fishery and forestry use tends to lead to excessive extraction. The first two are static allocation problems, while the third refers to dynamic tradeoffs between current and future uses of a resource. The following incorporates standard textbook treatment of these issues (e.g., Johansen and Lofgren 1985).

Open access
Fishery and forestry resources are regarded as common pool resources (CPRs) that are subject to multiple use, difficulty in exclusion and rivalry in the extracted resource, i.e., fish catch or logs (Ostrom, Gardner and

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Walker 1994). The problem of the "commons" (i.e., an open access problem) was pointed out in a seminal paper by Hardin (1968). Consider a resource stock that yields a homogenous harvest to users upon application of effort. Suppose the cost of each unit of effort and the price of the harvest are constant. Also assume the set of users is the industry, and industry effort is subject to diminishing marginal product. In the region of diminishing returns at the margin, average product exceeds marginal product and is falling. Open access implies free entry; hence, equilibrium is reached when the marginal user earns zero profit. This implies equality between average product and marginal cost of effort. The optimum though is at the point where marginal product equals marginal cost. The equilibrium effort implies over-harvesting of the resource. A user is unable to take into account the external effect of his/her own effort on the harvest of others.

Offsite services
Natural resources such as forests provide a wide range of environmental services (watershed maintenance, erosion control, wildlife preservation, etc.). When forests are felled, the loss of these services involves a cost above that of the extractive activity itself (e.g., timber cutting and hauling). The extraction cost and offsite cost together comprise the social cost. A private sector firm will extract timber until the marginal cost of extraction equals the unit value of the timber. Since social optimum involves equality of the unit value of the timber with the marginal social cost, the private firm's equilibrium involves excessive extraction. Take for instance a logging company's decision that does not consider the costs imposed by downstream siltation of lakes and reservoirs; here, too little forest cover in the end will be maintained.

Intergenerational concerns
The foregoing discussions refer to externalities imposed by a user on other current users. There is still a different type of externality imputed to future users. This is the concept of sustainability. Consider once again a given resource that yields a homogenous harvest. To isolate the intergenerational aspect of the exploitation problem, consider the case of a privately-owned resource, where extraction involves no offsite costs. Let the discount rate be r. Various stock levels of the resource are possible, ranging from the minimum threshold to the maximum carrying capacity. Below the threshold, the population declines to zero; beyond the carrying capacity, the stock will also tend to decline. In between the threshold

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and the carrying capacity, the stock grows. The growth rate at first increases with the stock level, then decreases to zero as it approaches the carrying capacity. At equilibrium, the harvest equals the growth rate; hence, the resource stock remains constant. The equilibrium stock is that level where the (positive) change in growth rate equals the discount rate. If the discount rate increases, the equilibrium stock falls (so as to realize greater changes in the growth rate). It is quite possible for the discount rate to be sufficiently high such that the short-term equilibrium stock is set below the threshold level— implying complete extraction of the resource in the long run. The problem with the equilibrium solution is that the value of the resource and the discount rate are set only by the current generation. Compared to valuation that represents scenarios for future generations of users, the harvest price may be too low or the discount rate too high. The problem becomes more stark when long-run equilibrium entails extinction of a species; the willingness to pay of future generations for some positive population is not captured by the market.

Regimes for reducing exploitation Regulation and taxation instruments To correct these externalities, the country should find a cost-effective means of limiting extraction. The most direct method is command and control. However the geographic sprawl of the CPRs as well as the transportation costs have, in many countries, rendered this instrument largely ineffective (Hyde et al. 1996). Another means is to impose harvest fees or taxes. If set at the right rates, taxes and fees can lead to a complete internalization of costs, although their implementation costs may be high or prohibitive.

Private (individual) land rights
A recent alternative policy is the promotion of property regimes in CPRs. One option is to confer use rights to individuals. Such an option is feasible for forestland, where numerous titling or other tenure programs have been undertaken in developing countries. (It should be noted that, even in theory, conferment of use rights can be effective only against the open access problem. It cannot be regarded as a means to adequately account for offsite externalities.) In practice, establishing private property arrangements must contend with the costs of enforcement. The evolutionary theory predicts that, where benefits of internalization exceed costs, private property rights will evolve. The absence of such conditions is prima facie evidence that private property

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arrangements are too costly. Forest products have low value as well as low marginal extraction cost, whereas the cost of limiting access even for a private landholders is typically large (Hyde et al. 1996). Tenurial programs are often coupled with agro forestry projects. In the framework of the evolutionary theory, this is to raise "the benefits of internalization." Internalization of costs can be facilitated by extension efforts and subsidies packaged as conservation programs. So will a titling program. Successful cost internalization projects suggest that profitability is a critical element; quicker gestation projects are favored by farmers as well. Thus, tenurial security promotes investment and innovation. Interestingly, the greatest threat to security comes from government regulation (Current et al. 1995). For instance, logging restrictions can effectively nullify tenurial arrangements and reduce the incentive to protect the property rights. Ironically, even if private property rights can be effectively enforced, land titling programs (or even the expectation of such programs) may actually hasten deforestation. The perverse possibility arises because occupancy is usually the criterion for obtaining a title---hence, providing an incentive to undertake clearing activities (Angelsen 1999).

Common property
The third option for CPR management is to promote common (in contrast to private) property arrangements. The durability of common property arrangements, some of them rooted in ancient tradition, has motivated numerous attempts to analyze their effectiveness in resource management. At the simplest level, communal arrangements realize economies of scale in protection activities. In terms of production, however, individual rights are typically bestowed on the basis of land clearing and occupancy. Hence, customary tenure is not exactly inimical to commercial activities such as agro forestry (Otsuka 1998). Collective production is not a common feature of communal arrangements, contrary to popular belief; rather, such arrangements provide public goods, enhance equity, undertake riskreduction or help break seasonal labor bottlenecks (Deininger and Feder 1998). Factors conducive for a group to govern its members effectively have been compiled in a famous list by Ostrom (1994), which is based on a wide range of case studies. These factors are: (1) exclusion of nonmembers from the resource; (2) appropriateness to local conditions;

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(3) (4) (5) (6) (7) (8)

membership participation in rule setting; accountability in monitoring; application of graduated sanctions; presence of low-cost conflict resolution mechanisms; recognition by the formal authority; and nesting of cooperative groups in large organizations.

Meanwhile a formal approach typically employs game theory. Common property arrangements are interpreted as a cooperative equilibrium achieved by the players. The more appealing models employ repeated interaction, where the central idea is that exclusion from future benefits can lead to noncooperative behavior. For cooperative equilibrium to be possible, the player must perceive the number of interactions to be indefinite, retaliation from other members credible, and the future sufficiently important (Seabright 1993). Unfortunately, as expressed in the Folk Theorem, cooperative behavior is not the only possible equilibrium. Nor is it clear that a cooperative equilibrium is robust to environmental and group change. One extension of the theory of cooperation is to examine the role of history in the evolution of social norms. Sethi and Samanathan (1996) describes the development of social norms as the evolution of strategies in terms of "replicator dynamics." Strategies are increasingly adopted when their payoffs yield more than the average payoffs. They find that norms of restraint and punishment can be stable, even against the entry of narrowly self-interested players. Another related theory recognizes that communal arrangements need not fit into a cooperative/noncooperative dichotomy; rather, a wide range of success in various aspects of resource management are possible. McCarthy, de Janvry and Sadoulet (1998) regard cooperation as a matter of degree and subject to variable costs. Their model provides a flexible framework for identifying factors that raise or reduce the equilibrium degree of cooperation.

Programs and reforms in the forestry and fishery sectors
The DENR takes the lead in administering programs and implementing policies for the natural resource sector. For forestry, extraction is regulated under Timber Licensing Agreements. The agency is also implementing several programs to address forest denudation as well as upland poverty. the CARP, too, already has tenure programs in forest land, referred to as

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the Integrated Social Forestry Program. Beneficiaries of this program are issued nontransferable Certificates of Stewardship to provide them security of tenure. The oversight of the projects has been mostly devolved to the LGUs since 1991. The Community Forestry Program, meanwhile, assigns forest protection and management to organized communities. The privilege to use and sell forest products is formalized in a 25-year Community Forest Management Agreement. By 1997, there were 66 such agreements covering 173,298 hectares of land. Other community-based programs are the Forest Land Management Program (covering reforested areas) and the Regional Resources Management Program. For fisheries, legislation has been consolidated in the Philippine Fisheries Code of 1998. The other important laws are the Local Government Code (LGC) of 1991, and the Agriculture and Fisheries Modernization Act (AFMA) of 1997. The LGC defined the scope of municipal fisheries to cover waters up to 15 kilometers from the coast. Boats above three tons (which are classified as commercial vessels) are not allowed to fish in these areas. It also expanded the authority of LGUs in administering these areas. The municipal authority was empowered to enforce fishery laws, license municipal fishers, grant privileges to organized fishers in constructing immobile gears and regulate local waters. Meanwhile commercial waters remain the responsibility of the national government, specifically the Bureau of Fisheries and Aquatic Resources. The Fisheries Code as well as the AFMA explicitly expressed the principle of sustainable development in the management of agricultural and fishery resource (Israel and Roque 1999). For commercial waters, licensing and fishing permits are supposed to reflect resource rents as well as regulate harvests to the maximum sustainable yield level. The code also enumerated various sanctions on illegal fishing gear, exploitation of sensitive resources, catch limits, restricted fish species, etc.

Evaluation studies for the Philippines Incentives and environmental degradation Forest denudation in the country is typically associated with upland migration; estimates of upland population range from one-tenth to onethird of the total population. This suggests "push" factors, given declining person-land ratios and nonfarm employment opportunities in the lowlands (Cruz and Repetto 1992). Upland dwellers as well as coastal fishermen comprise some of the poorest sectors in the country, with subsistence

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activities being the norm. Upland poverty itself is sometimes thought to be a contributor to unsustainable land use practices. This notion is, however, not empirically substantiated (Grepperud 1997). Coxhead and Rola (1998) find that "pull" factors in the form of price incentives are also important, particularly for the spread of erosive farming. Lack of access to credit constrains the adoption of conservation measures. Increasing access to credit has, however, an ambiguous impact on soil erosion as land clearing is also positively related with credit access. For the fisheries sector, Israel (1997) found that virtually open access regime in commercial waters resulted in fishing effort far in excess of that required for either maximum economic yield or for maximum sustainable yield. In 1994, fishing efforts should have been reduced by about 12 percent to attain the maximum sustainable yield or by nearly half (45%) to attain the maximum economic yield.

Environmental taxes and subsidies
Environmental observers agree that extraction charges are too low, given the rents earned. In the case of forestry, an early calculation (de los Angeles 1989) found that charges extract less than a tenth of resource rent. For fisheries, large resource rents are likewise being earned but the fees have not been adjusted since the early 1980s (Israel and Roque 1998). However, fee increases may meet strong political opposition; Elazegui and Paunlagui (1999) cite an example of a municipality which could not raise fees due to vehement local objections. Government programs to promote sustainable technology also promote adoption of conservation measures. Adoption rates among cooperators in the Central Visayas Regional Project are higher than that among noncooperators. Moreover, the degree of participation is positively related to the adoption choice. Incomes of cooperators are also shown to be higher than incomes of noncooperators. The former has also increased faster over the program's eight-year implementation (Francisco 1994).

Tenurial security and property rights
De los Angeles (1994) claims that the link between upland conservation and property rights is "no longer debatable." She cites studies which found that the extent and pace of adoption of conservation measures differ between CSC holders and non-CSC holders. Coxhead and Rola (1998) confirm that less secure tenure in the uplands is associated with the adoption of erosive farming.

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As mentioned earlier, tenurial security may be undermined by government regulation. The threat of imposing a total log ban casts a veil of uncertainty over upland property rights arrangements. Most likely, given the enforcement costs, elimination of formal rights will lead to informal encroachment. The de facto open access state may therefore reassert itself. Extreme logging restrictions may unintentionally promote forest destruction (de los Angeles and Oliva 1996).

Promotion of community-based management
Building community organizations is an important factor in the adoption of agro forestry schemes (Francisco 1994). The promotion of co-management (where the State retains ownership of the resource but users also undertake resource management) in fisheries is currently an active research area of the WorldFish Center (formerly the International Center for Living Aquatic Resources Management, or ICLARM). Among the Asian countries considered (Philippines, Vietnam, Thailand, Malaysia, Indonesia and Bangladesh), the Philippines was singled out as having the most experience with community-based management of coastal resources as well as the strongest set of supporting policies and laws. These studies evaluated the ingredients for sustainable common property arrangements, identified by Ostrom (1990, 1994). As listed in Pomeroy, Katon and Harkes (1999), these are: 1(1) clearly defined boundaries; 1(2) clearly defined membership; 1(3) group cohesion; 1(4) existing organization; 1(5) positive net benefits from the member's viewpoint; 1(6) participation by those affected; 1(7) enforcement of management rules; 1(8) legal rights to organize; 1(9) community level cooperation and leadership; (10) decentralization and delegation of authority; and (11) coordination between government and community. Among these, those of "high importance" are numbers 1, 2, 5, 6,7 and 9. To illustrate: in San Salvador and in Malalison Island in the Philippines, the marine sanctuary was clearly demarcated with buoys. All members of the fisher organization were involved in making and changing the rules. The NGOs devote much time and effort in educating fishers

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about the benefits and costs of comanagement. Comanagement was more successful in communities where fishers had positive attitudes toward collective action, and where a strong local leadership was present. Studies that quantify the benefits and costs of co-management are, however, sparse. Katon et al. (1997) analyzed beneficiary perception of the quality of life improvements in Cogtong Bay, Central Visayas. Comanagement in this area began in 1989, when the national and municipal government, together with local fishers, established a regime of coastal resource management. The comanagement project was found to be successful in promoting positive and statistically significant changes in its performance indicators, except for the household income indicator. Not surprisingly, the most significant changes were observed for indicators related to "empowerment." As for the cost side, a study by Abdullah et al. (1997) measured the transaction costs of a fishery comanagement project. This study categorized transaction cost as either information, collective decisionmaking or operational costs. the following are the results of the study (in pesos): Years 1-2 Comanagement Centralized management 1,547,272 1,446,895 Years 3-4 1,113,250 1,467,542 Years 5-8 1,200,200 2,830,847

Figures on centralized management are derived from key informant interviews and other studies. Its total cost is slightly lower than that of comanagement (P3.86 million versus P3.74 million). However, the bulk of the transaction cost of comanagement take the form of initial startup costs. It may be conjectured that comanagement more than compensates these initial costs by requiring lower outlays in later years. Enforcement costs may eventually be lower as community members are more likely to comply with rules formed under participation, than with rules that are externally imposed.

Research issues: fisheries and forestry
The research issues for CPRs can be divided into three broad categories, namely: the link between property rights and environmental degradation; the transaction costs of establishing property rights; and the appropriate set of instruments, in combination with the property rights regime, for managing CPRs.

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The link between conservation practices and tenurial security is well established. What is unclear is whether the promotion of formal individual rights under conventional programs contribute significantly to the control of environmental degradation. Of special concern is whether perverse incentives for land clearing and migration might be created by tenure programs. Except for a few studies on fishery comanagement, there are no estimates available regarding the benefits as well as costs of establishing property rights regimes. More work needs to be done in this area, especially in terms of evaluating and comparing alternative regimes. Emphasis should be both on generating concrete figures over time for particular cases so as to obtain an idea about orders of magnitude as well as relating costs over time to the locality's social and physical environment. An interesting hypothesis for research is that community-based management—when compared to centralized management--- involves large initial investment but low recurring costs. Finally, research should also examine further the appropriate combination of other interventions with the promotion of property rights. Consider pricing issues: a criticism is that fees collected for logging concessions and commercial fishing licenses are too low to capture resource rents. The appropriate level and structure of fees as well the system of fee setting are yet to be specified. Further studies should therefore focus on the appropriate level of fees and process of adjustment. Also, as the Fisheries Code includes a very limited provision on marketbased instruments, analysis of policies in this direction will be a valuable input to future legislation. To date, studies that focus on the increasing role of markets in the tenurial and access schemes are a controversial yet poorlyresearched area. The devolution of oversight functions over the ISF Program as well as of municipal waters presents another important issue. While most observers approve the general intent of the Local Government Code, research on the benefits of the changing of hands on uplands and coastal resource management is yet to be rigorously studied. As most recommendations center on improving the capacity of local governments to undertake the environmental protection, research on governance should specifically focus on capacity-building proposals.

Conclusion
The agriculture and natural resource sectors in the Philippines have undergone extensive property rights reforms, particularly from the late 1980s.

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Recent literature on property rights is replete with empirical evidence across countries and over time, on both favorable and unfavorable efficiency impacts of such reforms. Some carry hypotheses on equity and sustainability and on links between efficiency and equity. Unfortunately in the case of Philippine agriculture, much of these hypotheses have yet to be established. Findings of past studies are mostly based on case studies, where their applicability over a bigger locality is inconclusive. Greater effort should be directed to achieving wider generality. Also, nationwide studies for agrarian reform do not permit time-series comparisons. Nor do they address large coverage areas for reform such as occupants of public and government lands. Though opportunities have clearly been missed, these are part of a rich potential for further research. The very slow reform implementation itself consequently permits extended comparisons between beneficiaries and nonbeneficiaries, which is essential for any statistical analysis of causation. While the literature has indeed burgeoned over time, the absence of a concerted, systematic research aimed at gathering evidence, tracking changes over time, and testing hypothesis arising from a coherent framework is regrettable but not irreparable. By paying heed to what is known and not known about the impacts of property rights reform, further research work can bridge the gap within this decade.

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Appendix The survey frames of the major data sets
The Benchmark Survey, covering crop year 1989-1990, was aimed at providing a basis for comparing the progress of agrarian reform at the farm and household level. Over 8,000 households were drawn from 400 barangays out of 41 provinces having the highest proportions of lands subject to CARP. Sample selection was also stratified by ecological zone (i.e., upland, lowland and coastal zones). The Benchmark Survey of ARCs, like the Benchmark Survey, included both ARBs and non-ARBs among the respondents. Data pertained to crop year 1993-1994. This survey covered 61 ARCs with 3,656 respondents (approximately 60 each ARB). Within each ARC, barangays were stratified by ecological zone when possible. Selection of ARBs and nonbeneficiaries was done by proportional sampling. The MODE Impact of Agrarian Reform survey (henceforth the MODE survey) consisted of interviews of a subset of respondents (around 1,500 in all) from the Benchmark survey. Its sampling design hewed closely to that of the Benchmark Survey. Unfortunately, the survey instrument diverged greatly from that used in the Benchmark survey, making the usefulness of the MODE survey for longitudinal comparison limited. The sample design of PMES was also based on the Benchmark Survey, but its coverage was limited to ARBs under DAR jurisdiction. Phase 2 was a pilot test of the PMES covering 3,411 ARB respondents from 20 provinces. Selection of provinces applied island group statification (Luzon, Visayas and Mindanao) and size stratification (large and small provinces). Meanwhile Phase 3 is yet to be finalized, although summary findings are available. This survey is distinguished by its validity for regional analysis as well as its inclusion of ARCs as a distinct domain. The ARBs are first stratified in terms of residence or non-residence in an ARC. The selection of ARC barangays from each included province is based on categories of LAD accomplishment. For non-ARC residents, selection from each included province is based on a subset of municipalities, followed by a subset of barangays and finally a subset of ARBs in the barangay.





















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Finally, the longitudinal study of Deiniger et al. (1999) utilized villages that had been surveyed by the International Rice Research Institute as well as the International Food Policy Research Institute in 1985, 1989 and 1998. The 1989 survey was able to collect information on inheritances, assets and the history of land transactions. Five villages were covered: two in Central Luzon and three in Panay island. In each area, the sample included one village with irrigated rice land and a favorable agro climatic environment, as well as one village with rainfed production combined with supplemental irrigation. The fifth village (in Panay) had an unfavorable upland environment.

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References
Abdullah, N., N. Mustapha, R. Pomeroy, E. Genio, A. Salamanca. 1997. Transaction costs and fisheries comanagement. Universiti Pertanian Malaysia and International Center for Living Aquatic Resources Management (ICLARM) Serdang Selangor and Manila: Fisheries Comanagement Research Project. Manila: ICLARM. Adriano, L. 1994. DAR, land reform-related agencies and the CARP: a study of government and alternative approaches to land acquisition and distribution. Philippine Institute for Development Studies Discussion Paper No. 94-13. Makati City: PIDS. Aghion, P., E. Caroli and C. Penalosa. 1999. Inequality and economic growth: the perspective of the new growth theories. Journal of Economic Literature 37(4): 1615-60. Alwang, J. and P. Siegel. 1999. Labor shortages on small landholdings in Malawi: Implications for policy reforms. World Development 27(8):14611475. Baland, J. M. and J. P. Platteau. 1997. Wealth inequality and efficiency in the commons (Part 1). Oxford Economic Papers 49(4):451-482. Balisacan, A. 1993. Agricultural growth, landlessness, off-farm employment and rural poverty in the Philippines. Economic Development and Cultural Change 41:533-562. Balisacan, A. 1999. Land inequality, asset accumulation and poverty in rural areas of the Philippines. Paper presented at the Biennial Convention of the Philippine Agricultural Economics and Development Association, Philippine Trade and Training Center, Manila, 19 February. Balisacan, A. 1997. Getting the story right: Growth, redistribution and poverty alleviation in the Philippines. Philippine Review of Economics and Business 34(1): 1-37. Banerjee, A. and A. Newman. 1994. Poverty, incentives and development. American Economic Review 84(2):211-215. Benjamin, D. 1995. Can unobserved land quality explain the inverse productivity relationship? Journal of Development Economics 46(1): 51-84. Binswanger, H. and K. Deininger. 1997. Explaining agricultural and agrarian policies in developing countries. World Bank Policy Research Working Paper 1765. Washington D. C.: WB. Binswanger, H., K. Deininger and G. Feder. 1995. Power, distortions, revolt and reform in agricultural land relations. In Handbook of development economics edited by J. Behrman and T. Srinivasan. Volume 3. Amsterdam: Elsevier.





















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