Raising Farmer Incomes through Farm Machinery

It sounds simple: provide farmers with machines that will increase their yields, and their incomes will rise, lifting them out of poverty. Unfortunately,  it is a bit more complicated than that. There are several reasons why the Philippine government and most NGOs are reluctant to provide farmers with large-scale farm machinery.

One problem, it seems, is that it is difficult for farmers to properly manage high-capacity machines. High-capacity machines like tractors require a high level of organizational efficiency and discipline. Since a tractor could plow large swaths of land (up to 300 hectares), there would inevitably be a mad scramble for its services; and cooperatives could not service all requests.  Ensuring that qualified people operate the machine at all times is also difficult. Also, if the tractor is given (for free) to a cooperative, the cooperative will tend to charge too low prices for its use; leading to problems in financing repairs and eventual replacement.
In other countries, cooperatives mostly bungled the management of farm machinery.

Alternatively, the government could take direct charge of the machines (as was the case in the Soviet Union). This solution was often quite unsatisfactory; it led to enormous bureaucratic bottlenecks and massive corruption.

Then, there is the reluctance to displace farm workers who would otherwise do the work. On close examination, this is only partly true: machines (e.g. tractors) would mostly replace draft animals like the carabao. Moreover, the logic of ‘providing employment’ is illusory. If agricultural development is held back by the lack of machines, farmer incomes would stagnate and even decrease, resulting in many farms being left idle. And this results in less work for farm workers. On the other hand, farm machinery would need workers to operate and service them; and the increased production as a result of the machines will stimulate farmers to bring more land into production. Increased farmer incomes would lead to other agricultural activities e.g. vegetable growing, poultry raising,  which are quite labor intensive.

International NGOs have another problem with mechanization – machines are seen as polluters, producers of greenhouse gases. Carabaos are seen as more ‘green’. It is true that machines do use diesel or gasoline, and emit carbon dioxide; but the carabao also emits methane when it farts.

These considerations has led to an unsatisfactory compromise: the goverment and NGOs give farmers lower-capacity farm machinery, like hand-tractors and threshers. These machines increase productivity a bit, and result in some additional lands being tilled. This choice does not displace labor; and farmer associations and cooperatives can manage these machines. The main benefit will be that more lands could be tilled and more palay harvested (which is the Philippine government’s main aim); but the productivity per hectare (which more directly affect farmer income) does not improve significantly.
On the environmental angle, though, the policy is not good: a tractor can do the work of 5 hand-tractors; but 5 hand-tractors use more diesel than one tractor.

In contrast, some corporations are directly addressing the need for farm mechanization. Their strategy is is to contract land from farmers, and then use large scale machinery and modern production methods to reap abundant harvests. In terms of increasing productivity, this formula is a big success. In terms of raising farmers incomes, though, it is much less spectacular.
A big advantage is that farmers are assured a steady income independent of the uncertainties of the crop cycle. But on the other hand, the rent that the corporations pay to the farmers will most likely remain the same over the years – not raising in step with the increase in harvest, or with inflation. Also, the control over the land effectively passes on to the corporation.

PAIS (Pasali Agricultural Innovations and Services) is a social business active in Region 12, and in particular the town of Palimbang, in Sultan Kudarat province. It proposes yet another approach: provide the services of large-scale agricultural machines, while it teaches farmers improved techniques of planting rice, and organizes them into clusters/associations/cooperatives.  PAIS calls this its Farm Machinery Pool (FMP) project. As a social business, PAIS does not need to make a profit for private shareholders, and recycles all its profits into expansion and social services. The PAIS FMP will provide services of Tractors, Planters and Harvesters – which, in combination, will significantly increase harvests and lessen production costs. Its rates will be relatively low, and the services will be gradually expanded to service more and more farmers. And, the farmers will retain control over their land; which means that they will benefit directly from the increased harvests.
At present, PAIS installs water systems in highland areas all over Mindanao. It will launch with its Farm Machinery Pool in the last quarter of 2014. PAIS is the social business arm of Pasali; its NGO sister organization is the PPF (Pasali Philippines Foundation).
See also: Pasali: Bringing Peace and Lifting Families out of Poverty

 

 

 

Pasali: Bringing Peace and Lifting Families out of Poverty

This post is about Pasali, an organization which works in the southern Philippine island of Mindanao. It is active in 7 municipalities and 1 city in the southern Mindanao, but is most active in one particular town – Palimbang, in the province of Sultan Kudarat, where it does almost half of its work.

Palimbang is a town that is different from most other Philippine towns. For starters, the majority of its population is Muslim, and that in itself is unique, since only 5% of Filipinos are Muslim (81% of Filipinos are Roman Catholic, and 10% follow other Christian religions). Palimbang lacks roads, electricity, and even mobile phone access – very un-Philippines. To make things worse, about 45% of the people live below the poverty line – making it one of the poorest provinces in the Philippines.

Palimbang is special in another way – it is the cradle of the Muslim rebellion (which started in 1972, and has not quite ended). Major battles raged there between the rebels and the government military till less than a decade ago; hostilities continued till 2011.
Palimbang has a Muslim majority, but it has a substantial Christian minority. They were in a state of armed ceasefire with each other (always at the brink of hostilities) when Pasali started its work there in 2004. And both Christians and Muslims looked down on the Manobo tribespeople living in Palimbang’s hills.

Businesses and government development bodies avoid Palimbang like the plague. And so do NGOs. Except Pasali. In 2004, Pasali moved in (it had been founded in 1994 in Rotterdam, as a group of Filipino seafarers which pooled their financial resources for themselves, and for Philippine projects). Pasali started by forcing the Muslims and Christians to work together to build its Technical Center – and promoted cooperation instead of hostilities. Since there was no school serving the Manobos in the hills, Pasali launched a program of having Muslim and Christian families host Manobo children, who were able to then go to school in the lowlands.

Ten Years Later
Now, after almost ten years of work in Palimbang, many people in Palimbang are still quite poor. However, Pasali has improved the lives of many in various ways:
The Muslims and Christians work together in various ways – they help each other till their fields, are organized into mixed associations and cooperatives, etc.
The Manobos, from being despised by Muslims and Christians, have become valued members of the community. The Manobos now ‘export’ corn and vegetables which is sold all over Palimbang. And many families have close relationships with Manobo children, from many years of serving as host families for them.
Pasali installs water systems (including the revolutionary Hydraulic Ram Pump, which pumps water uphill – up to 200 meters vertically – without using a motor). This has brought water to hilltribes all over Mindanao island. But almost as important is the fact that Pasali’s water technicians started off as boys from the area; and they were child soldiers before becoming water technicians. These water technicians are now role models for the youth of Palimbang – children used to look up to rebels as role models, now their role models are Pasali water technicians, or farm machinery operators.
Pasali has a rudimentary Farm Machinery Pool, which has simple machinery that are used by rice farmers. This not only helps the farmers, but offers employment to local youth.

Reducing Poverty
Now that Pasali has brought peace and cooperation among the ethnic groups in Palimbang,  Pasali is setting its sights on lifting its population out of poverty.  It has some projects in this direction:
Farm Machinery and Improved Farming Methods. Pasali is promoting SRI (System of Rice Intensification) which increases rice yields with lesser inputs (uses organic fertilizer, but no herbicides and very little pesticides, less water, less seeds). This, in combination with farm machinery (Pasali hopes to raise money for these in the coming year), would effectively double their harvests, and lift them out of poverty.  This will be done in batches of 250 families at a time, over a two year period.
Reforestation and the Planting of Rubber Trees. The hills where the Manobo highlanders live are bare – they had been cut clean by successive logging companies in decades past. They want to restore their forest and also plant rubber trees to augment their income.  Pasali has made a start, by planting 20 hectares of rubber trees in the last two years. It plans to plant up to a total of 200 hectares to rubber in the coming years, as well as to restore up to more than 3500 hectares of native forest.

I believe that Pasali does quite good work. It is able to do a lot with modest resources; but could do a lot more if given more support. While helping one town (Palimbang, population of 115,000) in the Philippines (population of 105 million) seems like a drop in the bucket; Palimbang is one of the most difficult places to work in the whole country. If Pasali succeeds in Palimbang, it will mean a lot for lifting other poor communities in the country. After all, if they could succeed in Palimbang, others could succeed everywhere else in the Philippines.

See also: Pasali Philippines Foundation

Optimizing Remittances for Development

We Overseas Filipinos (OFs) remit money to relatives and others in the Philippines. The money that we remit is often used by our relatives for basic needs e.g. housing, food, clothing and education. They are also used for occasional expenses like health (medicines, hospitalization), burial expenses etc. But once these kinds of needs are met, we would often begin ‘investing’- i.e. remitting money for the purpose of building up a store of capital, which could be used when we are no longer based abroad, or as an additional source of income for relatives.

Strictly speaking, all remittances contribute to Philippine national development. Remittances that fulfill the recipients’ immediate needs contribute to development: they stimulate the local economy (the multiplier effect); they prepare and nurture the workforce (education and health); etc. However, some remittances have a bigger impact on development than others. The question before us then is: how could we optimize the discretionary part of remittances towards development.

The problem is not that we do not care about making economic (developmental) investments. Rather, it is on how this could best be done. All OFs share the desire to build up resources in the Philippines, which would continue to generate income when we no longer work abroad. Let us take a look at some factors that affect our decisions on economic investments:

Scale. A single OF would have only a limited amount of resources. This means that he/she would be limited in the scale of the investments that could be made. Micro-investments e.g. tricycle, sari-sari store etc. could be readily financed from a single OF’s earnings. Bigger investments e.g. restaurant, grocery store, machine shop would need to be financed from many years of savings, or by pooling the resources of several OFs.

Relatives. OF investments are most often done through our relatives. They are the main beneficiaries of our remittances, and we expect them to also want to create an additional income stream that could generate money when we return for good. However, OF relatives tend to look upon the added income stream from the investment as a thing of the present – additional income to the regular remittance. Thus, while we view it as an ‘investment’, our relatives treat it as just another remittance – which means that they can use it for their daily expenses. This causes all kinds of problems.

But it is difficult for us not to include relatives in our investment plans. In the first place, the remittance is mainly coursed through them. Then, the relatives are usually the ones expected to manage the project. And finally, we have limited options in terms of ‘owning’ the investment – we are usually expected (or have no other choice but) to put the investment under the name of the relative.

A solution to the limiting nature of investing thru relatives is investing with the help of third-party channels. These could include rural banks, local venture-capital companies, or companies with projects open to OF investments. As of yet, these channels are not yet well developed in order to optimally serve the needs of OFs.

Information on Possibilities. OFs are often limited in the choice of which investments to make, because of the lack of information on possiblities. We usually just take on the suggestions of our relatives, or from fellow OFs. Many of us end up buying tricycles or jeepneys, or starting a sari-sari store partly because other investment possibilities are simply unknown. Because of the limited choices, we often decide against making investments. The money gets put in a savings account, we buy real estate (land, cemetery lots, condominium units etc.) or jewelry. Some OFs opt to invest their savings in their host country – by buying a house (which they live in) or investing in the stock market.

Development Intensity
While all remittances support development, we aim to maximize their developmental effect. But development can be interpreted in many different ways. When we seek to optimize remittances for development, we start from the principle that some uses of remittance money result in more development than others; and that it is possible to intervene to shift towards investments with a bigger development effect.

For this, we need to develop a concept of ‘development intensity’, in which investments with a higher intensity would be preferable to those with lower intensity. We can formulate ‘development intensity’ as a value that comes out of a number of factors:

Beneficiaries. This would include employment created for people, and the number of beneficiaries of the products from services, as well as the extent to which they benefit.

Extent it Enables. How the products and services offered increase the capability of people to provide for their own needs (e.g. increases agricultural productivity).
Long-term Viability. How durable the project is, in terms of finance and management.

Environment-Friendliness. Net effect on the environment, compared to the previous situation.

Effect on the Local Economy. How the project improves local economic activity, through its upstream (inputs acquired locally) and downstream (selling in the local market) linkages.

Appropriation of Surplus. Where eventual profits are used for.

The six components for evaluating development intensity would be difficult to measure quantitatively. Quantifying them is made difficult by the fact that the relative weights of the components and their relationships vary. However, even if we can’t yet use it quantitatively, it can be used qualitatively to make a general comparison. Take the example of comparing two investments: one, buying a jeepney; and the other, putting up of a bee-keeping business (these would cost approximately the same).

In terms of beneficiaries, both are equivalent – they employ 1 or 2 people, and the public ‘buys’ the product or service. The jeepney’s marginal utility would be small (resulting in a smaller additional benefit for consumers), since it would simply be added to an already fully served market; while beekeeping would probably be a pioneer (and thus have a bigger marginal utility). Any surplus generated goes to the OF relative. The long-term viability depends on the OF relative, and is thus equivalent. On their effect on the local economy – they both have limited linkages.
In their enabling function, the beehive increases the harvests of surrounding crops and trees, while the jeepney does nothing similar. Also, the jeepney pollutes the environment, while beekeeping is beneficial. Taken all together, we can say that the honey-bee business is more development intense than the jeepney.

In general, we can say that investments that benefit the wider community (rather than just one family), stimulate the local economy, and which are environment-friendly, would tend to be more development intensive than those which don’t.

Interventions
In order to optimize remittances for development, we seek not only to stimulate Overseas Filipinos to make more development intensive investments, we should also help them surpass the limitations of scale, relatives and lack of knowledge. Concretely, this could be addressed in a number of ways.

Financial Literacy
Both the Overseas Filipinos and their families in the Philippines would benefit from trainings on ‘financial literacy’. This would teach them how to be more systematic in handling their finances, including how they could save money for investments. These trainings can be given abroad, as well as in the Philippines. Ideally, the financial literacy training should be part of the pre-departure briefing, and that the potential OF should take it together with their partner.
In addition to the basic trainings, there is also a need for trainings that give them skills in setting up and running a business – a training on Business Management. This should be done in the Philippines.

Government Policy
The Philippine government could do a lot toward helping OFs’ remittances be more development intense. These would include:

Recognizing OF investments as Filipino. A law that would recognize all investments done by natural-born Filipinos, regardless of their present citizenship, as Filipino will go a long way toward encouraging OFs to invest in businesses in the Philippines. There are laws that limit business ownership to Filipino passport holders, and even to Philippine-residents; and these inhibit many OFs from investing. But more than that, there are many laws that limit government agencies’ (e.g. DOST, DTI) support to businesses only to those which are ‘100% Filipino owned’ . With this law, OF-initiated businesses can fully avail of government support.
Such a recognition would also enable OFs to invest on their own, lessening the need for them to go through their relatives.

Directing Line Agencies to Help OFs. Line agencies, e.g. DTI could do a lot more to help OFs and their families invest in business. The government could create an inter-agency body at the provincial level to assist OF investments by providing them with technical support and management knowhow, credit, etc.

Accredit Filipino Businesses Established Abroad. Many OFs have set up businesses abroad, or have formed cooperatives. There should be a speedy process of accrediting these for doing business in the Philippines.

Amending Laws that Restrict OF Investment. There are laws that block non-Philippine residents (even if they hold Philippine passports) from investing in some economic sectors (e.g. retail trade). These laws need to be amended accordingly.

Investment Projects
Educating and Assisting OFs are important things to do; but in the end, there need to be actual projects for them to invest in. These projects should be as development intensive as possible; and they would preferably be medium-sized businesses (i.e. have 10-199 employees, or P3000 to P100,000 capital). They could take the following forms:

Shares of Stock in Existing SMEs. These corporations would open up their ownership to OFs to up to 50% of the shares of stock.

SMEs with Modules than OFs can invest in. The company would offer distinct business units which OFs can buy, and which will be managed by the company. These would range from ‘time-share’ arrangements in tourist accomodations, to units of land tilled to crops or trees, etc.

SMEs set up by OFs. These would be managed either by a returning OF, or by a management team that is hired by the OFs. The OF-entrepreneur will have either invested his/her savings over many years, or be managing the money of an organization or group of OFs.
These interventions would be done by OF organizations, NGOs in the Philippines, businesses in the Philippines, and the Philippine government. In order to make investing in these SMEs attractive to OFs, they need to show that they are reliable and profitable. It would be good if the government can set up a system of investment insurance for OFs, or of accrediting SMEs for OF investment.
Not all OFs will prefer to invest through SMEs. Most probably the majority of OFs will continue to prefer investing in micro-businesses that are run by their relatives. For them, the financial literacy and business management trainings, as well as other support from government agencies, rural banks and NGOs would go a long way to making their micro-investments succeed.

Our aim will be both to empower OFs who invest in micro-businesses, and to enable a smaller number of OFs to invest in SMEs.

What OF Organizations can do
OF organizations could actively intervene in order to help OFs invest in more development intensive investments. Some of these ways include:

Organizing Trainings. We could organize trainings in financial literacy and business management to cater to their members, as well as other OFs.
Lobby. The Philippine government needs to be prodded to support more OF investments, through better laws and through the work of government agencies. The government should also amend laws that restrict OF investments. OF organizations can work with OF-supportive NGOs in the Philippines to undertake such a lobby.

Lobby. The Philippine government needs to be prodded to support more OF investments, through better laws and through the work of government agencies. The government should also amend laws that restrict OF investments. OF organizations can work with OF-supportive NGOs in the Philippines to undertake such a lobby.

Promote Investment Projects. OF organizations could set up investment projects in the Philippines themselves. Or, they could check out the possibilities offered by NGOs, businesses, government and other OF organizations in the Philippines, so as to recommend which would be good for their members to invest in.

On the Kasambahay Law

Some news reports say that the new Kasambahay Law (Republic Act 10361, “An Act Instituting Policies for the Protection and Welfare of Domestic Workers” was signed into law on 18 January 2013) will have the unintended consequence of making many people unemployed. Families who could not afford to pay P 2500/month (in Metro Manila) to their kasambahays are expected to lay them off en masse.
Let us take a closer look at this supposed effect.

There are two kinds of families who pay their kasambahays too little. First, there are those whose income is high enough, but who pay their kasambahays too little because they think that is all they deserve. These families would be forced to pay a decent living wage to their kasambahays. They may have to forego some very minor luxuries to do this.

Then, there are the families whose income is barely enough to support the family plus a kasambahay.  If such families cannot afford to pay P2500/month  to a kasambahay, they should simply not hire one. Very often, such families do not objectively need a kasambahay. They could easily divide household tasks among the members of the family.
For these families, having a kasambahay  is more a matter of prestige than an objective need. They want to underline the fact that their social status has risen by having a kasambahay.  Family members then think it would be beneath them to do household chores. But when they do hire a kasambahay, they could not afford to pay them properly, and the working conditions would often be bad (e.g. cramped sleeping quarters, bad food, long work hours).

When a family hires a kasambahay they are making a choice not to spend for some other things instead. Rationally, a family would hire a kasambahay when it is able to become more productive (and thus earn more money) as a result. This is the case when both partners work. But hiring a kasambahay may not always be the optimum solution. There are (theoretically) other choices open to them.
If they need help in specific tasks e.g. cooking, laundry, gardening, cleaning or taking care of children, there are options other than hiring a live-in kasambahay. Cooking could be done by sharing the task among all household members, or they could bring home cooked food. Children could go to day-care centers, and a good schedule of play-dates could be made for the other days. They could hire a labandera to come once a week, or bring their clothes to a laundry service; they could hire someone to clean the house or to work the garden once a week. These steps would probably be cheaper than hiring a live-in kasambahay.

Massive Lay-offs?
The main beneficiaries of the kasambahay arrangement are the families who employ them. The kasambahays also benefit, but only if they are paid properly and have decent working conditions. Overall welfare is not enhanced by allowing sub-standard payment and working conditions of kasambahays.

The Kasambahay Law imposes added financial and legal requirements for employers. But will it result in massive lay-offs of kasambahays? This is most unlikely. The majority of employers can afford to pay the required wages. The minimum wage of 2500 pesos is only for kasambahays in Metro Manila; it is 2000 pesos for other chartered cities and first-class municipalities, and only 1500 pesos for everywhere else. Most families already pay as much to their kasambahays; and those who don’t will probably only have to pay a little more to comply.

Employers will have more of a problem with the other requirements. Kasambahays need to be registered with the SSS, PhilHealth and Pag-Ibig, and the employers will need to make the monthly payments. The kasambahays need to be registered with the local barangays. The kasambahays must have a minimum of 8 hours of rest a day, and 24 hours off a week; they will have five days of annual leave with pay. Also, hiring children younger than 15 years old is prohibited.
A written contract will have to be accomplished, there is a list of valid reasons allowed for termination, employers should respect the kasambahay’s privacy. For their part, the kasambahay is now required to keep all information about the employers family confidential, even after their work with them is over.
All this means that employers’ relationship with their kasambahay will have to change.

The main ‘problem’ with the Kasambahay Law is not economic, but cultural. Filipinos are not yet used to treating their kasambahays as full fledged workers. It will take some years before people will have made the cultural adjustment.

Very few kasambahays presently employed will be laid off. There would probably be a shift from recruiting kasambahays from afar, to those coming from nearby.

National Development
In addition to its being a worker welfare law, the Kasambahay Law is a law that will foster Philippine national development. It will increase the cash that kasambahays receive, since: it bans delayed payment or payment in kind; deployment expenses will be shouldered by the employers; agencies will be prohibited from taking a part of the kasambahay’s salary. This increased cash would have multiplier effects when it is remitted to their home towns.

The law promotes the integration of kasambahays in the urban labor force. It will help make being a kasambahay a steppingstone to other jobs.

The rationalization of domestic labor that the law brings will gradually transform Philippine society. Domestic workers will eventually be hired only by families which can afford them AND really need them. Others would then be hired only for specific tasks, and this will streamline the labor market. More young girls would then go to high school in their hometowns instead of becoming kasambahays in the big cities. And many of those now working as kasambahays will pursue an education. This will come at a time when the country has an increasing need for educated workers, for which there is an impending shortage.

Planting Trees

President Aquino issued on 4 March 2011 Executive Order 26 – the National Greening Program (NGP), an initiative to plant 1.5 billion trees by the end of his term in 2016. This would serve to absorb carbon dioxide. Many people have declared that this target is unachievable. Perhaps. But I think it would be good to at least try.

Valuable Trees
Previous tree planting schemes have indeed succeeded in planting trees; only to have the trees cut down by the same farmers who planted them. This is because they had been paid only to plant the trees. After planting, the trees themselves meant nothing to them; they were more valuable cut than left standing.

The key to a succesful tree planting, or forest preservation, program will be making sure that the trees are more valuable to the farmers when they are left standing that when they are cut.

Forest Wardens. One method would be to hire the farmers as forest wardens tasked to guard the forest. Better still, the whole community is given money to maintain the forest, as well as the right to exploit its resources (e.g. gathering etc). This does not include cutting the trees, of course.
This method is effective especially in cases where there is an existing forest. The wardens will guard against people who cut the trees there.

Commercial Trees. Planting trees with commercial value to the farmer e.g. rubber and fruit trees, is another way of reforestation. When these trees are planted, the farmer gets a continuous benefit from them. They will not only NOT cut down these trees, they will defend them with their lives (figurately, we hope).

Partnership with NGOs, Social Enterprises
The government could not plant a billion trees all on its own. Despite its resources, there are limits to government’s ability to mobilize grassroots groups and adapt to the local situation in so many places. Government will need to cooperate with civil society organizations. These organizations would be in a better position to relate with and mobilize communities to participate in the program.

Pasali, an NGO in Region 12, cooperates with the government (at all levels) as well as with grassroots cooperatives and IP tribes. It will mobilize all these to participate in a tree planting program. It plans to plant a million or more trees in the coming nine years, or till 2020 (and, if it receives foreign support, it will plant much more than that). Similar organizations in other regions will greatly speed up the implementation of the government’s ‘billion tree planting program’.

Indigenous Peoples
A big proportion of the areas where the trees could be planted are occupied by Indigenous People (IP) tribes. The government should improve the status of IP ownership of this land, specifically in their applications for CADT (Certificate of Ancestral Domain Title). If the IPs are ‘sovereign’ over their lands, they will be in a position to take better care of them.

Food security and the use of proper technology are also important. In Palimbang, Sultan Kudarat, Pasali provided a Manobo tribe with a portable corn miller, as well as improved their technology for planting corn (SCI – System for Corn Intensification). As a result, this tribe is now self-reliant in food. They also now have a policy against the commercial cutting of trees.

A million trees is not much compared to a target of 1.5 billion trees, but at least it is a concrete target that helps achieve it.