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2 August 2008

Foreign aid and CARP extension

By Saturnino Borras Jr., Mary Ann Manahan, Eduardo C. Tadem

The authors are involved in a policy-oriented study on ODA and agrarian reform in collaboration with several researchers, the Asian regional office of the Belgian Coalition of North-South Movements or the "11.11.11-Pilipinas" and the Focus on the Global South. Saturnino M. Borras Jr., Ph.D., is Canada Research chair in International Development Studies at Saint Mary’s University in Halifax, Canada. Mary Ann Manahan is a research associate with Focus on the Global South, a policy-based think tank in Thailand, India and the Philippines. Eduardo C. Tadem, Ph.D., is associate professor of Asian Studies, University of the Philippines Diliman.>

OPPONENTS OF EXTENDING THE COMPREHENSIVE Agrarian Reform Program (CARP) insist that we suspend land redistribution and focus assistance on the farmer households that have received land under the program. We argue that it is not a question of land redistribution versus support. The challenge is how to effectively assist land reform beneficiaries while completing land redistribution.

Significant on paper

The government must not abandon land distribution at this time. On paper, CARP’s land redistribution is significant. The Department of Agrarian Reform (DAR) claims that CARP has redistributed nearly 6 million hectares of land and changed tenancy relations in another 1 million hectares, benefiting about 3 million poor farmer households.

Aside from actual distribution being likely lower than what DAR claims, the fact is 1.4 million hectares of private agricultural lands remain to be distributed. Without CARP extension, no funding will be allocated and land redistribution, which is at the heart of land reform, is killed.

Neither should providing support be abandoned. Land redistribution will come to naught if the economic viability of redistributed farms is not promoted.

Development assistance

Addressing land redistribution and support requires substantial funding. Completing the unfinished redistribution component alone will require P160 billion. On top of this, P66 billion more is needed for continued support services. Given the precarious fiscal position of the government and the low priority given to land reform, the extension of CARP funding beyond this year is a contested issue indeed.

In the past, the lack of funding commitment from national government increased reliance on official development assistance (ODA). Agrarian-related ODA to the Philippines has substantially increased since the early 1990s. While this can partly be explained by the global trend to support these kinds of asset-reform programs, reform-minded agrarian reform secretaries have also played a role.


Under Ernesto Garilao, DAR was able to gain the trust and confidence of foreign donors. Since 1995, DAR has generated P57.8 billion for 56 projects in ODA loans and grants. This is significant considering that the total budget for CARP from 1988 to 2007 was P130 billion or P6.5 billion annually. Interestingly, despite CARP’s uncertain future, 28 projects worth P31.5 billion are still in the pipeline.

While sustaining CARP, heavy reliance on ODA has its downside. For one, it contributes to the debt accumulation of the government. Of the total investment requirement for foreign-assisted projects, the ODA loan-grant mix is highly skewed in favor of loans.


The share of loans is 61 percent, while that of grants is only 10.6 percent. The remaining 28.4 percent is funded through Philippine counterparts, in cash or in kind, from the national government agencies, local government units and agrarian reform beneficiaries’ organizations or cooperatives. For 2008, DAR is responsible for as much as P21 billion of the country’s external debt.

For another, ODA has strings attached to it that may not be the best approach to CARP effectiveness. In terms of sectoral allocation, since 1995, 60 percent (4,091 subprojects worth P18.4 billion) went to infrastructure development such as farm-to-market roads, irrigation systems, post-harvest facilities, potable water systems and solar dryers.

Social dimension

While infrastructure-related and enterprise-building projects are urgently necessary in agrarian reform communities (ARCs), they can also cause problems. This happens when such projects are undertaken without regard for the social and political dimensions of agrarian reform such as organizing and capacity-building for land reform petitioners and rights advocacy groups.

Community and institutional development support, agricultural productivity and rural enterprise development, basic social services, gender and development, and land tenure improvement have taken a back seat.

Only 262,638 land reform beneficiaries were organized in formal associations and 91,919 land-reform-beneficiary leaders were provided with training activities on organizational development, agricultural productivity and others.

Turning a blind eye

This represents only 40 percent and 1 percent, respectively, of total land reform beneficiaries reached by ODA. This is a lackluster record when compared with the physical infrastructure component.

Ownership of projects is another key problem in ODA. While donor countries acknowledge the importance of ownership of projects, they, however, turn a blind eye to demands to provide funds directly for land acquisition and distribution. The reason behind this is the perception that land markets would be distorted if ODA funds are channeled to landowners’ compensation.

On the other hand, when donor countries express interest in land distribution such as in the case of the World Bank’s Market Assisted Land Reform (MALR), their framework can even undermine the potential redistributive impact of land distribution. The MALR operates in a "willing buyer-willing seller" framework, which encourages land transfer through the market.

A local version, the World Bank-funded Community-Managed Agrarian Reform and Poverty Reduction Project (CMARPRP) was found to be marked by highly questionable land transactions (with relatives of landowners ending up as beneficiaries), inappropriate projects and interventions by landlords and speculators.

Contested impact

There is also the German Technical Cooperation (GTZ), which proposes to focus only on support services, abandoning physical land distribution as indicated in its 2006 Post-2008 CARP Scenarios study.

The extent of ODA’s impact on the agrarian reform process is contested. DAR reports that, as of 2008, ODA infrastructure projects have reached half a million beneficiaries. DAR also claims that 329,160 jobs were generated, with 60 percent coming from road construction. Thus, most of the jobs were of short-term nature and therefore no sustainable employment opportunities were generated by ODA funds.

DAR recently evaluated four of its foreign-assisted projects covering 280 ARCs. It said that poverty incidence in the project sites declined by about 3 percent to 7 percent and that the average annual household incomes increased from 44 percent to 49 percent, based on 2005 data.


These findings are welcome but not significant enough given the average national annual household income at 2006 prices of P172,000.

As the main mechanism for DAR’s extension of support services, ARCs suffer from glaring inadequacies. The majority of ARCs have, in fact, not received any DAR assistance at all. There are 1,959 ARCs nationwide covering 995,114 beneficiaries, or only 32 percent of total CARP beneficiaries. Of these, only 1,078 ARCs (79 percent) are beneficiaries of ODA projects covering 655,437 beneficiaries. Of those that received ODA funds, most have pending land disputes; thus support went to landowners. Two-thirds of beneficiaries (2 million of 3 million) remain outside the ARCs.

Assessing the impact of ODA in land reform vis-à-vis the avowed objectives is more difficult. Usually, the main objective of projects is to "alleviate rural poverty and agricultural stagnation." It will be next to impossible to isolate the direct contribution of the ODA-funded projects since many of them have focused interventions in specialized communities, i.e., ARCs, and do not deal with regional socioeconomic planning.
Power and bargaining

The significant impact and value of ODA for agrarian reform lie in the realm of politics. Throughout all its stages, ODA involves a political process of negotiations at different levels-between donors and recipient countries, between recipient countries and implementing agencies, and between implementors and end users. It is about power and bargaining, i.e. those in power can influence where the money goes and who gets the money.

To the extent that CARP has been a "milking cow" for ODA projects and a source of political patronage, antireform forces, especially in Congress, opportunistically cater to ARCs and inadvertently become de facto land reform allies. Legislators can pressure DAR to include their provinces or districts in the list of ARC targets. In fact, the debates in Congress repeatedly referred to the importance of ARCs. In the lower house, House Bill No. 4077, includes the provision for the creation of a "minimum of 3 ARCs Š per year Š in each legislative district with a predominantly agricultural production." In effect, ODA helped to shield CARP against antireform forces within government.

Addressing contradictions

The problems arising from relying on ODA point to two things with respect to addressing CARP funding.

First, we all need to take an active role in shifting the thrust of ODA to make it more responsive to Philippine agrarian reform objectives. For instance, for ARCs to truly work, security of tenure is needed and this means seriously undergoing the highly political and controversial, yet necessary component of agrarian reform, i.e. land acquisition and distribution.

Second, the government must seriously rationalize its policy of passing on to the ODA donor community the responsibility of CARP funding. The tendency to pass funding responsibility to the ODA community highlights the low priority given by government to CARP, despite its policy pronouncements. This is confounded by macroeconomic policies that tend to defeat and undermine the gains expected from agrarian reform.

For instance, land reform beneficiaries lacking support services and who are still socially and economically weak are unable to compete in an environment of liberalized entry of agricultural produce. Instead of targeting land reform beneficiaries, the Department of Agriculture has prioritized the agribusiness sector. The task of transforming land reform beneficiaries into a competitive sector has been left to DAR, with its technically challenged personnel and limited funds.

Urgent and necessary

In the end, the major hurdle for CARP’s extension is the low priority accorded to land reform by the Arroyo administration. Its CARP performance is the worst since 1988 with a mere 13.86 percent share of land reform output compared with the Ramos administration’s 52.34 percent and the Aquino administration’s 22.51 percent. The Arroyo administration’s performance was only slightly better than the Estrada administration’s 9.24 percent share but former President Joseph Estrada had only 2.5 years compared with President Macapagal-Arroyo’s seven.

In conclusion, ODA funds for land reform have been significant, but far from adequate and in many instances, even inappropriate. The key need, therefore, is to highlight the government’s obligation in completing land distribution, ensuring the economic viability and political empowerment of land reform beneficiaries, and ushering in a lasting era of rural social justice. This is not an "either or" issue. Within the above context, the extension of CARP is both urgent and necessary.


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