Philippines - Agrarian Reform Community Development Project

Report No. PIC3939 Project Name Philippines-Agrarian Reform Community... Development Project Region East Asia and Pacific Sector Infrastructure Project ID Number PHPA37079 Borrower The Republic of the Philippines Implementing Agency The Department of Agrarian Reform Contact Field Operation Group & Support Services of the Department of Agrarian Reform Telephone: 63 2 972 966 Fax: 63 2 973 968 Date this PID prepared May 21, 1996 Projected Appraisal Date June 1996 Projected Board Date September 1996 Background 1. The agricultural sector in the Philippines accounts for about 22 percent of the gross domestic product (GDP), 16 percent of export receipts, and with 11.1 million people employed in this sector agriculture represents the largest employer (45%). Nearly 60 percent of the population lives in the rural areas and are directly or indirectly dependent on agriculture for their livelihood. Philippine farms are characterized by small holdings; about 85 percent of the 3.42 million crop and livestock farms in 1990 were under 5 hectares (ha), accounting for 50 percent of the total farm area. 2. Only 60 percent of the total farm area is owned by the farmers themselves, large areas continue to be tenant farmed. An agrarian reform program has been underway for some 40 years in the country, however, it has only been a priority since 1988. With such a large number of tenant farmers, poverty remains a major concern in the rural areas. The latest estimate of the incidence of poverty indicates that about 36 percent of the population lives below the poverty line. 1994 estimates, made by the National Statistical Board, indicate that about 47 percent of rural families and 24 percent of urban families fall below the annual per capita poverty threshold of P8,035 and P9,910, respectively. Widespread poverty also has its impact on the market for food, particularly on children. According to the Bureau of Agricultural Statistics, approximately 18.2 percent of households in 1994 (10.6 percent in the urban areas and .7 percent in the rural areas do not obtain sufficient food to avert malnutrition, while child malnutrition estimated at up to one third of the children . 3. An important cause of poverty and under-development in the Philippines is the way in which the nation's primary resource - land -  is used and controlled. Legislative efforts to change this situation trace back to 1936, with the most recent being the 1988 Comprehensive Agrarian Reform Law (CARL). However the implementation of the law has been lacking until recently, when significant achievements have been made by the Government. The present leadership in the Philippines is committed to pursue an even faster, fairer and more meaningful implementation of land and agrarian reform through CARP, to empower the farmers and increase agricultural productivity. The key implementing strategy of CARP is the Agrarian Reform Communities (ARCs) Development Program, which is basically an area-focused, resource-based, community- centered and impact-oriented approach to rural development. 4. Agrarian Reform Beneficiaries (ARBs) are among some of the most disadvantaged communities in the Philippines. All types of physical infrastructure are lacking, including: irrigation, roads, bridges, potable water, health and education facilities, and post- harvest handling and processing centers. The Comprehensive Agrarian Reform Program (CARP) has focused on the land acquisition and distribution priorities mandated by the government, however, the beneficiaries have been without much needed support services to address community building, agricultural extension, physical infrastructure, credit, and marketing support. Physical infrastructure is considered a priority amongst all ARBs. 5. Economic growth is a platform underpinning the Government of the Philippines (GOP) Medium Term Development Plan (MTDP), which emphasizes the need for world competitiveness and people empowerment to achieve a per capita gross national product of US$1,000 by the year 2000, and an annual GNP growth rate of 6 to 8 percent. This plan also contains an unequivocal commitment to reduce poverty from 36 percent (1994 data) to 30 percent by 1998. Economic growth and poverty reduction form the framework for all regional and sectoral policies, programs, and projects. 6. The Government of the Philippines has made agrarian reform, and particularly CARP, a priority to achieve the goals of Philippine 2000 (to be a Newly Industrialized Country by the year 2000). The Department of Agrarian Reform (DAR) has been given the lead role in the implementation of CARP, however eight GOP line agencies play an active role in the delivery of CARP. These include: DAR, Department of Agriculture (DA), Department of Environment and Natural Resources (DENR), Department of Trade and Industry (DTI), Department of labor and Employment (DOLE), Department of Public Works and Highways (DPWH), Land Bank of the Philippines (LBP), and National Irrigation Administration (NIA). 7. The CARP, instituted by the government, is mandated to: (a) distribute public and private lands to farmer beneficiaries in an effort to increase agricultural productivity, enhance income, and improve the standard of living of Agrarian Reform Beneficiaries (ARBs) and their respective farmers' organizations, and (b) deliver support services. To maximize the impact of the available limited resources, the Department of Agrarian Reform (DAR) has identified the Agrarian Reform Communities (ARCs) as the focus of government (national and local) intervention in providing community development assistance, livelihood -2 -  support including agro-business activities, and basic infrastructure investments. 8. To advance the objectives of the CARP the following three main areas of challenges/problems have been identified: (a) farmer beneficiaries and their respective communities, (b) CARP Line Agencies and Local Government Units (LGUs), and (c) NGOs/People Organizations (POs). (a) Farmer beneficiaries and their communities are facing relatively poor economic conditions due to inter-related technical, financial and social constraints which include respectively: (i) low cropping intensity, little use of improved inputs, low productivity, limited technical knowledge among ARBs, limited exposure to alternative cropping options and lack of marketing infrastructure; (ii) inadequate financial resources for post harvest and processing facilities, limited access to formal credit, limited financial base/indebtedness of POs, inadequate savings, lack of management skills to plan and operate economic activities and lack of internal control in POs; and (iii) weak organizational base of POs, weak leadership within the ARCs and POs, poor social infrastructure, and limited education among ARBs. (b) Local NGOs. The main constraints affecting the ability of local NGOs/POs to assist the ARCs development process are the inadequate or lack (in some areas) of qualified staff to provide the necessary technical support to ARCs, insufficient funds for wider deployment of staff and delayed funding from DAR, inadequate or inappropriate training of staff, lack of prior relationship with ARCs and diversity or non-complementary objectives of NGOs/POs leading to differing opinions on the required interventions for ARCs. (c) CARP Line Agencies and LGUs: Budget restrictions which include the overall funding availability; timing of budget allocation and releases along with a cumbersome bureaucracy and internal control and audit systems are the main issues affecting CARP performance. These constraints are the main cause for relatively slow land surveys (ie: inadequate equipment, communications facilities, and data processing/lack of computers), the slow pace of reducing legal challenges (ie: lack of access to legal libraries, court references, mobility, communication and computerization), shortage of trained ARC development facilitators in some provinces, mobility and communication, and inadequate support and commitment from other government line agencies. The main challenges affecting the performance of the LGUs regarding the development of ARCs are adjustments to devolution, management experience, shortage of funds, mobility of staff, linkages with national government support services such as agricultural research and extension (DA), - 3 -  irrigation (NIA), and infrastructure (DPWH). Project Scope and Objectives 9. The project would assist the Government in strengthening farmer organizations in Agrarian Reform Communities (ARCs) to plan and undertake development activities which would raise farmers' incomes and provide further opportunities for sustainable growth. In particular, the project would: (i) assist Agrarian Reform Beneficiaries (ARBs) to gain access to productive resources, social and physical infrastructure; (ii) support CARP line agencies, Local Government Units (LGUs), NGOs, People Organizations (POs) and coordinate their activities. Considering presently available financial resources, the Project would support the development activities of about 100 ARCs in selected suitable provinces (see 1/). The selection of these provinces would be based on criteria consistent with existing national programs, including the targets of Philippines 2000, DA's Medium Term Agriculture Development Plan (MTADP), and DAR's Strategic Operating Provinces (SOPs). The project would finance viable economic activities in ARCs that either have been or will be identified by the communities and their members. This would allow maximum flexibility in supporting ARCs that are at significantly different stages of developments and needs. Project financing would be based on cost sharing arrangement among project's beneficiaries, LGUs, and national government. Project Description 10. The Project would be implemented over five years, and would comprise the following three components. (a) Community Development and Technical Assistance. This component would enable ARCs to achieve community- determined objectives through more detailed and realistic planning, development of organizational capability and more effective management of human, physical and financial resources, (especially in support of initiatives in the Agriculture and Enterprise Development component). The two sub-components would address these aims. Community Development would concentrate on (i) increasing community participation in barangay planning processes, in implementation of development activities, in addressing social issues such as the role of women in the community, and in maximizing the sustainability of project interventions; and, (ii) organizational development which would strengthen the operations and activities of community groups within the ARCs, such as cooperatives, associations, farmers groups, women's groups, auto-savings groups and clubs. Support provided would include cooperative management training, financial management and enterprise development training and assistance in improving coordination with other agencies. Technical Assistance would focus on (i) technical advisory services through catering to specific skills training needs of the ARBs and by providing marketing support and technical consultancy services to the ARC - 4 -  organizations; and (ii) providing the necessary staff development in terms of training and support for effective project operations. (b) Rural Infrastructure. This component would support infrastructure requirements within selected ARCs, based on an assessment of needs in close consultation with beneficiaries. It would comprise three sub-components: (i) rural access would improve vehicle and pedestrian links from ARC barangays to existing all-weather roads. Works would include reconstruction or rehabilitation of 600-900 kms of existing roads, associated bridges, causeways and culverts additionally materials and technical assistance would be provided for spot improvements on 300-500 kms of farm access tracks; (ii) irrigation would include rehabilitation or extension of existing irrigated areas and, to a lesser extent, construction of new schemes on a total area of 10,000- 15,000 ha. Irrigation would include diversification into non-traditional crops and activities would include headworks (see 2/), intake structures, water conveyance canals, drainage channels, access roads and flood protection measures. Support would be restricted to irrigation managed by farmers on a communal basis where beneficiaries would repay development costs and take responsibility for operation and maintenance of completed works; and (iii) community infrastructure would include rehabilitation or construction of drinking water supply schemes, both point sources and piped systems; and development of multi-purpose buildings for community use. Investment priority would be given to rural access and communal irrigation, with rehabilitation of existing facilities given preference over new construction. All investments would be technically sound and environmentally acceptable, with rural access and irrigation also being economically viable. Proven, labor-based technology would be adopted wherever possible, through local employment. (c) Agricultural and Enterprise Development. This component would be directed towards the promotion and development of farm production and other income generating activities of the beneficiaries, their cooperatives, and the ARCs. Agricultural and enterprise development activities would be market-oriented and would involve government agencies and private enterprises for technology transfer, input supply, and processing and marketing of farm products. It would consist of four sub-components: (i) technical advisory services to assist in the refinement of ARC development plans and provide business consultancy services to beneficiaries as they undertake individual projects; (ii) marketing assistance to equip beneficiaries with accurate and timely market information and help establish sustainable market linkages and viable outlets for their products and services; (iii) farm - 5 -  extension services to upgrade the technical skills of local farm extension workers and effectively disseminate modern and appropriate technology to beneficiaries; and (iv) credit services would be extended to co-finance production, processing, and marketing activities of the beneficiaries and their cooperatives. Cost and Financing 11. Project costs are estimated, at this stage, at about US$106 million, of which the World Bank would tentatively finance about US$50 million. The balance would be provided as follows: by ARCs beneficiaries about US$20 million, LGUs US$5 million, GOP US$11 million, and LBP about US$20 million. Project Implementation 12. Oversight responsibility for the Project would rest with the Department of Agrarian Reform. The organizational structure of the Project would be targeted to link government and non-governmental institutions, taking advantage of the skills of each. It would combine: (a) regular administrative lines of authority running from central DAR through LGUs and other government line agencies down to the field; and (b) a parallel based NGO organizational structure providing technical assistance, and community development expertise in support of ARCs' operations. Implementation would follow existing provincial, municipal, LGU planning procedures, and support from DAR and other CARP line agencies. Project implementation procedures would be flexible to reflect the different stages of ARCs development, and the need to incorporate their own development priorities. Community development activities, and the cost associated with the operations of the Central Project Office, as well as the training program, would be financed through the government (DAR), physical infrastructure investment would be financed through the Municipal Development Fund (known as the MDF), and the enterprise development and agriculture, would be financed through LBP using its banking lending procedures. Poverty Category. 13. Program of targeted intervention. Environmental Impact 14. Rural infrastructure activities are not expected to have any significant adverse environmental impact as works would be small-scale in nature and not require forest clearing. Road improvements would largely follow existing alignments, and irrigation works would usually benefit areas where rice is already grown. Water rights would be observed and pollution minimized through environmentally sound management practices. In the case of new roads and irrigation sites, an environmental impact assessment with mitigation plans would be submitted for review and clearance by the Department of Environment and Natural Resources (DENR). Benefits and Rural Poverty -6-  15. The Project would benefit about 100 ARCs, comprising about 80,000 households, with a total number of beneficiaries of about 0.5 million. It is anticipated that indirect benefits of infrastructure works would also benefit an additional 40,000 households (approximately 0,000 people). The effect of better access roads and social infrastructure would be to both raise the quality of rural life and improve linkages/reduce costs with local and regional markets, allowing ARCs to move from a subsistence-based economy towards a more commercial operation. Agricultural productivity and farm level profitability would rise due to: (a) enhancing the resource base through additional irrigation; (b) facilitation of the use of inputs resulting from improved access, hence lower transport costs, relevant extension and training support, and better access to credit; and (c) the introduction of higher value crops and livestock enterprises to add value. The lower transport costs and shorter journey times which make marketing easier together with better access to credit and technical and management support for non agricultural business investments would also contribute towards income diversification and employment creation. Another major benefit of the project would be the enhancement of devolution of planning, operation and maintenance responsibilities to LGUs and community organizations (i.e. POs), both with respect to infrastructure facilities and economic activities. Improvements in roads and irrigation, together with increased rural trade would have a substantial positive effect on the tax and other revenues collected by LGUs. The project is estimated to yield an overall economic rate of return of about % - well above the National Economic Development Authority (NEDA) cut off rate of 159 and the World Bank's estimate of the Opportunity Cost of Capital (OCC) for the Philippines of 10%. 16. Beneficiaries. ARBs and other families living in the project area would generally benefit from the project through improved training, better organization, greater linkages with the outside world, and more productive agricultural resources. Some beneficiaries, those getting irrigation, would find the project has a substantial impact on their family incomes - a two hectare farmer would more than double his income under the project - but for most (see 3/), the impact would be largely indirect in that as transport becomes cheaper and easier and community and other enterprises are strengthened, opportunities for developing other skills and doing more productive work would also improve. For these people, it is estimated that increases in real income resulting from the project might be an average of 20%-30% by Project Year 6. Footnotes from text 1/ Provinces have been selected on the basis of several factors including: (i) land distribution has aost been completed; (ii) ARCs in the provinces being associated with, or likely to become associated with the Key Production Area program; (iii) LGUs being capable and willing to participate in the project; and (iv) farmers organizations having reached an acceptable level of maturity. 2/ Mainly run-of-river diversion weirs, but also Small Water Impounding Projects (SWIPs) in upland areas (small dams and reservoirs). 3/ Due to water, soil and topography limitations to economic expansion -7 -  of irrigated areas, the scope for irrigation under the project would be limited. Consequently over 75t of all beneficiaries would not receive incremental irrigation. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by the Public Information Center week ending June 13, 1996. - 8 -