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Republic of the Philippines .
HOUSE OF REPRESENTATIVES ~
Quezon City

16" Congress
First Regular Session

House Bill No._ 275

Introduced by HON. PRYDE HENRY A. TEVES

EXPLANATORY NOTE

Recent surges in the world price of rice and the increasingly tight global supply of rice
have been raising fears of food crisis in many parts of Asia where rice is a staple. Trend in
international rice prices has been on the rise since 2001. On the average, rice prices for the first,
ten months of 2007 was 35% higher at US $297/ton compared to the same period last year at
US$22I/ton. International price of rice continued to rise early 2008. For instance, the high
quality Thai 100%-B was quoted at US$346/ton in March 2008, up by 13% compared to
February of the same year.

Many experts believe that the price trend in the global market for rice will be sustained
The high costs of oil and fuel-based chemical fertilizers, the prevalence of crop diseases, the
emergence of chemically resistant pests, and the growing impact of climate change have been
largely blamed for the price spikes in the world market.

The Philippines’ vulnerability to fluctuations in the supply and price of rice in the global
market has been underscored by its dependence on importation to fill domestic production
shortfalls. Already, the country has been one of the largest importers of rice, accounting for 6%
of total rice imports in 2006-2007 (FAO,2008). This is partly due to production efficiency
disparities between domestic and foreign rice producers in addition to spiraling costs of
production inputs.

On the local front, the aforementioned factors in addition to market speculations of local
rice traders have fueled retail price increases. For 2008, a comparison of the January and April
domestic average retail rice price-levels displayed a 37.47% uptrend for regular-milied rice and
31.72% price increase for well-milled rice (Bureau of Agricultural Statistics, 2008).



‘Thus, the government needs to re-evaluate and subsequently redefine its short-run and
long-term priorities and resources aimed at improving rice productivity. The formidable
challenge confronting the government involves the attainment of food (rice) security in licu of
food sufficiency.

‘A pragmatic and effective approach to the problem is by encouraging more private sector
participation in agricultural production. Deeper private sector involvement will bring in the most
productive inputs and technologies available to help improve farm business structures in the
country. It must be noted that about eighty (80%) of landholdings in the country are
occupied/leased by small farmers which do not have the necessary resources and skills to
increase farm yields.

Toward this end, this Act seeks the adoption of a “corporate farming” scheme with the
private sector taking the lead role to promote food security. Specifically, this requires the
country’s most profitable corporations to engage in agricultural production to feed their own
employees. In addition, corporations and other business entities shall be required to engage in
corporate farming with rice as their primary crop. Vast tracts of unused public lands can be
tapped for such corporate farms. Corporations can also enter into joint venture agreements with
farmer beneficiaries of agrarian reform communities. As such , employers will not be able to
feed their own employees but also ensure the provision of adequate supply to local consumers.

‘There are two types of facilitating policies that are relevant to corporate/contract farming.
One involves regulatory regime adjustments to reduce transaction costs of contractual
arrangements. The other involves providing incentive mechanisms to encourage corporate
farming.

With the aforementioned effectively in place, corporate farming systems help eliminate
the chain of middlemen and bring the producers and processors face-to-face. In the long-run, it

leads to better allocative efficiency, induces higher private investment in agriculture, and results
in higher outputs, income and exports.

Y
PRYDF HENRY A. TEVES


Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

SIXTEENTH CONGRESS

First Regular Session

275

HOUSE BILL NO..

BY REPRESENTATIVE PRYDE HENRY A. TEVES

AN ACT PROMOTING CORPORATE FARMING AND PROVIDING INCENT!
THEREOF

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Domestic Corporations and Partnerships. ~ For the purpose of this Act.
domestic corporations and partnerships shall refer to all corporations and partnerships organized
and existing under Philippine laws, operating for profit: Provided, That the corporations and
partnerships report earnings over the last four (4) years that will allow them to engage in the
production of rice/corn for their employees requirements without adversely affecting their
financial viability. Appropriate guidelines shall be issued to determine the corporations and
partnerships that are to be covered by this Act.

SEC. 2. Corporate Farming Arrangements. ~ Participation in the Corporate Farming
Program shall be on a voluntary basis. For the purpose of this Act, the following are the
corporate farming schemes that the corporations/partnerships may engage in:

(a) Corporations and partnerships with existing landholdings suitable for rice/corn
production may manage the land and produce the rice/com or may enter into a
management/contractual arrangement with farmers’ groups such as_ farmers”
associations, cooperatives and agrarian reform communities (ARCs):

(b) Corporations and partnerships may purchase or lease on a long term basis, public or
private agricultural land suitable for rice/corn production, whereby the
corporations/partnerships are given full management and production control over the



purchased or leased lands or may enter into contractual arrangements, or joint
ventures with landowners, farmers’ organizations and ARCs

Agricultural lands purchased or leased for the purpose cannot be converted to other
uses within a period of seven (7) years. Fifty percent (50%) of the land should have been
developed within a period of three (3) years, and ninety percent (90%) within a period of
five (5) years.

For purchased lands, the government has the right to offer the said lands to other
interested parties based on the original acquisition cost and initial development cost, if
any, to be refunded to the corporation/partnership, in case the land has not been
developed as intended; and

(c) Corporations/partnerships may enter into a contractual arrangements with farm
organizations/ARCs, whereby the corporations and partnerships will provide the
production inputs and technical and related services, then buy back the produce;

(d) Corporations and partnerships may enter into joint ventures/contractual arrangements
with timber licensees and pasture lessees for the cultivation of lands found suitable
for rice/corn production in the timber concessions or leased pastures: through the
Department of Environment and Natural Resources.

‘The local government units (LGUs) shall be required to identify appropriate land
areas for corporate farming in consonance with their comprehensive land-use plan and
ordinances. The LGUs shall require the participating corporations or partnerships to
provide livelihood projects/opportunities to families who will not be hired by the said
entities. Further, the LGUs may also identify local taxes that may be offered as incentives
for corporate farming.

SI

. 3. Disposition of Excess Production. — Participating corporations or partnerships

shall be required to provide a minimum of six hundred (600) kilograms of rice/corn per year or
fifty (50) kilograms per employee per month. Production in excess of the employees’
consumption requirements may be sold in the local markets: Provided, That such will be
reported to the National Food Authority (NFA)

SEC. 4. Implementing Agencies and Implementing Rules and Regulations (IRR). ~ The

Department of Agriculture (DA) and the Department of Agrarian reform (DAR) shall be the lead
agencies to institute measures to ensure higher rice/corn productivity through corporate farming

schemes. Moreover, the DA and the DAR s!

| facilitate with the appropriate government

agencies the processing of management contracts between the corporations/partnerships and the
farmer’s groups. Further, the DA and the DAR shall oversee and monitor the IRR and guideline
of this Act. The Da and the DAR shall exercise the following functions:


(a) Develop eligibility criteria for both corporations/partnerships and farmers’ groups,
cooperatives and/or ARCs for consideration under this Act and to institute their
accreditation: Provided, That the farmers’ group criteria should include management
capabilities, technical and production skills critical to the effective operation of the
corporate farm;

(b) Identify suitable private and public-owned rice/eorn production areas for corporate
farming and determine the maximum ceiling of landholdings for corporate farming
arrangements; Provided, That the DA and the DAR shall periodically determine the
need to expand/reduce rice/corn production areas for corporate farming schemes on
the basis of rice/corn demand-supply gaps;

(c) Facilitate and promote grassroots cooperation to access agricultural services such
information, inputs and technical assistance;

(d) Initiate and develop periodic rural/farm assembly markets to provide avenues to
showcase their produce;

(e) Exercise regulatory functions with respect to all adherence to the provisions of
contracts and arrangements entered into by both corporations/partnerships and
farmers’ groups, cooperatives and/or ARCs and to develop mechanisms to facilitate
negotiations and mediate in disputes between stakeholders on matters of contract
enforcement;

(®) Coordinate with the appropriate government agencies to ensure the timely
establishment of support services such as credit, infrastructure, extension services and
others;

(g) In consultation with other concerned government agencies, non-government
organizations, private sector and farmers’ groups involved in rice/eorn production,
formulate the IRR necessary to operationalize the provisions of this Act within
ninety (90) days from its approval; and

(h) Facilitate the registration of the participating corporations/partnerships with the NFA.

SEC. 5. Incentive Package. ~ Corporations and partnerships which shall participate in the

Corporate Farming Act shall be entitled to tax incentives covering all aspects of the operation
germane to corporate farming activities. These include the following:

(a) Exemption from the payment of customs duties on the importation of all types of
agricultural inputs, particularly seeds, fertilizers, agricultural machinery and other
agricultural implements as provided under Republic Act No. 9281, which amends
Republic Act No. 8435 or the Agriculture and Fisheries Modernization Act;

(b) Exemption from payment of value-added tax (VAT) on the importation of
agricultural inputs in accordance with Section 109 of the National revenue Code, as
amended;


(c) Exemption from the payment of capital gains tax for a person, either natural or
juridical, who sells and/or transfers idle agricultural land to corporations and
partnerships engaged in corporate farming.

SEC. 6. Other Incentives. ~ Loans extended by banks, both government and private, 0
participating corporations/partnerships shall be treated as compliance with Republic Act 10000
or “The Agri-Agra Reform Credit Act of 2009.”

SEC. 7. Duration. ~ Participating corporations/partnerships with existing landholdings
may engage in rice/corn production within a period of time to be determined by this Act.
However, those corporations/partnerships which have purchased agricultural lands for the
purpose cannot convert the land to other uses within a period of seven (7) years.
‘Arrangements/negotiations for leased public or idle private agricultural lands shall be for a
period not less than seven (7) years.

SEC. 8. Automatic Review - The DA and the DAR, being the lead government agencies
in the Corporate Farming Program, shall submit periodic reports to both Houses of Congress on
the accomplishment of the Program. A review on the viability of the program shall be made by
the concerned agencies after five (5) years of its implementation.

SEC. 9. Separability Clause. ~ The provisions of this Act are hereby declared to be
separable, and in the event one or more such provisions are held unconstitutional, the validity of
the other provisions shall not be affected thereby.

SEC. 10. Repealing Clause. ~ All laws, decrees, executive orders, rules and regulations,
issuances or parts thereof inconsistent with the provisions of this Act are hereby repealed or
modified accordingly.

EC. 11. Effectivity. ~ This Act shall take effect after fifteen (15) days following its
publication in the Official Gazette or in a national newspaper of general circulation.

Approved,